SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

0-23229

(Commission File Number)

INDEPENDENCE COMMUNITY BANK CORP.

(Exact name of registrant as specified in its charter)

(718) 722-5300

(Registrant’s telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act:

None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, par value $.01 per share

(Title of Class)

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

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

     Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12-b-2 of the Act).     YES þ          NO o

     The aggregate market value of the 74,356,054 shares of the Registrant’s common stock held by non-affiliates (84,466,312 shares outstanding less 10,110,258 shares held by affiliates), based upon the closing price of $36.40 for the Common Stock on June 30, 2004, the last business day in the Registrant’s second quarter, was approximately $2.71 billion. Shares of Common Stock held by each executive officer and director, the Registrant’s 401(k) Plan and Employee Stock Ownership Plan have been excluded since such persons and entities may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

     As of February 28, 2005, there were 84,466,312 shares of the Registrant’s common stock issued and outstanding.

     (1) Portions of the definitive proxy statement for the Annual Meeting of Stockholders are incorporated into Part III.

INDEPENDENCE COMMUNITY BANK CORP.

2004 ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

PART I

ITEM 1.      Business

Independence Community Bank Corp.

      Independence Community Bank Corp. (the “Holding Company”) is a Delaware corporation organized in June 1997 by Independence Community Bank (the “Bank”), for the purpose of becoming the parent savings and loan holding company of the Bank. The Bank’s reorganization to the stock form of organization and the concurrent initial public offering of the Holding Company’s common stock was completed on March 13, 1998 (the “Conversion”). The assets of the Holding Company are primarily the capital stock of the Bank, dividends receivable from the Bank, securities available-for-sale, minority investment in a mortgage brokerage firm and certain cash and cash equivalents. The business and management of the Holding Company consists primarily of the business and management of the Bank (the Holding Company and the Bank are collectively referred to herein as the “Company”). The Holding Company neither owns nor leases any property, but instead uses the premises and equipment of the Bank. At the present time, the Holding Company does not intend to employ any persons other than officers of the Bank, and will continue to utilize the support staff of the Bank from time to time. Additional employees may be hired as appropriate to the extent the Holding Company expands or changes its business in the future.

      On April 12, 2004, the Company completed its acquisition of Staten Island Bancorp, Inc. (“SIB”) and the merger of SIB’s wholly owned subsidiary, SI Bank & Trust (“SI Bank”), with and into the Bank. The results of operations of SIB are included in the Consolidated Statements of Income and Comprehensive Income subsequent to April 12, 2004. The Company’s 2004 earnings per share reflect the issuance of 28,200,070 shares as part of the consideration paid for SIB. See Note 2 of the “Notes to Consolidated Financial Statements” set forth in Item 8 hereof for additional information.

      The Company’s executive office is located at 195 Montague Street, Brooklyn, New York 11201, and its telephone number is (718) 722-5300. The Company’s web address is www.myindependence.com.

Independence Community Bank

      The Bank’s principal business is gathering deposits from customers within its market area and investing those deposits along with borrowed funds primarily in multi-family residential mortgage loans, commercial real estate loans, commercial business loans, lines of credit to mortgage bankers, consumer loans, mortgage-related securities, investment securities and interest-bearing deposits. The Bank’s revenues are derived principally from interest on its loan and securities portfolios while its primary sources of funds are deposits, borrowings, loan amortization and prepayments and maturities of mortgage-related securities and investment securities. The Bank offers a variety of loan and deposit products to its customers. The Bank also makes available other financial instruments, such as annuity products and mutual funds, through arrangements with a third party.

      The Bank has continued to broaden its banking strategy by emphasizing commercial bank-like products, primarily commercial real estate and business loans, mortgage warehouse lines of credit and commercial deposits. This strategy focuses on increasing both net interest income and fee-based revenue while concurrently diversifying the Bank’s customer base.

Change in Fiscal Year End

      The Company announced in October 2001 that it changed its fiscal year end from March 31, to December 31, effective December 31, 2001. This change provided internal efficiencies as well as aligned the Company’s reporting cycle with regulators, taxing authorities and the investor community.

Market Area and Competition

      The Company is a community-oriented financial institution providing financial services and loans for housing and commercial businesses primarily within its market area. The Company has sought to set itself apart from its many competitors by tailoring its products and services to meet the diverse needs of its customers, by emphasizing customer service and convenience and by being actively involved in community affairs in the neighborhoods and communities it serves. The Company gathers deposits primarily from the communities and neighborhoods in close proximity to its branches, which deposits continue to constitute the primary funding source of the Bank’s operations. The Company

oversees its 123 branch office network from its headquarters located in downtown Brooklyn, including the 35 additional branches which resulted from the acquisition of SIB in April 2004. The Company operates 21 branch offices on Staten Island, 20 branch offices in the borough of Brooklyn, another eleven in the borough of Queens, ten in Manhattan and eight more branches dispersed among the Bronx, Nassau, Suffolk and Westchester Counties of New York. As a result of the acquisition of SIB during fiscal 2004 as well as the acquisitions during fiscal 2000 of Broad National Bancorporation (“Broad”), Newark, New Jersey and Statewide Financial Corp. (“Statewide”), Jersey City, New Jersey, the Company also operates 52 branches in the New Jersey counties of Bergen, Essex, Hudson, Middlesex, Monmouth, Ocean and Union. At its banking offices located on Staten Island, the Bank conducts business as SI Bank & Trust, a division of the Bank. In October 2004, the Company closed two branch offices as part of its integration of the SIB franchise. The Company also maintains one branch facility in Maryland as a result of the expansion of the Company’s commercial real estate lending activities to the Baltimore-Washington area as discussed below. The Company currently expects to expand its branch network through the opening of approximately six branch locations during 2005. The Company opened two of the new offices in Manhattan during the first quarter of 2005.

      Although the Company generally lends throughout the New York City metropolitan area, the majority of its real estate loans are secured by properties located in the boroughs of Brooklyn, Queens, Staten Island and Manhattan, Nassau County, Long Island, and the counties in northern and central New Jersey. During the third quarter of 2003, the Company announced the expansion of its commercial real estate lending activities to the Baltimore-Washington and the Boca Raton, Florida markets. During the third quarter of 2004, the Company continued the expansion of its commercial real estate lending activities to the Chicago market. The Company’s customer base within the New York and metropolitan area, like that of the urban neighborhoods which it serves, is racially and ethnically diverse and is comprised of mostly middle-income households and, to a lesser degree, low to moderate income households. Most of the businesses located in its primary market area that the Company lends to are small or medium sized and are primarily dependent upon the regional economy, which economy, due to its connections to the national economy, may be adversely affected not only by conditions within the local market but also by conditions existing elsewhere. Such loans may be more sensitive to adverse changes in the local economy than single-family residential loans. Increased delinquencies or other problems with such loans could affect the Company’s financial condition and profitability. At December 31, 2004, approximately 68% of the loan portfolio consisted of commercial real estate, commercial business and multi-family residential loans. However, these portfolios as a percent of total loans have declined during 2004 due to the increase in the size of the single-family residential mortgage loan portfolio as a result of the SIB acquisition.

      Over the past few years there has been a national and local economic slowdown. Recently, however, New York City’s economy continued its growth as Real Gross City Product (“GCP”) (an inflation-adjusted measure of the overall New York City economy) grew for the fourth consecutive quarter. The GCP growth rate of 3.4% for the third quarter of 2004 compared unfavorably to the U.S. Gross Domestic Product of 4.0%. Factors that limited New York City’s third quarter 2004 economic performance included a higher rate of inflation than the nation.

