##### 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: June 30, 2004 NORTH FORK BANCORPORATION, INC. 
  DELAWARE
    
    36-3154608(State or other Jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 275 BROADHOLLOW ROAD, MELVILLE, NEW YORK
    
    11747(Address of principal executive offices)
    
    (Zip Code)
 (631) 844-1004 
  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  8/5/04$.01 Par Value
    
    172,633,608
 1




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THIS PAGE INTENTIONALLY LEFT BLANK FOR THE EDGAR
DOCUMENT FILED WITH THE SECURITIES & EXCHANGE COMMISSION 2




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North Fork Bancorporation, Inc. Form 10-Q INDEX PagePART I. FINANCIAL INFORMATION (unaudited)Item 1. Financial StatementsConsolidated Balance Sheets
    
    
    4Consolidated Statements of Income
    
    
    5Consolidated Statements of Cash Flows
    
    
    6-7Consolidated Statements of Changes in Stockholders Equity
    
    
    8Consolidated Statements of Comprehensive Income
    
    
    9Condensed Notes to the Consolidated Financial Statements
    
    
    10Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4. Controls and Procedures
    
    
    36PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities
    
    
    37Item 4. Submission of Matters to a Vote of Security Holders
    
    
    37Item 6. Exhibits and Reports on Form 8-K
    
    
    37-38STATEMENT RE: COMPUTATION OF NET INCOMECERTIFICATIONCERTIFICATIONCERTIFICATIONCERTIFICATIONSUPPLEMENTAL PERFORMANCE MEASUREMENTS
 3




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Item 1. Financial Statements 
 Consolidated Balance Sheets (Unaudited) June 30,
    
    December 31,
    
    June 30,(in thousands, except per share amounts)
    
    2004
    
    2003
    
    2003Assets:Cash & Due from Banks
    
    $
    528,772
    
    
    $
    510,354
    
    
    $
    406,694Money Market Investments
    
    
    16,140
    
    
    
    21,037
    
    
    
    63,799Due from Brokers
    
    
    
    
    
    
    
    
    
    
    464,351Securities Held-for-Sale
    
    
    
    
    
    
    
    
    
    
    613,628Securities:Available-for-Sale ($2,290,348 ,$1,911,586 and $2,882,841 pledged at
June 30, 2004, December 31, 2003 and June 30, 2003, respectively)
    
    
    8,762,663
    
    
    
    7,136,275
    
    
    
    8,108,198Held-to-Maturity ($33,710, $52,808 and $82,445 pledged at
June 30, 2004, December 31, 2003 and June 30, 2003, respectively)
    
    
    152,201
    
    
    
    190,285
    
    
    
    221,378Total Securities
    
    
    8,914,864
    
    
    
    7,326,560
    
    
    
    8,329,576Loans:Held-for-Sale
    
    
    2,902
    
    
    
    4,074
    
    
    
    21,862Held-for-Investment, Net of Unearned Income & Deferred Costs
    
    
    15,385,568
    
    
    
    12,341,199
    
    
    
    11,875,571Total Loans
    
    
    15,388,470
    
    
    
    12,345,273
    
    
    
    11,897,433Less: Allowance for Loan Losses
    
    
    138,008
    
    
    
    122,733
    
    
    
    117,753Net Loans
    
    
    15,250,462
    
    
    
    12,222,540
    
    
    
    11,779,680Goodwill
    
    
    1,003,668
    
    
    
    410,494
    
    
    
    410,495Identifiable Intangibles
    
    
    49,447
    
    
    
    12,765
    
    
    
    14,548Premises & Equipment
    
    
    220,379
    
    
    
    150,875
    
    
    
    143,374Accrued Income Receivable
    
    
    107,495
    
    
    
    88,722
    
    
    
    101,972Other Assets
    
    
    380,632
    
    
    
    226,027
    
    
    
    211,017Total Assets
    
    $
    26,471,859
    
    
    $
    20,969,374
    
    
    $
    22,539,134Liabilities and Stockholders Equity:Deposits:Demand
    
    $
    5,259,052
    
    
    $
    4,080,134
    
    
    $
    3,746,741Savings
    
    
    4,494,251
    
    
    
    3,770,683
    
    
    
    3,665,580NOW & Money Market
    
    
    6,321,943
    
    
    
    4,519,476
    
    
    
    3,960,731Time
    
    
    2,300,540
    
    
    
    1,784,408
    
    
    
    1,922,407Certificates of Deposit, $100,000 & Over
    
    
    1,460,671
    
    
    
    961,414
    
    
    
    1,176,835Total Deposits
    
    
    19,836,457
    
    
    
    15,116,115
    
    
    
    14,472,294Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase
    
    
    2,288,935
    
    
    
    2,171,154
    
    
    
    3,291,500Federal Home Loan Bank Advances
    
    
    850,000
    
    
    
    1,050,000
    
    
    
    1,850,000Subordinated Debt
    
    
    462,808
    
    
    
    476,499
    
    
    
    493,790Junior Subordinated Debt
    
    
    261,358
    
    
    
    266,977
    
    
    
    281,021Accrued Expenses & Other Liabilities
    
    
    460,714
    
    
    
    410,140
    
    
    
    578,428Total Liabilities
    
    
    24,160,272
    
    
    
    19,490,885
    
    
    
    20,967,033Stockholders 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 193,108,367 shares at June 30, 2004
    
    
    1,931
    
    
    
    1,746
    
    
    
    1,746Additional Paid in Capital
    
    
    1,121,040
    
    
    
    378,793
    
    
    
    373,851Retained Earnings
    
    
    1,930,379
    
    
    
    1,816,458
    
    
    
    1,705,789Accumulated Other Comprehensive (Loss)/Income
    
    
    (61,784
    )
    
    
    (2,044
    )
    
    
    42,019Deferred Compensation
    
    
    (84,294
    )
    
    
    (91,789
    )
    
    
    (65,795
    )Treasury Stock at cost; 21,037,978 shares at June 30, 2004
    
    
    (595,685
    )
    
    
    (624,675
    )
    
    
    (485,509
    )Total Stockholders Equity
    
    
    2,311,587
    
    
    
    1,478,489
    
    
    
    1,572,101Total Liabilities and Stockholders Equity
    
    $
    26,471,859
    
    
    $
    20,969,374
    
    
    $
    22,539,134
 See accompanying notes to the consolidated financial statements 4




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Consolidated Statements of Income (unaudited) Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(in thousands, except per share amounts)
    
    2004
    
    2003
    
    2004
    
    2003Interest Income:Loans
    
    $
    213,002
    
    
    $
    195,826
    
    
    $
    407,202
    
    
    $
    392,747Mortgage-Backed Securities
    
    
    72,031
    
    
    
    70,355
    
    
    
    131,168
    
    
    
    152,583Other Securities
    
    
    11,296
    
    
    
    12,232
    
    
    
    20,895
    
    
    
    25,836State & Municipal Obligations
    
    
    6,578
    
    
    
    3,990
    
    
    
    11,102
    
    
    
    7,779Money Market Investments
    
    
    467
    
    
    
    95
    
    
    
    670
    
    
    
    269Total Interest Income
    
    
    303,374
    
    
    
    282,498
    
    
    
    571,037
    
    
    
    579,214Interest Expense:Savings, NOW & Money Market Deposits
    
    
    19,108
    
    
    
    14,476
    
    
    
    34,119
    
    
    
    29,236Time Deposits
    
    
    7,412
    
    
    
    9,419
    
    
    
    14,055
    
    
    
    19,472Certificates of Deposit, $100,000 & Over
    
    
    4,899
    
    
    
    4,801
    
    
    
    8,992
    
    
    
    9,904Federal Funds Purchased & Securities Sold Under Agreements to Repurchase
    
    
    19,035
    
    
    
    27,640
    
    
    
    35,316
    
    
    
    56,298Federal Home Loan Bank Advances
    
    
    12,273
    
    
    
    16,719
    
    
    
    24,595
    
    
    
    35,676Subordinated Debt
    
    
    4,599
    
    
    
    7,120
    
    
    
    9,144
    
    
    
    14,345Junior Subordinated Debt
    
    
    1,953
    
    
    
    2,451
    
    
    
    3,892
    
    
    
    4,961Total Interest Expense
    
    
    69,279
    
    
    
    82,626
    
    
    
    130,113
    
    
    
    169,892Net Interest Income
    
    
    234,095
    
    
    
    199,872
    
    
    
    440,924
    
    
    
    409,322Provision for Loan Losses
    
    
    6,500
    
    
    
    6,500
    
    
    
    13,000
    
    
    
    12,750Net Interest Income after Provision for Loan Losses
    
    
    227,595
    
    
    
    193,372
    
    
    
    427,924
    
    
    
    396,572Non-Interest Income:Customer Related Fees & Service Charges
    
    
    23,417
    
    
    
    20,460
    
    
    
    45,188
    
    
    
    40,626Investment Management, Commissions & Trust Fees
    
    
    4,099
    
    
    
    3,892
    
    
    
    8,023
    
    
    
    7,016Mortgage Banking Income
    
    
    1,318
    
    
    
    3,199
    
    
    
    2,478
    
    
    
    6,017Check Cashing Fees
    
    
    1,159
    
    
    
    1,265
    
    
    
    2,348
    
    
    
    2,261Other Income
    
    
    5,658
    
    
    
    3,964
    
    
    
    11,455
    
    
    
    8,510Securities (Losses)/Gains, net
    
    
    (475
    )
    
    
    3,699
    
    
    
    7,413
    
    
    
    6,296Gain on Sale of Facilities, net
    
    
    
    
    
    
    10,980
    
    
    
    
    
    
    
    10,980Total Non-Interest Income
    
    
    35,176
    
    
    
    47,459
    
    
    
    76,905
    
    
    
    81,706Non-Interest Expense:Employee Compensation & Benefits
    
    
    55,224
    
    
    
    49,075
    
    
    
    106,301
    
    
    
    96,415Occupancy & Equipment, net
    
    
    20,074
    
    
    
    16,389
    
    
    
    37,699
    
    
    
    31,910Other Expenses
    
    
    21,181
    
    
    
    16,894
    
    
    
    39,127
    
    
    
    33,711Amortization of Identifiable Intangibles
    
    
    1,889
    
    
    
    892
    
    
    
    2,670
    
    
    
    1,784Debt Restructuring Costs
    
    
    
    
    
    
    11,955
    
    
    
    
    
    
    
    11,955Total Non-Interest Expense
    
    
    98,368
    
    
    
    95,205
    
    
    
    185,797
    
    
    
    175,775Income Before Income Taxes
    
    
    164,403
    
    
    
    145,626
    
    
    
    319,032
    
    
    
    302,503Provision for Income Taxes
    
    
    55,404
    
    
    
    49,513
    
    
    
    107,514
    
    
    
    102,851Net Income
    
    $
    108,999
    
    
    $
    96,113
    
    
    $
    211,518
    
    
    $
    199,652Earnings Per Share  Basic
    
    $
    0.69
    
    
    $
    0.63
    
    
    $
    1.38
    
    
    $
    1.30Earnings Per Share  Diluted
    
    
    0.68
    
    
    
    0.62
    
    
    
    1.36
    
    
    
    1.29
 See
accompanying notes to the consolidated financial statements 5




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Consolidated Statements of Cash Flows (unaudited) For the Six Months Ended June 30, (in thousands)
    
