##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the quarterly period ended June 30, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
 For the transition period from                to
 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) 531-2970  (Companys telephone number, including area code)
 þ o
  þ o o
 o þ
  CLASS OF COMMON STOCK
    
    NUMBER OF SHARES OUTSTANDING 8/3/06$.01 Par Value
    
    465,838,512




---



##### 



North Fork Bancorporation, Inc.
 Form 10-Q
 INDEX
 PagePART 1. FINANCIAL INFORMATION (unaudited)Item 1. Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Consolidated Statements of Changes in Stockholders Equity
    
    
    6Consolidated Statements of Comprehensive Income
    
    
    7Condensed Notes to Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    42Item 4. Controls and Procedures
    
    
    43PART 2. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    43Item 1A. Risk Factors
    
    
    44Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    44Item 4. Submission of Matters to a Vote of Security Holders
    
    
    44Item 5. Other Information
    
    
    44Item 6. Exhibits
    
    
    45EX-11: STATEMENT RE: COMPUTATION OF NET INCOMEEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATIONEX-99.1: SUPPLEMENTAL PERFORMANCE MEASUREMENTS
  2




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##### Table of Contents



Item 1. Financial Statements
 
 Consolidated Balance Sheets (Unaudited)
 June 30,
    
    
    December 31,
    
    
    June 30,(in thousands except share amounts)
    
    2006
    
    
    2005
    
    
    2005Assets:Cash & Due from Banks
    
    $
    1,000,195
    
    
    $
    1,037,406
    
    
    $
    826,921Money Market Investments
    
    
    22,295
    
    
    
    24,843
    
    
    
    38,023Securities:Available-for-Sale ($3,175,760, $4,107,473 and $5,313,374 pledged
at June 30, 2006, December 31, 2005 and June 30, 2005,
respectively)
    
    
    9,867,618
    
    
    
    11,295,977
    
    
    
    12,924,780Held-to-Maturity ($11,761, $13,409 and $18,746 pledged at June
30, 2006, December 31, 2005 and June 30, 2005, respectively)
(Fair Value $96,321, $105,128 and $121,437 at June 30, 2006,
December 30, 2005 and June 30, 2005, respectively)
    
    
    97,344
    
    
    
    104,210
    
    
    
    118,429Total Securities
    
    
    9,964,962
    
    
    
    11,400,187
    
    
    
    13,043,209Loans:Loans Held-for-Sale
    
    
    5,406,341
    
    
    
    4,359,267
    
    
    
    6,398,119Loans Held-for-Investment
    
    
    35,551,560
    
    
    
    33,232,236
    
    
    
    32,482,774Less: Allowance for Loan Losses
    
    
    224,571
    
    
    
    217,939
    
    
    
    217,872Net Loans Held-for-Investment
    
    
    35,326,989
    
    
    
    33,014,297
    
    
    
    32,264,902Goodwill
    
    
    5,918,116
    
    
    
    5,918,116
    
    
    
    5,888,195Identifiable Intangibles
    
    
    96,373
    
    
    
    114,091
    
    
    
    132,468Premises & Equipment
    
    
    447,633
    
    
    
    438,040
    
    
    
    426,099Mortgage Servicing Rights, net
    
    
    272,543
    
    
    
    267,424
    
    
    
    253,482Accrued Income Receivable
    
    
    213,492
    
    
    
    205,892
    
    
    
    205,678Other Assets
    
    
    712,896
    
    
    
    837,308
    
    
    
    908,593Total Assets
    
    $
    59,381,835
    
    
    $
    57,616,871
    
    
    $
    60,385,689Liabilities and Stockholders Equity:Deposits:Demand
    
    $
    7,561,888
    
    
    $
    7,639,231
    
    
    $
    7,586,939Savings, NOW & Money Market
    
    
    21,377,573
    
    
    
    20,910,161
    
    
    
    21,659,890Time
    
    
    7,875,144
    
    
    
    8,067,181
    
    
    
    8,219,517Total Deposits
    
    
    36,814,605
    
    
    
    36,616,573
    
    
    
    37,466,346Federal Funds Purchased & Collateralized Borrowings
    
    
    11,249,615
    
    
    
    9,700,621
    
    
    
    11,387,571Other Borrowings
    
    
    1,463,066
    
    
    
    1,477,364
    
    
    
    1,506,337Accrued Expenses & Other Liabilities
    
    
    791,972
    
    
    
    820,072
    
    
    
    809,155Total Liabilities
    
    $
    50,319,258
    
    
    $
    48,614,630
    
    
    $
    51,169,409Stockholders Equity:Preferred Stock, par value $1.00; authorized 10,000,000 shares, unissued
    
    $
    
    
    
    $
    
    
    
    $
    Common Stock, par value $0.01; authorized 1,000,000,000 shares; issued
480,682,118 Shares at June 30, 2006
    
    
    4,807
    
    
    
    4,806
    
    
    
    4,792Additional Paid in Capital
    
    
    6,875,810
    
    
    
    7,035,314
    
    
    
    7,007,286Retained Earnings
    
    
    2,779,501
    
    
    
    2,581,047
    
    
    
    2,354,784Accumulated Other Comprehensive Loss
    
    
    (207,161
    )
    
    
    (108,898
    )
    
    
    (21,076
    )Deferred Compensation (See Note 1)
    
    
    
    
    
    
    (154,772
    )
    
    
    (115,160
    )Treasury Stock at Cost; 14,934,674 Shares at June 30, 2006
    
    
    (390,380
    )
    
    
    (355,256
    )
    
    
    (14,346
    )Total Stockholders Equity
    
    
    9,062,577
    
    
    
    9,002,241
    
    
    
    9,216,280Total Liabilities and Stockholders Equity
    
    $
    59,381,835
    
    
    $
    57,616,871
    
    
    $
    60,385,689
 See accompanying notes to consolidated financial statements
 3




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##### Table of Contents



Consolidated Statements of Income (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(in thousands, except per share amounts)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Interest Income:Loans Held-for-Investment
    
    $
    531,756
    
    
    $
    472,218
    
    
    $
    1,037,492
    
    
    $
    924,435Loans Held-for-Sale
    
    
    76,088
    
    
    
    73,065
    
    
    
    139,780
    
    
    
    139,913Mortgage-Backed Securities
    
    
    96,437
    
    
    
    133,375
    
    
    
    195,952
    
    
    
    275,382Other Securities
    
    
    29,173
    
    
    
    30,124
    
    
    
    57,818
    
    
    
    59,531Money Market Investments
    
    
    570
    
    
    
    662
    
    
    
    1,112
    
    
    
    1,395Total Interest Income
    
    
    734,024
    
    
    
    709,444
    
    
    
    1,432,154
    
    
    
    1,400,656Interest Expense:Savings, NOW & Money Market Deposits
    
    
    134,731
    
    
    
    82,455
    
    
    
    252,164
    
    
    
    152,051Time Deposits
    
    
    59,658
    
    
    
    40,391
    
    
    
    119,448
    
    
    
    73,857Federal Funds Purchased & Collateralized Borrowings
    
    
    89,628
    
    
    
    105,238
    
    
    
    173,102
    
    
    
    204,245Other Borrowings
    
    
    20,119
    
    
    
    19,287
    
    
    
    40,075
    
    
    
    37,111Total Interest Expense
    
    
    304,136
    
    
    
    247,371
    
    
    
    584,789
    
    
    
    467,264Net Interest Income
    
    
    429,888
    
    
    
    462,073
    
    
    
    847,365
    
    
    
    933,392Provision for Loan Losses
    
    
    9,000
    
    
    
    9,000
    
    
    
    18,000
    
    
    
    18,000Net Interest Income after Provision for Loan Losses
    
    
    420,888
    
    
    
    453,073
    
    
    
    829,365
    
    
    
    915,392Non-Interest Income:Mortgage Banking Income
    
    
    105,769
    
    
    
    90,680
    
    
    
    201,841
    
    
    
    201,775Customer Related Fees & Service Charges
    
    
    40,291
    
    
    
    41,902
    
    
    
    81,394
    
    
    
    83,908Investment Management, Commissions & Trust Fees
    
    
    9,127
    
    
    
    10,287
    
    
    
    18,796
    
    
    
    21,358Other Operating Income
    
    
    22,500
    
    
    
    15,378
    
    
    
    34,857
    
    
    
    29,456Securities Gains, net
    
    
    4,099
    
    
    
    10,884
    
    
    
    10,821
    
    
    
    15,519Trading Losses on Derivative Instruments
    
    
    (23,223
    )
    
    
    
    
    
    
    (21,070
    )
    
    
    Total Non-Interest Income
    
    
    158,563
    
    
    
    169,131
    
    
    
    326,639
    
    
    
    352,016Non-Interest Expense:Employee Compensation & Benefits
    
    
    145,248
    
    
    
    139,014
    
    
    
    286,559
    
    
    
    274,383Occupancy & Equipment, net
    
    
    51,254
    
    
    
    46,949
    
    
    
    102,546
    
    
    
    92,903Amortization of Identifiable Intangibles
    
    
    8,859
    
    
    
    9,133
    
    
    
    17,718
    
    
    
    18,266Other Operating Expenses
    
    
    55,310
    
    
    
    54,697
    
    
    
    112,026
    
    
    
    110,894Merger Related Expenses
    
    
    5,233
    
    
    
    
    
    
    
    5,233
    
    
    
    Settlement Recovery
    
    
    (16,031
    )
    
    
    
    
    
    
    (16,031
    )
    
    
    Total Non-Interest Expense
    
    
    249,873
    
    
    
    249,793
    
    
    
    508,051
    
    
    
    496,446Income Before Income Taxes
    
    
    329,578
    
    
    
    372,411
    
    
    
    647,953
    
    
    
    770,962Provision for Income Taxes
    
    
    108,761
    
    
    
    130,345
    
    
    
    217,008
    
    
    
    269,861Net Income
    
    $
    220,817
    
    
    $
    242,066
    
    
    $
    430,945
    
    
    $
    501,101Earnings Per Share:Basic
    
    $
    0.49
    
    
    $
    0.52
    
    
    $
    0.95
    
    
    $
    1.07Diluted
    
    $
    0.48
    
    
    $
    0.51
    
    
    $
    0.94
    
    
    $
    1.06
 See accompanying notes to consolidated financial statements
 4




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##### Table of Contents



Consolidated Statements of Cash Flows (Unaudited)
 For the Six Months Ended June 30,(in thousands)
    
    2006
    
    
    2005Cash Flows from Operating Activities:Net Income
    
    $
    430,945
    
    
    $
    501,101Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:Provision for Loan Losses
    
    
    18,000
    
    
    
    18,000Depreciation
    
    
    23,653
    
    
    
    20,617Net Amortization/(Accretion):Securities
    
    
    11,629
    
    
    
    13,681Loans
    
    
    8,222
    
    
    
    8,841Borrowings & Time Deposits
    
    
    (79,569
    )
    
    
    (64,637
    )Intangibles
    
    
    17,719
    
    
    
    18,266Deferred Compensation
    
    
    14,019
    
    
    
    11,357Gain on Sale of Loans Held-for-Investment
    
    
    
    
    
    
    (4,293
    )Securities Gains
    
    
    (10,821
    )
    
    
    (15,519
    )Capitalization of Mortgage Servicing Rights
    
    
    (32,839
    )
    