      The inflation rate in New York City rose in the third quarter of 2004 to 3.5%. New York City’s inflation rate was substantially higher than the corresponding national rate of 2.7% for the same period. New York City’s higher inflation rate weakens its competitiveness when compared with the rest of the nation.

      The unemployment rate remained significantly higher than the national rate. New York City’s rate of 7.0% in the third quarter of 2004 compared unfavorably to the national rate of 5.5%. New York City’s rate, however, was at its lowest level since the fourth quarter of 2001.

      Commercial real estate vacancies fell for the third consecutive quarter. In particular, the Manhattan vacancy rate fell to 11.4% compared to 12.5% for the third quarter of 2003. A decline in the vacancy rate has a positive effect on commercial real estate values.

      Historically, the New York City metropolitan area has benefited from being the corporate headquarters of many large industrial and commercial

national companies, which have, in turn, attracted many smaller companies, particularly within the service industry. However, as a consequence of being the home of many national companies and to a large number of national securities and investment banking firms, as well as being a popular travel destination, the New York City metropolitan area is particularly sensitive to the economic health of the United States. As a result, economic deterioration in other parts of the United States often has had an adverse impact on the economic climate of New York City.

      The Company faces significant competition both in making loans and in attracting deposits. The New York City metropolitan area has a significant concentration of financial institutions, many of which are branches of significantly larger institutions, which have greater financial resources than the Company. Over the past 10 years, consolidation of the banking industry in the New York City metropolitan area has continued, resulting in the Company facing larger and increasingly efficient competitors. The Company’s competition for loans comes principally from commercial banks, savings banks, savings and loan associations, credit unions, mortgage-banking companies, commercial finance companies and insurance companies. The Company’s most direct competition for deposits has historically come from commercial banks, savings banks, savings and loan associations, credit unions and commercial finance companies. The Company faces additional competition for deposits from short-term money market funds and other corporate and government securities funds and from other financial institutions such as brokerage firms and insurance companies.

Forward Looking Information

      Statements contained in this Annual Report on Form 10-K which are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors. Included in such forward-looking statements are statements regarding the merger of the Company and SIB. See “Business Strategy — Controlled Growth” in Item 7 hereof and Note 2 of the “Notes to Consolidated Financial Statements” set forth in Item 8 hereof.

      Words such as “expect”, “feel”, “believe”, “will”, “may”, “anticipate”, “plan”, “estimate”, “intend”, “should”, and similar expressions are intended to identify forward-looking statements. These statements include, but are not limited to, financial projections and estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to future operations, products and services; and statements regarding future performance. Such statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond the control of the Company, that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: (1) the growth opportunities and cost savings from the merger of the Company and SIB may not be fully realized or may take longer to realize than expected; (2) operating costs and business disruption resulting from the acquisition including adverse effects on relationships with employees, may be greater than expected; (3) competitive factors which could affect net interest income and non-interest income, general economic conditions which could affect the volume of loan originations, deposit flows and real estate values; (4) the levels of non-interest income and the amount of loan losses as well as other factors discussed in the documents filed by the Company with the Securities and Exchange Commission (the “SEC”) from time to time. The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Available Information

      The Company is a public company and files annual, quarterly and special reports, proxy statements and other information with the SEC. Members of the public may read and copy any document the Company files at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Members of the public can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference room. The Company’s SEC filings are also available to the public at

the SEC’s web site at http://www.sec.gov. In addition to the foregoing, the Company maintains a web site at www.myindependence.com. The Company’s website content is made available for informational purposes only. It should neither be relied upon for investment purposes nor is it incorporated by reference into this Form 10-K. The Company makes available on its internet web site copies of its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to such documents as soon as practicable after it electronically files such material with or furnishes such documents to the SEC.

Lending Activities

      General. At December 31, 2004, the Company’s net loan portfolio totaled $11.15 billion (not including $96.7 million of loans available-for-sale), which represented 62.8% of the Company’s total assets of $17.75 billion at such date. A key corporate objective during the past several years has been to change the mix of the Company’s loan portfolio by reducing the origination of one-to-four family residential mortgage loans and cooperative apartment loans while concurrently expanding the origination of higher yielding commercial real estate and commercial business loans as well as variable-rate mortgage warehouse lines of credit. However, these portfolios as a percent of total loans have declined during 2004 due to the increase in the size of the single-family residential mortgage loan portfolio as a result of the SIB acquisition.

      The largest individual category of loans in the Company’s portfolio continues to be multi-family residential mortgage loans, which totaled $3.80 billion or 33.8% of the Company’s total loan portfolio at December 31, 2004. Such loans are secured primarily by apartment buildings located in the Company’s market area. Reflecting the shift in the Company’s loan portfolios as a result of the acquisition of SIB, the second and third largest loan categories are commercial real estate loans and single-family residential and cooperative apartment loans, which totaled $3.03 billion or 27.0% and $2.49 billion or 22.1%, respectively, of the total loan portfolio at December 31, 2004. Commercial business loans were $809.4 million, or 7.2% of the total loan portfolio, at December 31, 2004. Loans made under mortgage warehouse lines of credit accounted for $659.9 million or 5.9% of the total loan portfolio at December 31, 2004. The remainder of the loan portfolio was comprised of $416.4 million of home equity loans and lines of credit and $47.8 million of consumer and other loans.

      The types of loans that the Company may originate are subject to federal and state laws and regulations. Interest rates charged by the Company on loans are affected principally by the demand for such loans and the supply of money available for lending purposes, the rates offered by its competitors and the terms and credit risks associated with the loans. These factors in turn, are affected by general and economic conditions, the monetary policy of the federal government, including the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), legislative tax policies and governmental budgetary matters.

      Loan Portfolio and Loans Available-for-Sale Composition. The following table sets forth the composition of the Company’s loan portfolio and loans available-for-sale at the dates indicated.

     Contractual Principal Repayments and Interest Rates. The following table sets forth scheduled contractual amortization of the Company’s loans at December 31, 2004, as well as the dollar amount of such loans which are scheduled to mature after one year and which have fixed or adjustable interest rates. Demand loans, overdraft loans and loans having no schedule of repayments and no stated maturity are reported as due in one year or less. The table does not include loans available-for-sale.

     Loan Originations, Purchases, Sales and Servicing. The Company originates multi-family residential loans, commercial real estate and business loans, advances under mortgage warehouse lines of credit, single-family residential mortgage loans, cooperative apartment loans, home equity loans and lines of credit, and consumer and other loans. The relative volume of originations is dependent upon customer demand and current and expected future levels of interest rates.

      During 2004, the Company continued its focus on expanding its higher yielding and/or variable-rate portfolios of commercial real estate and commercial business loans as well as expanding its mortgage warehouse lines of credit portfolio as part of its business plan.

      In addition to continuing to generate multi-family residential mortgage loans for portfolio, the Company originates and sells multi-family residential mortgage loans in the secondary market to Fannie Mae while retaining servicing. This relationship supports the Company’s ongoing strategic objective of increasing non-interest income related to lending and servicing revenue. The Company underwrites these loans using its customary underwriting standards, funds the loans, and sells the loans to Fannie Mae at agreed upon pricing thereby eliminating interest rate and basis exposure to the Company. Generally, the Company can originate and sell loans to Fannie Mae for not more than $20.0 million per loan. During the year ended December 31, 2004, the Company sold $2.07 billion of fixed-rate multi-family loans in the secondary market to Fannie Mae with servicing retained by the Company. Included in the $2.07 billion of loans sold during 2004 were $953.8 million that were originally held in portfolio with a weighted average yield of 4.89%. Under the terms of the sales program with Fannie Mae, the Company retains a portion of the credit risk associated with such loans. The Company has a 100% first loss position on each multi-family residential loan sold to Fannie Mae under such program until the earlier of (i) the losses on the multi-family residential loans sold to Fannie Mae reach the maximum loss exposure for the portfolio as a whole or

(ii) until all of the loans sold to Fannie Mae under this program are fully paid off. The maximum loss exposure is available to satisfy any losses on loans sold in the program subject to the foregoing limitations. Substantially all the loans sold to Fannie Mae under this program are newly originated using the Company’s underwriting guidelines. At December 31, 2004, the Company serviced $5.20 billion of loans for Fannie Mae sold to it pursuant to this program with a maximum potential exposure of $156.1 million.

