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SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549
 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the period ended:
March 31, 2005 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
(Address of principal executive offices)
    
    11747
(Zip Code)
 (631) 844-1004 
  Indicate by check mark whether the Company (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the Company was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days: þ Yes o No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act). þ Yes o No Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date. CLASS OF COMMON STOCK$.01 Par Value
    
    NUMBER OF SHARES OUTSTANDING
5/5/05477,595,951
   1




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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
    
    
    7Consolidated Statements of Comprehensive Income
    
    
    8Condensed Notes to Consolidated Financial Statements
    
    
    9Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    37Item 4. Controls and Procedures
    
    
    37PART 2. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    38Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    38Item 6. Exhibits
    
    
    38EX-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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Item 1. Financial Statements 
 Consolidated Balance Sheets (Unaudited) March 31,
    
    
    December 31,
    
    
    March 31,(in thousands except share amounts)
    
    2005
    
    
    2004
    
    
    2004Assets:Cash & Due from Banks
    
    $
    712,195
    
    
    $
    972,506
    
    
    $
    407,025Money Market Investments
    
    
    40,809
    
    
    
    90,394
    
    
    
    239,081Securities:Available-for-Sale ($6,367,537, $7,219,173 and $1,915,308 pledged at
March 31, 2005, December 31, 2004 and March 31, 2004, respectively)
    
    
    14,983,603
    
    
    
    15,444,625
    
    
    
    7,706,879Held-to-Maturity ($21,331, $24,114 and $40,470 pledged at
March 31, 2005, December 31, 2004 and March 31, 2004, respectively)
    
    
    133,745
    
    
    
    142,573
    
    
    
    169,264Total Securities
    
    
    15,117,348
    
    
    
    15,587,198
    
    
    
    7,876,143Loans:Loans Held-for-Sale
    
    
    5,350,823
    
    
    
    5,775,945
    
    
    
    3,209Loans Held-for-Investment
    
    
    31,857,021
    
    
    
    30,453,334
    
    
    
    12,655,744Less: Allowance for Loan Losses
    
    
    215,307
    
    
    
    211,097
    
    
    
    124,364Net Loans Held-for-Investment
    
    
    31,641,714
    
    
    
    30,242,237
    
    
    
    12,531,380Goodwill
    
    
    5,886,693
    
    
    
    5,878,277
    
    
    
    410,494Identifiable Intangibles
    
    
    141,601
    
    
    
    150,734
    
    
    
    11,984Premises & Equipment
    
    
    417,900
    
    
    
    416,003
    
    
    
    160,151Mortgage Servicing Rights
    
    
    283,268
    
    
    
    254,857
    
    
    
    Accrued Income Receivable
    
    
    213,195
    
    
    
    205,189
    
    
    
    92,375Other Assets
    
    
    974,854
    
    
    
    1,093,715
    
    
    
    242,295Total Assets
    
    $
    60,780,400
    
    
    $
    60,667,055
    
    
    $
    21,974,137Liabilities and Stockholders Equity:Deposits:Demand
    
    $
    7,106,826
    
    
    $
    6,738,302
    
    
    $
    4,233,526NOW & Money Market
    
    
    15,705,381
    
    
    
    14,265,395
    
    
    
    5,126,883Savings
    
    
    6,020,056
    
    
    
    6,333,599
    
    
    
    3,846,837Time
    
    
    5,257,218
    
    
    
    4,932,302
    
    
    
    1,743,679Certificates of Deposits, $100,000 & Over
    
    
    2,448,252
    
    
    
    2,542,830
    
    
    
    992,563Total Deposits
    
    
    36,537,733
    
    
    
    34,812,428
    
    
    
    15,943,488Federal Funds Purchased & Collateralized Borrowings
    
    
    12,931,678
    
    
    
    14,593,027
    
    
    
    2,955,362Other Borrowings
    
    
    1,484,468
    
    
    
    1,506,318
    
    
    
    762,344Accrued Expenses & Other Liabilities
    
    
    818,330
    
    
    
    874,203
    
    
    
    729,164Total Liabilities
    
    $
    51,772,209
    
    
    $
    51,785,976
    
    
    $
    20,390,358Stockholders Equity:Preferred Stock, par value $1.00; authorized 10,000,000 shares, unissued
    
    $
    
    
    
    $
    
    
    
    $
    Common Stock, par value $0.01; authorized 500,000,000 shares;
issued 477,452,783 Shares at March 31, 2005
    
    
    4,775
    
    
    
    4,745
    
    
    
    1,746Additional Paid in Capital
    
    
    7,004,048
    
    
    
    6,968,493
    
    
    
    376,408Retained Earnings
    
    
    2,218,134
    
    
    
    2,064,148
    
    
    
    1,872,989Accumulated Other Comprehensive (Loss)/Income
    
    
    (87,300
    )
    
    
    240
    
    
    
    31,855Deferred Compensation
    
    
    (121,011
    )
    
    
    (125,174
    )
    
    
    (88,502
    )Treasury Stock at Cost; 526,577 Shares at March 31, 2005
    
    
    (10,455
    )
    
    
    (31,373
    )
    
    
    (610,717
    )Total Stockholders Equity
    
    
    9,008,191
    
    
    
    8,881,079
    
    
    
    1,583,779Total Liabilities and Stockholders Equity
    
    $
    60,780,400
    
    
    $
    60,667,055
    
    
    $
    21,974,137
 See accompanying notes to consolidated financial statements 3




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Consolidated Statements of Income (Unaudited) Three Months EndedMarch 31,
    
    
    March 31,(in thousands, except per share amounts)
    
    2005
    
    
    2004Interest Income:Loans Held-for-Investment
    
    $
    452,217
    
    
    $
    194,200Loans Held-for-Sale
    
    
    66,848
    
    
    
    Mortgage-Backed Securities
    
    
    142,007
    
    
    
    59,137Other Securities
    
    
    29,407
    
    
    
    14,123Money Market Investments
    
    

    733
    
    
    
    203Total Interest Income
    
    
    691,212
    
    
    
    267,663Interest Expense:Savings, NOW & Money Market Deposits
    
    
    69,596
    
    
    
    15,011Time Deposits
    
    
    33,466
    
    
    
    10,736Federal Funds Purchased & Collateralized Borrowings
    
    
    99,007
    
    
    
    28,603Other Borrowings
    
    
    17,824
    
    
    
    6,484Total Interest Expense
    
    
    219,893
    
    
    
    60,834Net Interest Income
    
    
    471,319
    
    
    
    206,829Provision for Loan Losses
    
    
    9,000
    
    
    
    6,500Net Interest Income after Provision for Loan Losses
    
    
    462,319
    
    
    
    200,329Non-Interest Income:Gain on Sale of Loans
    
    
    105,369
    
    
    
    289Customer Related Fees & Service Charges
    
    
    42,006
    
    
    
    21,771Mortgage Servicing Fees
    
    
    5,576
    
    
    
    871Investment Management, Commissions & Trust Fees
    
    
    11,071
    
    
    
    3,924Other Operating Income
    
    
    14,228
    
    
    
    6,986Securities Gains, net
    
    
    4,635
    
    
    
    7,888Total Non-Interest Income
    
    
    182,885
    
    
    
    41,729Non-Interest Expense:Employee Compensation & Benefits
    
    
    135,369
    
    
    
    51,077Occupancy & Equipment, net
    
    
    45,954
    
    
    
    17,625Amortization of Identifiable Intangibles
    
    
    9,133
    
    
    
    781Other Operating Expenses
    
    
    56,197
    
    
    
    17,946Total Non-Interest Expense
    
    
    246,653
    
    
    
    87,429Income Before Income Taxes
    
    
    398,551
    
    
    
    154,629Provision for Income Taxes
    
    
    139,516
    
    
    
    52,110Net Income
    
    $
    259,035
    
    
    $
    102,519Earnings Per Share:Basic
    
    $
    .56
    
    
    $
    .46Diluted
    
    $
    .55
    
    
    $
    .45
 See accompanying notes to consolidated financial statements 4




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Consolidated Statements of Cash Flows (unaudited) For the Three Months Ended March 31,
    
    2005
    
    
    2004(in thousands)Cash Flows from Operating Activities:Net Income
    
    $
    259,035
    
    
    $
    102,519Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:Provision for Loan Losses
    
    
    9,000
    
    
    
    6,500Depreciation
    
    
    10,186
    
    
    
    4,209Net Amortization/(Accretion):Securities
    
    
    6,472
    
    
    
    9,177Loans
    
    
    (667
    )
    
    
    (3,903
    )Borrowings & Time Deposits
    
    
    (32,099
    )
    
    
    (675
    )Intangibles
    
    
    9,133
    
    
    
    781Deferred Compensation
    
    
    5,457
    
    
    
    3,501Gains on Sale of Loans
    
    
    (105,369
    )
    
    
    (289
    )Securities Gains
    
    
    (4,635
    )
    
    
    (7,888
    )Capitalization of Mortgage Servicing Rights
    
    
    (50,055
    )
    
    
    Amortization of Mortgage Servicing Rights
    
    
    19,989
    
    
    
    Loans Held-for-Sale:Originations
    
    
    (10,032,917
    )
    
    
    (25,054
    )Proceeds from Sale (1)
    
    
    10,177,590
    
    
    
    24,478Other
    
    
    385,818
    
    
    
    Purchases of Trading Assets
    
    
    
    
    
    
    (13,911
    )Sales of Trading Assets
    
    
    
    
    
    
    14,015Other, Net
    
    
    76,387
    
    
    
    46,254Net Cash Provided by Operating Activities
    
    
    733,325
    
    
    
    159,714Cash Flows from Investing Activities:Purchases of Securities Held-to-Maturity
    
    
    (500
    )
    
    
    Maturities, Redemptions, Calls and Principal Repayments on Securities Held-to-Maturity
    
    
    9,223
    
    
    
    20,844Purchases of Securities Available-for-Sale
    
    
    (704,280
    )
    
    
    (989,590
    )Proceeds from Sales of Securities Available-for-Sale
    
    
    195,499
    
    
    
    282,329Maturities, Redemptions, Calls and Principal Repayments on Securities Available-for-Sale
    
    
    831,918
    
    
    
    452,159Loans Originated, Net of Principal Repayments and Charge-offs
    
    
    (1,410,327
    )
    
    
    (314,375
    )Purchases of Premises and Equipment, net
    
    
    (12,084
    )
    
    
    (13,485
    )Net Cash (Used in) Investing Activities
    
    $
    (1,090,551
    )
    
    $
    (562,118
    )
 See accompanying notes to consolidated financial statements 5




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Consolidated Statements of Cash Flows (unaudited)  continued For the Three Months Ended March 31,
    
    2005
    
    
    2004(in thousands)Cash Flows from Financing Activities:Net Increase in Customer Deposit Liabilities
    
    $
    1,734,749
    
    
    $
    827,373Net Decrease in Borrowings
    
    
    (1,639,773
    )
    
    
    (265,792
    )Exercise of Options and Common Stock Sold for Cash
    
    
    56,503
    
    
    
    1,378Cash Dividends Paid
    
    
    (104,149
    )
    
    
    (45,840
    )Net Cash Provided by Financing Activities
    
    
    47,330
    
    
    
    517,119Net (Decrease)/Increase in Cash and Cash Equivalents
    
    
    (309,896
    )
    
    
    114,715Cash and Cash Equivalents at Beginning of the Period
    
    
    1,062,900
    
    
    
    531,391Cash and Cash Equivalents at End of the Period
    
    $
    753,004
    
    
    $
    646,106Supplemental Disclosures of Cash Flow Information:Cash Paid/(Received) During the Period for:Interest Expense
    
    $
    240,635
    
    
    $
    61,363Income Taxes
    
    $
    4,725
    
    (
    $
    737
    )During the
Period the Company Purchased
Various Securities which Settled in
the Subsequent Period
    
    $
    28,559
    
    
    $
    303,604
 (1)  Includes
loans retained in the held-for-investment portfolio totaling $1.8
million during 2005. See accompanying notes to consolidated financial statements 6




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Consolidated Statements of Changes in Stockholders Equity (unaudited) Accumulated Other
    
    
    
    
    
    
    
    
    
    
    TotalAdditional Paid
    
    
    Retained
    
    
    Comprehensive
    
    
    Deferred
    
    
    Treasury
    
    
    Stockholders(Dollars in thousands, except per share amounts)
    
    Common Stock
    
    
    In Capital
    
    
    Earnings
    
    
    (Loss)/Income
    
    
    Compensation
    
    
    Stock
    
    
    EquityBalance, December 31, 2003
    
    $
    1,746
    
    
    $
    378,793
    
    
    $
    1,816,458
    
    (
    $
    2,044
    )
    (
    $
    91,789
    )
    (
    $
    624,675
    )
    
    $
    1,478,489Net Income
    
    
    
    
    
    
    
    
    
    
    102,519
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,519Cash Dividends ($.20 per share)
    
    
    
    
    
    
    
    
    
    
    (45,988
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (45,988
    )Issuance of Stock (47,312 shares)
    
    
    
    
    
    
    485
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    893
    
    
    
    1,378Restricted Stock Activity, net
    
    
    
    
    
    
    77
    
    
    
    
    
    
    
    
    
    
    
    3,287
    
    
    
    131
    
    
    
    3,495Stock Based Compensation Activity, net
    
    
    
    
    
    
    (2,947
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,934
    
    
    
    9,987Other Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,899
    
    
    
    
    
    
    
    
    
    
    
    33,899Balance, March 31, 2004
    
    $
    1,746
    
    
    $
    376,408
    
    
    $
    1,872,989
    
    
    $
    31,855
    
    (
    $
    88,502
    )
    (
    $
    610,717
    )
    
    $
    1,583,779Balance, December 31, 2004
    
    $
    4,745
    
    
    $
    6,968,493
    
    
    $
    2,064,148
    
    
    $
    240
    
    (
    $
    125,174
    )
    (
    $
    31,373
    )
    
    $
    8,881,079Net Income
    
    
    
    
    
    
    
    
    
    
    259,035
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    259,035Cash Dividends ($.22 per share)
    
    
    
    
    
    
    
    
    
    
    (105,049
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (105,049
    )Issuance of Stock (73,793 shares)
    
    
    30
    
    
    
    723
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,454
    
    
    
    2,207Restricted Stock Activity, net
    
    
    
    
    
    
    512
    
    
    
    
    
    
    
    
    
    
    
    4,163
    
    
    
    833
    
    
    
    5,508Stock Based Compensation Activity, net
    
    
    
    
    
    
    34,320
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,631
    
    
    
    52,951Other Comprehensive Loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87,540
    )
    
    
    
    
    
    
    
    
    
    
    (87,540
    )Balance, March 31, 2005
    
    $
    4,775
    
    
    $
    7,004,048
    
    
    $
    2,218,134
    
    (
    $
    87,300
    )
    (
    $
    121,011
    )
    (
    $
    10,455
    )
    
    $
    9,008,191
 See accompanying notes to consolidated financial statements 7




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##### Table of Contents



Consolidated Statements of Comprehensive Income (Unaudited) Three Months EndedMarch 31,
    
    
    March 31,(in thousands)
    
    2005
    
    
    2004Net Income
    
    $
    259,035
    
    
    $
    102,519Other Comprehensive IncomeUnrealized (Losses)/Gains On Securities:Changes in Unrealized (Losses)/Gains Arising During The Period
    
    $
    (160,826
    )
    
    $
    67,100Less: Reclassification Adjustment For Gains Included in Net Income
    
    
    (4,635
    )
    
    
    (7,888
    )Changes in Unrealized (Losses)/Gains Arising During the Period
    
    
    (165,461
    )
    
    
    59,212Related Tax Effect on Unrealized (Losses)/Gains During the Period
    
    
    71,113
    
    
    
    (25,462
    )Net Change in Unrealized (Losses)/Gains Arising During the Period
    
    
    (94,348
    )
    