    
    (81,154
    )Amortization of Mortgage Servicing Rights
    
    
    45,412
    
    
    
    40,580Temporary (Recovery)/Impairment Charge  Mortgage Servicing Rights
    
    
    (18,592
    )
    
    
    34,971Loans Held-for-Sale:Originations (1)
    
    
    (16,273,448
    )
    
    
    (18,837,611
    )Proceeds from Sale
    
    
    15,164,479
    
    
    
    17,681,069Gains on Sale of Loans
    
    
    (184,065
    )
    
    
    (225,944
    )Other
    
    
    245,959
    
    
    
    760,312Other, Net
    
    
    96,313
    
    
    
    52,700Net Cash Used in Operating Activities
    
    
    (522,984
    )
    
    
    (67,663
    )Cash Flows from Investing Activities:Loans Held-for-Investment Originated, Net of Principal Repayments and Charge-offs
    
    
    (2,356,363
    )
    
    
    (2,984,916
    )Purchases of Securities Available-for-Sale
    
    
    (806,026
    )
    
    
    (1,537,330
    )Proceeds from Sale of Securities Available-for-Sale
    
    
    965,022
    
    
    
    1,983,910Maturities, Redemptions, Calls and Principal Repayments on Securities Available-for-Sale
    
    
    1,146,695
    
    
    
    2,097,417Purchases of Securities Held-to-Maturity
    
    
    (1,000
    )
    
    
    (1,000
    )Maturities, Redemptions, Calls and Principal Repayments on Securities Held-to-Maturity
    
    
    7,744
    
    
    
    24,737Proceeds from Sale of Loans Held-for-Investment
    
    
    29,663
    
    
    
    960,503Purchases of Premises and Equipment, net
    
    
    (33,246
    )
    
    
    (30,713
    )Net Cash (Used in)/Provided by Investing Activities
    
    $
    (1,047,511
    )
    
    $
    512,608Cash Flows from Financing Activities:Net Increase in Customer Deposit Liabilities
    
    $
    217,883
    
    
    $
    2,672,497Net Increase/(Decrease) in Borrowings
    
    
    1,599,919
    
    
    
    (3,162,063
    )Purchase of Treasury Stock
    
    
    (131,839
    )
    
    
    Exercise of Options and Common Stock Sold for Cash
    
    
    77,582
    
    
    
    55,867Cash Dividends Paid
    
    
    (232,809
    )
    
    
    (209,202
    )Net Cash Provided by/(Used in) Financing Activities
    
    
    1,530,736
    
    
    
    (642,901
    )Net Decrease in Cash and Cash Equivalents
    
    
    (39,759
    )
    
    
    (197,956
    )Cash and Cash Equivalents at Beginning of the Period
    
    
    1,062,249
    
    
    
    1,062,900Cash and Cash Equivalents at End of the Period
    
    $
    1,022,490
    
    
    $
    864,944Supplemental Disclosures of Cash Flow Information:Cash Paid During the Period for:Interest Expense
    
    $
    631,238
    
    
    $
    520,294Income Taxes
    
    $
    132,552
    
    
    $
    86,662During the Period, the Company Purchased Various
Securities which Settled in the Subsequent Period
    
    $
    45,726
    
    
    $
    70,166
 
 (1)
    
    Excludes loans retained in the held-for-investment portfolio totaling $1.4 billion and $3.6
billion during 2006 and 2005, respectively See accompanying notes to consolidated financial statements
 5




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##### Table of Contents



Consolidated Statements of Changes in Stockholders Equity (unaudited)
 AccumulatedOther
    
    
    
    
    
    
    
    
    
    
    Total(Dollars in thousands, except share
    
    Common
    
    
    Additional Paid
    
    
    Retained
    
    
    Comprehensive
    
    
    Deferred
    
    
    Treasury
    
    
    Stockholdersamounts)
    
    Stock
    
    
    In Capital
    
    
    Earnings
    
    
    (Loss)/Income
    
    
    Compensation
    
    
    Stock
    
    
    EquityBalance,
December 31, 2004
    
    $
    4,745
    
    
    $
    6,968,493
    
    
    $
    2,064,148
    
    
    $
    240
    
    
    ($
    125,174
    )
    
    ($
    31,373
    )
    
    $
    8,881,079Net Income
    
    
    
    
    
    
    
    
    
    
    501,101
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    501,101Cash Dividends ($.44
per share)
    
    
    
    
    
    
    
    
    
    
    (210,465
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (210,465
    )Issuance of Stock
(147,590 shares)
    
    
    47
    
    
    
    1,072
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,119
    
    
    
    4,238Restricted Stock
Activity, net
    
    
    
    
    
    
    1,207
    
    
    
    
    
    
    
    
    
    
    
    10,014
    
    
    
    (191
    )
    
    
    11,030Stock Based
Compensation
Activity, net
    
    
    
    
    
    
    36,514
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,099
    
    
    
    50,613Other Comprehensive
Loss, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,316
    )
    
    
    
    
    
    
    
    
    
    
    (21,316
    )Balance, June 30, 2005
    
    $
    4,792
    
    
    $
    7,007,286
    
    
    $
    2,354,784
    
    
    ($
    21,076
    )
    
    ($
    115,160
    )
    
    ($
    14,346
    )
    
    $
    9,216,280Balance, December 31,
2005
    
    $
    4,806
    
    
    $
    7,035,314
    
    
    $
    2,581,047
    
    
    $
    (108,898
    )
    
    ($
    154,772
    )
    
    ($
    355,256
    )
    
    $
    9,002,241Net Income
    
    
    
    
    
    
    
    
    
    
    430,945
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    430,945Cash Dividends ($.50
per share)
    
    
    
    
    
    
    
    
    
    
    (232,491
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (232,491
    )Issuance of Stock
(152,769 shares)
    
    
    1
    
    
    
    236
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,991
    
    
    
    4,228Reclassification of
Deferred Compensation
to Additional Paid in
Capital upon
Adoption of
SFAS No. 123(R)
    
    
    
    
    
    
    (154,772
    )
    
    
    
    
    
    
    
    
    
    
    154,772
    
    
    
    
    
    
    
    Restricted Stock
Activity, net
    
    
    
    
    
    
    14,462
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60
    
    
    
    14,522Stock Based
Compensation
Activity, net
    
    
    
    
    
    
    (19,430
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,664
    
    
    
    73,234Purchases of Treasury
Stock (5,101,900
shares)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (131,839
    )
    
    
    (131,839
    )Other Comprehensive
Loss, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98,263
    )
    
    
    
    
    
    
    
    
    
    
    (98,263
    )Balance, June 30, 2006
    
    $
    4,807
    
    
    $
    6,875,810
    
    
    $
    2,779,501
    
    
    ($
    207,161
    )
    
    $
    
    
    
    ($
    390,380
    )
    
    $
    9,062,577
 See accompanying notes to consolidated financial statements
 6




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##### Table of Contents



Consolidated Statements of Comprehensive Income (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Net Income
    
    $
    220,817
    
    
    $
    242,066
    
    
    $
    430,945
    
    
    $
    501,101Other Comprehensive IncomeUnrealized (Losses)/Gains On Securities:Changes in Unrealized (Losses)/Gains Arising During the Period
    
    $
    (66,801
    )
    
    $
    127,453
    
    
    $
    (163,089
    )
    
    $
    (33,371
    )Less: Reclassification Adjustment for Gains Included in Net Income
    
    
    (4,099
    )
    
    
    (10,884
    )
    
    
    (10,821
    )
    
    
    (15,519
    )Changes in Unrealized (Losses) /Gains Arising During the Period
    
    
    (70,900
    )
    
    
    116,569
    
    
    
    (173,910
    )
    
    
    (48,890
    )Related Tax Effect on Unrealized (Losses) /Gains During the Period
    
    
    30,487
    
    
    
    (50,095
    )
    
    
    74,783
    
    
    
    21,019Net Change in Unrealized (Losses) /Gains Arising During the Period
    
    
    (40,413
    )
    
    
    66,474
    
    
    
    (99,127
    )
    
    
    (27,871
    )Unrealized Gains/(Losses) On Derivative Instruments:Changes in Unrealized Gains/(Losses) Arising During the Period
    
    $
    443
    
    
    $
    (1,131
    )
    
    $
    1,021
    
    
    $
    9,707Add: Reclassification Adjustment for Expenses Included in Net Income
    
    
    203
    
    
    
    690
    
    
    
    496
    
    
    
    1,790Changes in Unrealized Gains/(Losses) Arising During the Period
    
    
    646
    
    
    
    (441
    )
    
    
    1,517
    
    
    
    11,497Related Tax Effect on Unrealized Gains/(Losses) During the Period
    
    
    (277
    )
    
    
    191
    
    
    
    (653
    )
    
    
    (4,942
    )Net Change in Unrealized (Losses) /Gains Arising During the Period
    
    
    369
    
    
    
    (250
    )
    
    
    864
    
    
    
    6,555Net Other Comprehensive (Loss)/Income
    
    $
    (40,044
    )
    
    $
    66,224
    
    
    $
    (98,263
    )
    
    $
    (21,316
    )Comprehensive Income
    
    $
    180,773
    
    
    $
    308,290
    
    
    $
    332,682
    
    
    $
    479,785
 See accompanying notes to consolidated financial statements
 7




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##### Table of Contents



North Fork Bancorporation, Inc.
 
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 June 30, 2006 and 2005
  Note 1  Business and Summary of Significant Accounting Policies
  Proposed Plan of Merger with Capital One Financial Corporation
    Basis of Presentation
  8




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##### Table of Contents



Accounting for Stock-Based Compensation
  Critical Accounting Policies
  Provision and Allowance for Loan Losses
     
    
    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, or 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).
 9




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##### Table of Contents



Accounting for Derivative Financial Instruments
     10




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##### Table of Contents



Representation and Warranty Reserve
   Mortgage Servicing Rights
    11




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##### Table of Contents



NOTE 2  SECURITIES
  June 30, 2006
    
    
    December 31, 2005
    
    
    June 30, 2005Available-for-Sale
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair(in thousands)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueCMO Agency Issuances
    
    $
    3,188,748
    
    
    $
    3,036,421
    
    
    $
    3,604,117
    
    
    $
    3,511,285
    
    
    $
    4,269,559
    
    
    $
    4,231,390CMO Private Issuances
    
    
    3,305,213
    
    
    
    3,179,137
    
    
    
    3,484,016
    
    
    
    3,409,789
    
    
    
    3,941,709
    
    
    
    3,926,929Agency Pass-Through Certificates
    
    
    1,744,499
    
    
    
    1,685,025
    
    
    
    1,986,388
    
    
    
    1,956,487
    
    
    
    2,328,213
    
    
    
    2,335,485State & Municipal Obligations
    
    
    671,738
    
    
    
    663,997
    
    
    
    884,742
    
    
    
    881,238
    
    
    
    768,793
    
    
    
    771,349Equity Securities (1) (2)
    
    
    732,923
    
    
    
    724,836
    
    
    
    663,371
    
    
    
    675,525
    
    
    
    685,873
    
    
    
    693,509U.S. Treasury & Agency
Obligations
    
    
    188,734
    
    
    
    184,003
    
    
    
    233,468
    
    
    
    231,152
    
    
    
    278,294
    
    
    
    277,806Other Securities
    
    
    398,535
    
    
    