      The maximum loss exposure of the associated credit risk related to the loans sold to Fannie Mae under this program is calculated pursuant to a review of each loan sold to Fannie Mae. A risk level is assigned to each such loan based upon the loan product, debt service coverage ratio and loan to value ratio of the loan. Each risk level has a corresponding sizing factor which, when applied to the original principal balance of the loan sold, equates to a recourse balance for the loan. The sizing factors are periodically reviewed by Fannie Mae based upon its continuing review of loan performance and are subject to adjustment. The total of the recourse balance per loan is aggregated to create a maximum loss exposure for the entire portfolio at any given point in time. The Company’s maximum loss exposure for the entire portfolio of sold loans is periodically reviewed and, based upon factors such as amount, size, types of loans and loan performance, may be adjusted downward. Fannie Mae is restricted from increasing the maximum exposure on loans previously sold to it under this program as long as (i) the total borrower concentration (i.e., the total amount of loans extended to a particular borrower or a group of related borrowers) as applied to all mortgage loans delivered to Fannie Mae since the sales program began does not exceed 10% of the aggregate loans sold to Fannie Mae under the program and (ii) the average principal balance per loan of all mortgage loans delivered to Fannie Mae since the sales program began continues to be $4.0 million or less.

      During 2002, the Company sold from portfolio at par, $257.6 million of fully performing multi-family loans in exchange for Fannie Mae mortgage–backed securities representing a 100% interest in these loans. Such loans were sold with full recourse with the Company retaining servicing. These loans had an outstanding balance of $51.2 million at December 31, 2004. This transaction supported the Company’s efforts to continue to build and strengthen its relationship with Fannie Mae and had no impact on 2002 earnings.

      The Company has not sold multi-family residential loans to any other entities besides Fannie Mae during the last four years.

      Although all of the loans serviced for Fannie Mae (both loans originated for sale and loans sold from portfolio) are performing, the Company has established a liability related to the fair value of the retained credit exposure. This liability represents the amount that the Company would have to pay a third party to assume the retained recourse obligation. The estimated liability represents the present value of the estimated losses that the portfolio is projected to incur based upon an industry-based default curve with a range of estimated losses. At December 31, 2004 the Company had a $7.9 million liability related to the fair value of the retained credit exposure for loans sold to Fannie Mae under this sales program.

      As a result of retaining servicing on $5.25 billion of multi-family residential loans sold to Fannie Mae, which includes both loans originated for sale and loans sold from portfolio, the Company had an $11.8 million loan servicing asset at December 31, 2004 compared to $7.8 million at December 31, 2003. During 2004, the Company sold $2.07 billion of multi-family loans to Fannie Mae and recorded a $13.6 million servicing asset, which was partially offset by $9.2 million of amortization expense related to the servicing asset.

      At December 31, 2004, the Company had a $6.3 million loan servicing asset related to $600.5 million of single-family residential loans that were sold in the secondary market with servicing retained as a result of the SIB acquisition. The Company recorded $1.4 million of amortization expense of this servicing asset during 2004.

      During the third quarter of 2003, the Company announced that ICM Capital, L.L.C. (“ICM Capital”), a newly formed subsidiary of the Bank, was approved as a Delegated Underwriting and Servicing (“DUS”) mortgage lender by Fannie Mae. Under the Fannie Mae DUS program, ICM Capital is able to underwrite, fund and sell mortgages on multi-family residential properties to Fannie Mae, with servicing retained. Participation in the DUS program requires ICM Capital to share the risk of loan losses with Fannie Mae with one-third of all losses assumed by ICM Capital and two-thirds of

all losses assumed by Fannie Mae. There were no loans originated under the DUS program during both the years ended December 31, 2004 and 2003.

      The Bank has a two-thirds ownership interest in ICM Capital and Meridian Company, LLC (“Meridian Company”), a Delaware limited liability company, has a one-third ownership interest. ICM Capital’s operations will be coordinated with those of Meridian Capital Group, LLC (“Meridian Capital”). Meridian Capital is 65% owned by Meridian Capital Funding, Inc. (“Meridian Funding”), a New York-based mortgage brokerage firm, with the remaining 35% minority equity investment held by the Holding Company. Meridian Funding and Meridian Company have the same principal owners. See Note 20 of the “Notes to Consolidated Financial Statements” set forth in Item 8 hereof.

      Over the past few years, the Company has de-emphasized the origination for portfolio of single-family residential mortgage loans in favor of higher yielding loan products. In November 2001, the Company entered into a private label program for the origination of single-family residential mortgage loans through its branch network under a mortgage origination assistance agreement with Cendant Mortgage Corporation, doing business as PHH Mortgage Services (“Cendant”). Under this program, the Company utilizes Cendant’s mortgage loan origination platforms (including telephone and Internet platforms) to originate loans that close in the Company’s name. The Company funds the loans directly, and, under a separate loan and servicing rights purchase and sale agreement, sells the loans and related servicing to Cendant on a non-recourse basis at agreed upon pricing. During the year ended December 31, 2004, the Company originated for sale $122.8 million and sold $119.3 million of single-family residential mortgage loans through the program. The Company is using this program as a means of increasing non-interest income while efficiently serving its client base. In recent years the Company has continued to originate to a very limited degree certain adjustable and fixed-rate residential mortgage loans for portfolio retention. However, during 2004, the Company originated for portfolio $143.4 million of single-family residential and cooperative apartment loans primarily as a result of funding SIB loan commitments in existence at the time the acquisition was completed in April 2004. The Company does not foresee any material expansion of such lending activities.

      Mortgage loan commitments to borrowers related to loans originated for sale are considered a derivative instrument under Statement of Financial Accounting Standards (“SFAS”) No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities” (“SFAS No. 149”). In addition, forward loan sale agreements with Fannie Mae and Cendant also meet the definition of a derivative instrument under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” (“SFAS No. 133”). For more information regarding the Company’s derivative instruments, see Note 18 of the “Notes to Consolidated Financial Statements” set forth in Item 8 hereof.

      During the fourth quarter of 2002, the Company entered into a private label program for the origination and servicing of small business lines of credit through an origination assistance agreement with Wells Fargo & Company (“Wells Fargo”). This program is referred to as “Business Custom Capital” and consists of unsecured lines of credit, up to $100,000, to small business customers in the Company’s market area with over $50,000 in annual sales. These lines are underwritten, funded and serviced by Wells Fargo for their own portfolio and have no impact on the Company’s Statement of Financial Condition. The Company is using this program as a means of increasing non-interest income as the Company receives an upfront fee for lines originated and a fee on the outstanding balance of the line for a period of three years after origination.

      As of December 31, 2004, the Company serviced $647.8 million of single-family residential mortgage loans and $5.44 billion of multi-family residential loans for others.