    
    33,750Unrealized Gains/(Losses) On Derivative Instruments:Changes in Unrealized Gains/(Losses) Arising During the Period
    
    
    10,841
    
    
    
    (2,464
    )Add: Reclassification Adjustment for Expenses/Losses Included in Net Income
    
    
    1,100
    
    
    
    2,725Changes in Unrealized Gains/(Losses) Arising During the Period
    
    
    11,941
    
    
    
    261Related Tax Effect on Unrealized Gains/(Losses) During the Period
    
    
    (5,133
    )
    
    
    (112
    )Net Change in Unrealized Losses Arising During the Period
    
    
    6,808
    
    
    
    149Net Other Comprehensive (Loss)/Income
    
    $
    (87,540
    )
    
    $
    33,899Comprehensive Income
    
    $
    171,495
    
    
    $
    136,418
 See accompanying notes to consolidated financial statements 8




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##### Table of Contents



North Fork Bancorporation, Inc. 
 CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (unaudited)
 March 31, 2005 and 2004
 In this quarterly report on Form 10-Q, where the context requires, the Company, North Fork,
we, us, and our refer to North Fork Bancorporation, Inc. and its subsidiaries. Note 1  Business and Summary of Significant Accounting Policies North Fork Bancorporation, Inc. is a regional bank holding company organized under the laws of
the State of Delaware and registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended. North Fork Bank, our principal bank subsidiary, operates from approximately
360 retail bank branches in the Tri-state area. Through our recent acquisition of GreenPoint
Financial Corp., we operate a nationwide mortgage business (GreenPoint Mortgage Funding Inc.)
headquartered in Novato, California. Through our non-bank subsidiaries, we offer financial products
and services to our customers including asset management, securities brokerage, and the sale of
alternative investment products. We also operate a second subsidiary bank, Superior Savings of New
England, N.A., headquartered in Branford, Connecticut which focuses on telephonic and media-based
generation of deposits principally in the Northeast. In 2004 we completed two strategically important and accretive acquisitions that have more
than doubled our total assets and expanded our geographic presence in northern and central New
Jersey. (See Note 2 - Business combinations in our 2004 Annual Report
on Form 10-K for Additional Information.) In May 2004, we acquired The Trust Company of New Jersey (TCNJ) and simultaneously merged
its operations into North Fork Bank. TCNJ was the fourth largest commercial bank headquartered in
New Jersey and operated primarily in the northern and central New Jersey market area. TCNJ
represented our first significant expansion into a state other than New York. At the date of
merger, TCNJ had $4.1 billion in total assets, $1.4 billion in securities, $2.1 billion in net
loans, $3.2 billion in deposits and $.7 billion in borrowings. In October 2004, we acquired GreenPoint Financial Corp. (GreenPoint). GreenPoint operated
two primary businesses, a New York based retail bank (GreenPoint Bank) and a separate mortgage
banking business (GreenPoint Mortgage or GPM) with nationwide operations. GreenPoint Bank
maintained 95 retail bank branches in the Tri-state area. At the date of merger, GreenPoint had $27
billion in assets, $6.8 billion in securities, $5.1 billion in loans held-for-sale, $12.8 billion
in loans held-for-investment, $12.8 billion in deposits, and $11.4 billion in borrowings. Basis of Presentation The accounting and financial reporting policies of the Company and its subsidiaries are in
conformity with accounting principles generally accepted in the United States of America. The
preparation of unaudited interim consolidated financial statements, in conformity with accounting
principles generally accepted in the United States of America, requires that management make
estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the unaudited interim consolidated
financial statements and the reported amounts of income and expenses during the reporting period.
Such estimates are subject to change in the future as additional information becomes available or
previously existing circumstances are modified. Actual results could differ from those estimates.
Additionally, where applicable, the policies conform to the accounting and reporting guidelines
prescribed by bank regulatory authorities. All significant inter-company accounts and transactions
have been eliminated. Certain prior period amounts have been reclassified to conform to current
period presentation. These unaudited interim consolidated financial statements and related managements discussion
and analysis should be read together with the consolidated financial information in our 2004 Annual
Report on Form 10-K, previously filed with the United States Securities and Exchange Commission
(SEC). Results of operations for the three months ended March 31, 2005 are not necessarily
indicative of the results of operations which may be expected for the full year 2005 or any future
interim period. In reviewing and understanding the financial information contained herein you are encouraged
to read the significant accounting policies contained in Note 1  Business and Summary of
Significant Accounting Policies of our 2004 Annual Report on Form 10-K. There have not been any
significant changes in the factors or methodology used in determining accounting estimates or
applied in our critical accounting policies since December 2004 that are material in relation to
our financial condition or results of operations. 9




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Accounting for Stock-Based Compensation Stock-based compensation plans are accounted for in accordance with the requirements specified
in SFAS No. 123 Accounting for Stock-Based Compensation (SFAS 123), as amended by SFAS No. 148,
Accounting for Stock-Based Compensation  Transition and Disclosure (SFAS 148). As permitted
under these statements, we have elected to apply the intrinsic value method in accounting for
option-based stock compensation plans. Accordingly, compensation expense has not been recognized
in the accompanying consolidated financial statements for stock-based compensation plans, other
than for restricted stock awards. Restricted stock awards are recorded as deferred compensation, a
component of stockholders equity, at the fair value of these awards at the date of grant and are
amortized to compensation expense over the awards specified vesting periods. Since the intrinsic
value method is used, we are required to disclose the pro-forma impact on net income and earnings
per share that the fair value-based method would have had, if it was applied rather than the
intrinsic value method. Stock options are typically awarded at year end and contain a nominal
vesting period. Since the pro forma effect on net income of expensing stock options during the
three months ended March 31, 2005 and 2004 is nominal, we have not included such pro forma
compensation expense and its related effect on net income and earnings per share herein. Critical Accounting Policies We have identified four accounting policies that are critical to the presentation of our
financial statements and that require critical accounting estimates, involving significant
valuation adjustments, on the part of management. The following is a description of those
policies: Provision and Allowance for Loan Losses The allowance for loan losses is available to cover probable losses inherent in the current
loans held-for-investment portfolio. Loans held-for-investment, or portions thereof, deemed
uncollectible are charged to the allowance for loan losses, while recoveries, if any, of amounts
previously charged-off are added to the allowance. Amounts are charged-off after giving
consideration to such factors as the customers financial condition, underlying collateral values
and guarantees, and general economic conditions. The evaluation process for determining the adequacy of the allowance for loan losses and the
periodic provisioning for estimated losses is undertaken on a quarterly basis, but may increase in
frequency should conditions arise that would require our prompt attention. Conditions giving rise
to such action are business combinations or other acquisitions or dispositions of large quantities
of loans, dispositions of non-performing and marginally performing loans by bulk sale or any
development which may indicate an adverse trend. Recognition is also given to the changed risk
profile resulting from previous business combinations, customer knowledge, results of ongoing
credit-quality monitoring processes and the cyclical nature of economic and business conditions. The loan portfolio is categorized according to collateral type, loan purpose or borrower type
(i.e. commercial, consumer). The categories used include Multi-Family Mortgages, Residential
Mortgages, Commercial Mortgages, Commercial and Industrial, Consumer, and Construction and Land,
which are more fully described in the section entitled Managements Discussion and Analysis, 
Loans. An important consideration is our concentration of real estate related loans located in
the Tri-state area. The methodology employed for assessing the appropriateness of the allowance consists of the
following criteria:  Establishment of reserve amounts for specifically identified criticized loans, including
those arising from business combinations and those designated as requiring special attention by our
internal loan review program, 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). The initial allocation or specific-allowance methodology commences with loan officers and
underwriters grading the quality of their loans on a risk classification scale ranging from 1  8.
Loans identified as below investment grade are referred to our independent Loan Review Department
(LRD) for further analysis and identification of those factors that may ultimately affect the
full recovery or collectibility of principal and/or interest. These loans are subject to continuous
review and monitoring while they remain in a criticized category. Additionally, LRD is responsible
for performing periodic reviews of the loan portfolio independent from the identification process
employed by loan officers and underwriters. Loans that fall into criticized categories are further
evaluated for impairment in accordance with the provisions of Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan. The portion of the
allowance allocated to impaired loans is based on the most appropriate of the following measures:
discounted cash flows from the loan using the loans effective interest rate, the fair value of the
collateral for collateral dependent loans, or the observable market price of the impaired loan. The remaining allocation applies a category specific loss experience factor to loans which
have not been specifically reviewed for impairment, including smaller balance homogeneous loans
that we have identified as residential and consumer, which are not specifically
reserved for impairment. These category specific factors give recognition to our historical
loss experience, as well as that of acquired businesses, cyclical trends, current economic
conditions and our exposure to real estate values. These factors are reviewed on a quarterly basis
with senior lenders to ensure that the factors applied to each loan category are reflective of
trends or changes in the current business environment which may affect these categories. 10




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Upon completion of both allocation processes, the specific and loss experience factor method
allocations are combined, producing the allocation of the allowance for loan losses by loan
category. Other factors used to evaluate the adequacy of the allowance for loan losses include the
amount and trend of criticized loans, results of regulatory examinations, peer group comparisons
and economic data associated with the relevant markets, specifically the local real estate market.
Because many loans depend upon the sufficiency of collateral, any adverse trend in the relevant
real estate markets could have a significant adverse effect on the quality of our loan portfolio.
This may lead management to consider that the overall allowance level should be greater than the
amount determined by the allocation process described above. Accounting for Derivative Financial Instruments Derivative financial instruments are recorded at fair value as either assets or liabilities on
the balance sheet. The accounting for changes in the fair value of a derivative instrument is
determined by whether it has been designated and qualifies as part of a hedging relationship and on
the type of hedging relationship. Transactions hedging changes in the fair value of a recognized
asset, liability, or firm commitment are classified as fair value hedges. Derivative instruments
hedging exposure to variable cash flows of recognized assets, liabilities or forecasted
transactions are classified as cash flow hedges. Fair value hedges result in the immediate recognition through earnings of gains or losses on
the derivative instrument, as well as corresponding losses or gains on the hedged item to the
extent they are attributable to the hedged risk. The gain or loss on the effective portion of a
derivative instrument designated as a cash flow hedge is reported in other comprehensive income,
and reclassified to earnings in the same period that the hedged transaction affects earnings. The
gain or loss on the ineffective portion of the derivative instrument, if any, is recognized in
earnings for both fair value and cash flow hedges. Derivative instruments not qualifying for hedge
accounting treatment are recorded at fair value and classified as trading assets or liabilities
with the resultant changes in fair value recognized in earnings during the period of change. We
also account for certain fair value hedges under the short cut method of accounting for
derivatives. The short cut method assumes no ineffectiveness between an interest-bearing financial
instrument and an interest rate swap. Changes in the fair value of the interest rate swap are
recorded as changes in both the fair value of the swap and the hedged financial instrument. In the event of early termination of a derivative contract, previously designated as part of a
cash flow hedging relationship, any resulting gain or loss is deferred as an adjustment to the
carrying value of the assets or liabilities, against which the hedge had been designated with a
corresponding offset to other comprehensive income, and reclassified to earnings over the shorter
of the remaining life of the designated assets or liabilities, or the derivative contract. However,
if the hedged item is no longer on balance sheet (i.e.  sold or canceled), the derivative gain or
loss is immediately reclassified to earnings. We designate certain fixed rate residential mortgage loans held-for-sale as hedged items in
fair value hedges. The risk hedged on these loans is the changes in fair value attributable to
changes in market interest rates. We designate forward delivery commitments as the hedging
instruments used in these fair value hedges. The results of previous retrospective assessments of
hedge effectiveness have established an expectation that the results of the derivative hedging
instruments will substantially offset the effects of changes in the fair value of the hedged item
on a prospective basis. If the retrospective assessment determines that the hedge was not highly
effective, we will discontinue hedge accounting prospectively. We will re-establish the prospective
expectation of correlation if the hedge is determined to be highly effective. Derivative financial instruments which do not qualify for hedge accounting are recorded at
fair value with changes in the instruments fair value recognized through earnings. For example, an
interest rate lock commitment on a mortgage loan that we do not intend to hold for investment is a
derivative. During the accumulation of these commitments with borrowers, we are exposed to interest
rate risk. If market interest rates required by investors are higher than managements assumptions,
the prices paid by investors and resultant gain on sale of loans will be lower than previously
estimated. To mitigate this interest rate risk, we use a combination of other derivatives, such as
forward delivery commitments and forward sales contracts. The amount and duration of these
derivatives are selected in order to have the changes in their fair value correlate closely with
the changes in fair value of the interest rate lock commitments on loans to be sold. Representation and Warranty Reserve The representation and warranty reserve is available to cover probable losses inherent with
the sale of loans in the secondary market. In the normal course of business certain representations
and warranties are made to investors at the time of sale, which permit the investor to return the
loan to the seller or require the seller to indemnify the investor (make whole) for any losses
incurred by the investor while the loan remains outstanding. The evaluation process for determining the adequacy of the representation and warranty reserve
and the periodic provisioning for estimated losses is performed for each product type on a
quarterly basis. Factors considered in the evaluation process include historical
sales volumes, aggregate repurchase and indemnification activity and actual losses incurred.
Additions to the reserve are recorded as a reduction to the gain on sale of loans. Losses incurred
on loans where we are required to either repurchase the loan or make payments to the investor under
the indemnification provisions are charged against the reserve. The representation and warranty
reserve is included in accrued expenses and other liabilities in the consolidated balance sheet. 11




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Mortgage Servicing Rights The
rights to service mortgage loans for others, or Mortgage Servicing
Rights (MSRs), is
recognized when mortgage loans are sold in the secondary market and
we retain the right to service those
loans for a service fee. The MSRs initial carrying value is determined by
allocating the recorded investment in the underlying mortgage loans between the assets sold and the
interest retained based on their relative fair values at the date of transfer. Fair value of MSRs
are determined using the present value of estimated future cash flows
of net servicing income. MSRs are carried at the lower of the
initial carrying value, adjusted for amortization or fair value. MSRs are amortized in proportion
to, and over the period of, estimated net servicing income. The amortization of MSRs is
periodically analyzed and adjusted to reflect changes in prepayment speeds. To determine fair value, a valuation model that calculates the present value of estimated
future net servicing income is utilized. We use assumptions in the valuation model that market participants
use when estimating future net servicing income including prepayment speeds, discount
rates, default rates, cost to service, escrow account earnings, contractual servicing fee income,
ancillary income and late fees. MSRs are periodically evaluated for impairment based on the difference between the carrying
amount and current fair value. To evaluate and measure impairment, the underlying loans are
stratified based on certain risk characteristics, including loan type, note rate and investor
servicing requirements. If it is determined that temporary impairment exists, a valuation
allowance is established through a charge to earnings for any excess of amortized cost over the
current fair value, by risk stratification. If determined in future periods that all or a portion
of the temporary impairment no longer exists for a particular risk stratification, the valuation
allowance is reduced by increasing earnings. However, if impairment for a particular risk
stratification is deemed other-than-temporary (recovery of a recorded valuation allowance is
remote), a direct write-down, permanently reducing the carrying value of the MSR is recorded. The
periodic evaluation of MSRs for other-than-temporary impairment considers both historical and
projected trends in interest rates, payoff activity and whether impairment could be recovered
through increases in market interest rates. NOTE 2  SECURITIES The amortized cost and estimated fair values of available-for-sale securities are as follows: March 31, 2005
    
    
    December 31, 2004
    
    
    March 31, 2004Available-for-Sale
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    

    
    Fair(in thousands)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueCMO Agency Issuances
    
    $
    4,826,934
    
    
    $
    4,746,558
    
    
    $
    5,121,001
    
    
    $
    5,098,243
    
    
    $
    3,147,345
    
    
    $
    3,161,028CMO Private Issuances
    
    
    4,984,430
    
    
    
    4,923,934
    
    
    
    4,723,080
    
    
    
    4,721,813
    
    
    
    1,679,583
    
    
    