    394,199
    
    
    
    628,737
    
    
    
    630,501
    
    
    
    685,176
    
    
    
    688,312Total Available-for-Sale
Securities
    
    $
    10,230,390
    
    
    $
    9,867,618
    
    
    $
    11,484,839
    
    
    $
    11,295,977
    
    
    $
    12,957,617
    
    
    $
    12,924,780
 
 (1)
    
    Amortized cost and fair value includes $426.8 million, $265.8 million and $291.8 million in
Federal Home Loan Bank Stock at June 30, 2006, December 31, 2005 and June 30, 2005,
respectively.(2)
    
    Amortized cost and fair value includes $273.8 million and $266.0 million at June 30, 2006,
respectively, $332.3 million and $342.8 million at December 31, 2005, respectively and $332.3
million and $337.4 million at June 30, 2005, respectively of Federal Home Loan Mortgage
Corporation and Federal National Mortgage Association Preferred Stock, respectively.  June 30, 2006
    
    
    December 31, 2005
    
    
    June 30, 2005Held-to-Maturity
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair(in thousands)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueAgency Pass-Through Certificates
    
    $
    42,400
    
    
    $
    40,852
    
    
    $
    46,155
    
    
    $
    45,814
    
    
    $
    50,491
    
    
    $
    51,428State & Municipal Obligations
    
    
    36,562
    
    
    
    37,571
    
    
    
    38,301
    
    
    
    40,116
    
    
    
    41,372
    
    
    
    43,951CMO Private Issuances
    
    
    8,648
    
    
    
    8,215
    
    
    
    9,430
    
    
    
    8,958
    
    
    
    15,356
    
    
    
    14,902Other Securities
    
    
    9,734
    
    
    
    9,683
    
    
    
    10,324
    
    
    
    10,240
    
    
    
    11,210
    
    
    
    11,156Total Held-to-Maturity Securities
    
    $
    97,344
    
    
    $
    96,321
    
    
    $
    104,210
    
    
    $
    105,128
    
    
    $
    118,429
    
    
    $
    121,437
  NOTE 3  LOANS
  Loans Held-for-Sale
    
    June 30,
    
    
    % of
    
    
    December 31,
    
    
    % of
    
    
    June 30,
    
    
    % of(dollars in thousands)
    
    2006
    
    
    Total
    
    
    2005
    
    
    Total
    
    
    2005
    
    
    TotalResidential Mortgages
    
    $
    4,319,709
    
    
    
    81
    %
    
    $
    3,824,547
    
    
    
    89
    %
    
    $
    5,481,104
    
    
    
    87
    %Home Equity
    
    
    1,035,928
    
    
    
    19
    
    
    
    496,656
    
    
    
    11
    
    
    
    852,137
    
    
    
    13Total
    
    $
    5,355,637
    
    
    
    100
    %
    
    $
    4,321,203
    
    
    
    100
    %
    
    $
    6,333,241
    
    
    
    100
    %Deferred Origination Costs
    
    
    50,704
    
    
    
    
    
    
    
    38,064
    
    
    
    
    
    
    
    64,878Total Loans Held-for-Sale
    
    $
    5,406,341
    
    
    
    
    
    
    $
    4,359,267
    
    
    
    
    
    
    $
    6,398,119
 12




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##### Table of Contents



Loans Held-for- Investment
    
    June 30,
    
    
    % of
    
    
    December 31,
    
    
    % of
    
    
    June 30,
    
    
    % of(dollars in thousands)
    
    2006
    
    
    Total
    
    
    2005
    
    
    Total
    
    
    2005
    
    
    TotalCommercial Mortgages
    
    $
    7,079,501
    
    
    
    20
    %
    
    $
    6,206,416
    
    
    
    19
    %
    
    $
    5,725,316
    
    
    
    18
    %Commercial & Industrial
    
    
    5,806,928
    
    
    
    16
    
    
    
    4,709,440
    
    
    
    14
    
    
    
    3,879,830
    
    
    
    12Total Commercial
    
    
    12,886,429
    
    
    
    36
    %
    
    
    10,915,856
    
    
    
    33
    %
    
    
    9,605,146
    
    
    
    30
    %Residential Mortgages
    
    
    14,519,282
    
    
    
    41
    
    
    
    15,068,443
    
    
    
    45
    
    
    
    16,176,829
    
    
    
    49Multi-Family Mortgages
    
    
    5,134,232
    
    
    
    15
    
    
    
    4,821,642
    
    
    
    15
    
    
    
    4,485,420
    
    
    
    14Consumer
    
    
    1,749,383
    
    
    
    5
    
    
    
    1,558,782
    
    
    
    5
    
    
    
    1,521,869
    
    
    
    5Construction & Land
    
    
    1,222,981
    
    
    
    3
    
    
    
    829,273
    
    
    
    2
    
    
    
    653,002
    
    
    
    2Total
    
    $
    35,512,307
    
    
    
    100
    %
    
    $
    33,193,996
    
    
    
    100
    %
    
    $
    32,442,266
    
    
    
    100
    %Unearned Income & Deferred Origination Costs, net
    
    
    39,253
    
    
    
    
    
    
    
    38,240
    
    
    
    
    
    
    
    40,508Total Loans Held-for -Investment
    
    $
    35,551,560
    
    
    
    
    
    
    $
    33,232,236
    
    
    
    
    
    
    $
    32,482,774
  Non-Performing Assets
   June 30,
    
    
    December 31,
    
    
    June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    2005Commercial Mortgages
    
    $
    1,833
    
    
    $
    498
    
    
    $
    6,409Commercial & Industrial
    
    
    9,384
    
    
    
    7,970
    
    
    
    7,768Total Commercial
    
    
    11,217
    
    
    
    8,468
    
    
    
    14,177Residential Mortgages
    
    
    14,219
    
    
    
    19,315
    
    
    
    63,979Multi-Family Mortgages
    
    
    
    
    
    
    550
    
    
    
    44Consumer
    
    
    1,837
    
    
    
    2,684
    
    
    
    2,179Construction and Land
    
    
    
    
    
    
    
    
    
    
    308Non-Performing Loans Held-for-Investment
    
    $
    27,273
    
    
    $
    31,017
    
    
    $
    80,687Non-Performing Loans Held-for-Sale
    
    
    27,148
    
    
    
    13,931
    
    
    
    45,377Other Real Estate
    
    
    3,255
    
    
    
    4,101
    
    
    
    14,557Total Non-Performing Assets
    
    $
    57,676
    
    
    $
    49,049
    
    
    $
    140,621Allowance for Loan Losses to Non-Performing Loans Held-for-Investment
    
    
    823
    %
    
    
    703
    %
    
    
    270
    %Allowance for Loan Losses to Total Loans Held-for-Investment
    
    
    .63
    
    
    
    .66
    
    
    
    .67Non-Performing Loans to Total Loans Held-for-Investment
    
    
    .08
    
    
    
    .09
    
    
    
    .25Non-Performing Assets to Total Assets
    
    
    .10
    
    
    
    .09
    
    
    
    .23
   13




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##### Table of Contents



NOTE 4  ALLOWANCE FOR LOAN LOSSES
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Balance at Beginning of Period
    
    $
    221,256
    
    
    $
    215,307
    
    
    $
    217,939
    
    
    $
    211,097Provision For Loan Losses
    
    
    9,000
    
    
    
    9,000
    
    
    
    18,000
    
    
    
    18,000Total
    
    
    230,256
    
    
    
    224,307
    
    
    
    235,939
    
    
    
    229,097Recoveries Credited to the Allowance
    
    
    4,029
    
    
    
    4,141
    
    
    
    7,181
    
    
    
    9,143Losses Charged to the Allowance
    
    
    (9,714
    )
    
    
    (10,576
    )
    
    
    (18,549
    )
    
    
    (20,368
    )Balance at End of Period
    
    $
    224,571
    
    
    $
    217,872
    
    
    $
    224,571
    
    
    $
    217,872Annualized Net Charge-offs to Average Loans, net
    
    
    .07
    %
    
    
    .08
    %
    
    
    .07
    %
    
    
    .07
    %
 NOTE 5  FEDERAL FUNDS PURCHASED AND COLLATERALIZED BORROWINGS
  June 30,
    
    
    December 31,
    
    
    June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    2005Federal Funds Purchased
    
    $
    1,412,000
    
    
    $
    2,634,000
    
    
    $
    1,957,925Securities Sold Under Repurchase Agreements
    
    
    2,735,387
    
    
    
    3,783,017
    
    
    
    5,211,985Federal Home Loan Bank Advances
    
    
    7,102,228
    
    
    
    3,283,604
    
    
    
    4,217,661Total Federal Funds Sold and Collateralized Borrowings
    
    $
    11,249,615
    
    
    $
    9,700,621
    
    
    $
    11,387,571
  (dollars in thousands)
    
    FHLB
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageMaturity
    
    Advances
    
    
    Rate (1)
    
    
    Repos
    
    
    Rate (1)
    
    
    Total (2)
    
    
    Rate (1)2006
    
    $
    5,925,015
    
    
    
    5.08
    %
    
    $
    1,082,527
    
    
    
    3.86
    %
    
    $
    7,007,542
    
    
    
    4.89
    %2007
    
    
    150,000
    
    
    
    3.77
    
    
    
    700,000
    
    
    
    3.05
    
    
    
    850,000
    
    
    
    3.182008
    
    
    650,000
    
    
    
    2.67
    
    
    
    550,000
    
    
    
    4.30
    
    
    
    1,200,000
    
    
    
    3.422009
    
    
    200,000
    
    
    
    2.93
    
    
    
    
    
    
    
    
    
    
    
    200,000
    
    
    
    2.932010
    
    
    100,000
    
    
    
    5.90
    
    
    
    275,000
    
    
    
    3.90
    
    
    
    375,000
    
    
    
    4.44Thereafter
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    4.39
    
    
    
    100,000
    
    
    
    4.39Total
    
    $
    7,025,015
    
    
    
    4.78
    %
    
    $
    2,707,527
    
    
    
    3.76
    %
    
    $
    9,732,542
    
    
    
    4.49
    %
 
 (1)
    
    Reflects the impact of purchase accounting adjustments and interest rate swaps.(2)
    
    Excludes $77.2 million and $27.9 million of purchase
accounting discounts on the FHLB Advances and Repos,
respectively.  14




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##### Table of Contents



NOTE 6  OTHER BORROWINGS
  SUBORDINATED NOTES
 June 30,
    
    
    December 31,
    
    
    June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    2005Parent Company:5.875% Subordinated Notes due August 2012
    
    $
    349,453
    
    
    $
    349,408
    
    
    $
    349,3645.0% Fixed Rate/Floating Rate Subordinated Notes due August 2012
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000Subsidiary Bank:9.25% Subordinated Bank Notes due October 2010
    
    
    175,613
    
    
    
    178,622
    
    
    
    181,632Total Subordinated Notes
    
    
    675,066
    
    
    
    678,030
    
    
    
    680,996Fair Value Hedge Adjustment
    
    
    (38,745
    )
    
    
    (31,040
    )
    
    
    (18,993
    )Total Subordinated Notes Carrying Amount
    
    $
    636,321
    
    
    $
    646,990
    
    
    $
    662,003
    JUNIOR SUBORDINATED DEBT (related to Trust Preferred Securities):
 June 30,
    