      In December 1998, Broad entered into an agreement with New Jersey Citizen Action (“NJCA”), a community group, pursuant to which Broad agreed to use its best efforts to lend a total of $20.0 million in the state of New Jersey over a five year period beginning on January 1, 1999. Subsequent to the merger of Broad and the Company in July 1999 and the merger of Statewide and the Company in January 2000, the Bank entered into a modified agreement with NJCA pursuant to which a revised target goal of extending $33.0 million in loans was established for the five-year term of the agreement ending December 31, 2004. Such loans are to consist primarily of affordable home mortgage

products in the form of one-to-four family mortgage loans to qualified low and moderate income borrowers, community development financing consisting primarily of loans for the purpose of purchasing, constructing and rehabilitating housing affordable to low and moderate income families and economic development financing to facilitate small business startup and expansion and job development. As of December 31, 2004, the Company had extended approximately $35.9 million of loans in connection with the NJCA agreement.

      Loan Activity. The following table shows the activity in the Company’s loan portfolio and loans available-for-sale portfolio during the periods indicated.

(footnotes on next page)

     Multi-Family Residential Lending. The Company originates multi-family (five or more units) residential mortgage loans, which are secured primarily by apartment buildings, cooperative apartment buildings and mixed-use (combined residential and commercial) properties located primarily in the Company’s market area. These loans are comprised primarily of middle-income housing located primarily in the boroughs of Brooklyn, Queens, Manhattan, the Bronx and Northern New Jersey. During the third quarter of 2003, the Company announced the expansion of its commercial real estate lending (both multi-family residential and non-residential mortgage loans) activities to the Baltimore-Washington and the Boca Raton, Florida markets. During the third quarter of 2004, the Company continued the expansion of its commercial real estate lending activities to the Chicago market. The Company expects the loans to be referred primarily by Meridian Capital, which already has an established presence in these market areas. During 2004, the Company originated $126.7 million for portfolio and $140.9 million for sale of multi-family residential loans in the Baltimore-Washington market. The Company also originated $88.7 million for portfolio and $82.9 million for sale of multi-family residential loans in the Florida market during 2004. There were no loans originated in the Chicago market for the year ended December 31, 2004. The Company will review its expansion program periodically and establish and adjust its targets based on market acceptance, credit performance, profitability and other relevant factors.

      The main competitors for loans in the Company’s market area tend to be commercial banks, savings banks, savings and loan associations, credit unions, mortgage-banking companies and insurance companies. Historically, the Company has been an active lender of multi-family residential mortgage loans for portfolio retention. More recently, in order to further its commitment to remain a leader in the multi-family market, the Company continues to build on its relationship with Fannie Mae to originate and sell multi-family residential mortgage loans in the secondary market while retaining servicing. The Company determines whether to originate a loan for portfolio retention or for sale based upon the yield and terms of the loan. Due to the low interest rate environment during 2003 and 2002, a larger portion of the Company’s multi-family residential loan originations were for sale as opposed to portfolio retention. During 2004, as interest rates were in transition, the Company also sold lower-yielding multi-family residential loans from portfolio to Fannie Mae. See “Business-Lending Activities-Loan Originations, Purchases, Sales and Servicing”.

      At December 31, 2004, multi-family residential mortgage loans totaled $3.80 billion, or 33.8% of the Company’s total loan portfolio. The Company increased its originations of multi-family residential loans for portfolio by $1.29 billion, or 113.9% to $2.42 billion during the year ended December 31, 2004 compared to $1.13 billion for the year ended December 31, 2003. The Company also acquired $70.2 million of multi-family residential loans from SIB. Multi-family residential mortgage loans in the Company’s portfolio generally range from $500,000 to $25.0 million and have an average loan size of approximately $1.3 million.

      At December 31, 2004, the Company had $22.6 million of multi-family loans available-for-sale. During the year ended December 31, 2004 the Company originated for sale $1.14 billion and sold $2.07 billion (of which $1.12 billion was originated for sale and $953.8 million was sold from portfolio) of multi-family residential loans to Fannie Mae with servicing retained by the Bank. By comparison, during the year ended December 31, 2003 the Company originated for sale $1.62 billion and sold $1.73 billion (all originated for sale) of multi-family residential loans to Fannie Mae with servicing retained by the Company.

      The Company has developed during the past several years working relationships with several mortgage brokers. Under the terms of the arrangements with such brokers, the brokers refer potential loans to the Company. The loans are appraised and underwritten by the Company utilizing its underwriting policies and standards. The mortgage brokers receive a fee from the borrower upon the

funding of the loans by the Company. In recent years, mortgage brokers have been the source of substantially all of the multi-family residential and commercial real estate loans originated by the Company. In October 2002, in furtherance of its business strategy regarding commercial real estate and multi-family loan originations and sales, the Company increased from 20% to 35% its minority investment in Meridian Capital, which is 65% owned by Meridian Funding. Meridian Funding is primarily engaged in the origination of commercial real estate and multi-family mortgage loans. The loans originated by the Company resulting from referrals by Meridian Capital account for a significant portion of the Company’s total loan originations. For the year ended December 31, 2004, such loans accounted for approximately 27.7% of the aggregate amount of loans originated for portfolio and for sale compared to 20.3% for the year ended December 31, 2003. With respect to the loans which were originated for portfolio in 2004 (excluding mortgage warehouse lines of credit), loans resulting from referrals from Meridian Capital amounted to approximately 69.3% of such loans compared to 57.1% for the year ended December 31, 2003. In addition, referrals from Meridian Capital accounted for the majority of the loans originated for sale in 2004. All loans resulting from referrals from Meridian Capital are underwritten by the Company using its loan underwriting standards and procedures. The Company generally does not pay referral fees to Meridian Capital. However in 2004 on a limited number of loan transactions, the Company agreed to pay a portion of the loan origination fee normally paid in full by the borrower to Meridian Capital. The ability of the Company to continue to originate multi-family residential and commercial real estate loans at the levels experienced in recent years may be a function of, among other things, maintaining the mortgage broker relationships discussed above. See Note 20 of the “Notes to Consolidated Financial Statements” set forth in Item 8 hereof.

      When approving new multi-family residential mortgage loans, the Company follows a set of underwriting standards which generally permit a maximum loan-to-value ratio of 80% based on an appraisal performed by either one of the Company’s in-house licensed and certified appraisers or by a Company-approved licensed and certified independent appraiser (whose appraisal is reviewed by a Company licensed and certified appraiser), and sufficient cash flow from the underlying property to adequately service the debt. A minimum debt service ratio of 1.25 generally is required on multi-family residential mortgage loans. The Company also considers the financial resources of the borrower, the borrower’s experience in owning or managing similar properties, the market value of the property and the Company’s lending experience with the borrower. For loans sold in the secondary market to Fannie Mae, the maximum loan-to-value ratio is 80% and the minimum debt service ratio is 1.25. The Company’s current lending policy for loans originated for portfolio and for sale requires that newly originated loans in excess of $5.0 million be approved by at least two members of the Credit Committee of the Board of Directors, the composition of which is changed periodically.

      It is the Company’s policy to require appropriate insurance protection, including title and hazard insurance, on all mortgage loans prior to closing. Other than cooperative apartment loans, mortgage loan borrowers generally are required to advance funds for certain items such as real estate taxes, flood insurance and private mortgage insurance, when applicable.

      The Company’s multi-family residential mortgage loans include loans secured by cooperative apartment buildings. In underwriting these loans, the Company applies the normal underwriting criteria used with other multi-family properties. In addition, the Company generally will not make a loan on a cooperative apartment building unless at least 50% of the total units in the building are owner-occupied. However, the Company will consider making a loan secured by a cooperative apartment building if it has a large positive rental income which significantly exceeds maintenance expense. At December 31, 2004, the Company had $278.3 million of loans secured by cooperative apartment buildings.