    1,688,505Agency Pass-Through Certificates
    
    
    2,506,448
    
    
    
    2,491,331
    
    
    
    2,715,253
    
    
    
    2,737,067
    
    
    
    1,249,088
    
    
    
    1,266,341State & Municipal Obligations
    
    
    980,352
    
    
    
    979,304
    
    
    
    916,239
    
    
    
    920,112
    
    
    
    706,583
    
    
    
    714,308Equity Securities (1) (2)
    
    
    769,594
    
    
    
    776,108
    
    
    
    790,042
    
    
    
    794,005
    
    
    
    173,238
    
    
    
    176,950U.S. Treasury & Agency Obligations
    
    
    360,920
    
    
    
    357,407
    
    
    
    361,987
    
    
    
    363,775
    
    
    
    109,588
    
    
    
    109,980Other Securities (3)
    
    
    704,211
    
    
    
    708,961
    
    
    
    800,848
    
    
    
    809,610
    
    
    
    572,313
    
    
    
    589,767Total Available for Sale Securities
    
    $
    15,132,889
    
    
    $
    14,983,603
    
    
    $
    15,428,450
    
    
    $
    15,444,625
    
    
    $
    7,637,738
    
    
    $
    7,706,879
   (1)
    
    Amortized cost and fair value includes $336.8 million, $351.7 million and $68.2 million
in Federal Home Loan Bank Stock at March 31, 2005, December 31, 2004 and March 31, 2004,
respectively.(2)
    
    Amortized cost and fair value includes $369.6 million and $374.4 million at March 31,
2005, respectively $369.6 million and $371.2 million at December 31, 2004, respectively and
$50.0 million and $50.3 million at March 31, 2004, respectively of Freddie Mac and Fannie
Mae Preferred Stock, respectively.(3)
    
    Amortized cost and fair value includes $10.8 million and $31.8 million at March 31,
2005 and December 31, 2004, respectively of retained interests in securitizations retained
on home equity loan securitizations that were executed prior to the acquisition. 12




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The amortized cost and estimated fair values of held-to-maturity securities are as follows: March 31, 2005
    
    
    December 31, 2004
    
    
    March 31, 2004Held-to-Maturity
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair(in thousands)
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    ValueAgency Pass-Through Certificates
    
    $
    54,118
    
    
    $
    54,483
    
    
    $
    57,719
    
    
    $
    58,776
    
    
    $
    73,425
    
    
    $
    75,851State & Municipal Obligations
    
    
    44,405
    
    
    
    46,676
    
    
    
    45,303
    
    
    
    47,991
    
    
    
    53,494
    
    
    
    57,065CMO Private Issuances
    
    
    23,202
    
    
    
    22,737
    
    
    
    24,426
    
    
    
    24,151
    
    
    
    27,628
    
    
    
    27,789Other Securities
    
    
    12,020
    
    
    
    11,931
    
    
    
    15,125
    
    
    
    15,073
    
    
    
    14,717
    
    
    
    14,678Total Held-to-Maturity Securities
    
    $
    133,745
    
    
    $
    135,827
    
    
    $
    142,573
    
    
    $
    145,991
    
    
    $
    169,264
    
    
    $
    175,383
 At March 31, 2005, securities carried at $9.6 billion were pledged to secure securities sold
under agreements to repurchase, other borrowings, and for other purposes as required by law.
Securities pledged under agreements pursuant to which the collateral may be sold or repledged by
the secured parties approximated $6.4 billion, while securities pledged under agreements pursuant
to which the secured parties may not sell or repledge approximated
$3.2 billion at March 31, 2005. NOTE 3  LOANS Loans designated as held-for-sale are summarized as follows: Loans Held-for-Sale
    
    March 31,
    
    
    % of
    
    
    December 31,
    
    
    % of
    
    
    March 31,
    
    
    % of(dollars in thousands)
    
    2005
    
    
    Total
    
    
    2004
    
    
    Total
    
    
    2004
    
    
    TotalResidential Mortgages
    
    $
    4,239,366
    
    
    
    80
    %
    
    $
    4,339,581
    
    
    
    76
    %
    
    $
    3,209
    
    
    
    100
    %Home Equity
    
    
    1,061,352
    
    
    
    20
    
    
    
    1,380,247
    
    
    
    24
    
    
    
    
    
    
    
    Total
    
    $
    5,300,718
    
    
    
    100
    %
    
    $
    5,719,828
    
    
    
    100
    %
    
    $
    3,209
    
    
    
    100
    %Deferred Origination Costs
    
    
    50,105
    
    
    
    
    
    
    
    56,117
    
    
    
    
    
    
    
    Total Loans Held-for-Sale
    
    $
    5,350,823
    
    
    
    
    
    
    $
    5,775,945
    
    
    
    
    
    
    $
    3,209
 The composition of loans held-for-investment are summarized as follows: Loans Held-for-Investment
    
    March 31,
    
    
    % of
    
    
    December 31,
    
    
    % of
    
    
    March 31,
    
    
    % of(dollars in thousands)
    
    2005
    
    
    Total
    
    
    2004
    
    
    Total
    
    
    2004
    
    
    TotalCommercial Mortgages
    
    $
    5,535,281
    
    
    
    17
    %
    
    $
    5,369,656
    
    
    
    18
    %
    
    $
    2,836,434
    
    
    
    22
    %Commercial & Industrial
    
    
    3,408,006
    
    
    
    11
    
    
    
    3,046,820
    
    
    
    10
    
    
    
    2,248,285
    
    
    
    18Total Commercial
    
    
    8,943,287
    
    
    
    28
    %
    
    
    8,416,476
    
    
    
    28
    %
    
    
    5,084,719
    
    
    
    40
    %Residential Mortgages
    
    
    16,445,902
    
    
    
    51
    
    
    
    15,668,938
    
    
    
    51
    
    
    
    2,503,107
    
    
    
    20Multi-Family Mortgages
    
    
    4,328,879
    
    
    
    14
    
    
    
    4,254,405
    
    
    
    14
    
    
    
    3,658,070
    
    
    
    29Consumer
    
    
    1,554,499
    
    
    
    5
    
    
    
    1,604,863
    
    
    
    5
    
    
    
    1,113,982
    
    
    

    9Construction & Land
    
    
    541,280
    
    
    
    2
    
    
    
    480,162
    
    
    
    2
    
    
    
    326,703
    
    
    
    2Total
    
    $
    31,813,847
    
    
    
    100
    %
    
    $
    30,424,844
    
    
    
    100
    %
    
    $
    12,686,581
    
    
    
    100
    %Unearned Income &
Deferred Origination Costs
    
    
    43,174
    
    
    
    
    
    
    
    28,490
    
    
    
    
    
    
    
    (30,837
    )Total Loans Held-for-Investment
    
    $
    31,857,021
    
    
    
    
    
    
    $
    30,453,334
    
    
    
    
    
    
    $
    12,655,744
 At March 31, 2005 loans held-for-investment of $5.4 billion were pledged as collateral under
borrowing arrangements with the Federal Home Loan Bank of New York. 13




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##### Table of Contents



Non-Performing Assets Non-performing assets include loans ninety days past due and still accruing, non-accrual loans
and other real estate. Other real estate consists of properties acquired through foreclosure or
deed in lieu of foreclosure. Other real estate is carried at the lower of the recorded amount of
the loan or the fair value of the property based on the current appraised value adjusted for
estimated disposition cost. The following table presents the components of non-performing assets as of the dates indicated: March 31,
    
    
    December 31,
    
    
    March 31,(in thousands)
    
    2005
    
    
    2004
    
    
    2004Commercial Mortgages
    
    $
    11,459
    
    
    $
    16,890
    
    
    $
    33Commercial & Industrial
    
    
    8,152
    
    
    
    8,730
    
    
    
    5,471Total Commercial
    
    
    19,611
    
    
    
    25,620
    
    
    
    5,504Residential Mortgages
    
    
    91,411
    
    
    
    103,745
    
    
    
    4,230Consumer
    
    
    2,527
    
    
    
    3,178
    
    
    
    1,568Multi-Family Mortgages
    
    
    1,293
    
    
    
    1,290
    
    
    
    Construction and Land
    
    
    
    
    
    
    
    
    
    
    Non-Performing Loans Held-for-Investment
    
    $
    114,842
    
    
    $
    133,833
    
    
    $
    11,302Non-Performing Loans Held-for-Sale
    
    
    45,780
    
    
    
    60,858
    
    
    
    Other Real Estate
    
    
    14,243
    
    
    
    17,410
    
    
    
    93Total Non-Performing Assets
    
    $
    174,865
    
    
    $
    212,101
    
    
    $
    11,395Allowance for Loan Losses to Non-Performing Loans Held-for-Investment
    
    
    187
    %
    
    
    158
    %
    
    
    1100
    %Allowance for Loan Losses to Total Loans Held-for-Investment
    
    
    .68
    
    
    
    .69
    
    
    
    .98Non-Performing Loans to Total Loans Held-for-Investment
    
    
    .36
    
    
    
    .44
    
    
    
    .09Non-Performing Assets to Total Assets
    
    
    .29
    
    
    
    .35
    
    
    
    .05
 Non-performing loans held-for-investment includes loans ninety days past due and still
accruing totaling $4.0 million, $5.3 million and $2.2 million at March 31, 2005, December 31,
2004 and March 31, 2004, respectively. Future levels of non-performing assets will be influenced by prevailing economic conditions
and the impact of those conditions on our customers, prevailing interest rates, unemployment rates,
property values, and other internal and external factors, including potential sales of such assets. 14




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##### Table of Contents

\

NOTE 4  ALLOWANCE FOR LOAN LOSSES A summary of changes in the allowance for loan losses is shown below for the periods indicated: Three Months EndedMarch 31,
    
    
    December 31,
    
    
    March 31,(dollars in thousands)
    
    2005
    
    
    2004
    
    
    2004Balance at Beginning of Period
    
    $
    211,097
    
    
    $
    138,797
    
    
    $
    122,733Allowance from Acquisitions
    
    
    
    
    
    
    74,726
    
    
    
    Provision for Loan Losses
    
    
    9,000
    
    
    
    7,689
    
    
    
    6,500Total
    
    
    220,097
    
    
    
    221,212
    
    
    
    129,233Recoveries Credited to the Allowance
    
    
    5,002
    
    
    
    3,189
    
    
    
    2,613Losses Charged to the Allowance
    
    
    (9,792
    )
    
    
    (13,304
    )
    
    
    (7,482
    )Balance at End of Period
    
    $
    215,307
    
    
    $
    211,097
    
    
    $
    124,364
 NOTE 5  FEDERAL FUNDS PURCHASED AND COLLATERALIZED BORROWINGS The expected maturity or repricing of Federal Home Loan Bank (FHLB) Advances and Repurchase
Agreements (Repos) at March 31, 2005 is as follows: ( dollars in thousands)
    
    FHLB
    
    
    Average
    
    
    Repurchase
    
    
    Average
    
    
    
    
    
    
    Total AverageMaturity
    
    Advances
    
    
    Rate (1)
    
    
    Agreements
    
    
    Rate (1)
    
    
    Total (2)
    
    
    Rate (1)2005
    
    $
    2,275,015
    
    
    
    3.18
    %
    
    $
    3,179,588
    
    
    
    2.86
    %
    
    $
    5,454,603
    
    
    
    2.99
    %2006
    
    
    300,000
    
    
    
    3.86
    
    
    
    700,000
    
    
    
    2.86
    
    
    
    1,000,000
    
    
    
    3.162007
    
    
    100,000
    
    
    
    2.02
    
    
    
    1,000,000
    
    
    
    2.98
    
    
    
    1,100,000
    
    
    
    2.902008
    
    
    1,050,000
    
    
    
    2.50
    
    
    
    800,000
    
    
    
    4.13
    
    
    
    1,850,000
    
    
    
    3.212009
    
    
    200,000
    
    
    
    2.93
    
    
    
    200,000
    
    
    
    3.29
    
    
    
    400,000
    
    
    
    3.11Thereafter
    
    
    250,000
    
    
    
    4.62
    
    
    
    400,000
    
    
    
    4.38
    
    
    
    650,000
    
    
    
    4.47Total
    
    $
    4,175,015
    
    
    
    3.10
    %
    
    $
    6,279,588
    
    
    
    3.15
    %
    
    $
    10,454,603
    
    
    
    3.13
    %
   (1)
    
    Reflects the impact of purchase accounting adjustments and interest rate swaps.(2)
    
    Excludes $238.1 million in purchase accounting adjustments (unamortized premiums).(3)
    
    Federal funds
purchased were $2.2 billion at March 31, 2005. Interest rate swaps were used to convert $175 million in Repos from variable rates to fixed
rates. These swaps qualify as cash flow hedges and are explained in more detail in Note 9 
Derivative Financial Instruments. 15




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##### Table of Contents



NOTE 6  OTHER BORROWINGS The following tables summarize other borrowings outstanding as of the dates indicated: SUBORDINATED NOTES March 31,
    
    
    December 31,
    
    
    March 31,(in thousands)
    
    2005
    
    
    2004
    
    
    2004Parent Company:5.875% Subordinated Notes due August 2012
    
    $
    349,341
    
    
    $
    349,319
    
    
    $
    349,2525.0% Subordinated Notes due August 2012
    
    
    150,000
    
    
    
    150,000
    
    
    
    150,000Subsidiary Bank:9.25% Subordinated Bank Notes due October 2010 (1)
    
    
    183,137
    
    
    
    184,474
    
    
    
    Total Subordinated Debt
    
    
    682,478
    
    
    
    683,793
    
    
    
    499,252Fair Value Hedge Adjustment
    
    
    (33,354
    )
    
    
    (22,888
    )
    
    
    (10,850
    )Total Subordinated Notes Carrying Amount
    
    $
    649,124
    
    
    $
    660,905
    
    
    $
    488,402
   (1)
    
    Includes the remaining fair value adjustment of $33.1 million and $34.6 million (unamortized premium)
at March 31, 2005 and December 31, 2004, respectively,
which reduced the effective cost of funds
to 4.61%. $350 million of 5.875% Subordinated Notes and $150 million of 5% Fixed Rate/Floating Rate
Subordinated Notes mature in 2012, and qualify as Tier II capital for regulatory purposes.
The 5.875% Subordinated Notes bear interest at a fixed rate through maturity, pay interest
semi-annually and are not redeemable prior to maturity. The Fixed Rate/Floating Rate notes bear
interest at a fixed rate of 5% per annum for the first five years, and convert to a floating rate
thereafter until maturity based on three-month LIBOR plus 1.87%. Beginning in the sixth year, we
have the right to redeem the fixed rate/floating rate notes at par plus accrued interest. There
are $500 million in pay floating swaps, designated as fair value hedges, that were used to convert
the stated fixed rate on these Notes to variable rates indexed to three-month LIBOR. (See Note 9 
Derivative Financial Instruments for additional information). In
October 2004, we assumed $150 million of 9.25% Subordinated Bank
Notes from GreenPoint. The 9.25% Subordinated Bank Notes mature in 2010, pay interest semi-annually and qualify as
Tier II capital for regulatory purposes. JUNIOR SUBORDINATED DEBT (related to Trust Preferred Securities): March 31,
    
    
    December 31,
    
    
    March 31,(in thousands)
    
    2005
    
    
    2004
    
    
    20048.70% Junior Subordinated Debt  - due December 2026
    
    $
    102,830
    
    
    $
    102,827
    
    
    $
    102,8188.00% Junior Subordinated Debt  - due December 2027
    
    
    102,801
    
    
    
    102,798
    
    
    
    102,7888.17% Junior Subordinated Debt  - due May 2028
    
    
    46,547
    
    
    
    46,547
    
    
    
    46,5479.10% Junior Subordinated Debt  - due June 2027 (1)
    
    
    236,906
    
    
    
    237,251
    
    
    
    Total Junior Subordinated Debt
    
    
    489,084
    
    
    
    489,423
    
    
    