    
    December 31,
    
    
    June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    20058.70% Junior Subordinated Debt  due December 2026
    
    $
    102,845
    
    
    $
    102,839
    
    
    $
    102,8338.00% Junior Subordinated Debt  due December 2027
    
    
    102,817
    
    
    
    102,811
    
    
    
    102,8048.17% Junior Subordinated Debt  due May 2028
    
    
    46,547
    
    
    
    46,547
    
    
    
    46,5479.10% Junior Subordinated Debt  due June 2027
    
    
    228,553
    
    
    
    235,867
    
    
    
    236,560Total Junior Subordinated Debt
    
    
    480,762
    
    
    
    488,064
    
    
    
    488,744Fair Value Hedge Adjustment
    
    
    
    
    
    
    7,427
    
    
    
    15,984Total Junior Subordinated Debt Carrying Amount
    
    $
    480,762
    
    
    $
    495,491
    
    
    $
    504,728
  15




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##### Table of Contents



SENIOR NOTES:
 June 30,
    
    
    December 31,
    
    
    June 30,(in thousands)
    
    2006
    
    
    2005
    
    
    20053.20% Senior Notes  due June 2008
    
    $
    345,983
    
    
    $
    344,945
    
    
    $
    343,907Fair Value Hedge Adjustment
    
    
    
    
    
    
    (10,062
    )
    
    
    (4,301
    )Total Senior Notes Carrying Amount
    
    $
    345,983
    
    
    $
    334,883
    
    
    $
    339,606
   NOTE 7  MORTGAGE SERVICING RIGHTS
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,(dollars
in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Mortgage Servicing Rights:Balance, Beginning of Period
    
    $
    283,626
    
    
    $
    283,268
    
    
    $
    290,550
    
    
    $
    254,857Originations
    
    
    15,779
    
    
    
    31,099
    
    
    
    32,839
    
    
    
    81,154Amortization
    
    
    (21,814
    )
    
    
    (20,591
    )
    
    
    (45,412
    )
    
    
    (40,580
    )Sales
    
    
    (514
    )
    
    
    (5,323
    )
    
    
    (900
    )
    
    
    (6,978
    )Balance, End of Period
    
    $
    277,077
    
    
    $
    288,453
    
    
    $
    277,077
    
    
    $
    288,453Valuation allowance:Balance, Beginning of Period
    
    $
    (7,435
    )
    
    $
    
    
    
    $
    (23,126
    )
    
    $
    Temporary Recovery/(Impairment) on Mortgage
Servicing Rights
    
    
    2,901
    
    
    
    (34,971
    )
    
    
    18,592
    
    
    
    (34,971
    )Balance, End of Period
    
    $
    (4,534
    )
    
    $
    (34,971
    )
    
    $
    (4,534
    )
    
    $
    (34,971
    )Mortgage Servicing Rights, net
    
    $
    272,543
    
    
    $
    253,482
    
    
    $
    272,543
    
    
    $
    253,482Fair Value of Mortgage Servicing Rights
    
    $
    301,109
    
    
    $
    253,871
    
    
    $
    301,109
    
    
    $
    253,871Ratio of Mortgage Servicing Rights to Related Loans
Serviced for Others
    
    
    0.97
    %
    
    
    0.86
    %
    
    
    0.97
    %
    
    
    0.86
    %Weighted Average Service Fee
    
    
    0.28
    %
    
    
    0.29
    %
    
    
    0.28
    %
    
    
    0.29
    %
 16




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##### Table of Contents



June 30,
    
    June 30,2006
    
    2005Weighted Avg. Prepayment Rate (includes default Rate)
    
    
    24.90
    
    
    
    29.70Weighted Avg. Life (in years)
    
    
    4.1
    
    
    
    3.1Cash Flows, Discount Rate
    
    
    10.50
    %
    
    
    10.60
    %
   NOTE 8  REPRESENTATION AND WARRANTY RESERVE
   At and for the
    
    
    At and for theThree Months Ended
    
    
    Six Months Ended(in thousands)
    
    June 30, 2006
    
    
    June 30, 2006Balance at Beginning of Period
    
    $
    131,745
    
    
    $
    128,620Provisions for Estimated Losses (1)
    
    
    11,844
    
    
    
    23,325Losses Incurred
    
    
    (16,642
    )
    
    
    (24,998
    )Balance at End of Period
    
    $
    126,947
    
    
    $
    126,947
 
 (1)
    
    The provision is reported as a reduction to gain on sale of loans. NOTE 9  DERIVATIVE FINANCIAL INSTRUMENTS
   (dollars in thousands)
    
    Hedged
    
    Notional
    
    Fixed
    
    VariableMaturity
    
    Liability
    
    Amount
    
    Interest Rate
    
    Interest RatePay Fixed Swaps  2008
    
    Repurchase Agreements
    
    $
    75,000
    
    
    
    6.14
    %
    
    
    5.16
    %Pay Floating Swaps  2012
    
    5.875% Subordinated Notes
    
    
    350,000
    
    
    
    5.88
    
    
    
    7.47
 17




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##### Table of Contents



Three Months Ended
    
    
    Six Months Ended(in thousands )
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005(Loss)/Gain on Hedged Mortgage Loans
    
    $
    (7,042
    )
    
    $
    9,053
    
    
    $
    (9,382
    )
    
    $
    2,169(Loss)/Gain on Derivatives
    
    
    5,579
    
    
    
    (9,595
    )
    
    
    7,938
    
    
    
    (3,373
    )Hedge Ineffectiveness
    
    $
    (1,463
    )
    
    $
    (542
    )
    
    $
    (1,444
    )
    
    $
    (1,204
    )
 18




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##### Table of Contents



Trading Instruments
  (dollars in thousands)
    
    Previously Hedged
    
    Notional
    
    Fixed
    
    VariableMaturity
    
    Liability
    
    Amount
    
    Interest Rate
    
    Interest RatePay Floating Swaps2007
    
    5.00% Subordinated Notes
    
    $
    150,000
    
    
    
    5.00
    %
    
    
    7.48
    %2008
    
    3.20% Senior Notes
    
    
    350,000
    
    
    
    3.20
    %
    
    
    4.93
    %2026
    
    8.70% Junior Subordinated Debt
    
    
    100,000
    
    
    
    8.70
    %
    
    
    7.03
    %2027
    
    8.00% Junior Subordinated Debt
    
    
    100,000
    
    
    
    8.00
    %
    
    
    6.40
    %2028
    
    8.17% Junior Subordinated Debt
    
    
    45,000
    
    
    
    8.17
    %
    
    
    7.93
    %
  NOTE 10  OTHER COMMITMENTS AND CONTINGENT LIABILITIES
 Credit Related Commitments
  Retail Banking
      19




---



##### Table of Contents



(in thousands)
    
    2006Commitments to Extend Credit on Loans Held-for-Investment (1)
    
    $
    4,854,297Standby Letters of Credit (2)
    
    
    528,212Commercial Letters of Credit
    
    
    25,191
 
 (1)
    
    At June 30, 2006, commitments to extend credit on loans held-for-investment with maturities
of less than one year totaled $2.4 billion, while $2.4 billion mature between one and three
years.(2)
    
    Standby letters of credit are considered guarantees and are reflected in other liabilities
in the accompanying Consolidated Balance Sheet at their estimated fair value of $1.8 million
as of June 30, 2006. The fair value of these instruments is recognized as income over the
initial term of the guarantee. Mortgage Banking
    (in thousands)
    
    2006Commitments to Originate Mortgage Loans Held-for-Sale
    
    $
    6,246,558Commitments to Fund HELOCs
    
    
    215,247
 20




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##### Table of Contents



NOTE 11  RETIREMENT AND OTHER EMPLOYEE BENEFITS
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2005
    
    2006
    
    2005
    
    2006
    
    2005
    
    2006
    
    2005(in thousands)
    
    Pension
    
    Post-Retirement
    
    Pension
    
    Post-RetirementComponents of Net Periodic
Benefit Cost:Service Cost
    
    $
    3,134
    
    
    $
    2,563
    
    
    $
    492
    
    
    $
    513
    
    
    $
    6,268
    
    
    $
    5,126
    
    
    $
    984
    
    
    $
    1,026Interest Cost
    
    
    2,716
    
    
    
    2,600
    
    
    
    480
    
    
    
    704
    
    
    
    5,432
    
    
    
    5,200
    
    
    
    960
    
    
    
    1,408Expected Return on Plan Assets
    
    
    (5,192
    )
    
    
    (4,974
    )
    
    
    (131
    )
    
    
    (64
    )
    
    
    (10,384
    )
    
    
    (9,948
    )
    
    
    (262
    )
    
    
    (128
    )Amortization of Prior Service Cost
    
    
    114
    
    
    
    (66
    )
    
    
    (20
    )
    
    
    (20
    )
    
    
    181
    
    
    
    (132
    )
    
    
    (40
    )
    
    
    (40
    )Amortization of Transition
Asset/Obligation
    
    
    
    
    
    
    (24
    )
    
    
    73
    
    
    
    73
    
    
    
    
    
    
    
    (131
    )
    
    
    146
    
    
    
    146Recognized Actuarial Loss/(Gain)
    
    
    437
    
    
    
    273
    
    
    
    (14
    )
    
    
    94
    
    
    
    874
    
    
    
    546
    
    
    
    (28
    )
    
    
    188Net Periodic Benefit Cost
    
    $
    1,209
    
    
    $
    372
    
    
    $
    880
    
    
    $
    1,300
    
    
    $
    2,371
    
    
    $
    661
    
    
    $
    1,760
    
    
    $
    2,600
  Bank Owned Life Insurance
   NOTE 12  BUSINESS SEGMENTS
   
    
    Revenues and expenses directly associated with each segment are included in determining net income.
    
    Transactions between segments are based on specific criteria or appropriate third party interest rates.
    