      The Company’s typical multi-family residential mortgage loan is originated with a term to repricing or maturity of 5 to 7 years. These loans generally have fixed interest rates and may be extended by the borrower, upon payment of an additional fee, for an additional 5-year period at an interest rate based on the 5-year Federal Home Loan Bank of New York (“FHLB”) advance rate plus a margin at the time of extension. Under the terms of the Company’s multi-family residential mortgage loans, the principal balance generally is amortized at the rate of 1% per year with the remaining principal due in full at

maturity. Prepayment penalties are generally part of the terms of these loans.

      Commercial Real Estate Lending. In addition to multi-family residential mortgage loans, the Company originates commercial real estate loans. This growing portfolio is comprised primarily of loans secured by commercial and industrial properties, office buildings and small shopping centers located primarily within the Company’s market area. During the third quarter of 2003 the Company expanded its commercial real estate lending activities to the Baltimore-Washington and the Boca Raton, Florida markets. During the third quarter of 2004, the Company continued the expansion of its commercial real estate lending activities to the Chicago market. During 2004, the company originated $67.0 million of such loans in the Baltimore-Washington market and $113.2 million in the Florida market. There were no loans originated in the Chicago market for the year ended December 31, 2004.

      At December 31, 2004, commercial real estate loans amounted to $3.03 billion or 27.0% of total loans. This portfolio increased $1.42 billion, or 88.1%, during the year ended December 31, 2004 due to the Company’s increased emphasis on originating higher yielding commercial real estate and business loans in line with its business strategy as well as the loans acquired in connection with the acquisition of SIB. See “Lending Activities-General”. The Company originated $1.47 billion of commercial real estate loans during the year ended December 31, 2004 compared to $651.9 million for the year ended December 31, 2003. In addition, the Company acquired $507.9 million of commercial real estate loans from SIB. The Company intends to continue to emphasize the origination for portfolio of these higher yielding loan products.

      The Company’s commercial real estate loans generally range in amount from $50,000 to $15.0 million, and have an average size of approximately $1.3 million. The Company originates commercial real estate loans using similar underwriting standards as applied to multi-family residential mortgage loans. The Company reviews rent or lease income, rent rolls, business receipts, the borrower’s credit history and business experience, and comparable values of similar properties when underwriting commercial real estate loans.

      Loans secured by apartment buildings and other multi-family residential and commercial properties generally are larger and considered to involve a higher inherent risk of loss than single-family residential mortgage or cooperative apartment loans. Payments on loans secured by multi-family residential and commercial properties are often dependent on the successful operation or management of the properties and are subject, to a greater extent, to adverse conditions in the real estate market or the local economy. The Company seeks to minimize these risks through its underwriting policies, which generally limit the origination of such loans to loans secured by properties located in the Company’s market area and require such loans to be qualified on, among other things, the basis of the property’s income and debt service ratio.

      Single-Family Residential and Cooperative Apartment Lending. The Company, through its private label program with Cendant, offers both fixed-rate and adjustable-rate mortgage loans secured by single-family residential properties located in the Company’s primary market area. Under its agreement with Cendant, the Company offers a range of single-family residential loan products through various delivery channels, supported by direct consumer advertising, including telemarketing, branch referrals and the Company’s Internet website. At December 31, 2004, the Company had $5.1 million of loans available-for-sale to Cendant. During 2004, the Company originated for sale $122.8 million and sold $119.3 million of loans to Cendant. The Company will continue to emphasize this program as a means of increasing non-interest income.

      Over the past few years, the Company has de-emphasized the origination of single-family residential mortgages and cooperative apartment loans, for portfolio, in favor of higher yielding loan products. Although the Company’s cooperative apartment loans in the past have related to properties located in the boroughs of Manhattan, Brooklyn and Queens, in recent periods substantially all of such loans originated or purchased have related to properties located in Manhattan. At December 31, 2004, $2.49 billion, or 22.1%, of the Company’s total loan portfolio consisted of single-family residential mortgage loans and cooperative apartment loans (of which $1.35 billion were adjustable-rate mortgage loans (“ARMs”)) as compared to $284.4 million or 4.6% of the total loan portfolio at December 31, 2003. The substantial increase in this portfolio during 2004 was due to $2.67 billion of loans acquired from SIB and $143.4 million of originations. The

increased originations in 2004 were primarily the result of funding SIB loan commitments in existence at the time of the acquisition on April 12, 2004.

      The interest rates on the Company’s ARMs fluctuate based upon a spread above the average yield on United States Treasury securities, adjusted to a constant maturity which corresponds to the adjustment period of the loan (the “U.S. Treasury constant maturity index”) as published weekly by the Federal Reserve Board. In addition, ARMs generally are subject to limitations on interest increases or decreases of 2% per adjustment period and an interest rate cap during the life of the loan established at the time of origination. Certain of the Company’s ARMs can be converted at certain times to fixed-rate loans upon payment of a fee. Included in single-family residential loans is a modest amount of loans partially or fully guaranteed by the Federal Housing Administration (“FHA”) or the Department of Veterans’ Affairs (“VA”).

      In order to provide financing for low and moderate-income home buyers, the Company participates in residential mortgage programs and products sponsored by, among others, the Community Preservation Corporation and Neighborhood Housing Services. Various programs sponsored by these groups provide low and moderate income households with fixed-rate mortgage loans which are generally below prevailing fixed market rates and which allow below-market down payments for the construction of affordable rental housing. (See “ — Loan Originations, Purchases, Sales and Servicing”).

      Commercial Business Lending Activities. Part of the Company’s strategy to shift its portfolio mix is expanding its commercial business loan portfolio. The Company makes commercial business loans directly to businesses located primarily in its market area and targets small- and medium-sized businesses with annual revenue up to $500.0 million. Commercial business loans are obtained primarily from existing customers, branch referrals, accountants, attorneys and direct inquiries. As of December 31, 2004, commercial business loans totaled $809.4 million, or 7.2%, of the Company’s total loan portfolio compared to $606.2 million, or 9.8%, of the total loan portfolio at December 31, 2003. The Company originated $376.0 million of commercial business loans for portfolio during the year ended December 31, 2004 compared to $289.9 million for the year ended December 31, 2003. The Company also acquired $246.6 million of loans as part of the SIB acquisition during 2004.

      Commercial business loans originated by the Company generally range in amount from $50,000 to $10.0 million and have an average loan size of approximately $400,000. These loans include lines of credit, revolving credit, time loans and term loans. The loans generally range from one year to ten years and include floating, fixed and adjustable rates. Such loans are generally secured by real estate, receivables, inventory, equipment, machinery and vehicles and are further enhanced by the personal guarantees of the principals of the borrower. The Company’s current lending policy for loans originated for portfolio and for sale requires that newly originated loans in excess of $5.0 million be approved by two non-officer directors of the Credit Committee of the Board of Directors. Although commercial business loans generally are considered to involve greater credit risk, and generally bear a corresponding higher yield, than certain other types of loans, management intends to continue emphasizing the origination of commercial business loans to small- and medium-sized businesses in its market area.