    252,153Fair Value Hedge Adjustment
    
    
    11,606
    
    
    
    15,165
    
    
    
    21,789Total Junior Subordinated Debt Carrying Amount
    
    $
    500,690
    
    
    $
    504,588
    
    
    $
    273,942
   (1)
    
    Includes the remaining fair value adjustment of $30.7 million and $31.1 million (unamortized premiums)
at March 31, 2005 and December 31, 2004, respectively,
which reduced the effective cost of funds
to 7.63%. Capital Securities (or Trust Preferred Securities), which qualify as Tier I Capital for
regulatory purposes, were issued through Wholly-Owned Statutory Business Trusts (the Trusts).
The Trusts were initially capitalized with common stock and used the proceeds of both the common
stock and Capital Securities to acquire Junior Subordinated Debt issued by the Company. The Capital
Securities are obligations of the Trusts. The Junior Subordinated Debt and Capital Securities bear
the same interest rates, are due concurrently and are non-callable at any time in whole or in part
for ten years from the date of issuance, except in certain limited circumstances. They may be
redeemed annually thereafter, in whole or in part, at declining premiums to maturity. The costs
associated with these issuances have been capitalized and are being amortized to maturity using the
straight-line method. There are $245 million in pay floating swaps, designated as fair value hedges, that were used
to convert a corresponding amount of $245 million in Junior Subordinated Debt from their stated
fixed rates to variable rates indexed to three-month LIBOR. (See Note 9  Derivative Financial
Instruments for additional information.) 16




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##### Table of Contents



In
October 2004, We assumed $200 million of 9.10% Capital Securities
previously issued by GreenPoint through a wholly-owned Statutory Business Trust. SENIOR NOTES: March 31,
    
    
    December 31,(in thousands)
    
    2005
    
    
    20043.20% Senior
Notes  - due June 2008 (1)
    
    $
    343,388
    
    
    $
    342,869Fair Value Hedge Adjustment
    
    
    (8,734
    )
    
    
    (2,044
    )Total Senior Notes Carrying Amount
    
    $
    334,654
    
    
    $
    340,825
   (1)
    
    Includes fair value adjustment of $6.6 million and $7.1 million (unamortized premiums)
at March 31, 2005 and December 31, 2004, respectively. In
October 2004, $350 million of 3.20% Senior Notes were
assumed from GreenPoint.
The 3.20% Senior Notes mature in 2008, and pay interest semi-annually. Pay floating swaps of $350 million, designated as fair value hedges, were used to convert the
stated fixed rate on these notes to variable rates indexed to the three-month LIBOR. (See Note 9 -
Derivative Financial Instruments for additional information). NOTE 7  MORTGAGE SERVICING RIGHTS The change in the carrying value and fair value of mortgage servicing rights at March 31,
2005 is as follows: (in thousands )
    
    2005Balance at January 1, 2005
    
    $
    254,857Additions
    
    
    50,055Sales
    
    
    (1,655
    )Amortization
    
    
    (19,989
    )Balance at March 31, 2005
    
    $
    283,268Less: Reserve for Impairment
    
    
    Mortgage Servicing Rights, net
    
    $
    283,268Fair Value at March 31, 2005
    
    $
    315,703
 In
estimating the fair value of the mortgage servicing rights at
March 31, 2005, we utilized a weighted
average prepayment rate (includes default rate) of 23.6%, a weighted average life of 4.5 years and
a discount rate of 10.5%. At March 31, 2005, the sensitivities to immediate 10% and 20% increases in the weighted
average prepayment rates would decrease the fair value of mortgage servicing rights by $14 million
and $27 million, respectively . At March 31, 2005, the aggregate principal balance of mortgage loans serviced for others
was $32.2 billion. 17




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##### Table of Contents



NOTE 8  REPRESENTATION AND WARRANTY RESERVE The representation and warranty reserve is available to cover probable losses inherent
with the sale of loans in the secondary market. In the normal course of business, certain
representations and warranties are made to investors at the time of sale, which permit the investor
to return the loan to the Company or require the Company to indemnify the investor (make whole) for
any losses incurred by the investor while the loan remains outstanding. A summary of the changes in the representation and warranty reserve is shown below for the
quarter ended March 31, 2005: (in thousands )
    
    2005Balance at January 1, 2005
    
    $
    97,066Provisions for Estimated Losses (1)
    
    
    23,718Losses Incurred
    
    
    (9,083
    )Balance at March 31, 2005
    
    $
    111,701
   (1)
    
    The provision is reported as a reduction to gain on sale of loans. NOTE 9  DERIVATIVE FINANCIAL INSTRUMENTS The use of derivative financial instruments creates exposure to credit risk. This credit
exposure relates to losses that would be recognized if the counterparties fail to perform their
obligations under the contracts. To mitigate this exposure to non-performance, the Company deals
only with counterparties of good credit standing and establish counterparty credit limits. In
connection with our interest rate risk management process, the Company periodically enters into
interest rate derivative contracts. These derivative interest rate contracts may include interest
rate swaps, caps, and floors and are used to modify the repricing characteristics of specific
assets and liabilities. We have not utilized interest rate caps or floors for any periods presented
in these financial statements. The following table details the interest rate swaps and their associated hedged liabilities
outstanding as of March 31, 2005: (dollars in thousands)
    
    Hedged
    
    Notional
    
    
    Fixed
    
    
    VariableMaturity
    
    Liability
    
    Amounts
    
    
    Interest Rates
    
    
    Interest RatesPay Fixed Swaps2005
    
    Repurchase Agreements
    
    $
    100,000
    
    
    
    4.24 - 4.26
    %
    
    
    2.73
    %2008
    
    Repurchase Agreements
    
    
    75,000
    
    
    
    6.14
    
    
    
    2.77$
    175,000Pay Floating Swaps2007
    
    5.00%    Subordinated Notes
    
    $
    150,000
    
    
    
    5.00
    %
    
    
    2.79
    %2008
    
    3.20%    Senior Notes
    
    
    350,000
    
    
    
    3.20
    
    
    
    2.952012
    
    5.875%  Subordinated Notes
    
    
    350,000
    
    
    
    5.875
    
    
    
    2.792026
    
    8.70%    Junior Subordinated Debt
    
    
    100,000
    
    
    
    8.70
    
    
    
    3.012027
    
    8.00%    Junior Subordinated Debt
    
    
    100,000
    
    
    
    8.00
    
    
    
    3.012028
    
    8.17%    Junior Subordinated Debt
    
    
    45,000
    
    
    
    8.17
    
    
    
    2.74$
    1,095,000
 At March 31, 2005, $175 million in pay fixed swaps, designated as cash flow hedges, were
outstanding. These agreements change the repricing characteristics of certain repurchase
agreements, requiring us to make periodic fixed rate payments and receive periodic variable rate
payments indexed to three-month LIBOR, based on a common notional amount and identical payment and
maturity dates. These swaps had as of the end of the period, an
unrealized loss of $3.8 million,
which is recorded as a component of other liabilities (the net of tax balance of $2.2 million is
reflected in stockholders equity as a component of accumulated other comprehensive income). The
use of pay fixed swaps outstanding increased interest expense by $1.1 million and $2.7 million in
the first quarters of 2005 and 2004, respectively. Based upon the current interest rate
environment, approximately $.7 million of the $2.2 million unrealized after tax loss is expected to
be reclassified from accumulated other comprehensive income in the next twelve months. The Company utilized $350 million in pay floating swaps designated as fair value hedges to
convert the stated fixed rate on the 5.875% subordinated notes to variable rates indexed to
three-month LIBOR. The swap term and payment dates match the related terms of the subordinated
notes. The Company also utilized $150 million in pay floating swaps designated as fair value
hedges to convert the stated fixed rate on the 5% subordinated notes to variable rates indexed to
three-month LIBOR. The swap term is for five years, matching the period of time the subordinated
notes pay a fixed rate. Beginning in the sixth year, we have the right to redeem the fixed
rate/floating rate notes at par plus accrued interest or the interest rate converts to a spread
over three month LIBOR. At March 31, 2005, the fair value adjustment of the swap hedging $500
million in subordinated notes was an unrealized loss of $33.3 million and is reflected as a
component of other liabilities. The carrying amount of the $500 million in subordinated notes was
increased by an identical amount. These swaps 18




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##### Table of Contents



reduced interest expense by approximately $1.0
million and $2.7 million in the first quarters of 2005 and 2004, respectively. There was no hedge
ineffectiveness recorded in the Consolidated Statements of Income on these transactions for all
periods reported. We assumed $350 million of 3.20% senior notes previously issued by
GreenPoint. The Company also assumed $350 million of pay floating swaps designated as fair value
hedges which were used to convert the stated fixed rate on the 3.20% senior notes to variable rates
indexed to three-month LIBOR. The swap term and payment dates match the related terms of the senior
notes. At March 31, 2005, the fair value adjustment of the swap hedging the $350 million of senior
notes was an unrealized loss of $8.7 million and is reflected as a component of other liabilities.
The carrying amount of the $350 million in senior notes was decreased by an identical amount. These
swaps reduced interest expense by $.9 million in the first quarter of 2005. There was no hedge
ineffectiveness recorded in the Consolidated Statements of Income on these transactions. Interest rate swap agreements were used to change the repricing characteristics of $245
million in Junior Subordinated Debt from their stated fixed rates to variable rates indexed to
three-month LIBOR. The swaps, designated as fair value hedges, contain payment dates, maturity
dates and embedded call options held by the counterparty (exercisable in approximately four years),
which are identical to the terms and call provisions contained in the Junior Subordinated Debt. At
March 31, 2005, the fair value adjustment on the swap agreements hedging $200 million of Junior
Subordinated Debt was an unrealized gain totaling $13.8 million and is reflected as a component of
other assets. The carrying amount of the $200 million in Junior Subordinated Debt was increased by
an identical amount. The fair value adjustment on the swap agreements hedging $45 million of Junior
Subordinated Debt was an unrealized loss totaling $2.2 million and is reflected as a component of
other liabilities. The carrying amount of the $45 million in Junior Subordinated Debt was decreased
by an identical amount. These swaps decreased interest expense by $2.5 million and $3.4 million in
the first quarter of 2005 and 2004, respectively. There was no hedge ineffectiveness recorded in
the Consolidated Statements of Income from these transactions for each period reported. The Company enters into mandatory commitments to deliver mortgage whole loans to various
investors and to issue private securities and Fannie Mae and Freddie Mac securities (forward
delivery commitments). The forward delivery commitments are used to manage the interest rate risk
associated with mortgage loans and interest rate lock commitments made by the Company to mortgage
borrowers. The notional amount of these contracts was $4.3 billion at March 31, 2005. The forward
delivery commitments designated as fair value hedges associated with mortgage loans had a notional
value of $3.1 billion at March 31, 2005. The notional amount of forward delivery commitments used
to manage the interest rate risk associated with interest rate lock commitments on mortgage loans
was $1.2 billion at March 31, 2005. The following table shows hedge ineffectiveness on fair value hedges included in gain on sale
of loans for the three months ended March 31, 2005: (In thousands)
    
    2005Gain on Hedged Mortgage Loans
    
    $
    6,884Loss on Derivatives
    
    
    (6,222
    )Hedge Ineffectiveness
    
    $
    662
 NOTE 10  OTHER COMMITMENTS AND CONTINGENT LIABILITIES Credit Related Commitments The Company has outstanding commitments to extend credit to customers in accordance with
certain contractual provisions. These commitments usually have fixed expiration dates or other
termination clauses and may require the payment of a fee. Total commitments outstanding do not
necessarily represent future cash flow requirements of the Company as many commitments expire
without being funded. The Company is also contractually committed to fund the undrawn portion of
home equity lines of credit (HELOCs), which it has originated. The commitment extends to HELOCs
which are currently held-for-sale by the Company and HELOCs previously sold with servicing
retained. In addition, the Company extends certain off-balance sheet financial products to meet the
financing needs of its customers. They include various types of letters of credit. Management evaluates each customers creditworthiness prior to issuing these commitments and
may also require certain collateral upon extension of credit based on managements credit
evaluation. Collateral varies but may include accounts receivable, inventory, property, plant and
equipment, and income-producing properties. Fixed rate commitments are subject to interest rate
risk based on changes in prevailing rates during the commitment period. The Company is subject to
credit risk in the event that the commitments are drawn upon and the customer is unable to repay
the obligation. Letters of credit are irrevocable commitments issued at the request of customers. They
authorize the beneficiary to draw drafts for payment in accordance with the stated terms and
conditions. Letters of credit substitute a banks creditworthiness for that of the customer and are
issued for a fee commensurate with the risk. 19




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##### Table of Contents



The Company typically issues two types of letters of credit: Commercial (documentary) Letters
of Credit and Standby Letters of Credit. Commercial Letters of Credit are commonly issued to
finance the purchase of goods and are typically short term in nature. Standby letters of credit are
issued to back financial or performance obligations of a bank customer, and are typically issued
for periods up to one year. Due to their long-term nature, standby letters of credit require
adequate collateral in the form of cash or other liquid assets. In most instances, standby letters
of credit expire without being drawn upon. The credit risk involved in issuing letters of credit is
essentially the same as extending credit facilities to comparable customers. The following table presents total commitments and letters of credit outstanding at March 31 ,
2005: (in thousands)
    

2005Commitments to Originate Mortgage Loans Held-for-Sale (1)
    
    $
    7,407,671Commitments to Extend Credit on Loans Held-for-Investment (3)
    
    
    3,438,610Commitments to Fund Against Home Equity Lines of Credit
    
    
    742,369Standby Letters of Credit (2) (3)
    
    
    367,620Commercial Letters of Credit (3)
    
    
    17,997
   (1) At March 31, 2005, the pipeline of mortgage loans held-for-sale included $1.5 billion of
fixed rate mortgage loans and $5.9 billion of adjustable rate mortgage loans.
 (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 $1.6 million as of
March 31, 2005. The fair value of these instruments is recognized as income over the initial term
of the guarantee. (3) At March 31, 2005, commitments to extend credit on loans held-for-investment with maturities of
less than one year totaled $2.0 billion, while $1.4 billion matures between one to three years.
Standby and commercial letters of credit are issued with original maturity terms of twelve months
or less. NOTE 11  RETIREMENT AND OTHER EMPLOYEE BENEFIT PLANS The components of net periodic benefit costs for pension and post-retirement benefits for the three
months ended March 31, Pension Benefits
    
    
    Post-Retirement Benefits(in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Components of Net Periodic Benefit Cost:Service Cost
    
    $
    2,563
    
    
    $
    953
    
    
    $
    513
    
    
    $
    183Interest Cost
    
    
    2,600
    
    
    
    1,390
    
    
    
    704
    
    
    
    327Expected Return on Plan Assets
    
    
    (4,974
    )
    
    
    (1,815
    )
    
    
    (64
    )
    
    
    Amortization of Prior Service Cost
    
    
    (66
    )
    
    
    (66
    )
    
    
    (20
    )
    
    
    (20
    )Amortization of Transition Asset/Obligation
    
    
    (107
    )
    
    
    (107
    )
    
    
    73
    
    
    
    73Recognized Actuarial Loss
    
    
    273
    
    
    
    258
    
    
    
    94
    
    
    
    81Net Periodic Benefit Cost
    
    $
    289
    
    
    $
    613
    
    
    $
    1,300
    
    
    $
    644
 We do not anticipate making a contribution to the pension plan during 2005, however we do
anticipate making a contribution of $2.4 million to the post-retirement benefit plan in 2005. Bank Owned Life Insurance We maintain three Bank Owned Life Insurance Trusts (commonly referred to as BOLI). The BOLI
trusts were formed to offset future employee benefit costs and to provide additional benefits due
to their tax exempt nature. Only officer level employees, who have consented, have been insured
under the program. The underlying structure of the original BOLI trust formed by the Company required that the
assets supporting the program be recorded on the consolidated balance sheet. At March 31, 2005,
$219.2 million of assets held by this trust were principally included in the available-for-sale
securities portfolio in the accompanying consolidated balance sheet. The Company maintains two
other BOLI trusts which were obtained through acquisitions. Based on the underlying
structure of these trusts, the cash surrender value of the policies
held by the trusts are required to be classified as a component of other
assets on the consolidated balance sheets. The related income is reflected on the accompanying
consolidated income statement as a component of other operating income. The cash surrender value held by these trusts was $205.3 million at March 31, 2005. 20