    Inter-company eliminations are reflected in the Other column.
 21




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##### Table of Contents



(in thousands)
    
    Retail
    
    Mortgage
    
    Segment
    
    
    
    
    
    ConsolidatedFor the Three Months Ended June 30, 2006
    
    Banking
    
    Banking
    
    Totals
    
    Other
    
    OperationsNet Interest Income
    
    $
    425,788
    
    
    $
    3,981
    
    
    $
    429,769
    
    
    $
    119
    
    
    $
    429,888Provision for Loan Losses
    
    
    9,000
    
    
    
    
    
    
    
    9,000
    
    
    
    
    
    
    
    9,000Net Interest Income After Provision for Loan Losses
    
    
    416,788
    
    
    
    3,981
    
    
    
    420,769
    
    
    
    119
    
    
    
    420,888Non-Interest Income:Mortgage Banking Income
    
    
    
    
    
    
    126,623
    
    
    
    126,623
    
    
    
    (20,854
    )
    
    
    105,769Customer Related Fees & Service Charges
    
    
    40,291
    
    
    
    
    
    
    
    40,291
    
    
    
    
    
    
    
    40,291Investment Management, Commissions & Trust
Fees
    
    
    9,127
    
    
    
    
    
    
    
    9,127
    
    
    
    
    
    
    
    9,127Other Operating Income
    
    
    18,077
    
    
    
    4,423
    
    
    
    22,500
    
    
    
    
    
    
    
    22,500Securities Gains, net
    
    
    4,099
    
    
    
    
    
    
    
    4,099
    
    
    
    
    
    
    
    4,099Trading Losses
    
    
    (23,223
    )
    
    
    
    
    
    
    (23,223
    )
    
    
    
    
    
    
    (23,223
    )Total Non-Interest Income
    
    
    48,371
    
    
    
    131,046
    
    
    
    179,417
    
    
    
    (20,854
    )
    
    
    158,563Non-Interest Expense:Employee Compensation & Benefits
    
    
    96,017
    
    
    
    49,231
    
    
    
    145,248
    
    
    
    
    
    
    
    145,248Occupancy & Equipment Expense, net
    
    
    40,443
    
    
    
    10,811
    
    
    
    51,254
    
    
    
    
    
    
    
    51,254Other Operating Expense
    
    
    59,277
    
    
    
    18,845
    
    
    
    78,122
    
    
    
    (13,953
    )
    
    
    64,169Merger Related Expenses
    
    
    5,233
    
    
    
    
    
    
    
    5,233
    
    
    
    
    
    
    
    5,233Settlement Recovery
    
    
    (16,031
    )
    
    
    
    
    
    
    (16,031
    )
    
    
    
    
    
    
    (16,031
    )Total Non-Interest Expense
    
    
    184,939
    
    
    
    78,887
    
    
    
    263,826
    
    
    
    (13,953
    )
    
    
    249,873Income Before Income Taxes
    
    
    280,220
    
    
    
    56,140
    
    
    
    336,360
    
    
    
    (6,782
    )
    
    
    329,578Provision for Income Taxes
    
    
    89,579
    
    
    
    22,031
    
    
    
    111,610
    
    
    
    (2,849
    )
    
    
    108,761Net Income
    
    $
    190,641
    
    
    $
    34,109
    
    
    $
    224,750
    
    
    $
    (3,933
    )
    
    $
    220,817Total Assets
    
    $
    52,634,925
    
    
    $
    6,746,910
    
    
    $
    59,381,835
    
    
    $
    
    
    
    $
    59,381,835
 (in thousands)
    
    Retail
    
    Mortgage
    
    Segment
    
    
    
    
    
    ConsolidatedFor the Three Months Ended June 30, 2005
    
    Banking
    
    Banking
    
    Totals
    
    Other
    
    OperationsNet Interest Income
    
    $
    432,093
    
    
    $
    29,799
    
    
    $
    461,892
    
    
    $
    181
    
    
    $
    462,073Provision for Loan Losses
    
    
    9,000
    
    
    
    
    
    
    
    9,000
    
    
    
    
    
    
    
    9,000Net Interest Income After Provision for Loan Losses
    
    
    423,093
    
    
    
    29,799
    
    
    
    452,892
    
    
    
    181
    
    
    
    453,073Non-Interest Income:Mortgage Banking Income
    
    
    
    
    
    
    114,534
    
    
    
    114,534
    
    
    
    (23,854
    )
    
    
    90,680Customer Related Fees & Service Charges
    
    
    41,902
    
    
    
    
    
    
    
    41,902
    
    
    
    
    
    
    
    41,902Investment Management, Commissions & Trust
Fees
    
    
    10,287
    
    
    
    
    
    
    
    10,287
    
    
    
    
    
    
    
    10,287Other Operating Income
    
    
    13,415
    
    
    
    1,963
    
    
    
    15,378
    
    
    
    
    
    
    
    15,378Securities Gains, net
    
    
    10,884
    
    
    
    
    
    
    
    10,884
    
    
    
    
    
    
    
    10,884Total Non-Interest Income
    
    
    76,488
    
    
    
    116,497
    
    
    
    192,985
    
    
    
    (23,854
    )
    
    
    169,131Non-Interest Expense:Employee Compensation & Benefits
    
    
    87,882
    
    
    
    51,132
    
    
    
    139,014
    
    
    
    
    
    
    
    139,014Occupancy & Equipment Expense, net
    
    
    37,374
    
    
    
    9,575
    
    
    
    46,949
    
    
    
    
    
    
    
    46,949Other Operating Expense
    
    
    55,928
    
    
    
    17,738
    
    
    
    73,666
    
    
    
    (9,836
    )
    
    
    63,830Total Non-Interest Expense
    
    
    181,184
    
    
    
    78,445
    
    
    
    259,629
    
    
    
    (9,836
    )
    
    
    249,793Income Before Income Taxes
    
    
    318,397
    
    
    
    67,851
    
    
    
    386,248
    
    
    
    (13,837
    )
    
    
    372,411Provision for Income Taxes
    
    
    107,659
    
    
    
    28,497
    
    
    
    136,156
    
    
    
    (5,811
    )
    
    
    130,345Net Income
    
    $
    210,738
    
    
    $
    39,354
    
    
    $
    250,092
    
    
    $
    (8,026
    )
    
    $
    242,066Total Assets
    
    $
    53,519,909
    
    
    $
    6,865,780
    
    
    $
    60,385,689
    
    
    $
    
    
    
    $
    60,385,689
 22




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##### Table of Contents



(in thousands)
    
    Retail
    
    Mortgage
    
    Segment
    
    
    
    
    
    ConsolidatedFor the Six Months Ended June 30, 2006
    
    Banking
    
    Banking
    
    Totals
    
    Other
    
    OperationsNet Interest Income
    
    $
    825,018
    
    
    $
    22,101
    
    
    $
    847,119
    
    
    $
    246
    
    
    $
    847,365Provision for Loan Losses
    
    
    18,000
    
    
    
    
    
    
    
    18,000
    
    
    
    
    
    
    
    18,000Net Interest Income After Provision for Loan Losses
    
    
    807,018
    
    
    
    22,101
    
    
    
    829,119
    
    
    
    246
    
    
    
    829,365Non-Interest Income:Mortgage Banking Income
    
    
    
    
    
    
    242,862
    
    
    
    242,862
    
    
    
    (41,021
    )
    
    
    201,841Customer Related Fees & Service Charges
    
    
    81,394
    
    
    
    
    
    
    
    81,394
    
    
    
    
    
    
    
    81,394Investment Management, Commissions & Trust
Fees
    
    
    18,796
    
    
    
    
    
    
    
    18,796
    
    
    
    
    
    
    
    18,796Other Operating Income
    
    
    29,726
    
    
    
    5,131
    
    
    
    34,857
    
    
    
    
    
    
    
    34,857Securities Gains, net
    
    
    10,821
    
    
    
    
    
    
    
    10,821
    
    
    
    
    
    
    
    10,821Trading Losses
    
    
    (21,070
    )
    
    
    
    
    
    
    (21,070
    )
    
    
    
    
    
    
    (21,070
    )Total Non-Interest Income
    
    
    119,667
    
    
    
    247,993
    
    
    
    367,660
    
    
    
    (41,021
    )
    
    
    326,639Non-Interest Expense:Employee Compensation & Benefits
    
    
    190,049
    
    
    
    96,510
    
    
    
    286,559
    
    
    
    
    
    
    
    286,559Occupancy & Equipment Expense, net
    
    
    81,092
    
    
    
    21,454
    
    
    
    102,546
    
    
    
    
    
    
    
    102,546Other Operating Expense
    
    
    120,963
    
    
    
    35,424
    
    
    
    156,387
    
    
    
    (26,643
    )
    
    
    129,744Merger Related Expenses
    
    
    5,233
    
    
    
    
    
    
    
    5,233
    
    
    
    
    
    
    
    5,233Settlement Recovery
    
    
    (16,031
    )
    
    
    
    
    
    
    (16,031
    )
    
    
    
    
    
    
    (16,031
    )Total Non-Interest Expense
    
    
    381,306
    
    
    
    153,388
    
    
    
    534,694
    
    
    
    (26,643
    )
    
    
    508,051Income Before Income Taxes
    
    
    545,379
    
    
    
    116,706
    
    
    
    662,085
    
    
    
    (14,132
    )
    
    
    647,953Provision for Income Taxes
    
    
    177,179
    
    
    
    45,766
    
    
    
    222,945
    
    
    
    (5,937
    )
    
    
    217,008Net Income
    
    $
    368,200
    
    
    $
    70,940
    
    
    $
    439,140
    
    
    $
    (8,195
    )
    
    $
    430,945
 (in thousands)
    
    Retail
    
    Mortgage
    
    Segment
    
    
    
    
    
    ConsolidatedFor the Six Months Ended June 30, 2005
    
    Banking
    
    Banking
    
    Totals
    
    Other
    
    OperationsNet Interest Income
    
    $
    870,147
    
    
    $
    62,871
    
    
    $
    933,018
    
    
    $
    374
    
    
    $
    933,392Provision for Loan Losses
    
    
    18,000
    
    
    
    
    
    
    
    18,000
    
    
    
    
    
    
    
    18,000Net Interest Income After Provision for Loan Losses
    
    
    852,147
    
    
    
    62,871
    
    
    
    915,018
    
    
    
    374
    
    
    
    915,392Non-Interest Income:Mortgage Banking Income
    
    
    
    
    
    
    247,289
    
    
    
    247,289
    
    
    
    (45,514
    )
    
    
    201,775Customer Related Fees & Service Charges
    
    
    83,908
    
    
    
    
    
    
    
    83,908
    
    
    
    
    
    
    
    83,908Investment Management, Commissions & Trust
Fees
    
    
    21,358
    
    
    
    
    
    
    
    21,358
    
    
    
    
    
    
    
    21,358Other Operating Income
    
    
    25,807
    
    
    
    3,649
    
    
    
    29,456
    
    
    
    
    
    
    
    29,456Securities Gains, net
    
    
    15,519
    
    
    
    
    
    
    
    15,519
    
    
    
    
    
    
    
    15,519Total Non-Interest Income
    
    
    146,592
    
    
    
    250,938
    
    
    
    397,530
    
    
    
    (45,514
    )
    
    
    352,016Non-Interest Expense:Employee Compensation & Benefits
    
    
    178,794
    
    
    
    95,589
    
    
    
    274,383
    
    
    
    
    
    
    
    274,383Occupancy & Equipment Expense, net
    
    
    73,693
    
    
    
    19,210
    
    
    
    92,903
    
    
    
    
    
    
    
    92,903Other Operating Expense
    
    
    109,324
    
    
    
    36,542
    
    
    
    145,866
    
    
    
    (16,706
    )
    
    
    129,160Total Non-Interest Expense
    
    
    361,811
    
    
    
    151,341
    
    
    
    513,152
    
    
    
    (16,706
    )
    
    
    496,446Income Before Income Taxes
    
    
    636,928
    
    
    
    162,468
    
    
    
    799,396
    
    
    
    (28,434
    )
    
    
    770,962Provision for Income Taxes
    
    
    213,566
    
    
    
    68,236
    
    
    
    281,802
    
    
    
    (11,941
    )
    
    
    269,861Net Income
    
    $
    423,362
    
    
    $
    94,232
    
    
    $
    517,594
    
    
    $
    (16,493
    )
    
    $
    501,101
 23




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,(in thousands)
    
    2006
    
    2005
    
    2006
    
    2005Gain on Sale of Loans Held-for-Sale
    
    $
    102,316
    
    
    $
    120,576
    
    
    $
    184,065
    
    
    $
    225,944Mortgage Banking Fees, net
    
    
    22,366
    
    
    
    25,666
    
    
    
    44,596
    
    
    