    2004
    
    2003Cash Flows from Operating Activities:Net Income
    
    $
    211,518
    
    
    $
    199,652Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:Provision for Loan Losses
    
    
    13,000
    
    
    
    12,750Depreciation
    
    
    8,792
    
    
    
    7,350Amortization of Deferred Compensation
    
    
    6,962
    
    
    
    4,966Amortization of Identifiable Intangible
    
    
    2,670
    
    
    
    1,784Amortization of Premiums
    
    
    18,851
    
    
    
    52,544Accretion of Discounts and Net Deferred Loan Fees
    
    
    (15,576
    )
    
    
    (15,640
    )Securities Gains, net
    
    
    (7,413
    )
    
    
    (6,296
    )Gains on Sales of Loans Held-for-Sale
    
    
    (592
    )
    
    
    (3,188
    )Originations of Loans Held-for-Sale
    
    
    (58,166
    )
    
    
    (209,532
    )Proceeds from Sales of Loans Held-for-Sale
    
    
    57,586
    
    
    
    203,909Purchases of Trading Assets
    
    
    (13,911
    )
    
    
    (24,895
    )Sales of Trading Assets
    
    
    14,015
    
    
    
    25,362Gain on the Sale of Facilities
    
    
    
    
    
    
    (10,980
    )Debt Restructuring Costs
    
    
    
    
    
    
    11,955Other, Net
    
    
    (15,480
    )
    
    
    51,248Net Cash Provided by Operating Activities
    
    
    222,256
    
    
    
    300,989Cash Flows from Investing Activities:Purchases of Securities Held-to-Maturity
    
    
    
    
    
    
    (29,348
    )Maturities, Redemptions, Calls and Principal Repayments on Securities Held-to-Maturity
    
    
    37,736
    
    
    
    115,035Purchases of Securities Available-for-Sale
    
    
    (2,882,982
    )
    
    
    (4,415,437
    )Proceeds from Sales of Securities Available-for-Sale
    
    
    917,045
    
    
    
    1,231,757Maturities, Redemptions, Calls and Principal Repayments on Securities Available-for-Sale
    
    
    1,742,003
    
    
    
    3,624,486Net Change in Loans Held-for-Investment
    
    
    (929,825
    )
    
    
    (520,338
    )Transfers to Other Real Estate, Net of Sales
    
    
    502
    
    
    
    Purchases of Premises and Equipment, net
    
    
    (29,164
    )
    
    
    (20,042
    )Purchase Acquisition, net of cash acquired
    
    
    246,209
    
    
    
    Net Cash Used in Investing Activities
    
    
    (898,476
    )
    
    
    (13,887
    )Cash Flows from Financing Activities:Net Increase in Customer Deposit Liabilities
    
    
    1,549,940
    
    
    
    1,279,764Net Decrease in Borrowings
    
    
    (771,282
    )
    
    
    (271,455
    )Purchases of Treasury Stock
    
    
    
    
    
    
    (91,952
    )Exercise of Options and Common Stock Sold for Cash
    
    
    2,815
    
    
    
    5,786Cash Dividends Paid
    
    
    (91,732
    )
    
    
    (85,111
    )Net Cash Provided by Financing Activities
    
    
    689,741
    
    
    
    837,032Net Increase in Cash and Cash Equivalents
    
    
    13,521
    
    
    
    1,124,134Cash and Cash Equivalents at Beginning of the Period
    
    
    531,391
    
    
    
    424,338Cash and Cash Equivalents at End of the Period
    
    $
    544,912
    
    
    $
    1,548,472
 6




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Consolidated Statements of Cash Flows (continued) For the Six Months Ended June 30, (in thousands)
    
    2004
    
    2003Supplemental Disclosures of Cash Flow Information:Cash Paid
During the Period for:Interest Expense
    
    $
    127,007
    
    
    $
    174,266Income Taxes
    
    $
    73,400
    
    
    $
    112,160During the Period the Company Purchased Various Securities which
Settled in the Subsequent Period
    
    $
    86,769
    
    
    $
    188,063During the Period the Company Sold Various Securities which
Settled in the Subsequent Period
    
    $
    29,913
    
    
    $
    464,351Non-cash activity related to the TCNJ acquisition not reflected above
for the period ended June 30, 2004 follows (1):Fair Value of Assets Acquired
    
    $
    4,028,089Goodwill & Identifiable Intangible Assets
    
    
    632,525Common Stock Issued and Fair Value of Options, net of taxes
    
    
    744,125Liabilities Assumed
    
    $
    3,916,489
  (1)
    
    See Condensed Notes to the Consolidated Financial Statements  Note 2  Business Combinations for further details. See accompanying notes to the consolidated financial statements 7




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Consolidated Statements of Changes in Stockholders Equity (unaudited)   Additional
    
    
    
    
    
    AccumulatedCommon
    
    Paid in
    
    Retained
    
    Other Comprehensive
    
    Deferred
    
    Treasury(dollars in thousands, except per share amounts)
    
    Stock
    
    Capital
    
    Earnings
    
    Income/(Loss)
    
    Compensation
    
    Stock
    
    TotalBalance, December 31, 2002
    
    $
    1,746
    
    
    $
    377,311
    
    
    $
    1,590,594
    
    
    $
    17,991
    
        ($
    70,562
    )
        ($
    403,027
    )
    
    $
    1,514,053Net Income
    
    
    
    
    
    
    
    
    
    
    199,652
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,652Cash Dividends ($.54 per share)
    
    
    
    
    
    
    
    
    
    
    (84,457
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (84,457
    )Issuance of Stock (84,813 shares)
    
    
    
    
    
    
    545
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,285
    
    
    
    2,830Restricted Stock Activity, net
    
    
    
    
    
    
    162
    
    
    
    
    
    
    
    
    
    
    
    4,767
    
    
    
    62
    
    
    
    4,991Employee Stock Option Activity, net
    
    
    
    
    
    
    (4,167
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,123
    
    
    
    2,956Purchases of Treasury Stock (2,796,000 shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (91,952
    )
    
    
    (91,952
    )Accumulated Other Comprehensive Income, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    24,028
    
    
    
    
    
    
    
    
    
    
    
    24,028Balance, June 30, 2003
    
    $
    1,746
    
    
    $
    373,851
    
    
    $
    1,705,789
    
    
    $
    42,019
    
        ($
    65,795
    )
        ($
    485,509
    )
    
    $
    1,572,101Balance, December 31, 2003
    
    $
    1,746
    
    
    $
    378,793
    
    
    $
    1,816,458
    
        ($
    2,044
    )
        ($
    91,789
    )
        ($
    624,675
    )
    
    $
    1,478,489Net Income
    
    
    
    
    
    
    
    
    
    
    211,518
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211,518Cash Dividends ($.60 per share)
    
    
    
    
    
    
    
    
    
    
    (97,597
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (97,597
    )Issuance of
Stock - TCNJ (18,527,589 shares)
    
    
    185
    
    
    
    714,609
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    714,794Fair Value
of Options - TCNJ
    
    
    
    
    
    
    33,364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,364Issuance of Stock (70,386 shares)
    
    
    
    
    
    
    822
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,993
    
    
    
    2,815Restricted Stock Activity, net
    
    
    
    
    
    
    148
    
    
    
    
    
    
    
    
    
    
    
    7,495
    
    
    
    (908
    )
    
    
    6,735Employee Stock Option Activity, net
    
    
    
    
    
    
    (6,696
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27,905
    
    
    
    21,209Accumulated Other Comprehensive (Loss), net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,740
    )
    
    
    
    
    
    
    
    
    
    
    (59,740
    )Balance, June 30, 2004
    
    $
    1,931
    
    
    $
    1,121,040
    
    
    $
    1,930,379
    
    
    ($
    61,784
    )
    
    ($
    84,294
    )
    
    ($
    595,685
    )
    
    $
    2,311,587
 
 See accompanying notes to the consolidated financial statements 8




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Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(in thousands)
    
    2004
    
    2003
    
    2004
    
    2003Net Income
    
    $
    108,999
    
    
    $
    96,113
    
    
    $
    211,518
    
    
    $
    199,652Other Comprehensive (Loss)/IncomeUnrealized (Losses)/Gains On Securities:Change in Unrealized (Losses)/Gains During the Period
    
    
    (170,600
    )
    
    
    12,658
    
    
    
    (103,501
    )
    
    
    30,550Less: Reclassification Adjustment for Losses/(Gains) Included in Net Income
    
    
    475
    
    
    
    (3,699
    )
    
    
    (7,413
    )
    
    
    (6,296
    )Change in Unrealized (Losses)/Gains During the Period
    
    
    (170,125
    )
    
    
    8,959
    
    
    
    (110,914
    )
    
    
    24,254Related Tax Effect on Unrealized (Losses)/Gains During the Period
    
    
    73,154
    
    
    
    (3,852
    )
    
    
    47,692
    
    
    
    (10,429
    )Net Change in Unrealized (Losses)/Gains During the Period
    
    
    (96,971
    )
    
    
    5,107
    
    
    
    (63,222
    )
    
    
    13,825Unrealized Gains/(Losses) On Derivative Instruments:Change in Unrealized Gains/(Losses) Arising During the Period
    
    
    3,462
    
    
    
    (4,241
    )
    
    
    998
    
    
    
    (7,225
    )Add: Reclassification Adjustment for Expenses/Losses Included in Net Income
    
    
    2,383
    
    
    
    14,761
    
    
    
    5,108
    
    
    
    25,125Change in Unrealized Gains/(Losses) During the Period
    
    
    5,845
    
    
    
    10,520
    
    
    
    6,106
    
    
    
    17,900Related Tax Effect on Unrealized Gains/(Losses) During the Period
    
    
    (2,513
    )
    
    
    (4,524
    )
    
    
    (2,624
    )
    
    
    (7,697
    )Net Change in Unrealized Gains/(Losses) During the Period
    
    
    3,332
    
    
    
    5,996
    
    
    
    3,482
    
    
    
    10,203Net Other Comprehensive (Loss)/Income
    
    $
    (93,639
    )
    
    $
    11,103
    
    
    $
    (59,740
    )
    
    $
    24,028Comprehensive Income
    
    $
    15,360
    
    
    $
    107,216
    
    
    $
    151,778
    
    
    $
    223,680
 See accompanying notes to the consolidated financial statements 9




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North Fork Bancorporation, Inc. 
 CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 June 30, 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 and Pending Business Combination We are a $26 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 commercial bank. North Fork Bank
operates 258 retail banking branches in the New York Metropolitan area,
including 73 branches 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. On May 14, 2004, North Fork completed its acquisition of The Trust Company
of New Jersey (TCNJ) for approximately $744 million in stock. Accordingly,
the consolidated results of operations contained herein reflect the activity of
TCNJ subsequent to the acquisition date. The assets acquired and liabilities
assumed from TCNJ were recorded at the date of acquisition on the consolidated
balance sheet at fair value. (See Note 2  Business Combinations - for
additional information.) In February 2004, we entered into a definitive agreement to acquire
GreenPoint Financial Corp. (GreenPoint) in an all stock transaction valued at
approximately $6.3 billion. We have received all necessary banking regulatory
approvals. Special meetings of GreenPoint and North Fork Shareholders to
approve the merger will be held on August 30, 2004 and August 31, 2004,
respectively. We anticipate closing the transaction on or about September 30,
2004. Additional information regarding the terms of the merger and its pro
forma impact on our financial statements can be found in amendment No. 2 to the
registration statement filed on Form S-4 with the Securities and Exchange
Commission. 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 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 adopted FASB Interpretation No. 46, Consolidation
of Variable Interest Entities (revised December 2003), (FIN 46R). In
accordance with the provisions of FIN 46R, we deconsolidated our 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 Capital Securities to 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,
stockholders equity and regulatory capital. 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 10