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##### Table of Contents



NOTE 12  BUSINESS SEGMENTS As a result of the October 2004 acquisition of GreenPoint, we now operate a national mortgage
business. Accordingly, we have divided our operating activity into two primary business segments:
Retail Banking and Mortgage Banking. The retail banking business provides a full range of banking products and services principally
through approximately 360 branches located throughout the Tri-State area. The mortgage banking
segment is conducted through GreenPoint Mortgage, which is in the business of originating, selling
and servicing a wide variety of mortgages secured by 1-4 family residences and small commercial
properties, on a nationwide basis. The Company changed its segment reporting structure in 2004, to reclassify its Financial
Services Division into retail banking. The Financial Services Division had previously been reported
as a separate operating segment. The products offered by this segment included the sale of
alternative investment products (mutual funds and annuities), trust services, discount brokerage
and investment management. The primary delivery channel for these products is the retail banks
branches. As a result of the previously mentioned realignment, this area of the Company reports
directly to the head of retail banking and from a budgeting and performance measurement perspective
it is viewed as a component of the retail bank. The segment information presented in the table below is prepared according to the following
methodologies:  
    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 rates.
    Inter-company eliminations are reflected in the Other column. Management believes that the following table provides a reasonable representation of each
segments contribution to consolidated net income. Retail
    
    
    Mortgage
    
    
    Segment
    
    
    
    
    
    
    Consolidated(In thousands)
    
    Banking
    
    
    Banking
    
    
    Totals
    
    
    Other
    
    
    OperationsQuarter ended March 31, 2005Net Interest Income
    
    $
    438,054
    
    
    $
    33,072
    
    
    $
    471,126
    
    
    $
    193
    
    
    $
    471,319Provision for Loan Losses
    
    
    9,000
    
    
    
    
    
    
    
    9,000
    
    
    
    
    
    
    
    9,000Net Interest Income After Provision for Loan Losses
    
    
    429,054
    
    
    
    33,072
    
    
    
    462,126
    
    
    
    193
    
    
    
    462,319Non-Interest Income:Gain on Sale of Loans
    
    
    
    
    
    
    119,966
    
    
    
    119,966
    
    
    
    (14,597
    )
    
    
    105,369Customer Related Fees & Service Charges
    
    
    42,006
    
    
    
    
    
    
    
    42,006
    
    
    
    
    
    
    
    42,006Mortgage Servicing Fees
    
    
    
    
    
    
    12,639
    
    
    
    12,639
    
    
    
    (7,063
    )
    
    
    5,576Investment Management, Commissions & Trust Fees
    
    
    11,071
    
    
    
    
    
    
    
    11,071
    
    
    
    
    
    
    
    11,071Other Operating Income
    
    
    12,392
    
    
    
    1,836
    
    
    
    14,228
    
    
    
    
    
    
    
    14,228Net Securities Gains
    
    
    4,635
    
    
    
    
    
    
    
    4,635
    
    
    
    
    
    
    
    4,635Total Non-Interest Income
    
    
    70,104
    
    
    
    134,441
    
    
    
    204,545
    
    
    
    (21,660
    )
    
    
    182,885Non-Interest Expense:Employee Compensation and Benefits
    
    
    90,912
    
    
    
    44,457
    
    
    
    135,369
    
    
    
    
    
    
    
    135,369Occupancy and Equipment Expense, net
    
    
    36,319
    
    
    
    9,635
    
    
    
    45,954
    
    
    
    
    
    
    
    45,954Other Operating Expenses
    
    
    53,396
    
    
    
    18,804
    
    
    
    72,200
    
    
    
    (6,870
    )
    
    
    65,330Total Non-Interest Expense
    
    
    180,627
    
    
    
    72,896
    
    
    
    253,523
    
    
    
    (6,870
    )
    
    
    246,653Income Before Income Taxes
    
    
    318,531
    
    
    
    94,617
    
    
    
    413,148
    
    
    
    (14,597
    )
    
    
    398,551Provision for Income Taxes
    
    
    105,907
    
    
    
    39,739
    
    
    
    145,646
    
    
    
    (6,130
    )
    
    
    139,516Net Income
    
    $
    212,624
    
    
    $
    54,878
    
    
    $
    267,502
    
    
    $
    (8,467
    )
    
    $
    259,035Total Assets
    
    $
    54,789,612
    
    
    $
    5,990,788
    
    
    $
    60,780,400
    
    
    $
    
    
    
    $
    60,780,400
 21




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##### Table of Contents



NOTE 13  RECENT ACCOUNTING PRONOUNCEMENTS Accounting for Stock Based Compensation In December 2004, the FASB issued SFAS No. 123R Accounting for Stock Based Compensation, Share
Based Payment, (SFAS 123R) replaces the guidance prescribed in SFAS 123. SFAS 123R requires that
compensation costs relating to share-based payment transactions be recognized in the financial
statements. The associated costs will be measured based on the fair value of the equity or
liability instruments issued. SFAS 123R covers a wide range of share-based compensation
arrangements including share options, restricted share plans, performance-based awards, share
appreciation rights and employee share purchase plans. The SEC recently delayed the effective date
of SFAS 123R. The new rule allows companies to implement SFAS 123R at the beginning of their next
fiscal year beginning after
June 15, 2005. Adoption of this pronouncement is not
expected to have a material impact on the Companys consolidated financial statements. 22




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not
historical facts but instead represent only our beliefs regarding future events, many of which by
their nature, are inherently uncertain and beyond our control. Forward-looking statements may be
identified by the use of such words as: believe, expect, anticipate, intend, plan,
estimate, or words of similar meaning, or future or conditional terms such as will, would,
should, could, may, likely, probably, or possibly. Examples of forward-looking statements include, but are not limited to, estimates or
projections with respect to our future financial condition, expected or anticipated revenues,
results of operations and our business, with respect to:  
    projections of revenues, income, earnings per share, capital expenditures, assets,
liabilities, dividends, capital structure, or other financial items;
    statements regarding the adequacy of the allowance for loan losses, the representation and warranty reserve or other reserves;
    descriptions of plans or objectives of management for future operations, products, or services;
    expected cost savings and revenue enhancements from the GreenPoint acquisition may not be
fully realized or realized within the expected time frame;
    forecasts of future economic performance; and
    descriptions of assumptions underlying or relating to any of the foregoing. By their nature, forward-looking statements are subject to risks and uncertainties. There are
a number of factors, many of which are beyond our control, that could cause actual conditions,
events, or results to differ significantly from those described in the forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to:  
    general business and economic conditions on both a regional and national level;
    worldwide political and social unrest, including acts of war and terrorism;
    competitive pressures among financial services companies which may increase significantly;
    competitive pressures in the mortgage origination business which could have an adverse effect on gain on sale profit margins;
    changes in the interest rate environment may negatively affect interest margins and mortgage loan originations;
    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 changes, including increased regulation of our businesses, including enforcement of the US Patriot Act;
    technological changes, including increasing dependence on the Internet;
    monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board and;
    accounting principles, policies, practices or guidelines Readers are cautioned that any forward-looking statements made in this report or incorporated
by reference in this report are made as of the date of this report, and, except as required by
applicable law, we assume no obligation to update or revise any forward-looking statements or to
update the reasons why actual results could differ from those projected in the forward-looking
statements. You should consider these risks and uncertainties in evaluating forward-looking
statements and you should not place undue reliance on these statements. 23




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##### Table of Contents



Summary Business Overview North Fork Bancorporation, Inc. is a regional bank holding company organized under the laws of
the State of Delaware and registered as a bank holding company under the Bank Holding Company Act
of 1956, as amended. We are committed to providing superior customer service, while offering a full
range of banking products and financial services, to both our retail and commercial customers. Our
primary subsidiary is North Fork Bank which operates from approximately 360 retail bank branches in
the Tri-state area. We operate GreenPoint Mortgage Funding Inc (GreenPoint Mortgage or GPM), a
nationwide mortgage business headquartered in Novato, California. Through our non-bank
subsidiaries, we offer financial products and services to our customers including asset management,
securities brokerage, and the sale of alternative investment products. We also operate a second
subsidiary bank, Superior Savings of New England, N.A., headquartered in Branford, Connecticut
which focuses on telephonic and media-based generation of deposits principally in the Northeast. In 2004, we completed two strategically important and accretive acquisitions more than
doubling our total assets, expanded our geographic presence in northern and central New Jersey and
transformed our institution into one of the twenty largest banking organizations in the United
States, with approximately $60 billion in assets at March 31, 2005. (See Item 1, Condensed Notes to
the Consolidated Financial Statements  Note 1  Business and Summary of Significant Accounting
Policies for additional information). As a result of acquiring a nationwide mortgage business, we have divided our operating
activities into two primary business segments (Retail Banking and Mortgage Banking): Retail Banking Our retail banking operation is conducted principally through North Fork
Bank. North Fork Bank operates approximately 360 branches located in the Tri-state area, through
which we provide a full range of banking products and services to both commercial and
consumer clients. We are a significant provider of commercial and commercial real estate loans,
multi-family mortgages, construction and land development loans, asset based lending services,
lease financing and business credit services, including lines of credit. Our consumer lending
operations emphasize indirect automobile loans. We offer our customers a complete range of deposit
products through our branch network and on-line banking services. We provide our clients, both
commercial and consumer, with a full complement of cash management services including on-line
banking, and offer directly or through our securities and insurance affiliates a full selection of
alternative investment products. We also provide trust, investment management and custodial
services through North Fork Banks Trust Department and investment advisory services through our
registered investment advisor. Revenue from our retail banking operations, principally net interest income, is the
difference between the interest income we earn on our loan and investment portfolios and the cost
to us of funding those portfolios. Our primary source of such funds are deposits and collateralized
borrowings. We also earn income from fees charged on the various banking products and services we
offer. Commissions from the sale of alternative investment products which includes the sale of
mutual funds and insurance products are also a component of revenues. Mortgage Banking We entered into the national mortgage business through our October 2004
purchase of GreenPoint. GreenPoint Mortgage originates single-family and small commercial mortgages
throughout the country. Approximately 97% are originated through a national wholesale loan broker
and correspondent lender network. GPM offers a broad range of mortgage loan products in order to
provide maximum flexibility to its borrowers. These products include Jumbo mortgage loans,
specialty mortgage loans, conforming agency mortgage loans and home equity loans. After
origination, GPM packages mortgage loans for whole loan sale into the secondary market and, from
time to time, for securitization. Also, certain products are retained by the Banks loan portfolio.
GPM has established loan distribution relationships with various financial institutions such as
banks, investment banks, broker-dealers, and REITs, as well as both Fannie Mae and Freddie Mac. For
the first quarter of 2005, GPM originated $10.0 billion in loans with an average gain on sale
margin of approximately 127 basis points. The composition of total loan originations was: 42%
specialty, 38% jumbo, 15% home equity and 5% agency. GPM also engages in mortgage loan servicing, which includes customer service, escrow
administration, default administration, payment processing, investor reporting and other ancillary
services related to the general administration of mortgage loans. As of March 31, 2005, GPMs
mortgage loan servicing portfolio consisted of mortgage loans with an aggregate principal balance
of $46.9 billion, of which $32.2 billion was serviced for investors other than North Fork. Loans
held-for-sale totaled $5.4 billion, while the pipeline was $7.4 billion ($2.5 billion was covered
under interest rate lock commitments) at March 31, 2005. The following table sets forth a summary reconciliation of each business segments
contribution to consolidated after-tax earnings as reported. (See Mortgage Banking section of
Managements Discussion and Analysis and Item 1, Condensed Notes to the Consolidated Financial
Statements  Note -12 Segment Reporting  for additional information). Segment Results Summary Consolidated Net Income
    
    2005
    
    
    Contribution %(Dollars in thousands)Retail Banking
    
    $
    212,624
    
    
    
    82
    %Mortgage Banking (1)
    
    
    46,411
    
    
    
    18Consolidated Net Income
    
    $
    259,035
    
    
    
    100
    %
   (1)
    
    Excludes net inter-company activity of $8.5 million, after taxes. 24




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##### Table of Contents



Financial Overview Selected financial highlights for the three months ended March 31, 2005 and 2004 are set forth in
the table below. The succeeding discussion and analysis describes the changes in components of
operating results. Three Months EndedMarch 31,
    
    
    March 31,(in thousands, except ratios & per share amounts)
    
    2005
    
    
    2004Earnings:Net Income
    
    $
    259,035
    
    
    $
    102,519Per Share:Earnings Per Share  Basic
    
    $
    .56
    
    
    $
    .46Earnings Per Share  Diluted
    
    
    .55
    
    
    
    .45Cash Dividends
    
    
    .22
    
    
    
    .20Dividend Payout Ratio
    
    
    41
    %
    
    
    45
    %Book Value
    
    $
    18.89
    
    
    $
    6.90Tangible Book Value (2)
    
    $
    6.25
    
    
    $
    5.06Average Equivalent Shares  Basic
    
    
    466,476
    
    
    
    222,404Average Equivalent Shares  Diluted
    
    
    473,314
    
    
    
    225,369Selected Ratios:Return on Average Total Assets
    
    
    1.74
    %
    
    
    1.96
    %Return on Average Tangible Assets (1)
    
    
    1.98
    
    
    
    2.01Return on Average Equity
    
    
    11.65
    
    
    
    26.58Return on Average Tangible Equity (1)
    
    
    35.94
    
    
    
    36.72Yield on Interest Earning Assets (3)
    
    
    5.52
    
    
    
    5.57Cost of Funds
    
    
    2.04
    
    
    
    1.62Net Interest Margin (3)
    
    
    3.79
    
    
    
    4.33Efficiency Ratio (4)
    
    
    35.96
    
    
    
    35.41
 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 USA.(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 and
other real estate expenses to net interest income on a tax equivalent basis and
non-interest income net of securities gains. 25




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##### Table of Contents



Financial Results Highlights for the first quarter ended March 31, 2005 include:  
    A 153% increase in earnings for the first quarter compared to 2004, with a 22% increase in diluted earnings per share.
    A 20% annualized growth rate for total deposits, from December 31, 2004.
    Demand deposits, running counter to cyclical trends, grew at
an annualized rate of 22%, from December 31, 2004.
    Annualized loan growth of 18% or $1.4 billion, from December 31, 2004.
    A return on tangible equity and assets of approximately 36% and 2%, respectively.
    Non-performing loans and net charge-offs declined further from their existing low levels, improving reserve coverage.
    A $1.7 billion reduction in short-term borrowings, while
short-term interest rates climbed, from December 31, 2004.
    Mortgage loan originations from our mortgage banking subsidiary were $10 billion in the
current quarter. The Company retained approximately 17% of the 2005 originations or $1.8
billion.
    A net interest income increase of 128% over the first quarter of 2004 to $471 million
for the current quarter. The net interest margin was 3.79% in the current quarter.
    The successful integration of GreenPoints systems and operations in mid-quarter of 2005.
    Declaration of the regular quarterly cash dividend of $.22 per common share, a current yield of approximately 3.3%. Net Income Net income for the current quarter was $259.0 million or diluted earnings per share of $.55
compared to $102.5 million or $.45 diluted earnings per share in 2004. Returns on average tangible
equity and average tangible assets during the first quarter were 35.9% and 2%, respectively,
compared to 36.7% and 2% in 2004. Net Interest Income Net interest income is the difference between interest income earned on assets, such as loans
and securities and interest expense incurred on liabilities, such as deposits and borrowings. Net
interest income constituted 72% of total revenue (defined as net interest income plus non-interest
income) for the period. Net interest income is affected by the level and composition of assets,
liabilities and equity, as well as the general level of interest rates and changes in interest
rates. Net interest margin is determined by dividing tax equivalent net interest income by average
interest-earning assets. The interest rate spread is the difference between the average equivalent
yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities.
The net interest margin is generally greater than the interest rate spread due to the additional
income earned on those assets funded by non-interest-bearing liabilities, primarily demand
deposits, and stockholders equity. 26