      Included in commercial business loans are lease financing activities. ICB Leasing Corp., a subsidiary of the Bank, was formed during the third quarter of 2004 to provide small and mid-size equipment lease financing to customers within the Company’s primary market area. The Company originated $3.9 million of such loans during the fourth quarter of 2004. Also included in commercial business loans are small business lending activities. Small business lending activities are targeted to customers within the Company’s market area with annual sales of $5.0 million or less. The Company offers various products to small business customers in its market area which include (i) originating secured loans for its own portfolio, (ii) originating secured loans in amounts up to $2.0 million using the Company’s underwriting standards and guidelines from the Small Business Administration (“SBA”), and selling, at a gain, the guaranteed portion (75%) of each loan, with servicing retained, and (iii) offering access to unsecured lines of credit up to $100,000 through its private label program with Wells Fargo. (See “ — Loan Origination, Purchases, Sales and Servicing”). The Company originated $3.4 million and sold $1.3 million of SBA loans during the year ended December 31, 2004.

The Company offers these activities to better serve its small business customers as well as a means of increasing non-interest income.

      Mortgage Warehouse Lines of Credit. Mortgage warehouse lines of credit are revolving lines of credit to small- and medium-sized mortgage-banking companies at interest rates indexed at a spread to the prime rate as listed in the Wall Street Journal. The lines are drawn upon by such companies to fund the origination of mortgages, primarily one-to-four family loans, where the amount of the draw is generally no higher than 99% of the loan amount, which, in turn, in most cases, is no higher than 80% of the appraised value of the property. In most cases, where the amount of the draw is in excess of 80%, the mortgage is covered by private mortgage insurance or government insurance through the FHA. In substantially all cases, prior to funding the advance, the mortgage banker has received an approved commitment for the sale of the loan, which in turn reduces credit exposure associated with the line. The lines are repaid upon completion of the sale of the mortgage loan to third parties, which usually occurs within 90 days of origination of the loan. During the period between the origination and sale of the loan, the Company maintains possession of the original mortgage note. These loans are of short duration and are made to customers located primarily in New Jersey and surrounding states whose primary business is mortgage refinancing. In the event of rising interest rates, the Company would expect that the use of these lines of credit would be substantially reduced and replaced only to the extent of strength in the general housing market.

      Mortgage warehouse lines of credits to mortgage bankers generally range in amount from $1.0 million to $35.0 million, and have an average size of approximately $10.1 million. The Company establishes limits on mortgage warehouse lines of credit using its normal underwriting standards. The Company reviews credit history, business experience, process controls and procedures and requires personal guarantees of the principals of the borrower.

      As of December 31, 2004, advances under mortgage warehouse lines of credit totaled $659.9 million, or 5.9% of the Company’s total loan portfolio compared to $527.3 million at December 31, 2003. During 2004, advances on mortgage warehouse lines of credit totaled $10.19 billion and repayments totaled $10.05 billion. Unused mortgage warehouse lines of credit totaled $775.9 million at December 31, 2004. Utilization of the borrowers’ lines of credit approximated 47% and 36% of the total lines approved at December 31, 2004 and December 31, 2003, respectively.

      Consumer Lending Activities. The Company offers a variety of consumer loans including home equity loans and lines of credit, automobile loans and passbook loans in order to provide a full range of financial services to its customers. Such loans are obtained primarily through existing and walk-in customers and direct advertising. At December 31, 2004, $464.2 million or 4.1% of the Company’s total loan portfolio was comprised of consumer loans.

      The largest component of the Company’s consumer loan portfolio is home equity loans and lines of credit. Home equity lines of credit are a form of revolving credit and are secured by the underlying equity in the borrower’s primary or secondary residence. The loans are underwritten in a manner such that they result in a risk of loss which is similar to that of single-family residential mortgage loans. The Company’s home equity lines of credit have interest rates that adjust or float based on the prime rate listed in the Wall Street Journal, have loan-to-value ratios of 80% or less, and are generally for amounts of less than $100,000. The loan repayment is generally based on a 20 year term consisting of principal amortization plus accrued interest. At December 31, 2004, home equity loans and lines of credit amounted to $416.4 million, or 3.7%, of the Company’s total loan portfolio. The Company had an additional $160.8 million of unused commitments pursuant to such equity lines of credit at December 31, 2004.

      Another component of the Company’s consumer loan portfolio at December 31, 2004 was passbook loans which totaled $14.5 million and are secured by the borrowers’ deposits at the Bank. At December 31, 2004, the remaining $33.3 million of the Company’s consumer loan portfolio was comprised primarily of miscellaneous unsecured loans.

      Loan Approval Authority and Underwriting. The Board of Directors of the Bank has established lending authorities for individual officers as to its various types of loan products. For multi-family residential mortgage loans, commercial real estate and commercial business loans, an Executive Vice President and a Senior Vice President have the authority to approve newly originated loans in

amounts up to $3.0 million and for the private banking group within the Company’s business banking area, two Senior Vice Presidents acting jointly have authority to approve up to $500,000. Amounts up to $5.0 million may be approved by either the Chief Executive Officer or the Chief Credit Officer.

      Single-family residential mortgage loans and cooperative apartment loans and home equity loans of less than $300,000 can be approved by an individual loan officer, while loans up to and including $500,000 must be approved by a senior loan officer. Two senior officers acting jointly have the authority to approve such loans in amounts up to $750,000 and those loans exceeding $750,000 may be approved by two senior officers acting jointly (one of whom must be the Chief Executive Officer, Chief Credit Officer or Executive Vice President – Consumer Banking.) Consumer loans of less than $50,000 can be approved by an individual loan officer and loans between $50,000 and $100,000 can be approved by an individual senior loan officer. Loans between $100,000 and $300,000 must be approved by the joint action of two senior loan officers.

      Any mortgage loan, cooperative apartment and commercial business loan in excess of $5.0 million must be approved by at least two members of the Credit Committee of the Board of Directors, which consists of various directors, the composition of which is changed periodically and the joint action of two senior officers, one of whom must be the Chief Executive Officer, Chief Credit Officer, Executive Vice President-Consumer Banking or Senior Vice President-Lending, Consumer Banking.

      With certain limited exceptions, the Company’s credit administration policy limits the amount of credit related to mortgage loans and commercial loans that can be extended to any one borrower to $20.0 million, substantially less than the limits imposed by applicable law and regulation. With certain exceptions, the Company’s policy also limits the amount of commercial business or commercial real estate loans that can be extended to any affiliated borrowing group to $40.0 million. Exceptions to the above policy limits must have the approval of the Chief Executive Officer, Chief Credit Officer and two members of the Credit Committee of the Board of Directors. With certain limited exceptions, a New York-chartered savings bank may not make loans or extend credit for commercial, corporate or business purposes (including lease financing) to a single borrower, the aggregate amount of which would exceed (i) 15% of the Bank’s net worth if the loan is unsecured, or (ii) 25% of net worth if the loan is secured. Excluding relationships that include loans that have been sold to Fannie Mae and against which Fannie Mae has recourse, the outstanding aggregate loan balance to the Company’s largest lending relationship was $121.5 million at December 31, 2004 which was in compliance with the regulatory limitations.

      Appraisals for multi-family residential and commercial real estate loans are generally conducted either by licensed and certified internal appraisers or qualified external appraisers. In addition, the Company generally reviews internally all appraisals conducted by independent appraisers on multi-family residential and commercial real estate properties.

      Loan Origination and Loan Fees. In addition to interest earned on loans, the Company receives loan origination fees or “points” for many of the loans it originates. Loan points are a percentage of the principal amount of the mortgage loan and are charged to the borrower in connection with the origination of the loan. The Company also offers a number of residential loan products on which no points are charged.

      The Company’s loan origination fees and certain related direct loan origination costs are offset, and the resulting net amount is deferred and amortized over the contractual life of the related loans as an adjustment to the yield of such loans. At December 31, 2004, the Company had $15.6 million of net deferred loan fees.