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##### Table of Contents



financial position and 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 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 contained in our 2003
Annual Report filed 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. Our
most critical accounting policy is the allowance for loan losses (See Critical
Accounting Estimates below). Results of operations for the three and six months ended June 30, 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. 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. (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 criticized or reviewed for
impairment, including but not limited to, smaller balance homogeneous loans
that we have identified as residential and consumer. 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 11




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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 primarily awarded prior to
December 31 and contain a nominal vesting period; therefore, we would have
expensed these options under the fair value method at year end. Since the pro
forma effect on net income of expensing stock options during the three months
and six months ended June 30, 2004 and 2003 is nominal, we have not disclose
such pro forma compensation expense and its related effect on net income and
earnings per share herein. 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 services. The products offered by this segment are directed toward
existing bank customers and non-customers. Management segregates the budgeting
and reporting of this segment from its commercial bank, utilizing separate
plans and measurements to evaluate performance. The following table provides
selected financial information for the Private Asset Group for the periods
indicated: Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(In thousands)
    
    2004
    
    2003
    
    2004
    
    2003Revenue
    
    $
    4,204
    
    
    $
    3,989
    
    
    $
    8,240
    
    
    $
    7,212Net Income
    
    
    868
    
    
    
    689
    
    
    
    1,633
    
    
    
    1,120Total Assets
    
    
    12,909
    
    
    
    5,588
    
    
    
    12,909
    
    
    
    5,588
 The Private Asset Groups total revenues, net income and total assets comprise
approximately 1.4%, .07% and .03%, respectively of the consolidated totals for
all periods presented. NOTE 2 -BUSINESS COMBINATIONS The Trust Company of New Jersey On May 14, 2004, we
completed the merger and simultaneously integrated the systems of TCNJ.
TCNJ was the fourth largest commercial bank headquartered in New Jersey and
operated primarily in the Northern New Jersey market. In addition to
enhancing our market penetration, the merger presented an
opportunity to bring new and prospective customers and banking products
together with ours and to increase combined revenues and earnings. At the date of the merger,
TCNJ had $4.1 billion in total assets, $1.4 billion in securities, $2.1 billion
in net loans, $3.2 billion in deposits and $.7 billion in borrowings. We
issued 18.5 million shares (a one for one exchange ratio) of common stock 12




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and
reserved for issuance 1.8 million common shares for TCNJs outstanding employee
stock options with a value of $715 million and $29 million, net of tax,
respectively. The value of common stock and employee stock options was
determined based on the North Forks average closing price of
$38.58 (Based on North Forks closing price from December 12, 2003 to
December 18, 2003). The excess of cost over fair value of net assets acquired
was $593 million. We applied the provisions of SFAS No. 141 Business
Combinations and No. 142 Goodwill and Other Intangible Assets as required
for the recognition of goodwill and intangible assets. The following table presents data with respect to the fair values of assets
acquired and liabilities assumed in the TCNJ merger: As of(in thousands)
    
    May 14, 2004Cash And Due From Banks
    
    $
    156,209Money Market Investments
    
    
    90,000Securities
    
    
    1,413,893Loans
    
    
    2,097,267Add: Unearned Income & Deferred Costs
    
    
    15,329Less: Allowance for Loan Losses
    
    
    (10,251
    )Net Loans
    
    
    2,102,345Goodwill
    
    
    593,173Core Deposit Intangible
    
    
    39,352Premises & Equipment
    
    
    49,132Other Assets
    
    
    216,510Total
    
    $
    4,660,614Deposits
    
    $
    3,170,402Federal Funds Purchased & Collateralized Borrowings
    
    
    689,063Other Liabilities
    
    
    57,024Total Liabilities
    
    
    3,916,489Common Stock Issued and Fair Value of Stock Options, Net of Tax
    
    
    744,125Total
    
    $
    4,660,614
 A
Core Deposit Intangible Asset (CDI) of $39.4 million recognized in
connection with the merger is being amortized over an estimated useful life of
eight years on an accelerated basis. We retained the services of an independent
valuation firm in determining the CDI. TCNJs results of operations are
included in the Consolidated Statements of Income subsequent to May 14, 2004.
Operating results for TCNJ were not significant to the consolidated operating
results and consequently, pro forma operating results for TCNJ have not been presented
herein. As of June 30, 2004, accrued merger related costs of $20.6 million
remain in Accrued Expenses & Other Liabilities in the Consolidated Balance
Sheet and consist primarily of unpaid employment benefits, long term lease
arrangements for vacated facilities and costs associated with the cancellation
of certain data and item processing contracts. It is estimated that none of
the goodwill associated with the TCNJ merger will be deductible for income tax
purposes. 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
approximately $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 93 retail bank branches.
GreenPoint Mortgage Corp. is a national mortgage company that 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. operates
29 offices located throughout the United States. 13




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##### Table of Contents



Pursuant to the agreement,
GreenPoint will merge with and into North Fork Bancorporation, Inc. All necessary banking regulatory approvals have been received and the
special meetings of GreenPoint and North Fork Shareholders to approve the
merger will be held on August 30, 2004 and August 31, 2004, respectively. The
transaction is expected to close on or about September 30, 2004. Upon
completion of the merger GreenPoint Bank will continue to operate as a separate
subsidiary until its core banking systems can be converted to North Fork Banks
platform. We expect this conversion to occur during the first quarter of 2005
at which time GreenPoint Bank will be merged with and into North Fork
Bank. As of June 30, 2004, GreenPoint reported $26.0 billion
in total assets, $16.9 billion in loans and $13.1 billion
in customer deposits. NOTE 3  SECURITIES PORTFOLIO The amortized cost and estimated fair values of available-for-sale and
held-to-maturity securities are as follows: June 30, 2004
    
    December 31, 2003
    
    June 30, 2003Available-for-Sale
    
    Amortized
    
    Fair
    
    Amortized
    
    Fair
    
    Amortized
    
    Fair(in thousands)
    
    Cost
    
    Value
    
    Cost
    
    Value
    
    Cost
    
    ValueCMO Agency Issuances
    
    $
    3,318,464
    
    
    $
    3,241,617
    
    
    $
    3,129,005
    
    
    $
    3,110,430
    
    
    $
    1,777,946
    
    
    $
    1,785,034CMO Private Issuances
    
    
    1,693,712
    
    
    
    1,665,125
    
    
    
    1,278,205
    
    
    
    1,276,049
    
    
    
    4,040,778
    
    
    
    4,084,745Agency Pass-Through Certificates
    
    
    2,172,586
    
    
    
    2,165,407
    
    
    
    1,240,897
    
    
    
    1,246,994
    
    
    
    768,625
    
    
    
    784,770State & Municipal Obligations
    
    
    592,798
    
    
    
    594,466
    
    
    
    700,307
    
    
    
    707,015
    
    
    
    550,117
    
    
    
    558,169Equity Securities (1)
    
    
    187,725
    
    
    
    189,681
    
    
    
    185,757
    
    
    
    194,345
    
    
    
    322,650
    
    
    
    331,234U.S. Treasury Securities
    
    
    103,971
    
    
    
    103,625
    
    
    
    55,750
    
    
    
    55,765
    
    
    
    35,982
    
    
    
    35,999U.S. Government Agencies Obligations
    
    
    159,098
    
    
    
    161,631
    
    
    
    2,310
    
    
    
    2,325
    
    
    
    1,435
    
    
    
    1,420Other Debt Securities
    
    
    635,293
    
    
    
    641,111
    
    
    
    534,114
    
    
    
    543,352
    
    
    
    516,286
    
    
    
    526,827$
    8,863,647
    
    
    $
    8,762,663
    
    
    $
    7,126,345
    
    
    $
    7,136,275
    
    
    $
    8,013,819
    
    
    $
    8,108,198
 (1) Amortized cost and fair value includes $80.5 million, $68.2 million and
$151.8 million in Federal Home Loan Bank stock at June 30, 2004, December 31,
2003 and June 30, 2003, respectively. June 30, 2004
    
    December 31, 2003
    
    June 30, 2003Held-to-Maturity
    
    Amortized
    
    Fair
    
    Amortized
    
    Fair
    
    Amortized
    
    Fair(in thousands)
    
    Cost
    
    Value
    
    Cost
    
    Value
    
    Cost
    
    ValueAgency Pass-Through Certificates
    
    $
    65,244
    
    
    $
    66,142
    
    
    $
    81,759
    
    
    $
    83,989
    
    
    $
    98,064
    
    
    $
    101,252State & Municipal Obligations
    
    
    48,956
    
    
    
    51,005
    
    
    
    54,732
    
    
    
    57,848
    
    
    
    59,275
    
    
    
    63,636CMO Private Issuances
    
    
    26,927
    
    
    
    26,561
    
    
    
    38,389
    
    
    
    38,129
    
    
    
    53,826
    
    
    
    54,918Other Debt Securities
    
    
    11,074
    
    
    
    10,966
    
    
    
    15,405
    
    
    
    15,346
    
    
    
    10,213
    
    
    
    10,213$
    152,201
    
    
    $
    154,674
    
    
    $
    190,285
    
    
    $
    195,312
    
    
    $
    221,378
    
    
    $
    230,019
 Securities grew $600 million or 7% to $8.9 billion for the quarter ended
June 30, 2004, compared to $8.3 billion at June 30, 2003. The growth achieved
during the period was due to $1.4 billion in securities acquired from TCNJ, of
which approximately $500 million were subsequently sold during the quarter.
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. These sales are reflected in the Consolidated Balance Sheet in
Due from Brokers and Securities Held-for-Sale at June 30, 2003. (See Item
2. Managements Discussion and Analysis of Financial Condition and Results of
Operations  Net Interest Income Section for additional Information) At June 30, 2004, securities carried at $4.5 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 $2.3 billion, while securities pledged under agreements
pursuant to which the secured parties may not sell or repledge approximated
$2.2 billion at June 30, 2004. 14




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NOTE 4  LOANS The following table represents the components of the loan portfolio as of the
dates indicated: June 30,
    
    % of
    
    December 31,
    
    % of
    
    June 30,
    
    % of(dollars in thousands)
    
    2004
    
    Total
    
    2003
    
    Total
    
    2003
    
    TotalMulti-Family Mortgages
    
    $
    3,824,615
    
    
    
    25
    %
    
    $
    3,634,533
    
    
    
    29
    %
    
    $
    3,792,647
    
    
    
    32
    %Commercial Mortgages
    
    
    3,536,517
    
    
    
    23
    
    
    
    2,814,103
    
    
    
    23
    
    
    
    2,359,316
    
    
    
    20Residential Mortgages
    
    
    3,329,949
    
    
    
    22
    
    
    
    2,403,306
    
    
    
    20
    
    
    
    2,413,125
    
    
    
    20Commercial
    
    
    2,529,253
    
    
    
    16
    
    
    
    2,145,798
    
    
    
    17
    
    
    
    2,000,623
    
    
    
    17Consumer
    
    
    1,751,240
    
    
    
    11
    
    
    
    1,095,529
    
    
    
    9
    
    
    
    1,068,616
    
    
    
    9Construction & Land
    
    
    453,922
    
    
    