    51,382Amortization of Mortgage Servicing Rights
    
    
    (21,814
    )
    
    
    (20,591
    )
    
    
    (45,412
    )
    
    
    (40,580
    )Temporary (Impairment Charge)/Recovery -
Mortgage Servicing Rights
    
    
    2,901
    
    
    
    (34,971
    )
    
    
    18,592
    
    
    
    (34,971
    )Total Mortgage Banking Income
    
    $
    105,769
    
    
    $
    90,680
    
    
    $
    201,841
    
    
    $
    201,775
 NOTE 13  RECENT ACCOUNTING PRONOUNCEMENTS
 Accounting for Uncertainty in Income Taxes
  Accounting for Servicing of Financial Assets
  NOTE 14  SUBSEQUENT EVENTS
   24




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Forward-Looking Statements
   
    
    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, the representation
and warranty reserve or other reserves;
    
    descriptions of management plans or objectives for future operations, products, or services;
    
    forecasts of future economic performance; and
    
    descriptions of assumptions underlying or relating to any of the foregoing;
   
    
    general business and economic conditions are less favorable than expected;
    
    worldwide political and social unrest, including acts of war and terrorism;
    
    competitive pressures among financial services companies which may increase significantly;
    
    competitive pressures in the mortgage origination business which could have an adverse
effect on origination volumes and gain on sale profit margins;
    
    changes in the interest rate environment may negatively affect interest margins, mortgage
loan originations and the valuation of mortgage servicing rights;
    
    changes in the securities and bond markets;
    
    changes in real estate markets, including possible erosion in values, which may
negatively affect loan origination and portfolio quality;
    
    legislative or regulatory environments, requirements or changes adversely affect businesses in which we are engaged;
    
    accounting principles, policies, practices or guidelines;
    
    monetary and fiscal policies of the U.S. Government, including policies of the U.S.
Treasury and the Federal Reserve Board;
    
    technological changes, including increasing dependence on the Internet
    
    competition and its effect on pricing, spending, third-party relationships and revenues.
 25




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##### Table of Contents




    
    the ability to obtain regulatory approvals for the contemplated transaction with Capital
One on the proposed terms and schedule;
    
    the failure of Capital One or North Fork stockholders to approve the transaction;
disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers;
  Summary
 Business Overview
  Proposed Plan of Merger with Capital One Financial Corporation
    26




---



##### Table of Contents



Business Segments
  Retail Banking
   Mortgage Banking
   For the
    
    
    For theThree Months Ended
    
    
    Six Months EndedSummary Consolidated Net Income
    
    June 30, 2006
    
    
    June 30, 2006(dollars in thousands)
    
    $
    
    
    %
    
    
    $
    
    
    %Retail Banking
    
    $
    190,641
    
    
    
    86
    %
    
    $
    368,200
    
    
    
    85
    %Mortgage Banking (1)
    
    
    30,176
    
    
    
    14
    
    
    
    62,745
    
    
    
    15Consolidated Net Income
    
    $
    220,817
    
    
    
    100
    %
    
    $
    430,945
    
    
    
    100
    %
 
 (1)
    
    Excludes net inter-company activity of $3.9 million and $8.2 million, after taxes for the
three and six months ended June 30, 2006, respectively. 27




---



##### Table of Contents



Financial Overview
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,(in thousands, except ratios & per share amounts)
    
    2006
    
    2005
    
    2006
    
    2005Earnings:Net Income
    
    $
    220,817
    
    
    $
    242,066
    
    
    $
    430,945
    
    
    $
    501,101Per Share:Earnings Per Share  Basic
    
    $
    .49
    
    
    $
    .52
    
    
    $
    .95
    
    
    $
    1.07Earnings Per Share  Diluted
    
    
    .48
    
    
    
    .51
    
    
    
    .94
    
    
    
    1.06Cash Dividends
    
    
    .25
    
    
    
    .22
    
    
    
    .50
    
    
    
    .44Dividend Payout Ratio
    
    
    53
    %
    
    
    44
    %
    
    
    54
    %
    
    
    42
    %Book Value
    
    $
    19.46
    
    
    $
    19.26
    
    
    $
    19.46
    
    
    $
    19.26Tangible Book Value (2)
    
    $
    6.54
    
    
    $
    6.68
    
    
    $
    6.54
    
    
    $
    6.68Average Equivalent Shares  Basic
    
    
    455,279
    
    
    
    469,413
    
    
    
    454,601
    
    
    
    467,953Average Equivalent Shares  Diluted
    
    
    460,495
    
    
    
    474,909
    
    
    
    459,699
    
    
    
    474,118Selected Ratios:Return on Average Total Assets
    
    
    1.52
    %
    
    
    1.58
    %
    
    
    1.50
    %
    
    
    1.66
    %Return on Average Tangible Assets (1)
    
    
    1.74
    
    
    
    1.79
    
    
    
    1.72
    
    
    
    1.89Return on Average Equity
    
    
    9.79
    
    
    
    10.59
    
    
    
    9.65
    
    
    
    11.11Return on Average Tangible Equity (1)
    
    
    30.07
    
    
    
    31.61
    
    
    
    29.92
    
    
    
    33.71Yield on Interest Earning Assets (3)
    
    
    5.95
    
    
    
    5.46
    
    
    
    5.92
    
    
    
    5.49Cost of Funds
    
    
    2.96
    
    
    
    2.24
    
    
    
    2.89
    
    
    
    2.14Net Interest Margin (3)
    
    
    3.53
    
    
    
    3.59
    
    
    
    3.55
    
    
    
    3.69Efficiency Ratio (4)
    
    
    40.69
    
    
    
    36.43
    
    
    
    43.51
    
    
    
    36.19
 This document contains certain supplemental financial information, described in the following
notes, which has been determined by methods other than accounting principles generally accepted
in the United States of America (GAAP) that management uses in its analysis of the Companys
performance. Management believes these non-GAAP financial measures provide information useful to
investors in understanding the underlying operational performance of the Company, its business
and performance trends and facilitates comparisons with the performance of others in the
financial services industry.
 
 (1)
    
    Return on average tangible assets and return on average tangible 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 equity is computed by dividing net income, as reported plus
amortization of identifiable intangible assets, net of taxes by average total equity less
average goodwill and average identifiable intangible assets. (See detailed schedule on exhibit
99.1)(2)
    
    Tangible book value is calculated by dividing period-end stockholders equity, less
period-end goodwill and identifiable intangible assets, by period end shares outstanding. (See
detailed schedule on exhibit 99.1).(3)
    
    Presented on a tax equivalent basis.(4)
    
    The efficiency ratio, which represents a non-GAAP measure, is defined as the ratio of
non-interest expense net of amortization of identifiable intangibles, recourse settlement and
merger charges to net interest income on a tax equivalent basis and other non-interest income
net of securities gains, temporary (impairment)/recovery on mortgage servicing right and
trading losses on derivative instruments.
 28




---



##### Table of Contents



Financial Results
   
    
    Robust commercial loan and total loan growth (excluding residential) of 34% and 29%, respectively
    
    Reduced non-performing assets by $82.9 million or 59%, improving reserve coverage
    
    Mortgage loan originations of $9.9 billion from our mortgage banking subsidiary
    
    Continued reduction in the securities portfolio
    
    Declaration of the regular quarterly cash dividend of $.25 per common share
 Balance Sheet Repositioning
    Net Interest Income
   29




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##### Table of Contents



2006
    
    
    2005Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(dollars in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest Earning Assets:Loans Held-for-Investment (2)
    
    $
    34,654,439
    
    
    $
    534,972
    
    
    
    6.19
    %
    
    $
    32,631,577
    
    
    $
    473,934
    
    
    
    5.83
    %Loans Held-for-Sale (2)
    
    
    4,978,945
    
    
    
    76,088
    
    
    
    6.13
    
    
    
    5,754,088
    
    
    
    73,065
    
    
    
    5.09Securities (1)
    
    
    10,718,973
    
    
    
    136,500
    
    
    
    5.11
    
    
    
    14,556,278
    
    
    
    173,698
    
    
    
    4.79Money Market Investments
    
    
    47,343
    
    
    
    670
    
    
    
    5.68
    
    
    
    87,406
    
    
    
    684
    
    
    
    3.14Total Interest Earning Assets
    
    $
    50,399,700
    
    
    $
    748,230
    
    
    
    5.95
    %
    
    $
    53,029,349
    
    
    $
    721,381
    
    
    
    5.46
    %Non-Interest Earning Assets:Cash and Due from Banks
    
    $
    999,159
    
    
    
    
    
    
    
    
    
    
    $
    1,015,667Other Assets (1)
    
    
    7,001,834
    
    
    
    
    
    
    
    
    
    
    
    7,435,447Total Assets
    
    $
    58,400,693
    
    
    
    
    
    
    
    
    
    
    $
    61,480,463Interest Bearing Liabilities:Savings, NOW & Money Market Deposits
    
    $
    21,707,006
    
    
    $
    134,731
    
    
    
    2.49
    %
    
    $
    21,794,356
    
    
    $
    82,455
    
    
    
    1.52
    %Time Deposits
    
    
    8,200,104
    
    
    
    59,658
    
    
    
    2.92
    
    
    
    7,876,539
    
    
    
    40,391
    
    
    
    2.06Total Savings and Time Deposits
    
    
    29,907,110
    
    
    
    194,389
    
    
    
    2.61
    
    
    
    29,670,895
    
    
    
    122,846
    
    
    
    1.66Federal Funds Purchased & Collateralized Borrowings
    
    
    9,845,733
    
    
    
    89,628
    
    
    
    3.65
    
    
    
    13,095,195
    
    
    
    105,238
    
    
    
    3.22Other Borrowings (4)
    
    
    1,454,216
    
    
    
    20,119
    
    
    
    5.55
    
    
    
    1,484,336
    
    
    
    19,287
    
    
    
    5.21Total Borrowings
    
    
    11,299,949
    
    
    
    109,747
    
    
    
    3.90
    
    
    
    14,579,531
    
    
    
    124,525
    
    
    
    3.43Total Interest Bearing Liabilities
    
    $
    41,207,059
    
    
    $
    304,136
    
    
    
    2.96
    
    
    $
    44,250,426
    
    
    $
    247,371
    
    
    
    2.24Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    2.99
    %
    
    
    
    
    
    
    
    
    
    
    3.22
    %Non-Interest Bearing Liabilities:Demand Deposits
    
    $
    7,414,598
    
    
    
    
    
    
    
    
    
    
    $
    7,290,545Other Liabilities
    
    
    734,575
    
    
    
    
    
    
    
    
    
    
    
    768,821Total Liabilities
    
    
    49,356,232
    
    
    
    
    
    
    
    
    
    
    
    52,309,792Stockholders Equity
    
    
    9,044,461
    
    
    
    
    
    
    
    
    
    
    
    9,170,671Total Liabilities and Stockholders  Equity
    
    $
    58,400,693
    
    
    
    
    
    
    
    
    
    
    $
    61,480,463Net Interest Income and Net Interest Margin (3)
    
    
    
    
    
    $
    444,094
    
    
    
    3.53
    %
    
    
    
    
    
    $
    474,010
    
    
    
    3.59
    %Less: Tax Equivalent Adjustment
    
    
    
    
    
    
    (14,206
    )
    
    
    
    
    
    
    
    
    