Asset Quality

      The Company generally places loans on non-accrual status when principal or interest payments become 90 days past due, except those loans reported as 90 days past maturity within the overall total of non-performing loans. However, FHA or VA loans continue to accrue interest because their interest payments are guaranteed by various government programs and agencies. Loans may be placed on non-accrual status earlier if management believes that collection of interest or principal is doubtful or when such loans have such well defined weaknesses that collection in full of principal or interest may not be probable. When a loan is placed

on non-accrual status, previously accrued but unpaid interest is deducted from interest income.

      Real estate acquired by the Company as a result of foreclosure or by deed-in-lieu of foreclosure is classified as other real estate owned (“OREO”) until sold. Such assets are carried at the lower of fair value minus estimated costs to sell the property, or cost (generally the balance of the loan on the property at the date of acquisition). All costs incurred in acquiring or maintaining the property are expensed and costs incurred for the improvement or development of such property are capitalized up to the extent of their net realizable value.

      Delinquent loans. The following table sets forth delinquencies in the Company’s loan portfolio as of the dates indicated:

     Non-Performing Assets. The following table sets forth information with respect to non-performing assets identified by the Company, including non-performing loans and OREO at the dates indicated.

     Non-performing assets increased $15.2 million or 41.5% to $51.8 million at December 31, 2004 compared to $36.6 million at December 31, 2003. Included in non-performing assets at December 31, 2004 were $20.8 million of non-performing assets acquired from SIB. The increase primarily reflects a $7.8 million increase in non-accrual loans and a $4.8 million increase in loans past due 90 days or more as to principal but still accruing, which loans continued to make payments on a basis consistent with the original repayment schedule. Non-accrual loans had increases of $9.8 million in non-accrual commercial business loans and $6.0 million in non-accrual single-family residential and cooperative apartment loans, which increases were partially offset by a decrease of $7.5 million in non-accrual commercial real estate loans.

      Although non-performing assets increased by $15.2 million at December 31, 2004 compared to December 31, 2003, they decreased significantly by $20.2 million or 28.1% compared to $72.0 million at September 30, 2004. This reduction was primarily due to diligent work-out efforts resulting in loan repayments of approximately $11.7 million from a single non-performing relationship.

      Loans 90 days or more past maturity which continued to make payments on a basis consistent with the original repayment schedule amounted to $5.5 million at December 31, 2004. Although these loans increased by $4.8 million during 2004, the Company is working with the borrowers to refinance or extend the term of such loans, at which time, the loans will no longer be deemed non-performing.

      The interest income that would have been recorded during the years ended December 31, 2004, 2003 and 2002 if all of the Bank’s non-accrual loans at the end of each such period had been current in accordance with their terms during such periods was $1.8 million, $1.1 million and $1.3 million, respectively.

      A New York-chartered savings bank’s determination as to the classification of its assets and the amount of its valuation allowances is subject to review by the Federal Deposit Insurance Corporation (“FDIC”) and the New York State Banking Department (“Department”), which can order the establishment of additional general or specific loss allowances. The FDIC, in conjunction with the other federal banking agencies, has adopted an interagency policy statement on the allowance for loan and lease losses. The policy statement provides guidance for financial institutions on both the responsibilities of management for the assessment and establishment of adequate allowances and guidance for banking agency examiners to use in determining the adequacy of general valuation guidelines. Generally the policy statement recommends that institutions have effective systems and controls to identify, monitor and address asset quality problems; that management has analyzed all significant factors that affect the collectibility of the portfolio in a reasonable manner, and that management has established acceptable allowance evaluation processes that meet the objectives set forth in the policy statement. Although the Company believes that its allowance for loan losses was at a level to cover all known and inherent losses in its loan portfolio at December 31, 2004 that were both probable and reasonable to estimate, there can be no assurance that the regulators, in reviewing the Company’s loan portfolio, will not request the Company to materially adjust its allowance for possible loan losses, thereby affecting the Company’s financial condition and results of operations at the date and for the period during which such adjustment must be recognized.

      Criticized and Classified Assets. Federal regulations require that each insured institution classify its assets on a regular basis. Furthermore, in connection with examinations of insured institutions, federal and state examiners have authority to identify problem assets and, if appropriate, classify them. There are three classifications for problem assets: “substandard,” “doubtful” and “loss.” Substandard assets have one or more defined weaknesses and are characterized by the distinct possibility that the insured institution will sustain some loss if the deficiencies are not corrected. Doubtful assets have the same weaknesses of substandard assets with the additional characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values questionable, resulting in a high probability of loss. An asset classified as loss is considered uncollectible and of such little value that continuance as an asset of the institution is not warranted. The Company also categorizes assets as “special mention”. These are generally defined as assets that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset. However, they do not currently expose an insured

institution to a sufficient degree of risk to warrant classification as substandard, doubtful or loss.

      The Company’s senior management reviews and classifies loans continually and reports the results of its reviews to the Board of Directors on a monthly basis. The Company has also experienced significant improvement in the level of classified loans during 2004. At December 31, 2004, the Company had classified an aggregate of $83.0 million of assets (a portion of which consisted of non-accrual loans) which was a 22.7% improvement compared to $107.4 million at December 31, 2003. In addition, at such date the Company had $97.1 million of assets that were designated by the Company as special mention.

      Allowance for Loan Losses. The determination of the level of the allowance for loan losses and the periodic provisions to the allowance charged to income is the responsibility of management. In assessing the level of the allowance for loan losses, the Company considers the composition and outstanding balance of its loan portfolio, the growth or decline of loan balances within various segments of the overall portfolio, the state of the local (and to a certain degree, the national) economy as it may impact the performance of loans within different segments of the portfolio, the loss experience related to different segments or classes of loans, the type, size and geographic concentration of loans held by the Company, the level of past due and non-performing loans, the value of collateral securing the loan, the level of classified loans and the number of loans requiring heightened management oversight. The continued shifting of the composition of the loan portfolio to be more commercial-bank like by increasing the balance of commercial real estate and business loans and mortgage warehouse lines of credit may increase the level of known and inherent losses in the Company’s loan portfolio.

      The formalized process for assessing the level of the allowance for loan losses is performed on a quarterly basis. Individual loans are specifically identified by loan officers as meeting the criteria of pass, criticized or classified loans. Such criteria include, but are not limited to, non-accrual loans, past maturity loans, impaired loans, chronic delinquencies and loans requiring heightened management oversight. Each loan is assigned to a risk level of special mention, substandard, doubtful and loss. Loans that do not meet the criteria to be characterized as criticized or classified are categorized as pass loans. Each risk level, including pass loans, has an associated reserve factor that increases as the risk level category increases. The reserve factor for criticized and classified loans becomes larger as the risk level increases. The reserve factor for pass loans differs based upon the loan type and collateral type. Commercial business loans have a larger loss factor applied to pass loans since these loans are deemed to have higher levels of known and inherent loss than commercial real estate and multi-family residential loans. The reserve factor is applied to the aggregate balance of loans designated to each risk level to compute the aggregate reserve requirement. This method of analysis is performed on the entire loan portfolio.

      The reserve factors that are applied to pass, criticized and classified loans are generally reviewed by management on a quarterly basis unless circumstances require a more frequent assessment. In assessing the reserve factors, the Company takes into consideration, among other things, the state of the national and/or local economies which could affect the Company’s customers or underlying collateral values, the loss experience related to different segments or classes of loans, changes in risk categories, the acceleration or decline in loan portfolio growth rates and underwriting or servicing weaknesses. To the extent that such assessment results in an increase or decrease to the reserve factors that are applied to each risk level, the Company may need to adjust its provision for loan losses which could impact earnings in the period in which such provisions are taken.