    3
    
    
    
    283,243
    
    
    
    2
    
    
    
    290,433
    
    
    
    2Total
    
    $
    15,425,496
    
    
    
    100
    %
    
    $
    12,376,512
    
    
    
    100
    %
    
    $
    11,924,760
    
    
    
    100
    %Less:Unearned Income & Deferred Costs
    
    
    37,026
    
    
    
    
    
    
    
    31,239
    
    
    
    
    
    
    
    27,327Loans, Net
    
    $
    15,388,470
    
    
    
    
    
    
    $
    12,345,273
    
    
    
    
    
    
    $
    11,897,433
 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 $2.9 million, $4.1 million and $21.9 million at
June 30, 2004, December 31, 2003 and June 30, 2003, respectively. 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: June 30,
    
    December 31,
    
    June 30,(in thousands)
    
    2004
    
    2003
    
    2003Loans Ninety Days Past Due and Still Accruing
    
    $
    5,438
    
    
    $
    2,268
    
    
    $
    2,629Non-Accrual Loans
    
    
    10,366
    
    
    
    11,072
    
    
    
    10,166Non-Performing Loans
    
    
    15,804
    
    
    
    13,340
    
    
    
    12,795Other Real Estate
    
    
    435
    
    
    
    313
    
    
    
    295Non-Performing Assets
    
    $
    16,239
    
    
    $
    13,653
    
    
    $
    13,090Allowance for Loan Losses to Non-Performing Loans
    
    
    873
    %
    
    
    920
    %
    
    
    920
    %Allowance for Loan Losses to Total Loans, net
    
    
    .90
    
    
    
    .99
    
    
    
    .99Non-Performing Loans to Total Loans, net
    
    
    .10
    
    
    
    .11
    
    
    
    .11Non-Performing Assets to Total Assets
    
    
    .06
    
    
    
    .07
    
    
    
    .06
 15




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##### Table of Contents



At June 30, 2004, the increase in non-performing loans was primarily due
to the TCNJ acquisition. 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: June 30,
    
    December 31,
    
    June 30,(in thousands)
    
    2004
    
    2003
    
    2003Commercial
    
    $
    7,256
    
    
    $
    5,632
    
    
    $
    6,425Residential Mortgages
    
    
    4,004
    
    
    
    4,808
    
    
    
    3,175Commercial Mortgages
    
    
    2,623
    
    
    
    557
    
    
    
    1,472Consumer
    
    
    1,872
    
    
    
    2,343
    
    
    
    1,723Construction and Land
    
    
    49
    
    
    
    
    
    
    
    Multi-Family Mortgages
    
    
    
    
    
    
    
    
    
    
    Total Non-Performing Loans
    
    $
    15,804
    
    
    $
    13,340
    
    
    $
    12,795
 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 three months ended
June 30, 2004 and 2003, respectively and $.6 million for the six months ended
June 30, 2004 and 2003, respectively. The amount of interest income included
in net income on non-accrual loans during the most recent quarter was not
significant. As of June 30, 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. 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 Ended
    
    Six Months EndedJune 30,
    
    June 30,(dollars in thousands)
    
    2004
    
    2003
    
    2004
    
    2003Balance at Beginning of Period
    
    $
    124,364
    
    
    $
    115,087
    
    
    $
    122,733
    
    
    $
    114,995Loans Charged-off:Consumer
    
    
    3,443
    
    
    
    3,448
    
    
    
    8,490
    
    
    
    7,595Commercial
    
    
    2,736
    
    
    
    1,941
    
    
    
    5,166
    
    
    
    5,979Commercial Mortgages
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    2Residential Mortgages
    
    
    
    
    
    
    50
    
    
    
    6
    
    
    
    75Multi-Family Mortgages
    
    
    
    
    
    
    13
    
    
    
    
    
    
    
    13Construction and Land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Charge-Offs
    
    
    6,179
    
    
    
    5,453
    
    
    
    13,662
    
    
    
    13,664Recoveries of Loans Charged-Off:Consumer
    
    
    1,847
    
    
    
    1,386
    
    
    
    3,443
    
    
    
    2,878Commercial
    
    
    1,222
    
    
    
    206
    
    
    
    1,740
    
    
    
    578Commercial Mortgages
    
    
    3
    
    
    
    
    
    
    
    503
    
    
    
    Residential Mortgages
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    207Multi-Family Mortgages
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    9Construction and Land
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Recoveries
    
    
    3,072
    
    
    
    1,619
    
    
    
    5,686
    
    
    
    3,672
 16




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(dollars in thousands)
    
    2004
    
    2003
    
    2004
    
    2003Net Loans Charged-Off
    
    
    3,107
    
    
    
    3,834
    
    
    
    7,976
    
    
    
    9,992Provision for Loan Losses
    
    
    6,500
    
    
    
    6,500
    
    
    
    13,000
    
    
    
    12,750TCNJ Purchase Acquisition
    
    
    10,251
    
    
    
    
    
    
    
    10,251
    
    
    
    Balance at End of Period
    
    $
    138,008
    
    
    $
    117,753
    
    
    $
    138,008
    
    
    $
    117,753Annualized Net Charge-Offs to Average Loans, net
    
    
    0.09
    %
    
    
    0.13
    %
    
    
    0.14
    %
    
    
    0.17
    %
 NOTE 6  FEDERAL HOME LOAN BANK ADVANCES AND REPURCHASE AGREEMENTS The maturity or repricing frequency of Federal Home Loan Bank (FHLB) Advances
and Repurchase Agreements (Repos) at June 30, 2004 is as follows: (dollars in thousands)
    
    FHLB
    
    Average
    
    Repurchase
    
    Average
    
    
    
    
    
    AverageMaturity
    
    Advances
    
    Rate (1)
    
    Agreements
    
    Rate (1)
    
    Total (2)
    
    Rate (1)2004
    
    $
    
    
    
    
    
    
    
    $
    240,405
    
    
    
    2.43
    %
    
    $
    240,405
    
    
    
    2.43
    %2005
    
    
    400,000
    
    
    
    5.83
    %
    
    
    350,000
    
    
    
    4.70
    
    
    
    750,000
    
    
    
    5.312006
    
    
    300,000
    
    
    
    3.86
    
    
    
    675,000
    
    
    
    2.38
    
    
    
    975,000
    
    
    
    2.842007
    
    
    150,000
    
    
    
    5.80
    
    
    
    100,000
    
    
    
    2.59
    
    
    
    250,000
    
    
    
    4.522008
    
    
    
    
    
    
    
    
    
    
    400,000
    
    
    
    5.59
    
    
    
    400,000
    
    
    
    5.59Thereafter
    
    
    
    
    
    
    
    
    
    
    425,000
    
    
    
    4.24
    
    
    
    425,000
    
    
    
    4.24Total
    
    $
    850,000
    
    
    
    5.13
    %
    
    $
    2,190,405
    
    
    
    3.71
    %
    
    $
    3,040,405
    
    
    
    4.11
    %
  (1)
    
    Includes the effects of TCNJ purchase accounting adjustments and
interest rate swaps.(2)
    
    Excludes $33.5 million in purchase accounting discounts. 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 Note 9  Derivative Financial Instruments. NOTE 7  SUBORDINATED DEBT The following table is a summary of Subordinated Notes outstanding as of the
dates indicated: June 30,
    
    December 31,
    
    June 30,(in thousands)
    
    2004
    
    2003
    
    20035.875% Subordinated Notes due August 15, 2012
    
    $
    349,274
    
    
    $
    349,229
    
    
    $
    349,1845.0% Subordinated Notes due August 15, 2012
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000Total Subordinated Debt
    
    
    499,274
    
    
    
    499,229
    
    
    
    499,184Fair Value Hedge Adjustment
    
    
    (36,466
    )
    
    
    (22,730
    )
    
    
    (5,394
    )Carrying Amount
    
    $
    462,808
    
    
    $
    476,499
    
    
    $
    493,790
 The $350 million aggregate principal amount of 5.875% subordinated notes
and $150 million aggregate principal amount of 5% Fixed Rate/Floating Rate
Subordinated Notes both 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 Note 9  Derivative
Financial Instruments for additional information). NOTE 8  JUNIOR SUBORDINATED DEBT The following table is a summary of Junior Subordinated Debt outstanding as of
the dates indicated: 17




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##### Table of Contents



June 30,
    
    December 31,
    
    June 30,(in thousands)
    
    2004
    
    2003
    
    20038.70% Junior Subordinated Debt - North Fork Capital Trust I, due December 15, 2026
    
    $
    102,821
    
    
    $
    102,815
    
    
    $
    102,8098.00% Junior Subordinated Debt - North Fork Capital Trust II, due December 15, 2027
    
    
    102,791
    
    
    
    102,785
    
    
    
    102,7798.17% Junior Subordinated Debt - Reliance Capital Trust I, due May 1, 2028
    
    
    46,547
    
    
    
    46,547
    
    
    
    46,547Total Junior Subordinated Debt- Capital Trusts
    
    
    252,159
    
    
    
    252,147
    
    
    
    252,135Fair Value Hedge Adjustment
    
    
    9,199
    
    
    
    14,830
    
    
    
    28,886Carrying Amount
    
    $
    261,358
    
    
    $
    266,977
    
    
    $
    281,021
 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
limited 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 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 Note 9 -
Derivative Financial Instruments for additional information.) The Capital Securities currently qualify as Tier I capital for regulatory
purposes. 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. As of June
30, 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. 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 period presented. The following table details the interest rate swaps and the associated hedged
liabilities outstanding as of June 30, 2004: Maturity
    
    
    
    Notional
    
    Swap Fixed
    
    Swap Variable(dollars in thousands)
    
    Hedged Liability
    
    Amounts
    
    Interest Rates
    
    Interest RatesPay Fixed Swaps2005
    
    Repurchase Agreements
    
    $
    100,000
    
    
    
    4.24%-4.26
    %
    
    
    1.17
    %2008
    
    Repurchase Agreements
    
    
    75,000
    
    
    
    6.14
    
    
    
    1.18$
    175,000Pay Floating Swaps2007
    
    5.00%    Subordinated Debt
    
    $
    150,000
    
    
    
    5.00
    %
    
    
    1.25
    %2012
    
    5.875%  Subordinated Debt
    
    
    350,000
    
    
    
    5.875
    
    
    
    1.252026
    
    8.70%    Junior Subordinated Debt
    
    
    100,000
    
    
    
    8.70
    
    
    
    1.522027
    
    8.00%    Junior Subordinated Debt
    
    
    100,000
    
    
    
    8.00
    
    
    
    1.522028
    
    8.17%    Junior Subordinated Debt
    
    
    45,000
    
    
    
    8.17
    
    
    