    
    (11,937
    )Net Interest Income
    
    
    
    
    
    $
    429,888
    
    
    
    
    
    
    
    
    
    
    $
    462,073
 
 (1)
    
    Unrealized gains/(losses) on available-for-sale securities are recorded in other assets.(2)
    
    For purposes of these computations, non-accrual loans are included in average loans(3)
    
    Interest income on a tax equivalent basis includes the additional amount of income that would
have been earned if investments in tax exempt money market investments and securities, state
and municipal obligations, non-taxable loans, public equity and debt securities, and U.S.
Treasuries had been made in securities and loans subject to Federal, State, and Local income
taxes yielding the same after-tax income. The tax equivalent amount for $1.00 of those
aforementioned categories was $1.78, $1.73, $1.57, $1.27, and $1.11 for the three months ended
June 30, 2006; and $1.78, $1.72, $1.57, $1.18, and $1.05 for the three months ended June 30,
2005.(4)
    
    For purposes of these computations, the fair value adjustments from hedging activities are
included in the average balance of the related hedged item and the impact of the hedge is
included as an adjustment to interest expense.
 30




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##### Table of Contents



2006
    
    
    2005Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(dollars in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest Earning Assets:Loans Held-for-Investment (2)
    
    $
    34,152,261
    
    
    $
    1,043,458
    
    
    
    6.16
    %
    
    $
    31,961,915
    
    
    $
    927,498
    
    
    
    5.85
    %Loans Held-for-Sale (2)
    
    
    4,639,308
    
    
    
    139,780
    
    
    
    6.08
    
    
    
    5,374,595
    
    
    
    139,913
    
    
    
    5.25Securities (1)
    
    
    10,915,620
    
    
    
    275,840
    
    
    
    5.10
    
    
    
    14,873,921
    
    
    
    354,383
    
    
    
    4.80Money Market Investments
    
    
    46,382
    
    
    
    1,271
    
    
    
    5.53
    
    
    
    87,198
    
    
    
    1,431
    
    
    
    3.31Total Interest Earning Assets
    
    $
    49,753,571
    
    
    $
    1,460,349
    
    
    
    5.92
    %
    
    $
    52,297,629
    
    
    $
    1,423,225
    
    
    
    5.49
    %Non-Interest Earning Assets:Cash and Due from Banks
    
    $
    1,027,278
    
    
    
    
    
    
    
    
    
    
    $
    1,035,913Other Assets (1)
    
    
    7,109,757
    
    
    
    
    
    
    
    
    
    
    
    7,513,649Total Assets
    
    $
    57,890,606
    
    
    
    
    
    
    
    
    
    
    $
    60,847,191Interest Bearing Liabilities:Savings, NOW & Money Market Deposits
    
    $
    21,604,412
    
    
    $
    252,164
    
    
    
    2.35
    %
    
    $
    21,488,577
    
    
    $
    152,051
    
    
    
    1.43
    %Time Deposits
    
    
    8,153,226
    
    
    
    119,448
    
    
    
    2.95
    
    
    
    7,718,745
    
    
    
    73,857
    
    
    
    1.93Total Savings and Time Deposits
    
    
    29,757,638
    
    
    
    371,612
    
    
    
    2.52
    
    
    
    29,207,322
    
    
    
    225,908
    
    
    
    1.56Federal Funds Purchased & Collateralized
Borrowings
    
    
    9,590,390
    
    
    
    173,102
    
    
    
    3.64
    
    
    
    13,232,552
    
    
    
    204,245
    
    
    
    3.11Other Borrowings (4)
    
    
    1,465,100
    
    
    
    40,075
    
    
    
    5.52
    
    
    
    1,495,100
    
    
    
    37,111
    
    
    
    5.01Total Borrowings
    
    
    11,055,490
    
    
    
    213,177
    
    
    
    3.89
    
    
    
    14,727,652
    
    
    
    241,356
    
    
    
    3.30Total Interest Bearing Liabilities
    
    $
    40,813,128
    
    
    $
    584,789
    
    
    
    2.89
    
    
    $
    43,934,974
    
    
    $
    467,264
    
    
    
    2.14Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.03
    %
    
    
    
    
    
    
    
    
    
    
    3.35
    %Non-Interest Bearing Liabilities:Demand Deposits
    
    $
    7,376,108
    
    
    
    
    
    
    
    
    
    
    $
    7,073,060Other Liabilities
    
    
    693,186
    
    
    
    
    
    
    
    
    
    
    
    744,719Total Liabilities
    
    
    48,882,422
    
    
    
    
    
    
    
    
    
    
    
    51,752,753Stockholders Equity
    
    
    9,008,184
    
    
    
    
    
    
    
    
    
    
    
    9,094,438Total Liabilities and Stockholders Equity
    
    $
    57,890,606
    
    
    
    
    
    
    
    
    
    
    $
    60,847,191Net Interest Income and Net Interest Margin (3)
    
    
    
    
    
    $
    875,560
    
    
    
    3.55
    %
    
    
    
    
    
    $
    955,961
    
    
    
    3.69
    %Less: Tax Equivalent Adjustment
    
    
    
    
    
    
    (28,195
    )
    
    
    
    
    
    
    
    
    
    
    (22,569
    )Net Interest Income
    
    
    
    
    
    $
    847,365
    
    
    
    
    
    
    
    
    
    
    $
    933,392
 
 (1)
    
    Unrealized gains/(losses) on available-for-sale securities are recorded in other assets.(2)
    
    For purposes of these computations, non-accrual loans are included in average loans.(3)
    
    Interest income on a tax equivalent basis includes the additional amount of income that would
have been earned if investments in tax exempt money market investments and securities, state
and municipal obligations, non-taxable loans, public equity and debt securities, and U.S.
Treasuries had been made in securities and loans subject to Federal, State, and Local income
taxes yielding the same after-tax income. The tax equivalent amount for $1.00 of those
aforementioned categories was $1.78, $1.72, $1.57, $1.26, and $1.12 for the six months ended
June 30, 2006; and $1.78, $1.72, $1.57, $1.22, and $1.04 for the six months ended June 30,
2005.(4)
    
    For purposes of these computations, the fair value adjustments from hedging activities are
included in the average balance of the related hedged item and the impact of the hedge is
included as an adjustment to interest expense.
 31




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006 vs. 2005
    
    
    2006 vs. 2005Change in
    
    
    Change inAverage
    
    
    Average
    
    
    Net Interest
    
    
    Average
    
    
    Average
    
    
    Net Interest(in thousands)
    
    Volume
    
    
    Rate
    
    
    Income
    
    
    Volume
    
    
    Rate
    
    
    IncomeInterest Income from Earning Assets:Loans-Held-for-Investment
    
    $
    30,298
    
    
    $
    30,740
    
    
    $
    61,038
    
    
    $
    65,458
    
    
    $
    50,502
    
    
    $
    115,960Loans Held-for-Sale
    
    
    (10,641
    )
    
    
    13,664
    
    
    
    3,023
    
    
    
    (20,542
    )
    
    
    20,409
    
    
    
    (133
    )Securities
    
    
    (48,241
    )
    
    
    11,043
    
    
    
    (37,198
    )
    
    
    (98,967
    )
    
    
    20,424
    
    
    
    (78,543
    )Money Market Investments
    
    
    (405
    )
    
    
    391
    
    
    
    (14
    )
    
    
    (854
    )
    
    
    694
    
    
    
    (160
    )Total Interest Income
    
    $
    (28,989
    )
    
    $
    55,838
    
    
    $
    26,849
    
    
    $
    (54,905
    )
    
    $
    92,029
    
    
    $
    37,124Interest Expense on Liabilities:Savings, NOW & Money Market Deposits
    
    $
    (332
    )
    
    $
    52,608
    
    
    $
    52,276
    
    
    $
    824
    
    
    $
    99,289
    
    
    $
    100,113Time Deposits
    
    
    1,721
    
    
    
    17,546
    
    
    
    19,267
    
    
    
    4,369
    
    
    
    41,222
    
    
    
    45,591Federal Funds Purchased and
Collateralized Borrowings
    
    
    (28,413
    )
    
    
    12,803
    
    
    
    (15,610
    )
    
    
    (62,212
    )
    
    
    31,069
    
    
    
    (31,143
    )Other Borrowings
    
    
    (400
    )
    
    
    1,232
    
    
    
    832
    
    
    
    (757
    )
    
    
    3,721
    
    
    
    2,964Total Interest Expense
    
    
    (27,424
    )
    
    
    84,189
    
    
    
    56,765
    
    
    
    (57,776
    )
    
    
    175,301
    
    
    
    117,525Net Change in Net Interest Income
    
    $
    (1,565
    )
    
    $
    (28,351
    )
    
    $
    (29,916
    )
    
    $
    2,871
    
    
    $
    (83,272
    )
    
    $
    (80,401
    )
    (See Financial Condition  Loans
Held-For-Investment section for additional information).
  32




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##### Table of Contents



(See Item 1, Condensed Notes to the Consolidated Financial Statements,
Note 9  Derivative Financial Instruments for additional information).
 Provision and Allowance for Loan Losses
 (See Notes to the Consolidated
Financial Statements Note 1  Business and Summary of Significant Accounting Policies  Critical
Accounting Policies for additional information).
 33




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##### Table of Contents



Residential &
    
    Commercial &(Dollars in thousands)
    
    Total
    
    Multi-Family
    
    All Other LoansLoans Held-for-Investment
    
    $
    35,551,560
    
    
    $
    19,692,767
    
    
    $
    15,858,793Allowance for Loan Losses
    
    $
    224,571
    
    
    $
    61,223
    
    
    $
    163,348Non-Performing Loans Held-for-Investment
    
    $
    27,273
    
    
    $
    14,219
    
    
    $
    13,054Allowance for Loan Losses to Loans-Held-for Investment
    
    
    .63
    %
    
    
    .31
    %
    
    
    1.03
    %Allowance for Loan Losses to Non-Performing Loans Held-for-Investment
    
    
    823
    %
    
    
    431
    %
    
    
    1,251
    %
  Non-Interest Income
  Non-Interest Expense
   34




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##### Table of Contents



Income Taxes
  Mortgage Banking
  For the Three Months Ended
    
    
    For the Six Months Ended(in thousands)
    
    June 30, 2006
    
    
    June 30, 2005
    
    
    June 30, 2006
    
    
    June 30, 2005Net Interest Income
    
    $
    3,981
    
    
    $
    29,799
    
    
    $
    22,101
    
    
    $
    62,871Non-Interest Income:Gain on Sale of Loans (1)
    
    
    109,098
    
    
    
    134,411
    
    
    
    198,196
    
    
    
    254,377Mortgage Servicing Fees (2)
    
    
    36,438
    
    
    
    35,685
    
    
    
    71,486
    
    
    
    68,463Amortization of Mortgage Servicing Rights
    
    
    (21,814
    )
    
    
    (20,591
    )
    
    
    (45,412
    )
    
    
    (40,580
    )Temporary Recovery/(Impairment) Charge -
Mortgage Servicing Rights
    
    
    2,901
    
    
    
    (34,971
    )
    
    
    18,592
    
    
    
    (34,971
    )Other Operating Income
    
    
    4,423
    
    
    
    1,963
    
    
    
    5,131
    
    
    
    3,649Total Non-Interest Income
    
    
    131,046
    
    
    
    116,497
    
    
    