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##### Table of Contents



The following table presents an analysis of net interest income (on a tax equivalent
basis) by each major category of interest-earning assets and interest-bearing liabilities for
the three months ended March 31,: 2005
    
    
    2004Average
    
    
    
    
    
    
    Average
    

    
    Average
    
    
    
    
    
    
    Average(dollars in thousands )
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest Earning Assets:Loans Held-for-Investment (2)
    
    $
    31,284,812
    
    
    $
    453,563
    
    
    
    5.88
    %
    
    $
    12,474,528
    
    
    $
    194,615
    
    
    
    6.27
    %Loans Held-for-Sale (2)
    
    
    4,990,885
    
    
    
    66,848
    
    
    
    5.43
    
    
    
    
    
    
    
    
    
    
    
    Securities (1)
    
    
    15,195,094
    
    
    
    180,687
    
    
    
    4.82
    
    
    
    7,212,411
    
    
    
    78,963
    
    
    
    4.40Money Market Investments
    
    
    86,989
    
    
    
    747
    
    
    
    3.48
    
    
    
    81,144
    
    
    
    241
    
    
    
    1.19Total Interest Earning Assets
    
    $
    51,557,780
    
    
    $
    701,845
    
    
    
    5.52
    %
    
    
    19,768,083
    
    
    $
    273,819
    
    
    
    5.57
    %Non-Interest Earning Assets:Cash and Due from Banks
    
    $
    1,056,382
    
    
    
    
    
    
    
    
    
    
    
    533,395Other Assets (1)
    
    
    7,592,720
    
    
    
    
    
    
    
    
    
    
    
    759,254Total Assets
    
    $
    60,206,882
    
    
    
    
    
    
    
    
    
    
    $
    21,060,732Interest Bearing Liabilities:Savings, NOW & Money Market Deposits
    
    $
    21,179,399
    
    
    $
    69,596
    
    
    
    1.33
    %
    
    $
    8,515,206
    
    
    $
    15,011
    
    
    
    .71
    %Time Deposits
    
    
    7,559,198
    
    
    
    33,466
    
    
    
    1.80
    
    
    
    2,794,364
    
    
    
    10,736
    
    
    
    1.55Total Savings and Time Deposits
    
    
    28,738,597
    
    
    
    103,062
    
    
    
    1.45
    
    
    
    11,309,570
    
    
    
    25,747
    
    
    
    .92Federal
Funds Purchased & Collateralized Borrowings
    
    
    13,371,436
    
    
    
    99,007
    
    
    
    3.00
    
    
    
    3,025,446
    
    
    
    28,603
    
    
    
    3.80Other Borrowings (4)
    
    
    1,505,984
    
    
    
    17,824
    
    
    
    4.80
    
    
    
    743,491
    
    
    
    6,484
    
    
    
    3.51Total Borrowings
    
    
    14,877,420
    
    
    
    116,831
    
    
    
    3.18
    
    
    
    3,768,937
    
    
    
    35,087
    
    
    
    3.74Total Interest Bearing Liabilities
    
    $
    43,616,017
    
    
    $
    219,893
    
    
    
    2.04
    
    
    
    15,078,507
    
    
    $
    60,834
    
    
    
    1.62Interest Rate Spread
    
    
    
    
    
    
    
    
    
    
    3.48
    %
    
    
    
    
    
    
    
    
    
    
    3.95
    %Non-Interest Bearing Liabilities:Demand Deposits
    
    $
    6,853,159
    
    
    
    
    
    
    
    
    
    
    $
    4,077,535Other Liabilities
    
    
    720,348
    
    
    
    
    
    
    
    
    
    
    
    353,261Total Liabilities
    
    
    51,189,524
    
    
    
    
    
    
    
    
    
    
    
    19,509,303Stockholders Equity
    
    
    9,017,358
    
    
    
    
    
    
    
    
    
    
    
    1,551,429Total Liabilities and Stockholders Equity
    
    $
    60,206,882
    
    
    
    
    
    
    
    
    
    
    $
    21,060,732Net Interest Income and Net Interest Margin (3)
    
    
    
    
    
    $
    481,952
    
    
    
    3.79
    %
    
    
    
    
    
    $
    212,985
    
    
    
    4.33
    %Less: Tax Equivalent Adjustment
    
    
    
    
    
    
    (10,633
    )
    
    
    
    
    
    
    
    
    
    
    (6,156
    )Net Interest Income
    
    
    
    
    
    $
    471,319
    
    
    
    
    
    
    
    
    
    
    $
    206,829
   (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. Average
loans held-for-sale and related interest income during 2004, was not meaningful.(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, $1.56, $1.26 update, and
$1.04 for the three months ended
March 31, 2005; and $1.77, $1.68, $1.55, $1.18, and $1.17 for the three months ended March 31,
2004.(4)
    
    For purposes of these computations, the fair value adjustments from hedging activities are
included in the average balance of the related hedged item and the impact of the hedge is
included as an adjustment of interest expense. 27




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##### Table of Contents



The following table highlights the relative impact on tax equivalent net interest income
brought about by changes in average interest earning assets and interest bearing liabilities as
well as changes in average rates on such assets and liabilities. Due to the numerous simultaneous
volume and rate changes during the periods analyzed, it is not possible to precisely allocate
changes to volume or rate. For presentation purposes, changes which are not solely due to changes
in volume or rate have been allocated to these categories based on the respective percentage
changes in average volume and average rates as they compare to each other. Three Months Ended March 31,2005 vs. 2004Change inAverage
    
    
    Average
    
    
    Net Interest(in thousands)
    
    Volume
    
    
    Rate
    
    
    IncomeInterest Income from Earning Assets:Loans-Held-for-Investment
    
    $
    271,896
    
    (
    $
    12,948
    )
    
    $
    258,948Loans Held-for-Sale
    
    
    66,848
    
    
    
    
    
    
    
    66,848Securities
    
    
    94,094
    
    
    
    7,630
    
    
    
    101,724Money Market Investments
    
    
    18
    
    
    
    488
    
    
    
    506Total Interest Income
    
    $
    432,856
    
    (
    $
    4,830
    )
    
    $
    428,026Interest Expense on Liabilities:Savings, NOW & Money Market Deposits
    
    $
    34,300
    
    
    $
    20,285
    
    
    $
    54,585Time Deposits
    
    
    18,727
    
    
    
    4,003
    
    
    
    22,730Federal
Funds Purchased and Collateralized Borrowings
    
    
    77,083
    
    
    
    (6,679
    )
    
    
    70,404Other Borrowings
    
    
    6,981
    
    
    
    4,359
    
    
    
    11,340Total Interest Expense
    
    
    137,091
    
    
    
    21,968
    
    
    
    159,059Net Change in Net Interest Income
    
    $
    295,765
    
    (
    $
    26,798
    )
    
    $
    268,967
 During the first quarter of 2005, net interest income improved $264.5 million or 128% to
$471.3 million when compared to $206.8 million in the same period of 2004, while the net interest
margin declined 54 basis points from 4.33% to 3.79%. The improvement in net interest income during
2005 was primarily a result of the GreenPoint and TCNJ acquisitions, loan growth funded with core
deposits (especially demand deposits) and increasing securities yields. The decline in the net
interest margin was due to GreenPoints lower yielding mortgage loans and higher costing retail
deposit base acquired in October 2004 and an increase in market interest rates. These two
strategically important and accretive acquisitions more than doubled our total assets. At the date
of acquisition, GreenPoint had $6.8 billion in securities, $5.1 billion in loans held-for-sale,
$12.8 billion in loans held-for-investment, $12.8 billion in deposits and $11.4 billion in
borrowings while TCNJ had $1.4 billion in securities, 2.1 billion in loans, $3.2 billion in
deposits and $.7 billion in borrowings (See Item 1, Condensed Notes to Consolidated Financial
Statements, Note 1  Business and Summary of Significant Accounting Policies for additional
information). Interest income during the first quarter of 2005 increased $423.5 million to $691.2 million
compared to the prior period. During this same period, the yield on average interest earning assets
declined 5 basis points from 5.57% to 5.52%. Average
loans held-for-sale of $5.0 billion, yielding 5.43% in the first
quarter of 2005, are the
result of GreenPoint Mortgage activity. At March 31, 2005, $5.4
billion were outstanding and were principally funded with short-term borrowings. The yield and level of these
earning assets will fluctuate with changes in origination volume,
loan composition and market interest rates. Loans held-for-investment averaged $31.3 billion for the first quarter of 2005 representing an
increase of $18.8 billion or 151% from the same period in 2004, while yields declined 39 basis
points to 5.88%. Loan growth was achieved in all categories, especially higher yielding commercial
loans and commercial mortgages which also contribute to deposit growth. Significant loan growth
also occurred in the residential loan category as a result of our decision to retain a portion of
the adjustable rate loans originated by GreenPoint Mortgage rather than invest core deposit inflows
into lower yielding securities. Residential loans typically carry a
lower yield than our
traditional commercial loan portfolio due to their lower inherent
risk thereby, reducing overall loan
yields. Securities averaged $15.2 billion for the first quarter of 2005, representing an $8.0 billion
increase from the prior period, as yields increased 42 basis points to 4.82%. The change in
the securities balance was a direct result of our 2004 acquisitions. Yield improvement was due
in part to a decrease in prepayment activity, lower premium amortization and to a lesser extent,
the purchase of securities at higher market interest rates. Net premium amortization affected security yields by
15 basis points during the first quarter of 2005 compared to 48 basis points in the same period in
2004. Average interest bearing liabilities rose $28.5 billion to $43.6 billion while funding costs
increased 42 basis points to 2.04% during the first quarter of 2005. The increase in interest
bearing liabilities was a result of the 2004 acquisitions and significant growth in core
deposits (Demand, Savings, NOW and Money Market). The increase in funding costs
resulted from higher costing retail deposits acquired from GreenPoint and an increase in market
interest rates during the period. 28




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##### Table of Contents



Average demand deposits grew $2.8 billion or 68% to $6.9 billion in the first quarter of 2005.
Total demand deposits contributed 34 basis points to our net interest margin during 2005. At
quarter end, demand deposits represented 19% of total deposits. Average Savings, NOW and Money
Market deposits increased $12.7 billion or 149% to $21.2 billion, while the corresponding cost of
funds increased 62 basis points to 1.33%. The increase in funding costs was the direct result of
higher costing retail deposits acquired from GreenPoint and an increase in market interest rates
during the period. The continued growth in core deposits is due to in large measure to our focused
effort in expanding our branch network, an emphasis on developing long-term deposit relationships
with borrowers as demonstrated by our growth in the commercial loans and commercial mortgages, the
use of incentive compensation plans, the introduction of new cash management products and services,
and our 2004 acquisitions. Core deposits have traditionally provided us with a low cost funding
source, benefiting our net interest margin and income. These core deposits favorably enhance the
value of our franchise and have been historically less sensitive to the potential impact of rising
interest rates. Average time deposits increase $4.8 billion while the cost of funds increased 25
basis points from the prior year. These increases were due to the acquisitions and the impact of
higher interest rates. Our focused strategy in growing core deposits has impacted our pricing
strategy for time deposits. We do not actively compete for time deposits since these customers have
traditionally been attracted by rate and not customer service. Average borrowings increased $11.1 billion while the cost of funds decreased 56 basis points
from the prior period. However, excluding the effects of the acquisitions, average borrowings
declined approximately $1 billion. This net decline in borrowings since our acquisitions is a
direct result of our continued focused strategy of growing core deposits. However, short-term
borrowings are utilized to fund loans held-for-sale and will fluctuate with the level of these
earning assets. The cost of funds has been positively impacted by the related fair value purchase
accounting adjustments associated with these transactions. Certain collateralized borrowings have their costs fixed through the use of interest rate
swaps, increasing interest expense by approximately $1.1 million and $2.7 million in the first
quarters of 2005 and 2004, respectively. Certain other borrowings were converted from fixed to
floating indexed to three-month LIBOR utilizing interest rate swaps. These swaps decreased
interest expense by approximately $4.3 million and $6.1 million, respectively, during the first
quarters of 2005 and 2004. (See Item 1, Notes to the Consolidated Financial Statements, Note 9 
Derivative Financial Instruments for additional information). Future
levels of net interest income, margin trends and earnings per share trends will
continue to be impacted by movements in market interest rates, loan demand, core deposit
growth, and future trends in the overall economy. Provision and Allowance for Loan Losses The provision for loan losses totaled $9.0 million for the first quarter of 2005, an increase
of $2.5 million when compared to the same period of 2004. As of March 31, 2005, the ratio of the
allowance for loan losses to non-performing loans held-for-investment was 187% and the allowance
for loans losses to total loans held-for-investment was .68%. Net charge-offs, as an annualized
percentage of average loans held-for-investment, was 6 basis points in the 2005 first quarter. The increases in both
the provision and the allowance for loan losses are consistent with the overall growth in the loan
portfolio and our provisioning policy. (See Notes to the Consolidated Financial Statements Note 1
 Business and Summary of Significant Accounting Policies  Critical Accounting Policies for
additional information). The
following table presents the impact of allocating the allowance for
loan losses on loans held-for-investment as of
March 31, 2005, into our two primary portfolio segments. Residential &
    
    
    Commercial &(Dollars in thousands)
    
    Total
    
    
    Multi-Family
    
    
    All Other LoansLoans Held-for-Investment
    
    $
    31,813,847
    
    
    $
    20,774,781
    
    
    $
    11,039,066Allowance for Loan Losses
    
    $
    215,307
    
    
    $
    76,104
    
    
    $
    139,203Non-Performing Loans Held-for-Investment
    
    $
    114,842
    
    
    $
    92,704
    
    
    $
    22,138Allowance for Loan Losses to Loans-Held-for Investment
    
    
    0.68
    %
    
    
    0.37
    %
    
    
    1.26
    %Allowance for Loan Losses to Non-Performing Loans Held-for-Investment
    
    
    187
    %
    
    
    82
    %
    
    
    629
    %
 The allowance for loan losses as a percentage of total loans held-for-investment was
impacted by the level of comparatively low risk residential loans acquired from
GreenPoint. As a result, residential and multi-family loans increased to 65% of our total
portfolio at March 31, 2005 as compared to 49% at the end of the same period in 2004. Historically,
losses incurred on residential and multi-family loans have represented only a small percentage of
our net charges offs. Non-Interest Income Non-interest income increased $141.2 million or 338% to $182.9 million in the first quarter of
2005 compared to $41.7 million in 2004. A significant portion of the growth achieved in each
component of non-interest income resulted from the 2004 acquisitions.
Gains on sale of loans totaled $105.4 million, the result of selling
$8.4 billion in loans at a margin of 1.27% in the first
quarter of 2005. Mortgage servicing fees also increased $4.7 million to $5.6 million. Both increases
were achieved from activity at GreenPoint Mortgage. Customer related fees and service charges also
improved due to continued growth in core deposits, expansion of both our retail and commercial
client base and a broadened use of 29