    1.18$
    745,000
 18




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##### Table of Contents



At June 30, 2004, $175 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 $7.4 million, which is recorded as a
component of other liabilities (the net of tax balance of $4.2 million is
reflected in stockholders equity as a component of accumulated other
comprehensive loss). The use of pay fixed swaps outstanding increased interest
expense by $2.4 million and $8.2 million in the second quarters of 2004 and
2003, respectively. For the six months ended June 30, 2004 and 2003, these
swaps increased interest expense by $5.1 million and $18.5 million,
respectively. The decline in swap related interest expense is primarily due to
the maturity of $850 million of these interest rate swaps in 2003. In June
2003, an additional $300 million in pay fixed swaps, designated as cash flow
hedges maturing in 2004 were cancelled and the underlying borrowings repaid.
The cancellation of these swaps resulted in a $6.6 million charge in the second
quarter of 2003. Based upon the current interest rate environment,
approximately $1.8 million of the after tax loss is expected to be reclassified
from accumulated other comprehensive loss during the next twelve months. (See
Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations  Net Interest Income Section for additional
Information) 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 June 30, 2004, the negative fair value adjustment of $36.5
million (unrealized loss) on the swap agreements hedging $500 million of
subordinated notes is reflected as a component of other liabilities. The
carrying amount of the $500 million in subordinated notes was decreased by an
identical amount. These swaps reduced interest expense by $2.7 million and $ .1
million in the second quarters of 2004 and 2003, respectively. For the six
months ended June 30, 2004 and 2003, these swaps reduced interest expense by
$5.3 million and $.1 million, respectively. There was no hedge ineffectiveness
recorded in the Consolidated Statements of Income on these transactions for any
period 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 June 30, 2004, the positive fair value
adjustment on the swap agreements hedging $200 million of Junior Subordinated
Debt was an unrealized gain totaling $12.5 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 $3.3 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. These swaps
reduced interest expense by $3.4 million and $2.9 million in the second
quarters of 2004 and 2003, respectively. For the six
months ended June 30, 2004 and 2003; these swaps reduced interest expense by
$6.7 million and $5.6 million, respectively. There was no hedge
ineffectiveness recorded in the Consolidated Statements of Income from these
transactions for any period 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
sheet. 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 19




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##### Table of Contents



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 June 30, 2004: (in thousands)Commitments to Extend Credit
    
    $
    2,416,567Standby letters of credit (1)
    
    
    251,687Commercial letters of credit
    
    
    21,539
 (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 June 30, 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 following table sets forth the components of net periodic benefit costs are
as follows: Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003
    
    2004
    
    2003Post-Retirement
    
    
    
    
    
    
    
    
    
    Post-Retirement(in thousands)
    
    Pension Benefits
    
    Benefits
    
    Pension Benefits
    
    BenefitsComponents of Net Periodic Benefit Cost:Service Cost
    
    $
    1,222
    
    
    $
    875
    
    
    $
    183
    
    
    $
    144
    
    
    $
    2,175
    
    
    $
    1,750
    
    
    $
    366
    
    
    $
    288Interest Cost
    
    
    1,605
    
    
    
    1,386
    
    
    
    374
    
    
    
    312
    
    
    
    2,995
    
    
    
    2,772
    
    
    
    701
    
    
    
    624Expected Return on Plan Assets
    
    
    (2,734
    )
    
    
    (1,701
    )
    
    
    
    
    
    
    
    
    
    
    (4,549
    )
    
    
    (3,402
    )
    
    
    
    
    
    
    Amortization of Prior Service Cost
    
    
    (66
    )
    
    
    (66
    )
    
    
    (20
    )
    
    
    (20
    )
    
    
    (132
    )
    
    
    (132
    )
    
    
    (40
    )
    
    
    (40
    )Amortization of Transition Asset/(Liability)
    
    
    (107
    )
    
    
    (107
    )
    
    
    73
    
    
    
    73
    
    
    
    (214
    )
    
    
    (214
    )
    
    
    146
    
    
    
    146Recognized Actuarial Loss
    
    
    258
    
    
    
    212
    
    
    
    81
    
    
    
    59
    
    
    
    516
    
    
    
    424
    
    
    
    162
    
    
    
    118Net Periodic Benefit Cost
    
    $
    178
    
    
    $
    599
    
    
    $
    691
    
    
    $
    568
    
    
    $
    791
    
    
    $
    1,198
    
    
    $
    1,335
    
    
    $
    1,136
 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, effective 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,
stockholders equity or regulatory capital. In July 2003, the Board of Governors of the Federal Reserve System 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 20




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##### Table of Contents



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 (As of June 30, 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 Note 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 not significant. 21




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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 the completed and pending
acquisitions;
    
    costs or difficulties related to the integration of the business
of GreenPoint Financial Corp. (GreenPoint) may be greater than
expected;
    
    expected cost savings and revenue enhancements from the completed
and 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. 22




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##### Table of Contents



Financial Summary Overview Selected financial highlights for the three and six months ended June 30, 2004
and 2003 are set forth in the table below. The periods ended June 30, 2004
include the operating results of TCNJ from May 14, 2004. The succeeding
discussion and analysis describes the changes in components of operating
results. Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,(in thousands, except ratios & per share amounts)
    
    2004
    
    2003
    
    2004
    
    2003Earnings:Net Income
    
    $
    108,999
    
    
    $
    96,113
    
    
    $
    211,518
    
    
    $
    199,652Per Share:Earnings Per Share  Basic
    
    $
    .69
    
    
    $
    .63
    
    
    $
    1.38
    
    
    $
    1.30Earnings Per Share  Diluted
    
    
    .68
    
    
    
    .62
    
    
    
    1.36
    
    
    
    1.29Cash Dividends
    
    
    .30
    
    
    
    .27
    
    
    
    .60
    
    
    
    .54Dividend Payout Ratio
    
    
    47
    %
    
    
    44
    %
    
    
    46
    %
    
    
    42
    %Book Value
    
    $
    13.43
    
    
    $
    10.06
    
    
    $
    13.43
    
    
    $
    10.06Tangible Book Value
    
    $
    7.31
    
    
    $
    7.34
    
    
    $
    7.31
    
    
    $
    7.34Average Equivalent Shares  Basic
    
    
    157,989
    
    
    
    152,911
    
    
    
    153,156
    
    
    
    153,417Average Equivalent Shares  Diluted
    
    
    160,316
    
    
    
    154,451
    
    
    
    155,737
    
    
    
    154,961Selected Ratios:Return on Average Total Assets
    
    
    1.78
    %
    
    
    1.73
    %
    
    
    1.86
    %
    
    
    1.83
    %Return on Average Tangible Assets (2)
    
    
    1.86
    
    
    
    1.77
    
    
    
    1.93
    
    
    
    1.88Return on Average Stockholders Equity
    
    
    22.92
    
    
    
    24.42
    
    
    
    24.56
    
    
    
    25.75Return on Average Tangible Stockholders Equity (2)
    
    
    38.23
    
    
    
    33.63
    
    
    
    37.49
    
    
    
    35.56Yield on Interest Earning Assets (1)
    
    
    5.49
    
    
    
    5.60
    
    
    
    5.53
    
    
    
    5.86Cost of Funds
    
    
    1.61
    
    
    
    1.97
    
    
    
    1.61
    
    
    
    2.06Net Interest Margin (1)
    
    
    4.26
    
    
    
    4.00
    
    
    
    4.30
    
    
    
    4.18Efficiency Ratio (3)
    
    
    35.56
    
    
    
    34.84
    
    
    
    35.49
    
    
    
    33.70
  (1)
    
    Presented on a tax equivalent basis.  (2)
    
    Return on average tangible assets and return on average
tangible stockholders equity which represent non GAAP measures
are computed, on an annualized basis as follows: - Return on average tangible assets is computed by dividing net
income, as reported plus amortization of identifiable intangible
assets, net of taxes by average total assets less average
goodwill and average identifiable intangible assets. (See
detailed schedule on exhibit 99.1) -Return on average tangible stockholders equity is computed by
dividing net income, as reported plus amortization of
identifiable intangible assets, net of taxes by average total
stockholders equity less average goodwill and average
identifiable intangible assets. (See detailed schedule on
exhibit 99.1)  (3)
    
    The efficiency ratio is used by the financial services
industry to measure an organizations operating efficiency. The
efficiency is defined as the ratio of non-interest expense net
of debt restructuring costs, amortization of identifiable
intangibles, other real estate related expenses and other
non-recurring charges, to the total of net interest income on
a tax equivalent basis and other non-interest income, of
securities gains, facilities gains and other non-recurring
items. 23




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##### Table of Contents



Highlights for the second quarter ended June 30, 2004 include:  
    
    A 13% increase in net income and a 10% increase in diluted earnings
per share when compared to the comparable prior year period.
    
    Annualized demand deposit and total deposit growth (excluding TCNJ) of 37% and 18%, respectively.
    
    Annualized loan growth (excluding TCNJ) of 20%.
    
    A net interest margin of 4.26% as compared to 4.00% in the comparable prior year period.
    
    Successfully closed and integrated TCNJ.
    
    Hired an experienced team of commercial bankers for the New Jersey
market and established an asset based lending/structured finance
business through the addition of a seasoned management team.
    
    Received all regulatory approvals for GreenPoint acquisition.
Special shareholder meeting dates to approve the transaction have been
established.
    
    Declaration of a regular quarterly cash dividend of $.30 per common
share. Net Income Net income for the second quarter was $109.0 million or diluted earnings per
share of $.68 compared to $96.1 million or $.62 diluted earnings per share in
the second quarter of 2003. Returns on average equity and assets during the
second quarter of 2004 were 22.9% and 1.8%, respectively, compared to 24.4% and
1.7% a year ago. Net income for the six months ended June 30, 2004 was $211.5 million, or
diluted earnings per share of $1.36 as compared to $199.7 million or diluted
earnings per share of $1.29 for the same period of 2003. Return on average
stockholders equity and average total assets were 24.6% and 1.9%,
respectively, during the six months ended June 30, 2004, as compared to 25.8%
and 1.8%, respectively, for the comparable prior year period. 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 87% of total
revenue (defined as net interest income plus non-interest income) for the
current 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. 24




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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 June 30,: 2004
    
    2003Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    Average(dollars in thousands )
    
    Balance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    RateInterest Earning Assets:Securities (1)
    
    $
    8,625,227
    
    
    $
    96,907
    
    
    
    4.52
    %
    
    $
    8,935,413
    
    
    $
    92,382
    
    
    
    4.15
    %Loans (2)
    
    
    13,934,465
    
    
    
    213,416
    
    
    
    6.16
    
    
    
    11,696,983
    
    
    
    196,220
    
    
    
    6.73Money Market Investments
    
    
    219,728
    
    
    
    481
    
    
    
    .88
    
    
    
    37,132
    
    
    
    143
    
    
    
    1.54Total Interest Earning Assets
    
    
    22,779,420
    
    
    
    310,804
    
    
    
    5.49
    %
    
    
    20,669,528
    
    
    
    288,745
    
    
    
    5.60
    %Non Interest Earning Assets:Cash and Due from Banks
    
    
    715,814
    
    
    
    
    
    
    
    
    
    
    
    415,732Other Assets (1)
    
    
    1,121,796
    
    
    
    
    
    
    
    
    
    
    
    1,231,544Total Assets
    
    $
    24,617,030
    
    
    
    
    
    
    
    
    
    
    $
    22,316,804Interest Bearing Liabilities:Savings, NOW & Money Market Deposits
    
    $
    10,067,881
    
    
    $
    19,108
    
    
    
    .76
    %
    
    $
    7,250,200
    
    
    $
    14,476
    
    
    
    .80
    %Time Deposits
    
    
    3,323,884
    
    
    
    12,311
    
    
    
    1.49
    
    
    
    3,023,237
    
    
    
    14,220
    
    
    
    1.89Total Savings and Time Deposits
    
    
    13,391,765
    
    
    
    31,419
    
    
    
    .94
    
    
    
    10,273,437
    
    
    
    28,696
    
    
    
    1.12Federal Funds Purchased & Securities Sold
Under Agreements to Repurchase
    
    
    2,179,640
    
    
    