    247,993
    
    
    
    250,938Non-Interest Expense:Employee Compensation & Benefits
    
    
    49,231
    
    
    
    51,132
    
    
    
    96,510
    
    
    
    95,589Occupancy & Equipment Expense, net
    
    
    10,811
    
    
    
    9,575
    
    
    
    21,454
    
    
    
    19,210Other Operating Expense
    
    
    18,845
    
    
    
    17,738
    
    
    
    35,424
    
    
    
    36,542Total Non-Interest Expense
    
    
    78,887
    
    
    
    78,445
    
    
    
    153,388
    
    
    
    151,341Income Before Income Taxes
    
    
    56,140
    
    
    
    67,851
    
    
    
    116,706
    
    
    
    162,468Provision for Income Taxes
    
    
    22,031
    
    
    
    28,497
    
    
    
    45,766
    
    
    
    68,236Net Income
    
    $
    34,109
    
    
    $
    39,354
    
    
    $
    70,940
    
    
    $
    94,232Total Assets
    
    $
    6,746,910
    
    
    $
    6,865,780
    
    
    $
    6,746,910
    
    
    $
    6,865,780
 
 (1)
    
    Includes $6.7 million, $14.1 million,$13.8 million and $28.4 million of inter-company
gains on sale of loans for the three and six months ended 2006 and 2005, respectively.(2)
    
    Includes $14.1 million,$26.9 million, $10.1 million and $17.1 million of inter-company
mortgage servicing fees for the three and six months ended 2006 and 2005, respectively.
  (See Gain on Sale of Loans in this section for further details)
   35




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##### Table of Contents



Gain on Sale of Loans
   For the Three Months Ended
    
    
    For the Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(Dollars in thousands)
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Loans Originated:Specialty Products
    
    $
    4,861,775
    
    
    $
    5,302,469
    
    
    $
    8,896,064
    
    
    $
    9,533,580Jumbo
    
    $
    3,173,457
    
    
    $
    4,840,739
    
    
    $
    5,428,110
    
    
    $
    8,635,930Home Equity/Seconds
    
    
    1,281,321
    
    
    
    1,566,306
    
    
    
    2,283,936
    
    
    
    3,055,054Agency
    
    
    573,124
    
    
    
    712,748
    
    
    
    1,053,338
    
    
    
    1,230,615Total Loans Originated
    
    $
    9,889,677
    
    
    $
    12,422,262
    
    
    $
    17,661,448
    
    
    $
    22,455,179Loans Sales:Specialty Products
    
    $
    4,162,568
    
    
    $
    4,394,898
    
    
    $
    8,194,599
    
    
    $
    8,728,682Jumbo
    
    
    2,432,546
    
    
    
    2,643,372
    
    
    
    4,127,270
    
    
    
    4,611,460Home Equity/Seconds
    
    
    755,613
    
    
    
    1,466,771
    
    
    
    1,671,630
    
    
    
    3,047,268Agency
    
    
    492,891
    
    
    
    596,805
    
    
    
    986,915
    
    
    
    1,067,715Total Loan Sales
    
    $
    7,843,618
    
    
    $
    9,101,846
    
    
    $
    14,980,414
    
    
    $
    17,455,125Average Margin on Loan Sales:Specialty Products
    
    
    1.64
    %
    
    
    1.35
    %
    
    
    1.44
    %
    
    
    1.40
    %Jumbo
    
    
    0.94
    %
    
    
    1.05
    %
    
    
    0.92
    %
    
    
    1.02
    %Home Equity/Seconds
    
    
    1.25
    %
    
    
    2.05
    %
    
    
    1.49
    %
    
    
    1.74
    %Agency
    
    
    0.33
    %
    
    
    0.32
    %
    
    
    0.35
    %
    
    
    0.30
    %Average Margin on Loan Sales
    
    
    1.30
    %
    
    
    1.31
    %
    
    
    1.23
    %
    
    
    1.29
    %Gains on Sale of Loans:Specialty Products
    
    $
    68,419
    
    
    $
    59,455
    
    
    $
    117,845
    
    
    $
    122,205Jumbo
    
    
    22,837
    
    
    
    27,773
    
    
    
    37,838
    
    
    
    46,956Home Equity/Seconds
    
    
    9,413
    
    
    
    30,139
    
    
    
    24,912
    
    
    
    52,997Agency
    
    
    1,647
    
    
    
    1,882
    
    
    
    3,470
    
    
    
    3,250Total Gain on Sale of Loans (1)
    
    $
    102,316
    
    
    $
    119,249
    
    
    $
    184,065
    
    
    $
    225,408
 
 (1)
    
    The gain on sale of whole loans for the three and six months ended June 30, 2005, differs
from the amounts reported under accounting principles generally accepted in the United States
of America on the accompanying Consolidated Income Statement due to a fair value adjustment of
$(1.3) million and $(.5) million, respectively on loans held-for-sale at October 1, 2004 which
were sold during 2005.
 36




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##### Table of Contents



Financial Condition
 Loans Held-for-Investment
  June 30,
    
    
    % of
    
    
    December 31,
    
    
    % of
    
    
    June 30,
    
    
    % of(dollars in thousands)
    
    2006
    
    
    Total
    
    
    2005
    
    
    Total
    
    
    2005
    
    
    TotalCommercial Mortgages
    
    $
    7,079,501
    
    
    
    20
    %
    
    $
    6,206,416
    
    
    
    19
    %
    
    $
    5,725,316
    
    
    
    18
    %Commercial & Industrial
    
    
    5,806,928
    
    
    
    16
    
    
    
    4,709,440
    
    
    
    14
    
    
    
    3,879,830
    
    
    
    12Total Commercial
    
    
    12,886,429
    
    
    
    36
    %
    
    
    10,915,856
    
    
    
    33
    %
    
    
    9,605,146
    
    
    
    30
    %Residential Mortgages
    
    
    14,519,282
    
    
    
    41
    
    
    
    15,068,443
    
    
    
    45
    
    
    
    16,176,829
    
    
    
    49Multi-Family Mortgages
    
    
    5,134,232
    
    
    
    15
    
    
    
    4,821,642
    
    
    
    15
    
    
    
    4,485,420
    
    
    
    14Consumer
    
    
    1,749,383
    
    
    
    5
    
    
    
    1,558,782
    
    
    
    5
    
    
    
    1,521,869
    
    
    
    5Construction & Land
    
    
    1,222,981
    
    
    
    3
    
    
    
    829,273
    
    
    
    2
    
    
    
    653,002
    
    
    
    2Total
    
    $
    35,512,307
    
    
    
    100
    %
    
    $
    33,193,996
    
    
    
    100
    %
    
    $
    32,442,266
    
    
    
    100
    %
        37




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##### Table of Contents



Securities
 (See Balance Sheet Repositioning section for further details)
 Item 1, Notes to the Consolidated
Financial Statements Note 2, Securities for additional information
     38




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##### Table of Contents



Deposits
  June 30,
    
    December 31,
    
    June 30,(in thousands)
    
    2006
    
    2005
    
    2005Demand
    
    $
    7,561,888
    
    
    $
    7,639,231
    
    
    $
    7,586,939NOW & Money Market
    
    
    16,331,950
    
    
    
    15,606,231
    
    
    
    15,848,473Savings
    
    
    5,045,623
    
    
    
    5,303,930
    
    
    
    5,811,417Time
    
    
    5,114,428
    
    
    
    5,428,921
    
    
    
    5,152,330Certificates of Deposit, $100,000 & Over
    
    
    2,760,716
    
    
    
    2,638,260
    
    
    
    3,067,187Total Deposits
    
    $
    36,814,605
    
    
    $
    36,616,573
    
    
    $
    37,466,346
  Asset/Liability Management
      39




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##### Table of Contents




    
    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.
    
    Maintaining our current asset or liability spreads to market interest rates.
    
    The model considers the magnitude and timing of the repricing of financial instruments,
loans and deposit products, including the effect of changing interest rates on expected
prepayments and maturities.
    
    NOW deposit rates experience a 15% impact of market rate movements immediately and have a
floor of 10 basis points.
  Changes in Net Interest Income(dollars in thousands)
    
    $ Change
    
    % ChangeChange in Interest Rates+ 200 Basis Points
    
    $
    (77,550
    )
    
    
    (4.86
    )%+ 100 Basis Points
    
    
    (34,295
    )
    
    
    (2.15
    )- 100 Basis Points
    
    
    29,040
    
    
    
    1.82
   Market Value of Equity(dollars in thousands)
    
    $ Change
    
    % ChangeChange in Interest Rates+ 200 Basis Points
    
    $
    (521,558
    )
    
    
    (5.5
    )%- 200 Basis Points
    
    $
    181,977
    
    
    
    1.9Policy Limit
    
    
    N/A
    
    
    
    (25.0
    )%
 Liquidity Risk Management
    40




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##### Table of Contents



Capital
     June 30, 2006
    
    
    June 30, 2005(dollars in thousands)
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTier 1 Capital
    
    $
    3,690,093
    
    
    
    10.26
    %
    
    $
    3,635,796
    
    
    
    10.50
    %Regulatory Requirement
    
    
    1,439,788
    
    
    
    4.00
    
    
    
    1,385,310
    
    
    
    4.00Excess
    
    $
    2,250,305
    
    
    
    6.25
    %
    
    $
    2,250,486
    
    
    
    6.50
    %Total Risk Adjusted Capital
    
    $
    4,534,117
    
    
    
    12.61
    %
    
    $
    4,506,469
    
    
    
    13.01
    %Regulatory Requirement
    
    
    2,879,576
    
    
    
    8.00
    
    
    
    2,770,620
    
    
    
    8.00Excess
    
    $
    1,654,541
    
    
    
    4.60
    %
    
    $
    1,735,849
    
    
    
    5.01
    %Risk Weighted Assets
    
    $
    35,994,699
    
    
    
    
    
    
    $
    34,632,749
   Capital Ratios:
    
    North Fork
    
    SuperiorTier 1 Capital
    
    
    11.42
    %
    
    
    11.49
    %Total Risk Adjusted
    
    
    12.39
    
    
    
    11.76Leverage Ratio
    
    
    7.82
    
    
    
    5.92
  41




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##### Table of Contents



Regulatory Matters
  Sarbanes-Oxley Act of 2002
  Future Legislation
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  42




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##### Table of Contents



Item 4. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   43




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##### Table of Contents



Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Total Number of
    
    Maximum Number ofShares Purchased as
    
    Shares that May YetTotal Number of
    
    Average Price Paid
    
    Part of Publicly
    
    Be Purchased UnderPeriod
    
    Shares Purchased
    
    Per Share
    
    Announced Program
    
    the ProgramApril 1, 2006  April 30, 2006
    
    
    
    n/a
    
    
    
    9,269,550 SharesMay 1, 2006  May 31, 2006
    
    
    
    n/a
    
    
    
    9,269,550 SharesJune 1, 2006  June 30, 2006
    
    
    
    n/a
    
    
    
    9,269,550 Shares
 
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
 Recent Developments
  44




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##### Table of Contents



Item 6. Exhibits
  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
 45




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##### Table of Contents



SIGNATURES
  Date:August 9, 2006
    
    North Fork Bancorporation, Inc./s/ Daniel M. Healy

Daniel M. HealyExecutive Vice President and Chief Financial Officer
 46