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our fee based services. Investment management, commissions and
trust fees benefited from the acquisitions due to the increased customer base
and demand for alternative investment products. Securities gains were $4.6 million for the
first quarter of 2005 as compared to $7.9 million in 2004. Gains recognized were derived
principally from the sale of mortgage-backed securities and certain debt and equity securities. Non-Interest Expense Non-interest expense was $246.7 million during the first quarter of 2005 representing an
increase of $159.2 million when compared to 2004. A significant portion of the increase of
non-interest expense resulted from the 2004 acquisitions. Several additional factors also
contributed to the increase in each non-interest expense category. Employee compensation and
benefits was impacted by the hiring of several senior lenders and support staff to pursue new
business initiatives, opening of nine new branches, annual merit increases, increased health
insurance costs and growth in incentive based compensation linked to deposit and fee income
generation. Additional increases in occupancy and equipment costs were recognized due to the
opening of new branches, upgrades made to new and existing facilities, investment in new technology and the
implementation of new business initiatives and support systems. We have made, and will continue to
make, significant investments in technology and delivery channels to provide our clients with a
wide array of easy to use and competitively priced products and services. The increase in
amortization of identifiable intangibles was due to the core deposit intangibles recorded with the
TCNJ and GreenPoint acquisitions. The efficiency ratio is used by the financial services industry to measure an organizations
operating efficiency. The ratio, which is calculated by dividing non-interest expense excluding
amortization of identifiable intangible assets and other real estate expense by net interest income
(on a tax equivalent basis) and non-interest income, excluding securities gains, was 35.96% for the
first quarter of 2005, as compared to 35.41% in 2004. Income Taxes Our effective tax rate for the three months ended March 31, 2005 and 2004 were 35% and 33.7%,
respectively. Management anticipates that the effective tax rate for the full year of 2005 will be
approximately 35%. Mortgage Banking The following table sets forth financial highlight information on the mortgage banking segment for
the period indicated: (in thousands)

    
    March 31,For the Quarter Ended March 31, 2005
    
    2005Net Interest Income
    
    $
    33,072Non-Interest Income:Gain on Sale of Loans (1)
    
    
    119,966Mortgage Servicing Fees (1)
    
    
    12,639Other Operating Income
    
    
    1,836Total Non-Interest Income
    
    
    134,441Non-Interest Expense:Employee Compensation & Benefits
    
    
    44,457Occupancy & Equipment Expense, net
    
    
    9,635Other Operating Expense
    
    
    18,804Total Non-Interest Expense
    
    
    72,896Income Before Income Taxes
    
    
    94,617Provision for Income Taxes
    
    
    39,739Net Income
    
    $
    54,878Total Assets
    
    $
    5,990,788
   (1)  Includes $14.5 million of inter-company gains on sale of loans and $7.0
million of inter-company mortgage servicing fees for the first quarter of 2005. For the quarter ended March 31, 2005, the mortgage banking segment earned $54.9 million in
net income. Net interest income for this segment was $33.1 million for the first quarter of 2005.
Net interest income was the result of $5.0 billion in average loans
held-for-sale outstanding in the quarter yielding 5.43%. The gain on
sale of loans of totaling $120.0 million includes $14.5
million in inter-company loan sales. Mortgage servicing fees recognized during the quarter were
$12.6 million including $7.0 million in inter-company mortgage servicing fees. 30




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##### Table of Contents



Gain on Sale of Loans We sell either whole loans or from time to time, we securitize loans, which involves the
private placement or public offering of pass-through asset backed securities. This approach allows
us to capitalize on favorable conditions in either the securitization or whole loan sale market.
During the first quarter of 2005, we only executed whole loan sales. These sales are completed with
no direct credit enhancements, but do include certain standard representations and warranties,
which permit the purchaser to return the loan if certain deficiencies exist in the loan
documentation or in the event of early payment default. Gain on sale and gain on sale margins are effected by changes in the valuation of
mortgage loans held-for-sale and interest rate lock commitments, the impact of the valuation of
derivatives utilized to manage the exposure to interest rate risk associated with mortgage loan
commitments and mortgage loans held-for-sale, and the impact of adjustments related to liabilities
established for representations and warranties made in conjunction with the loan sale. The
following table summarizes loans originated, sold, average margins and gains for the quarter ended
March 31, 2005. March 31, 2005Mortgage
    
    
    Mortgage
    
    
    Margins on
    
    
    Gain on(dollars in thousands)
    
    Loans Originated
    
    
    Loans Sold
    
    
    Whole Loan Sales
    
    
    Sale of Loans (1)Loan Type:Specialty Products
    
    $
    4,231,111
    
    
    $
    4,333,784
    
    
    
    1.45
    %
    
    $
    62,750Jumbo
    
    
    3,795,191
    
    
    
    1,968,088
    
    
    
    0.98
    %
    
    
    19,183Home Equity/Seconds
    
    
    1,488,748
    
    
    
    1,580,497
    
    
    
    1.45
    %
    
    
    22,858Agency
    
    
    517,867
    
    
    
    470,910
    
    
    
    0.29
    %
    
    
    1,368$
    10,032,917
    
    
    $
    8,353,279
    
    
    
    1.27
    %
    
    $
    106,159
   (1)  The gain on sale of whole loans for the quarter ended March 31, 2005, differs from the
amounts reported under accounting principles generally accepted in
the USA on the accompanying consolidated income statement
due to the fair value adjustment of loans held-for-sale at October 1, 2004 and sold during the
quarter, totaling $.8 million. Financial Condition Loans The following table represents the change in the loans held-for-investment portfolio, while
highlighting the impact of the GreenPoint and TCNJ transactions. The GreenPoint and TCNJ amounts
are presented at fair value as of the respective acquisition dates. (in thousands)
    
    March 31, 2005
    
    
    Core Activity
    
    
    GreenPoint
    
    
    TCNJ
    
    
    March 31, 2004Commercial Mortgages
    
    $
    5,535,281
    
    
    $
    640,724
    
    
    $
    1,445,294
    
    
    $
    612,829
    
    
    $
    2,836,434Commercial & Industrial
    
    
    3,408,006
    
    
    
    1,037,437
    
    
    
    
    
    
    
    122,284
    
    
    
    2,248,285Total Commercial
    
    
    8,943,287
    
    
    
    1,678,161
    
    
    
    1,445,294
    
    
    
    735,113
    
    
    
    5,084,719Residential Mortgages
    
    
    16,445,902
    
    
    
    2,003,358
    
    
    
    11,259,902
    
    
    
    679,535
    
    
    
    2,503,107Multi-Family Mortgages
    
    
    4,328,879
    
    
    
    583,526
    
    
    
    87,100
    
    
    
    183
    
    
    
    3,658,070Consumer
    
    
    1,554,499
    
    
    
    (190,136
    )
    
    
    27,162
    
    
    
    603,491
    
    
    
    1,113,982Construction & Land
    
    
    541,280
    
    
    
    122,099
    
    
    
    
    
    
    
    92,478
    
    
    
    326,703Total Loans Held-for-Investment
    
    $
    31,813,847
    
    
    $
    4,197,008
    
    
    $
    12,819,458
    
    
    $
    2,110,800
    
    
    $
    12,686,581
 Loans
held-for-investment increased $19.1 billion to $31.8 billion for the quarter ended March
31, 2005, compared to $12.7 billion at March 31, 2004. While a substantial portion of this growth,
$14.9 billion, represented amounts acquired in the GreenPoint
and TCNJ acquisitions, core activity of
$4.2 billion or 33% was also achieved since the first quarter of
2004. At the respective acquisition dates, GreenPoints loans
outstanding of $12.8 billion consisted principally of
residential mortgage loans and TCNJs loans
outstanding of $2.1 billion were similar in nature to those in the North Fork portfolio. We experienced strong loan demand during the period as demonstrated by core loan growth of
33%. Core growth was achieved in all categories, with the exception of consumer loans. Core
commercial and commercial mortgage loan growth of $1.7 billion or 33%, resulted from our expanded
presence in the New York City market, small business lending initiatives, robust lease financing
activity and the hiring of several lenders and support staff during the second half of 2004. This
initiative was undertaken by management to expand our commercial loan and deposit gathering
capabilities in New Jersey, strengthen our middle market commercial lending division on Long Island
and enter the asset based lending and structured finance business through our new subsidiary (North
Fork Business Capital Corp). 31




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##### Table of Contents



Core residential mortgage loan growth of $2.0 billion or 80% during the period was achieved by
managements decision to retain originations from GreenPoint Mortgage, as well adjustable rate
mortgages originated through North Fork Bank. Effective January 1, 2005 the mortgage origination
department of North Fork was consolidated with GreenPoint Mortgage. Future decisions to retain
loans originated by GreenPoint Mortgage will be impacted by mortgage origination volumes, growth in
other loan categories and deposit growth. Consumer loans, which are mostly comprised of auto loans, have been negatively impacted by
automobile manufacturers aggressive incentives and financing
programs. Core
multi-family loan growth of $.6 billion or 16% was achieved during the period, despite
our decision not to compete with the more liberal underwriting terms and rate structures offered by
certain competitors. Multi-family and commercial mortgage loans are primarily secured by real estate in the
Tri-state area and are diversified in terms of risk and repayment sources. The underlying
collateral includes multi-family apartment buildings and owner occupied/non-owner occupied
commercial properties. The risks inherent in these portfolios are dependent on both regional and
general economic stability, which affect property values, and our borrowers financial well being
and creditworthiness. The risk inherent in the mortgage portfolio is managed by prudent underwriting standards and
diversification in loan collateral type and location. Multi-family mortgages, collateralized by
various types of apartment complexes located in the Tri-State area, are largely dependent on
sufficient rental income to cover operating expenses. They may be affected by rent control or rent
stabilization regulations, which could impact future cash flows of the property. Most multi-family
mortgages do not fully amortize; therefore, the principal outstanding is not significantly reduced
prior to contractual maturity. Residential mortgages represent first liens on owner occupied 1-4
family residences located throughout the United States, with a concentration in the Tri-State area
and California. Commercial mortgages are secured by professional office buildings, retail stores,
shopping centers and industrial developments. Real estate underwriting standards include various limits on loan-to-value ratios based on
property types, real estate location, property condition, quality of the organization managing the
property, and the borrowers creditworthiness. They also address the viability of the project
including occupancy rates, tenants and lease terms. Additionally, underwriting standards require
appraisals, periodic property inspections and ongoing monitoring of operating results. Commercial loans are made to small and medium sized businesses and include loans
collateralized by security interests in lease finance receivables. The commercial mortgage and
commercial loan portfolios contain no foreign loans to developing countries (LDC). Consumer loans
consist primarily of new and used automobile loans originated through a network of automobile
dealers. The credit risk in auto lending is dependent on the borrowers creditworthiness and
collateral values. The average consumer loan is generally between $15  $25 thousand and has a
contractual life of approximately 60 months. The consumer loan portfolio does not contain higher
risk credit card or sub prime loans. Land loans are used to finance the acquisition of vacant land
for future residential and commercial development. Construction loans finance the building and
rehabilitation of residential and multi-family projects, and to a lesser extent, commercial
developments. The construction and land development portfolios do not contain any high-risk equity
participation loans (AD&C loans). We are selective in originating loans, emphasizing conservative lending practices and
fostering customer deposit relationships. Our success in attracting new customers while leveraging
our existing customer base, coupled with over-consolidation within our market area and the current
interest rate environment have contributed to sustained loan demand. We periodically monitor our underwriting standards to ensure that the quality of the loan
portfolio and commitment pipeline is not jeopardized by unrealistic loan to value ratios or debt
service levels. To date, there has been no deterioration in the performance or risk characteristics
of our real estate loan portfolio. Securities Securities, net of amounts acquired in the GreenPoint and TCNJ transactions of $8.2 billion,
decreased $1.0 billion from March 31, 2004. During the first quarter, we continued to invest
liquidity generated from our deposit growth into our loan portfolio and reinvested only portfolio
cash flows back into securities. This reflects the continued strategic transformation of the
balance sheet, emphasizing higher margin loan growth. Mortgage Backed Securities represented 81% of total securities at March 31, 2005, and included
pass-through certificates guaranteed by GNMA, FHLMC or FNMA and collateralized mortgage-backed
obligations (CMOs) backed by government agency pass-through certificates or whole loans. The
pass- through certificates included both fixed and adjustable rate instruments. CMOs, by virtue of
the underlying collateral or structure, are AAA rated and are either fixed rate current pay
sequentials and PAC structures or adjustable rate issues. (See Item 1, Notes to the Consolidated
Financial Statements Note 2, Securities for additional information). The adjustable rate
pass-throughs and CMOs are principally Hybrid Arms. These have a fixed initial term of 3 through 7
years and at the end of that term convert to one year adjustables indexed to short term benchmarks
(i.e. LIBOR or 1 year Treasuries). Hybrid Arms included in Pass-throughs and CMOs as of March 31,
2005 aggregated $3.5 billion. 32




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##### Table of Contents



Our goal is to maintain a portfolio with a short weighted average life and duration. This is
accomplished using instruments with short final maturities, predictable cash flows and adjustable
rates. These attributes allow us to proactively manage as market conditions change so that cash
flows may be reinvested in securities at current market rates, fund loan growth or utilized to pay
off short-term borrowings. These strategies contributed to the 3.9 year weighted average life and
3.1 duration of the MBS portfolio as of March 31, 2005. The yield and fair value of securities, specifically the MBS portfolio, are impacted by
changes in market interest rates and related prepayment activity. Given our current portfolio
composition, related prepayment activity could moderately decrease in a rising interest rate
environment, extending the portfolios weighted average life. Conversely, the opposite would occur
in a declining interest rate environment. These changes in average life would also either extend or
shorten the period over which the net premiums would be amortized affecting income and yields.
However, either impact would be minimal as net premiums total $39.5 million or approximately 32
basis points of the outstanding balance of MBSs at March 31, 2005. Municipal securities represent a combination of short-term debentures issued by local
municipalities (purchased as part of a strategy to expand relationships with these governmental
entities) and highly rated obligations of New York State and related authorities. Equity securities
held in the available-for-sale portfolio include $369.6 million of FNMA and FHLMC (GSE) Preferred
stock, $336.8 million of Federal Home Loan Bank common stock, and common and preferred stocks of
certain publicly traded companies. Other securities held in the available-for-sale portfolio
include capital securities (trust preferred securities) of certain financial institutions and
corporate bonds. When purchasing securities, we consider the overall interest-rate risk profile, as well as the
adequacy of expected returns relative to risks assumed, including prepayments. In managing the
securities portfolio, available-for-sale securities may be sold as a result of changes in interest
rates and spreads, actual or anticipated prepayments, credit risk associated with a particular
security, and/or following the completion of a business combination. Deposits The following table represents the change in deposits, while highlighting the impact of the
GreenPoint and TCNJ transactions. The GreenPoint and TCNJ amounts are presented at fair value as
of the respective acquisition dates. (in thousands)
    
    March 31, 2005
    
    
    Core Activity
    
    
    GreenPoint
    
    
    TCNJ
    
    
    March 31, 2004Demand
    
    $
    7,106,826
    
    
    $
    1,714,904
    
    
    $
    519,633
    
    
    $
    638,763
    
    
    $
    4,233,526Savings, NOW & Money Market
    
    
    21,725,437
    
    
    
    2,879,288
    
    
    
    8,641,389
    
    
    
    1,231,040
    
    
    
    8,973,720Time Deposits
    
    
    7,705,470
    
    
    
    (76,479
    )
    
    
    3,745,108
    
    
    
    1,300,599
    
    
    