    19,035
    
    
    
    3.51
    
    
    
    4,312,648
    
    
    
    27,640
    
    
    
    2.57Federal Home Loan Bank Advances
    
    
    1,002,748
    
    
    
    12,273
    
    
    
    4.92
    
    
    
    1,447,802
    
    
    
    16,719
    
    
    
    4.63Subordinated Debt (4)
    
    
    488,413
    
    
    
    4,599
    
    
    
    3.79
    
    
    
    499,174
    
    
    
    7,120
    
    
    
    5.72Junior Subordinated Debt (4)
    
    
    273,945
    
    
    
    1,953
    
    
    
    2.87
    
    
    
    276,676
    
    
    
    2,451
    
    
    
    3.55Total Borrowings
    
    
    3,944,746
    
    
    
    37,860
    
    
    
    3.86
    
    
    
    6,536,300
    
    
    
    53,930
    
    
    
    3.31Total Interest Bearing Liabilities
    
    
    17,336,511
    
    
    
    69,279
    
    
    
    1.61
    
    
    
    16,809,737
    
    
    
    82,626
    
    
    
    1.97Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.88
    %
    
    
    
    
    
    
    
    
    
    
    3.63
    %Non-Interest Bearing Liabilities:Demand Deposits
    
    $
    4,825,135
    
    
    
    
    
    
    
    
    
    
    $
    3,550,810Other Liabilities
    
    
    542,624
    
    
    
    
    
    
    
    
    
    
    
    377,551Total Liabilities
    
    
    22,704,270
    
    
    
    
    
    
    
    
    
    
    
    20,738,098Stockholders Equity
    
    
    1,912,760
    
    
    
    
    
    
    
    
    
    
    
    1,578,706Total Liabilities and Stockholders Equity
    
    $
    24,617,030
    
    
    
    
    
    
    
    
    
    
    $
    22,316,804Net Interest Income and Net Interest Margin (3)
    
    
    
    
    
    
    241,525
    
    
    
    4.26
    %
    
    
    
    
    
    
    206,119
    
    
    
    4.00
    %Less: Tax Equivalent Adjustment
    
    
    
    
    
    
    (7,430
    )
    
    
    
    
    
    
    
    
    
    
    (6,247
    )Net Interest Income
    
    
    
    
    
    $
    234,095
    
    
    
    
    
    
    
    
    
    
    $
    199,872
  (1)
    
    Unrealized gains/(losses) on available-for-sale securities are included 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, $1.67, $1.55, $1.17, and $1.10 for the three months
ended June 30, 2004; and $1.77, $1.65, $1.55, $1.23, and $1.15 for the three
months ended June 30, 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 in interest expense. 25




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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 six months ended June 30,: 2004
    
    2003Average
    
    
    
    
    
    Average
    
    Average
    
    
    
    
    
    Average(dollars in thousands )
    
    Balance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    RateInterest Earning Assets:Securities (1)
    
    $
    7,913,102
    
    
    $
    175,870
    
    
    
    4.47
    %
    
    $
    8,761,537
    
    
    $
    197,631
    
    
    
    4.55
    %Loans (2)
    
    
    13,204,601
    
    
    
    408,030
    
    
    
    6.21
    
    
    
    11,548,068
    
    
    
    393,489
    
    
    
    6.87Money Market Investments
    
    
    150,614
    
    
    
    722
    
    
    
    .96
    
    
    
    47,659
    
    
    
    397
    
    
    
    1.68Total Interest Earning Assets
    
    
    21,268,317
    
    
    
    584,622
    
    
    
    5.53
    %
    
    
    20,357,264
    
    
    
    591,517
    
    
    
    5.86
    %Non Interest Earning Assets:Cash and Due from Banks
    
    
    624,608
    
    
    
    
    
    
    
    
    
    
    
    415,797Other Assets (1)
    
    
    936,263
    
    
    
    
    
    
    
    
    
    
    
    1,214,918Total Assets
    
    $
    22,829,188
    
    
    
    
    
    
    
    
    
    
    $
    21,987,979Interest Bearing Liabilities:Savings, NOW & Money Market Deposits
    
    $
    9,291,543
    
    
    $
    34,119
    
    
    
    .74
    %
    
    $
    7,036,196
    
    
    $
    29,236
    
    
    
    .84
    %Time Deposits
    
    
    3,059,124
    
    
    
    23,047
    
    
    
    1.52
    
    
    
    3,074,038
    
    
    
    29,376
    
    
    
    1.93Total Savings and Time Deposits
    
    
    12,350,667
    
    
    
    57,166
    
    
    
    .93
    
    
    
    10,110,234
    
    
    
    58,612
    
    
    
    1.17Federal Funds Purchased & Securities Sold
Under Agreements to Repurchase
    
    
    2,077,547
    
    
    
    35,316
    
    
    
    3.42
    
    
    
    4,241,147
    
    
    
    56,298
    
    
    
    2.68Federal Home Loan Bank Advances
    
    
    1,026,374
    
    
    
    24,595
    
    
    
    4.82
    
    
    
    1,498,619
    
    
    
    35,676
    
    
    
    4.80Subordinated Debt (4)
    
    
    482,527
    
    
    
    9,144
    
    
    
    3.81
    
    
    
    499,163
    
    
    
    14,345
    
    
    
    5.80Junior Subordinated Debt (4)
    
    
    270,501
    
    
    
    3,892
    
    
    
    2.89
    
    
    
    276,668
    
    
    
    4,961
    
    
    
    3.62Total Borrowings
    
    
    3,856,949
    
    
    
    72,947
    
    
    
    3.80
    
    
    
    6,515,597
    
    
    
    111,280
    
    
    
    3.44Total Interest Bearing Liabilities
    
    
    16,207,616
    
    
    
    130,113
    
    
    
    1.61
    
    
    
    16,625,831
    
    
    
    169,892
    
    
    
    2.06Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.92
    %
    
    
    
    
    
    
    
    
    
    
    3.80
    %Non-Interest Bearing LiabilitiesDemand Deposits
    
    $
    4,451,326
    
    
    
    
    
    
    
    
    
    
    $
    3,416,613Other Liabilities
    
    
    438,293
    
    
    
    
    
    
    
    
    
    
    
    381,780Total Liabilities
    
    
    21,097,235
    
    
    
    
    
    
    
    
    
    
    
    20,424,224Stockholders Equity
    
    
    1,731,953
    
    
    
    
    
    
    
    
    
    
    
    1,563,755Total Liabilities and Stockholders Equity
    
    $
    22,829,188
    
    
    
    
    
    
    
    
    
    
    $
    21,987,979Net Interest Income and Net Interest Margin (3)
    
    
    
    
    
    
    454,509
    
    
    
    4.30
    %
    
    
    
    
    
    
    421,625
    
    
    
    4.18
    %Less: Tax Equivalent Adjustment
    
    
    
    
    
    
    (13,585
    )
    
    
    
    
    
    
    
    
    
    
    (12,303
    )Net Interest Income
    
    
    
    
    
    $
    440,924
    
    
    
    
    
    
    
    
    
    
    $
    409,322
  (1)
    
    Unrealized gains/(losses) on available-for-sale securities are included 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, $1.67,
$1.55, $1.17, and $1.13 for the six months ended June 30, 2004; and $1.77,
$1.65, $1.55, $1.23, and $1.10 for the six months ended June 30, 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 in interest expense. 26




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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 June 30,
    
    Six Months Ended June 30,2004 vs. 2003Change InAverage
    
    Average
    
    Net Interest
    
    Average
    
    Average
    
    Net Interest(in thousands)
    
    Volume
    
    Rate
    
    Income
    
    Volume
    
    Rate
    
    IncomeInterest Income from Earning Assets:Securities
    
    ($
    2,267
    )
    
    $
    6,792
    
    
    $
    4,525
    
    
    ($
    17,611
    )
    
    ($
    4,150
    )
    
    ($
    21,761
    )Loans
    
    
    34,866
    
    
    
    (17,670
    )
    
    
    17,196
    
    
    
    54,009
    
    
    
    (39,468
    )
    
    
    14,541Money Market Investments
    
    
    423
    
    
    
    (85
    )
    
    
    338
    
    
    
    555
    
    
    
    (230
    )
    
    
    325Total Interest Income
    
    
    33,022
    
    
    
    (10,963
    )
    
    
    22,059
    
    
    
    36,953
    
    
    
    (43,848
    )
    
    
    (6,895
    )Interest Expense on Liabilities:Savings, NOW & Money Market Deposits
    
    $
    5,341
    
    
    ($
    709
    )
    
    $
    4,632
    
    
    $
    8,642
    
    
    ($
    3,759
    )
    
    $
    4,883Time Deposits
    
    
    1,276
    
    
    
    (3,185
    )
    
    
    (1,909
    )
    
    
    (163
    )
    
    
    (6,166
    )
    
    
    (6,329
    )Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase
    
    
    (16,132
    )
    
    
    7,526
    
    
    
    (8,606
    )
    
    
    (33,386
    )
    
    
    12,404
    
    
    
    (20,982
    )Federal Home Loan Bank Advances
    
    
    (4,040
    )
    
    
    (405
    )
    
    
    (4,446
    )
    
    
    (9,833
    )
    
    
    (1,248
    )
    
    
    (11,081
    )Subordinated Debt
    
    
    (151
    )
    
    
    (2,370
    )
    
    
    (2,521
    )
    
    
    (461
    )
    
    
    (4,740
    )
    
    
    (5,201
    )Junior Subordinated Debt
    
    
    (24
    )
    
    
    (474
    )
    
    
    (498
    )
    
    
    (107
    )
    
    
    (962
    )
    
    
    (1,069
    )Total Interest Expense
    
    
    (13,730
    )
    
    
    383
    
    
    
    (13,347
    )
    
    
    (35,308
    )
    
    
    (4,471
    )
    
    
    (39,779
    )Net Change in Net Interest Income
    
    $
    46,752
    
    
    ($
    11,346
    )
    
    $
    35,406
    
    
    $
    72,261
    
    
    ($
    39,377
    )
    
    $
    32,884
 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
    
    
    
    
    
    20032nd Qtr
    
    1st Qtr
    
    4th Qtr
    
    3rd Qtr
    
    2nd QtrInterest Earning Assets:Securities
    
    
    4.52
    %
    
    
    4.40
    %
    
    
    4.29
    %
    
    
    3.84
    %
    
    
    4.15
    %Loans
    
    
    6.16
    
    
    
    6.27
    
    
    
    6.47
    
    
    
    6.62
    
    
    
    6.73Money Market Investments
    
    
    .88
    
    
    
    1.19
    
    
    
    .93
    
    
    
    1.34
    
    
    
    1.54Total Interest Earning Assets
    
    
    5.49
    %
    
    
    5.57
    %
    
    
    5.64
    %
    
    
    5.56
    %
    
    
    5.60
    %Interest Bearing Liabilities:Total Savings and Time Deposits
    
    
    .94
    %
    
    
    .92
    %
    
    
    .95
    %
    
    
    1.01
    %
    
    
    1.12
    %Total Borrowings
    
    
    3.86
    
    
    
    3.74
    
    
    
    3.72
    
    
    
    3.30
    
    
    
    3.31Total Interest Bearing Liabilities
    
    
    1.61
    %
    
    
    1.62
    %
    
    
    1.66
    %
    
    
    1.67
    %
    
    
    1.97
    %Interest Rate Spread
    
    
    3.88
    %
    
    
    3.95
    %
    
    
    3.98
    %
    
    
    3.89
    %
    
    
    3.63
    %Net Interest Margin
    
    
    4.26
    
    
    
    4.33
    
    
    
    4.39
    
    
    
    4.23
    
    
    
    4.00
 During the current quarter, net interest income increased $34.2 million
from the second quarter of 2003 and the net interest margin improved 26 basis
points from 4.00% to 4.26%. During the six months ended June 30, 2004, net
interest income also increased $31.6 million from the prior year period and the
net interest margin increased 12 basis points from 4.18% to 4.30%. These
improvements during the current quarter were primarily due to: (a) significant
growth (excluding TCNJ) in higher yielding assets, principally loans funded
with core deposits, especially demand deposits; (b) the mid-quarter acquisition
of TCNJ; (c) a reduction in higher cost wholesale funding due to our deposit
growth and our successful capital management strategy in June 2003; and (d) an
increase in securities yields due to a slow down in prepayment activity. 27




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Our consolidated net interest income and results of operations reflect
TCNJ subsequent to May 14, 2004. TCNJ had $4.1 billion in total assets, $1.4
billion in securities, $2.2 billion in net loans, $3.2 billion in deposits, and
$.7 billion in borrowings which were recorded on our consolidated balance sheet
at fair value (See Condensed Notes to the Consolidated Financial Statements -
Note 2 -Business Combinations for additional information). As previously reported, in June of 2003, we repositioned our balance sheet
in order to improve our net interest margin and strengthen our interest rate
profile. The repositioning included reducing our securities portfolio,
decreasing our short-term borrowings, restructuring longer term borrowings and
related swaps and converting certain fixed rate borrowings to variable rates. Interest income in the second quarter of 2004 increased $20.9 million to
$303.4 million compared to $282.5 million in 2003. During this same period, the
yield on average interest earning assets declined 11 basis points from 5.60% to
5.49%. Loans averaged $13.9 billion in the current quarter representing a $2.2
billion increase or 19% when compared to 2003, while yields declined 57 basis
points to 6.16%. During the six months ended June 30, 2004, loans averaged
$13.2 billion or an increase of $1.7 billion from 2003 while yields declined 66
basis points to 6.21%. This yield compression partially 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. While we have experienced loan growth in all
categories, it has been concentrated in higher yielding commercial loans and
commercial mortgages which also contributed to core commercial deposit growth.
As of June 30, 2004, the loans-to-deposits ratio was 78%, demonstrating that
sufficient liquidity exists to fund further loan growth with deposits. Loan
growth, excluding the completed and pending acquisitions, for the remainder of
2004 will approximate prior years experience. Securities averaged $8.6 billion in the second quarter of 2004
representing a $310 million or 3.5% decrease when compared to 2003, while
yields increased 37 basis points to 4.52%. During the six months ended June 30,
2004, securities averaged $7.9 billion or a decrease of $848 million from 2003
while yields declined 8 basis points to 4.47%. Average securities declined,
despite the acquisition of TCNJ, as a direct result of our June 2003 balance
sheet repositioning strategy. Portfolio yields and interest income were
positively impacted during the current quarter by an increase in interest rates
which resulted in reduced prepayment activity as compared to the first quarter
of 2003. Yields and income were negatively impacted during 2003 by increased
prepayment activity, which shortened our security portfolios anticipated lives
and accelerated premium amortization. Net premium amortization affected
security yields by 31 basis points during the current quarter when compared to
140 basis points in the comparable quarter of 2003. As market interest rates
continue to 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 continue to have a positive effect
on securities portfolio yields. Average interest bearing liabilities increased $527 million to $17.3
billion, while overall funding costs declined 36 basis points to 1.61%. During
the six months ended June 30, 2004, average interest bearing liabilities
decreased $418 million to $16.2 billion, while overall funding costs declined
45 basis points to 1.61%. The negative effects of lower interest earning asset
yields were offset by an increase in higher yielding loan balances and 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 $1.3 billion or 36% to $4.8 billion during
the second quarter of 2004 and positively impacted our net interest margin.
Total demand deposits contributed 75 basis points to our net interest margin
this quarter
compared to 45 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 $2.8 billion or 39% to $10.1 billion, while the
corresponding cost of funds declined 4 basis points to .76%. 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 moderated 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 increased $301 million, while their related cost decreased 40 basis
points 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 $2.6 billion to $3.9 billion in the
second quarter 2004 compared to 2003, while the related cost of funds increased
55 basis points to 3.86%. Average borrowings represented 23% of total interest
bearing liabilities as compared to 39% during the second quarter of 2003.
During the six months ended June 30, 2004, average total borrowings declined
$2.7 billion from the prior year period to $3.9 billion, while overall funding
costs increased 36 basis points to 3.80%. The decline in average borrowings is
a direct result of our June 2003 balance sheet repositioning strategy and the
growth in core deposits. The cost of funds increased due to the repayment of
short term borrowings related with our repositioning. At June 30, 2004,
collateralized borrowings (repurchase agreements and FHLB advances) maturing or
repricing in less than one year totaled $.8 billion and had a weighted average
cost of 2.45%. Collateralized borrowings with a weighted average maturity of
3.2 years totaled $2.2 billion and had a weighted average cost of 4.74%. In
prior years, certain collateralized borrowings were extended and their costs
fixed through the use of interest rate swaps, which increased interest expense
by approximately $2.4 million and $8.2 million for the second quarters of 2004
and 2003, respectively. For the six months ended June 30, 2004 and 2003, these
swaps increased interest expense by $5.1 million and $18.5 million,
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
Condensed Notes to the Consolidated Financial Statements  Note 9  Derivative
Financial Instruments for additional information). 28




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##### Table of Contents



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 three and six months ended June 30, 2004, these swaps decreased
interest expense by approximately $2.7 million and $5.3 million, respectively.
For the three and six months ended June 30, 2003, these swaps decreased
interest expense by approximately $.1 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 three and six months ended June 30,
2004, these swaps decreased interest expense by approximately $3.4 million and
$6.7 million, respectively. For the three and six months ended June 30, 2003,
these swaps decreased interest expense by approximately $2.9 million and $5.6
million, respectively (See Condensed Notes to the Consolidated Financial
Statements  Note 9  Derivative Financial Instruments for additional
information). Provision and Allowance for Loan Losses The provision for loan losses totaled $6.5 million for the second quarter
of 2004, unchanged when compared to the same period in 2003. As of June 30,
2004, the ratio of the allowance for loan losses to non-performing loans was
873% and the allowance for loans losses to total loans was .90%. Net
charge-offs, as an annualized percentage of average loans, was 9 basis points
in the second quarter of 2004. TCNJs allowance for loan loss totaled $10.3
million at May 14, 2004. The provision and allowance for loan losses are
consistent with the overall growth in the loan portfolio and our provisioning
policy. (See  Condensed 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 decreased $12.3 million or 26% to $35.2 million in the
second quarter of 2004 compared to $47.5 million in 2003. In the second
quarter of 2003, we recognized an $11.0 million net gain on the sale of three
facilities and $3.7 million in securities gains. Customer related fees and
service charges grew $3.0 million or 14% to $23.4 million resulting from
continued growth in core deposits (primarily demand deposits), expansion of
both our retail and commercial customer base, the acquisition of TCNJ and a
broadened use of fee based services. Growth in other income was partially
offset by a $1.9 million decline in mortgage banking income reflecting
decreased origination, refinancing and sales activity from record highs during
2003. Securities losses recognized during the second quarter of 2004 were $.5
million as compared to securities gains of $3.7 million in prior year period.
Gains recognized during 2003 were derived primarily from the sale of certain
corporate debt and equity securities. Non-Interest Expense Non-interest expense increased $3.2 million or 3.3% to $98.4 million in
the second quarter of 2004 compared to $95.2 million for the second quarter of
2003. During June 2003, we recognized $12.0 million in debt restructuring costs
from the cancellation of $300 million of variable rate term borrowings and
their underlying pay fixed swaps and $200 million of fixed rate term
borrowings. Contributing to the increase in non-interest expense was an
additional $6.1 million in employee
compensation and benefits, $3.7 million in occupancy and equipment costs
and $4.3 million in other operating expenses. Employee compensation and
benefits rose 13% due to the acquisition of TCNJ, 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 increase in the number of branches from the
TCNJ merger, 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 six months ended June 30, 2004, we have invested approximately $17.0
million in facilities and $12.2 million in technology and equipment. Other
operating expenses increased due to the acquisition of TCNJ and, to a lesser
extent, other customer related programs and expenses. The increase in
amortization of identifiable intangibles is due to the core deposit intangible
associated with the TCNJ acquisition. 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 35.6% and 35.5% for the three and six months ended June 30, 2004,
respectively. This ratio will be impacted in the near term due to the hiring of
several key lenders and the timing between closing the GreenPoint transaction
and merging GreenPoint Bank with North Fork Bank. Income Taxes Our effective tax rate for both the three and six months ended June 30,
2004 was 33.7%, as compared to 34% for the three and six months ended June 30,
2003. We anticipate that the effective tax rate for the full year of 2004 will
approximate the current quarters level. 29




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##### Table of Contents



Financial Condition Loan Portfolio At June 30, 2004, loans were $15.4 billion, an increase of $2.7 billion,
including $2.1 billion of loans from TCNJ. Our organic quarterly loan growth
(excluding TCNJ) was $638 million, an annualized growth rate of 20%.
Commercial loan growth, excluding TCNJ was $244 million in the quarter, an
annualized loan growth of 19%. On a linked quarter basis, we have experienced
organic loan growth in all loan categories. The following table presents our
organic loan growth excluding TCNJ for the second quarter of 2004 and the loans
acquired from TCNJ (at fair value). Actual
    
    NFB
    
    TCNJ
    
    NFB(in thousands)
    
    June 30, 2004
    
    Quarterly Growth
    
    May 14, 2004
    
    March 31, 2004Multi-Family Mortgages
    
    $
    3,824,615
    
    
    $
    166,362
    
    
    $
    183
    
    
    $
    3,658,070Commercial Mortgages
    
    
    3,536,517
    
    
    
    85,458
    
    
    
    614,625
    
    
    
    2,836,434Residential Mortgages
    
    
    3,329,949
    
    
    
    144,098
    
    
    
    679,535
    
    
    
    2,506,316Commercial
    
    
    2,529,253
    
    
    
    158,684
    
    
    
    122,284
    
    
    
    2,248,285Consumer
    
    
    1,751,240
    
    
    
    49,096
    
    
    
    588,162
    
    
    
    1,113,982Construction & Land
    
    
    453,922
    
    
    
    34,741
    
    
    
    92,478
    
    
    