    2,736,242Total Deposits
    
    $
    36,537,733
    
    
    $
    4,517,713
    
    
    $
    12,906,130
    
    
    $
    3,170,402
    
    
    $
    15,943,488
 Total deposits, exclusive of balances acquired in the GreenPoint and TCNJ transactions of
$16.1 billion, increased $4.5 billion or 28% to $36.5 billion at March 31, 2005, compared to the
same period in 2004. Factors contributing to core deposit activity include: (i) the continued
expansion of our retail branch network, (ii) the ongoing branch upgrade program providing for
greater marketplace identity, (iii) expanded branch hours providing additional accessibility and
convenience, (iv) commercial loan growth (v) the introduction of new cash management products and
services and (vi) incentive based compensation linked to deposit growth. Asset/Liability Management The net interest margin is directly affected by changes in the level of interest rates, the
shape of the yield curve, the relationship between rates, the impact of interest rate fluctuations
on asset prepayments, the level and composition of assets and liabilities, and the credit quality
of the loan portfolio. Our asset/liability objectives are to maintain a strong, stable net interest
margin, to utilize our capital effectively without taking undue risks, and to maintain adequate
liquidity. The risk assessment program includes a coordinated approach to the management of liquidity,
capital, and interest rate risk. This process is governed by policies and limits established by
senior management, which are reviewed at least annually by the Board of Directors. The
Asset/Liability Committee of the Board of Directors (ALCO) provides guidance for asset/ liability
activities. ALCO periodically evaluates the impact of changes in market interest rates on interest
earning assets and interest bearing liabilities, net interest margin, capital and liquidity, and
evaluates managements strategic plan. The balance sheet structure is primarily short-term with
most assets and liabilities repricing or maturing in less than five years. We monitor the
sensitivity of net interest income by utilizing a dynamic simulation model complemented by a
traditional gap analysis. The simulation model measures the volatility of net interest income to changes in market
interest rates. Simulation modeling involves a degree of estimation based on certain assumptions
that we believe to be reasonable. Factors considered include contractual maturities, prepayments,
repricing characteristics, deposit retention and the relative sensitivity of assets and liabilities
to changes in market interest rates and cash flows from derivative instruments. 33




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##### Table of Contents



The Board has established certain policy limits for the potential volatility of net interest
income as projected by the simulation model. Volatility is measured from a base case where rates
are assumed to be flat and is expressed as the percentage change, from the base case, in net
interest income over a twelve-month period. As of March 31, 2005, we were operating within policy
limits. The simulation model is kept static with respect to the composition of the balance sheet and,
therefore does not reflect our ability to proactively manage in changing market conditions. We may
choose to extend or shorten the maturities of our funding sources. We may also choose to redirect
cash flows into assets with shorter or longer durations or repay borrowings. As part of our overall
interest rate risk management strategy, we periodically use derivative instruments to minimize
significant unplanned fluctuations in earnings and cash flows caused by interest rate volatility.
This interest rate risk management strategy can involve modifying the repricing characteristics of
certain assets and liabilities utilizing interest rate swaps, caps and floors. The assumptions used are inherently uncertain and, as a result, we cannot precisely predict
the impact of changes in interest rates on net interest income. Actual results may differ
significantly from those presented due to the timing, magnitude and frequency of interest rate
changes, changes in market conditions and interest rate differentials (spreads) between maturity/
repricing categories, prepayments, and any actions we may take to counter such changes. The
specific assumptions utilized in the simulation model include:  
    The balance sheet composition remains static.
    Parallel yield curve shifts for market rates (i.e. treasuries, LIBOR, swaps, etc.) with an assumed floor of 50 basis points.
    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. The following table reflects the estimated change in projected net interest income for the
next twelve months assuming a gradual increase or decrease in interest rates over a twelve-month
period for March 31, 2005: Changes in Net Interest Income(dollars in thousands)
    
    $Change
    
    
    % ChangeChange in Interest Rates+ 200 Basis Points
    
    $
    (53,034
    )
    
    
    (2.8
    )%+ 100 Basis Points
    
    
    (21,200
    )
    
    
    (1.1
    )- 100 Basis Points
    
    
    8,948
    
    
    
    0.5Policy Limit
    
    
    N/A
    
    
    
    (10.00
    )
 Our philosophy toward interest rate risk management is to limit the variability of net
interest income in future periods under various interest rate scenarios. Another measure we monitor
is based on market risk. Market risk is the risk of loss from adverse changes in market prices
primarily driven by changes in interest rates. We calculate the value of assets and liabilities
using net present value analysis with upward and downward shocks of 200 basis points to market
interest rates. The net changes in the calculated values of the assets and liabilities are tax
affected and reflected as an impact to the market value of equity. The following table reflects the estimated change in the market value of equity at March 31,
2005, assuming an immediate increase or decrease in interest rates. Market Value of Equity(dollars in thousands)
    
    $ Change
    
    
    % ChangeChange in Interest Rates+ 200 Basis Points
    
    $
    (786,567
    )
    
    
    (6.9
    )%Flat Interest Rates
    
    
    
    
    
    
    - 200 Basis Points
    
    $
    (83,712
    )
    
    
    (0.7
    )%Policy Limit
    
    
    N/A
    
    
    
    (25
    )%
 Liquidity Risk Management The objective of liquidity risk management is to meet our financial obligations and capitalize
on new business opportunities. These obligations include the payment of deposits on demand or at
their contractual maturity, the repayment of borrowings as they mature and the ability to fund new
and existing loans and investments as opportunities arise. 34




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Our primary funding source is dividends from North Fork Bank. There are various federal and
state banking laws and guidelines limiting the extent to which a bank subsidiary can finance or
otherwise supply funds to its holding company. At March 31, 2005, dividends for North Fork Bank
were limited under such guidelines to $1.1 billion. From a regulatory standpoint, North Fork Bank,
with its current balance sheet structure, had the ability to dividend
approximately $875 million,
while still meeting the criteria for designation as a well-capitalized institution under existing
regulatory capital guidelines. Additional sources of liquidity for the Company include borrowings,
the sale of available-for-sale securities, and funds available through the capital markets. Customer deposits are the primary source of liquidity for our banking subsidiaries. Other
sources of liquidity at the bank level include loan and security principal repayments and
maturities, lines-of-credit with certain financial institutions, the ability to borrow under
repurchase agreements, Federal Home Loan Bank (FHLB) advances utilizing unpledged mortgage backed
securities and certain mortgage loans, the sale of available-for-sale securities and the
securitization or sale of loans. Our banking subsidiaries have the ability to borrow an additional $15.4 billion on a secured
basis, utilizing mortgage related loans and securities as collateral. At March 31, 2005, our
banking subsidiaries had $6.2 billion in advances and repurchase agreements outstanding with the
FHLB. We also maintain arrangements with correspondent banks to provide short-term credit for
regulatory liquidity requirements. These available lines of credit aggregated approximately $800
million at March 31, 2005. We continually monitor our liquidity position as well as the liquidity
positions of our bank subsidiaries and believe that sufficient liquidity exists to meet all of our
operating requirements. Capital We are subject to the risk based capital guidelines administered by bank regulatory agencies.
The guidelines are designed to make regulatory capital requirements more sensitive to differences
in risk profiles among banks and bank holding companies, to account for off-balance sheet exposure
and to minimize disincentives for holding liquid assets. Under these guidelines, assets and certain
off-balance sheet items are assigned to broad risk categories, each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total risk weighted assets and
certain off-balance sheet items. The guidelines require all banks and bank holding companies to
maintain a minimum ratio of total risk based capital to total risk weighted assets (Total Risk
Adjusted Capital) of 8%, including Tier 1 capital to total risk weighted assets (Tier 1 Capital)
of 4% and a Tier 1 capital to average total assets (Leverage Ratio) of at least 4%. Failure to
meet minimum capital requirements can initiate certain mandatory, and possibly additional
discretionary actions by regulators, that, if undertaken, could have a direct material effect on
us. The regulatory agencies have amended the risk-based capital guidelines to provide for interest
rate risk consideration when determining a banking institutions capital adequacy. The amendments
require institutions to effectively measure and monitor their interest rate risk and to maintain
capital adequate for that risk. As of March 31, 2005, the most recent notification from the various regulators categorized the
Company and our subsidiary banks as well capitalized under the regulatory framework for prompt
corrective action. Under the capital adequacy guidelines, a well capitalized institution must
maintain a Total Risk Adjusted Capital Ratio of at least 10%, a Tier 1 Capital Ratio of at least
6%, a Leverage Ratio of at least 5%, and not be subject to any written order, agreement or
directive. Since such notification, there are no conditions or events that management believes
would change this classification. The following table sets forth our risk-based capital amounts and ratios as of: March 31, 2005
    
    
    March 31, 2004(dollars in thousands )
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioTier 1 Capital
    
    $
    3,511,642
    
    
    
    10.35
    %
    
    $
    1,373,865
    
    
    
    10.61
    %Regulatory Requirement
    
    
    1,357,456
    
    
    
    4.00
    %
    
    
    517,873
    
    
    
    4.00
    %Excess
    
    $
    2,154,186
    
    
    
    6.35
    %
    
    $
    855,992
    
    
    
    6.61
    %Total Risk Adjusted Capital
    
    $
    4,379,222
    
    
    
    12.90
    %
    
    $
    1,998,159
    
    
    
    15.43
    %Regulatory Requirement
    
    
    2,714,912
    
    
    
    8.00
    %
    
    
    1,035,745
    
    
    
    8.00
    %Excess
    
    $
    1,664,310
    
    
    
    4.90
    %
    
    $
    962,414
    
    
    
    7.43
    %Risk Weighted Assets
    
    $
    33,936,401
    
    
    
    
    
    
    $
    12,946,817
 The Companys Leverage Ratio at March 31, 2005 and 2004 was 6.48% and 6.66%, respectively. 35




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The following table sets forth the capital ratios for our banking subsidiaries at March 31, 2005: Capital Ratios:
    
    North Fork
    
    
    SuperiorTier 1 Capital
    
    
    11.47
    %
    
    
    18.35
    %Total Risk Adjusted
    
    
    12.56
    
    
    
    19.00Leverage Ratio
    
    
    7.17
    
    
    
    7.05
 The Board of Directors approved in 2003 an increase in its share repurchase program from the
previously authorized level of 6 million shares to 12 million shares (adjusted for the 3-for-2
stock split), representing 5% of the shares outstanding at such time. As of March 31, 2005, the
Company had purchased 7.8 million shares at an average cost of $23.05 per share under this program.
No shares were repurchased during the first quarter of 2005. Repurchases are made in the open
market or through privately negotiated transactions. On September 24, 2004, the Board of Directors approved a three-for-two common stock split.
Accordingly, all prior period share amounts have been adjusted to reflect the impact. At the Annual Meeting of Stockholders held on May 3, 2005, shareholders approved an
increase in the number of shares authorized from 500 million to 1.0 billion. On March 22, 2005, the Board of Directors declared its regular quarterly cash dividend of $.22
per common share. The dividend will be payable on May 16, 2005 to shareholders of record at the
close of business on April 29, 2005. There are various federal and state banking laws and guidelines limiting the extent to which a
bank subsidiary can finance or otherwise supply funds to its holding company. Federal Reserve Board policy provides that, as a matter of prudent banking, a bank holding
company generally should not maintain a rate of cash dividends unless its net income available to
common stockholders is sufficient to fund the dividends, and the prospective rate of earnings
retention appears to be consistent with the holding companys capital needs, asset quality and
overall financial condition. In addition, among other things, dividends from a New York-chartered
bank, such as North Fork Bank, are limited to the banks net profits for the current year plus its
prior two years retained net profits. Under federal law, a depository institution is prohibited from paying a dividend if the
depository institution would thereafter be undercapitalized as determined by the federal bank
regulatory agencies. The relevant federal regulatory agencies and the state regulatory agency, the
Banking Department, also have the authority to prohibit a bank or bank holding company from
engaging in what, in the opinion of such regulatory body, constitutes an unsafe or unsound practice
in conducting its business. Regulatory Matters The
Bank Secrecy Act, Patriot Act and related anti-money laundering
(AML) laws have placed increasingly more substantial requirements on financial institutions. During a recent examination of North Fork Bank by the Federal Deposit Insurance Corporation and the New York State Banking
Department, the agencies identified certain supervisory issues with
respect to the Banks AML compliance program that require
managements attention. Management has been engaged in discussions with the regulators concerning these issues and has initiated appropriate action to thoroughly address
all the issues. The regulators notified management that they intend to request the Bank to enter into an informal memorandum of understanding with respect to these matters. A memorandum of understanding is
characterized by regulatory authorities as an informal action that is neither published nor made publicly available by agencies and is used when circumstances warrant a milder form of action
than a formal supervisory action, such as a formal written agreement
or cease and desist order. The Company is committed to ensuring that the requirements of the memorandum are met in a timely manner and expects that its current
efforts to resolve issues identified by regulators will address the matters that are likely to be raised in such a memorandum. Sarbanes-Oxley Act of 2002 The Sarbanes-Oxley Act passed in 2002 imposes significant new responsibilities on publicly
held companies, particularly in the area of corporate governance. We have responded to the various
requirements of the Act and the implementing regulations issued by the Securities and Exchange
Commission and The New York Stock Exchange. We have taken those steps to reinforce our corporate
governance structure and financial reporting procedures that are mandated under the Act and will
continue to observe full compliance in upcoming periods. We have always emphasized best practices
in corporate governance as the most effective way of assuring stockholders that their investment is
properly managed and their interests remain paramount. Future Legislation From time to time legislation is introduced in Congress and state legislatures with respect to
the regulation of financial institutions. Such legislation may change our operating environment
and the operating environment of our subsidiaries in substantial and unpredictable ways. We cannot
determine the ultimate effect that potential legislation, if enacted, or implementing regulations,
would have on our financial condition or results of operations or on our shareholders. 36




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk The information required by this item is contained throughout Item 2, Managements Discussion and
Analysis of Financial Condition and Results of Operations and is incorporated by reference herein. 
 Item 4. Controls and Procedures (a) Disclosure Controls and Procedures. Management, with the participation of the Chief
Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Companys
disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the end of the period
covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial
Officer have concluded that, as of the end of such period, the Companys disclosure controls and
procedures are effective in recording, processing, summarizing and
reporting, on a timely basis,
information required to be disclosed by the Company in the reports that it files or submits under
the Exchange Act, including this report, and are effective in
ensuring that information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is
accumulated and communicated to the Companys  management,
including the Companys Chief Executive
Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure. (b) Internal Control Over Financial Reporting. There have not been any changes in the
Companys internal control over financial reporting (as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, the Companys internal control
over financial reporting. 37




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##### Table of Contents



PART II. OTHER INFORMATION 
 Item 1. Legal Proceedings The Company is commonly subject to various pending and threatened legal actions relating to the
conduct of its normal business activities. In the opinion of management, the ultimate aggregate
liability, if any, arising out of any such pending or threatened legal actions will not be material
to the consolidated financial position or results of operations of the Company. 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The following table provides common stock repurchases made by us or on our behalf during the
period: Total Number of
    
    
    
    Maximum Number ofTotal Number of
    
    
    
    
    
    
    
    
    Shares Purchased as
    
    
    
    Shares that May YetShares Purchased
    
    
    
    Average Price Paid
    
    
    
    Part of Publicly
    
    
    
    Be Purchased UnderPeriod
    
    
    (1)
    
    
    
    Per Share
    
    
    
    Announced Program
    
    
    
    the Program (2)January 1, 2005  January 31, 2005
    
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    
    4,243,650 SharesFebruary 1, 2005 - February 28, 2005
    
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    
    4,243,650 SharesMarch 1, 2005 - March 31, 2005
    
    
    
    
    
    
    
    
    n/a
    
    
    
    
    
    
    
    
    4,243,650 Shares
   (1)
    
    We did not repurchase shares of our common stock during the first quarter of 2005,
pursuant to the repurchase program (the Program) that we publicly announced in June 2003.(2)
    
    In June 2003, our board of directors approved the repurchase of up to 12 million shares
of our common stock, which represented 5% of the shares outstanding at such time. Unless
terminated earlier by resolutions of our board of directors, the Program will expire when we
have repurchased all shares authorized for repurchase under the program. 
 Item 6. Exhibits The following exhibits are submitted herewith: Exhibit Number
    
    Description of Exhibit(11)
    
    Statement Re: Computation of Net Income Per Common and Common Equivalent Share(31.1)
    
    Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(31.2)
    
    Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(32.1)
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(32.2)
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(99.1)
    
    Supplemental Performance Measurements
 38




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##### Table of Contents



SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized. Date:May 10, 2005
    North Fork Bancorporation, Inc./s/ Daniel M. HealyDaniel M. HealyExecutive Vice President and
Chief Financial Officer 39