    326,703Total
    
    $
    15,425,496
    
    
    $
    638,439
    
    
    $
    2,097,267
    
    
    $
    12,689,790
 Loans grew $3.5 billion or 30% to $15.4 billion for the quarter ended June
30, 2004, compared to $11.9 billion at June 30, 2003. The growth achieved
during the period has resulted from continued strong loan demand despite slow
paced growth in the local economy and the recent acquisition of TCNJ. The
commercial and commercial mortgage portfolios, which increased $1.7 billion or
39%, have benefited from our expanded presence in the New York City market, our
small business lending initiatives, robust equipment and lease financing
activity and the acquisition of TCNJ. We focus on these higher yielding and
interest rate sensitive loans that also generate core deposit relationships.
Although we have experienced multi-family loan growth, these positive
developments continue to be tempered by our decision not to compete with the
more liberal underwriting terms and rate structures offered by certain
competitors. Residential loans increased as we portfolio more adjustable rate
mortgages which have become more attractive to borrowers in a rising interest
rate environment. However, this growth has been tempered as the majority of
fixed rate originations during 2003 and first quarter 2004 were sold into the
secondary market, generating additional mortgage banking income. Consumer
loans have benefited from the expansion of the geographic
footprint of our automobile financing activities. Loan growth, excluding
the completed and pending acquisitions, for the remainder of 2004 will
approximate prior years experience. (See Condensed Notes to the Consolidated
Financial Statements  Note  4 -Loans for additional information) Presently, 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. The risk inherent in the mortgage portfolio is managed 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 30




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##### Table of Contents



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. In order to expand our commercial banking penetration in New Jersey and
leverage our TCNJ acquisition, we hired an experienced team of approximately 30
senior lenders and support personnel to lead our New Jersey business
initiatives. We believe this team, coupled with our wide array of commercial
lending and retail products, will accelerate our growth in the New Jersey
market. Additionally, we announced the formation of North Fork Business
Capital Corp., an asset based structured finance division serving middle market
businesses on a nationwide basis, led by approximately 25 seasoned lenders and
support personnel. These two experienced teams of commercial bankers should
assist in the generation of quality assets and commercial deposits.
Substantially, all these new employees joined us effective July 1, 2004. Securities Portfolio Securities grew $600 million or 7% to $8.9 billion for the quarter ended
June 30, 2004, compared to $8.3 billion at June 30, 2003. The growth achieved
during the period was due to $1.4 billion in securities acquired from TCNJ, of
which approximately $500 million were subsequently sold during the quarter. At
June 30, 2004, Mortgage Backed Securities (MBS) represented 80% 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. (See Condensed Notes
to the Consolidated Financial Statements  Note  3 -Securities for additional
information) 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 4.3 and 3.6 years, respectively at June 30,
2004. 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 June 30,
2004, net premiums total $35 million and represented approximately .5% 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
available-for-sale 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. Deposits Total deposits increased $5.4 billion or 37% to $19.8 billion at June 30,
2004, compared to June 30, 2003, due to the acquisition of TCNJ, which
contributed $3.2 billion and our continued efforts on growing core deposits
(demand, savings, NOW and money market deposits). (See Condensed Notes to the
Consolidated Financial Statements  Note  2  Business Combinations for
additional information) 31




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##### Table of Contents



The following table presents our organic deposit growth excluding TCNJ for
the second quarter of 2004 and the deposits acquired from TCNJ (at fair value). NFBActual
    
    Quarterly
    
    TCNJ
    
    NFB(in thousands)
    
    June 30, 2004
    
    Growth
    
    May 14, 2004
    
    March 31, 2004Demand
    
    $
    5,259,052
    
    
    $
    386,763
    
    
    $
    638,763
    
    
    $
    4,233,526Savings
    
    
    4,494,251
    
    
    
    96,375
    
    
    
    551,039
    
    
    
    3,846,837NOW & Money Market
    
    
    6,321,943
    
    
    
    515,059
    
    
    
    680,001
    
    
    
    5,126,883Time
    
    
    2,300,540
    
    
    
    (96,452
    )
    
    
    653,313
    
    
    
    1,743,679Certificates of Deposit, $100,000 & Over
    
    
    1,460,671
    
    
    
    (179,178
    )
    
    
    647,286
    
    
    
    992,563Total Deposits
    
    $
    19,836,457
    
    
    $
    722,567
    
    
    $
    3,170,402
    
    
    $
    15,943,488
 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. Core deposits, net of TCNJ core deposits of $1.9 billion,
increased $2.8 billion or 25% at June 30, 2004, compared to the same period in
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 21% of
total deposits and accounted for 25% of deposit growth over the 12 month period
ended June 30, 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, while more
specifically highlighting Manhattan and New Jersey (TCNJ acquisition) for the
periods ended: June 30,
    
    December 31,
    
    June 30,(in thousands)
    
    2004
    
    2003
    
    2003Manhattan (28 branches)Demand
    
    $
    1,289,993
    
    
    $
    1,027,017
    
    
    $
    811,565Interest Bearing
    
    
    2,831,846
    
    
    
    2,267,543
    
    
    
    1,950,365Total
    
    $
    4,121,839
    
    
    $
    3,294,560
    
    
    $
    2,761,930New Jersey (73 branches)Demand
    
    $
    610,145
    
    
    
    
    
    
    
    Interest Bearing
    
    
    2,271,585
    
    
    
    
    
    
    
    Total
    
    $
    2,881,730
    
    
    
    
    
    
    
    All Other Locations (157 branches)Demand
    
    $
    3,358,914
    
    
    $
    3,053,117
    
    
    $
    2,935,176Interest Bearing
    
    
    9,473,974
    
    
    
    8,768,438
    
    
    
    8,775,188Total
    
    $
    12,832,888
    
    
    $
    11,821,555
    
    
    $
    11,710,364Total (258 branches)Demand
    
    $
    5,259,052
    
    
    $
    4,080,134
    
    
    $
    3,746,741Interest Bearing
    
    
    14,577,405
    
    
    
    11,035,981
    
    
    
    10,725,553Total
    
    $
    19,836,457
    
    
    $
    15,116,115
    
    
    $
    14,472,294
 Commercial demand deposit balances aggregated $3.5 billion or 66% of total
demand deposits as compared to $2.4 billion or 64% of total demand deposits at
June 30, 2003. Once again, these advances were fueled by our expanded branch
network, especially the Manhattan locations, and our strong commercial loan
growth and the TCNJ acquisition. 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. This 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 32




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##### Table of Contents



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 June 30, 2004, we were operating
within policy limits. 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. This 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 the periods presented. (See Condensed Notes to
the Consolidated Financial Statements  Note 9  Derivative Financial
Instruments for additional information). 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:  
    
    The balance sheet composition remains static.
    
    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: (dollars in millions)
    
    Changes in Net Interest IncomeChange in Interest Rates
    
    $ Change
    
    % Change+ 200 Basis Points
    
    $
    (6.6
    )
    
    
    (0.62
    )%+ 100 Basis Points
    
    $
    (3.3
    )
    
    
    (0.31
    )%- 100 Basis Points
    
    $
    (3.6
    )
    
    
    (0.34
    )%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. 33




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##### Table of Contents



The following table reflects the estimated change in the market value of
equity assuming an immediate increase or decrease in interest rates. (dollars in millions)
    
    Market Value of EquityChange in Interest Rates
    
    $ Change
    
    % Change+ 200 Basis Points
    
    $
    (321.0
    )
    
    
    (4.78
    )%Flat Interest Rates
    
    
    
    
    
    
    - 200 Basis Points
    
    $
    (129.0
    )
    
    
    (1.92
    )%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. 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 June 30, 2004, dividends for North Fork Bank were limited under
such guidelines to $665 million. From a regulatory standpoint, North Fork
Bank, with its current balance sheet structure, had the ability to dividend
approximately $120 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 $7.7 billion on a secured basis, utilizing mortgage related loans
and securities as collateral. At June 30, 2004, our banking subsidiaries had
$1.6 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 $2.0 billion at June 30, 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 June 30, 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. 34




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##### Table of Contents



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
June 30, 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. The following table sets forth our risk-based capital amounts and ratios as of: June 30, 2004
    
    June 30, 2003(dollars in thousands )
    
    Amount
    
    Ratio
    
    Amount
    
    RatioTier 1 Capital
    
    $
    1,561,021
    
    
    
    9.86
    %
    
    $
    1,349,440
    
    
    
    10.89
    %Regulatory Requirement
    
    
    633,005
    
    
    
    4.00
    %
    
    
    495,622
    
    
    
    4.00
    %Excess
    
    $
    928,016
    
    
    
    5.86
    %
    
    $
    853,818
    
    
    
    6.89
    %Total Risk Adjusted Capital
    
    $
    2,199,075
    
    
    
    13.90
    %
    
    $
    1,964,643
    
    
    
    15.86
    %Regulatory Requirement
    
    
    1,266,009
    
    
    
    8.00
    %
    
    
    991,244
    
    
    
    8.00
    %Excess
    
    $
    933,066
    
    
    
    5.90
    %
    
    $
    973,399
    
    
    
    7.86
    %Risk Weighted Assets
    
    $
    15,825,114
    
    
    
    
    
    
    $
    12,390,553
 Our Leverage Ratio at June 30, 2004 and 2003 was 6.63% and 6.17%,
respectively. North Fork Banks Tier 1, Total Risk Based and Leverage Ratios
were 9.87%, 10.75%, and 6.64%, respectively, at June 30, 2004. Superior Savings
of New Englands Tier 1, Total Risk Based and Leverage Ratios were 18.32%,
18.98% and 7.58%, respectively, at June 30, 2004. On June 22, 2004, the Board of Directors declared its regular quarterly
cash dividend of $.30 per common share. The dividend will be payable on August
16, 2004 to shareholders of record at the close of business on July 30, 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. 35




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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. 36




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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: Total Number ofAverage
    
    Shares Purchased
    
    Maximum Number ofTotal Number of
    
    Price
    
    as Part of Publicly
    
    Shares that May Yet BeShares
    
    Paid Per
    
    Announced
    
    Purchased Under thePeriod
    
    Purchased (1)
    
    Share
    
    Program
    
    Program (2)April 1, 2004 - April 30, 2004
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    2,829,100 SharesMay 1, 2004 - May 31, 2004
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    2,829,100 SharesJune 1, 2004 - June 30, 2004
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    2,829,100 Shares
  (1)
    
    We did not repurchase shares of our common stock during the second
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 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Stockholders held on April 27, 2004, the stockholders
voted on:  1)
    
    The election of 3 directors for a term of three years expiring
in 2007. Name of Director
    
    Shares Voted For
    
    Shares WithheldJames F. Reeve
    
    
    130,482,720
    
    
    
    2,728,207George H. Rowsom
    
    
    130,445,245
    
    
    
    2,765,762Dr. Kurt R. Schmeller
    
    
    129,883,388
    
    
    
    3,327,619
  2)
    
    Shareholders ratified the selection of KPMG, LLP as the
companys independent auditor for the fiscal year ending December 31,
2004 by 130,141,937 votes for and 1,850,212 votes withheld. 
 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(99.1)
    
    Supplemental Performance Measurements
  (b)
    
    Reports on Form 8-K 37




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##### Table of Contents



We filed the following Current Reports on Form 8-K during the period from
April 1, 2004 to the date of the filing of this Report:  
    
    On July 16, 2004, we filed a Current Report announcing our
operating results for the quarter ended June 2004.  
    
    On June 29, 2004, we filed a Current Report amending the
current report on Form 8-K filed on May 27, 2004, to include pro
forma financial statement information in connection with The Trust
Company of New Jersey.  
    
    On May 27, 2004, we filed a Current Report announcing that we
would file the required financial statements with respect to the
acquisition of The Trust Company of New Jersey.  
    
    On May 17, 2004, we filed a Current Report announcing that we
completed the acquisition of The Trust Company of New Jersey.  
    
    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. 38




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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:August 9, 2004
    
    North Fork Bancorporation, Inc./s/ Daniel M. HealyDaniel M. HealyExecutive Vice President andChief Financial Officer
 39