      The Company considers a loan impaired when, based upon current information and events, it is probable that it will be unable to collect all amounts due for both principal and interest, according to the contractual terms of the loan agreement. The measurement value of the Company’s impaired loans is based on either the present value of expected future cash flows discounted at the loan’s effective interest rate, the observable market prices of the loan, or the fair value of the underlying collateral if the loan is collateral dependent. The Company identifies and measures impaired loans in conjunction with its assessment of the level of the allowance for loan losses. Specific factors used in the identification of impaired loans include, but are not limited to, delinquency status, loan-to-value ratio, the condition of the underlying collateral, credit history and debt coverage. Impaired loans totaled $27.8 million

at December 31, 2004 with a related allowance allocated of $1.0 million applicable to such loans.

      The Company’s allowance for loan losses amounted to $101.4 million at December 31, 2004 as compared to $79.5 million at December 31, 2003. The Company’s allowance amounted to 0.90% of total loans at December 31, 2004 and 1.29% at December 31, 2003. The allowance for loan losses as a percent of non-performing loans was 205.8% at December 31, 2004 compared to 217.3% at December 31, 2003.

      The Company’s allowance for loan losses increased $21.9 million from December 31, 2003 to December 31, 2004 due to the $24.1 million allowance for loan losses acquired in the SIB transaction and the $2.0 million provision during fiscal 2004 partially offset by charge-offs, net of recoveries, of $4.2 million. The provision recorded reflected the improved quality in the characteristics of the loan portfolio including a reduction in classified loans and net charge-offs as well as the continued emphasis on commercial real estate and business loan originations and the recognition of current economic conditions. Included in the $2.0 million provision were adjustments to the allowance for loan losses by loan category to reflect changes in the Company’s loan mix and risk characteristics.

      The Company will continue to monitor and modify its allowance for loan losses as conditions dictate. Management believes that, based on information currently available, the Company’s allowance for loan losses at December 31, 2004 was at a level to cover all known and inherent losses in its loan portfolio at such date that were both probable and reasonable to estimate. In the future, management may adjust the level of its allowance for loan losses as economic and other conditions dictate. In addition, the FDIC and the Department as an integral part of their examination process periodically review the Company’s allowance for possible loan losses. Such agencies may require the Company to adjust the allowance based upon their judgment.

      The following table sets forth the activity in the Company’s allowance for loan losses during the periods indicated.

     The following table sets forth information concerning the allocation of the Company’s allowance for loan losses by loan category at the dates indicated.

Environmental Issues

      The Company encounters certain environmental risks in its lending activities. Under federal and state environmental laws, lenders may become liable under certain circumstances for costs of cleaning up hazardous materials found on property securing their loans. In addition, the existence of hazardous materials may make it uneconomic for a lender to foreclose on such properties. Although environmental risks are usually associated with loans secured by commercial real estate, risks also may be substantial for loans secured by residential real estate if environmental contamination makes security property unsuitable for use. This could also have a negative effect on nearby property values. The Company attempts to control its risk by requiring a Phase One environmental assessment be completed as part of its underwriting review for all non-residential mortgage applications.

      The Company believes its procedures regarding the assessment of environmental risk are adequate and the Company is unaware of any environmental issues which would subject it to any material liability at this time. However, no assurance can be given that the values of properties securing loans in the Company’s portfolio will not be adversely affected by unforeseen environmental risks.

Investment Activities

      Investment Policies. The investment policy of the Company, which is established by the Board of Directors, is designed to help the Company achieve its fundamental asset/liability management objectives. Generally, the policy calls for the Company to emphasize principal preservation, liquidity, diversification, short maturities and/or repricing terms, and a favorable return on investment when selecting new investments for the Company’s investment and mortgage-related securities portfolios. In addition, the policy sets forth objectives which are designed to limit new investments to those which further the Company’s goals with respect to interest rate risk management. The Company’s current securities investment policy permits investments in various types of liquid assets including obligations of the U.S. Treasury and federal agencies, investment-grade corporate and trust obligations, preferred securities, various types of mortgage-related securities, including collateralized mortgage obligations (“CMOs”), commercial paper and insured certificates of deposit. The Bank, as a New York-chartered savings bank, is permitted to make certain investments in equity securities and stock mutual funds. At December 31, 2004, these equity investments totaled $42.1 million. See “— Regulation-Activities and Investments of FDIC-Insured State-Chartered Banks”.

      The Company has the ability to enter into various derivative contracts for hedging purposes to facilitate its ongoing asset/liability management process. The Company’s hedging activities are limited to interest rate swaps, caps and floors with outstanding notional amounts not to exceed in the aggregate 10% of total assets. The objective of any hedging activities is to reduce the Company’s interest rate risk. Similarly, the Company does not invest in mortgage-related securities which are deemed by rating agencies to be “high risk,” or purchase bonds which are not rated investment grade.

      Mortgage-Related Securities. Mortgage-related securities represent a participation interest in a pool of single-family or multi-family mortgages, the principal and interest payments on which are passed from the mortgage originators, through intermediaries (generally U.S. Government agencies and government sponsored enterprises) that pool and repackage the participation interests in the form of securities, to investors such as the Company. Such U.S. Government agencies and government sponsored enterprises, which guarantee the payment of principal and interest to investors, primarily include the Federal Home Loan Mortgage Corporation (“Freddie Mac”), Fannie Mae and the Government National Mortgage Association (“GNMA”). The Company primarily invests in CMO private issuances, which are principally AAA rated and are current pay sequential pass-throughs or planned amortization class structures and CMOs backed by U.S. Government agency securities.

      Mortgage-related securities generally increase the quality of the Company’s assets by virtue of the insurance or guarantees that back them, are more liquid than individual mortgage loans and may be used to collateralize borrowings or other obligations of the Company. However, the existence of the guarantees or insurance generally results in such securities bearing yields which are less than the loans underlying such securities.

      Freddie Mac is a publicly traded corporation chartered by the U.S. Government. Freddie Mac issues participation certificates backed principally by conventional mortgage loans. Freddie Mac

guarantees the timely payment of interest and the ultimate return of principal on participation certificates. Fannie Mae is a private corporation chartered by the U.S. Congress with a mandate to establish a secondary market for mortgage loans. Fannie Mae guarantees the timely payment of principal and interest on Fannie Mae securities. Freddie Mac and Fannie Mae securities are not backed by the full faith and credit of the United States, but because Freddie Mac and Fannie Mae are U.S. Government-sponsored enterprises, these securities are considered to be among the highest quality investments with minimal credit risks. GNMA is a government agency within the Department of Housing and Urban Development which is intended to help finance government — assisted housing programs. GNMA securities are backed by FHA-insured and VA-guaranteed loans, and the timely payment of principal and interest on GNMA securities are guaranteed by GNMA and backed by the full faith and credit of the U.S. Government. Because Freddie Mac, Fannie Mae and GNMA were established to provide support for low-and middle-income housing, there are limits to the maximum size of one-to-four family loans that qualify for these programs.

      At December 31, 2004, the Company’s $3.48 billion of mortgage-related securities, which represented 19.6% of the Company’s total assets at such date, were comprised of $1.94 billion of AAA rated CMOs and $99.2 million of CMOs which were issued or guaranteed by Freddie Mac, Fannie Mae or GNMA (“Agency CMOs”) and $1.44 billion of pass through certificates, which were also issued or guaranteed by Freddie Mac, Fannie Mae or GNMA. The portfolio increased by $1.27 billion during the year ended December 31, 2004 primarily due to $1.62 billion of mortgage-related securities acquired from SIB combined with $840.3 million of purchases partially offset by proceeds totaling approximately $997.1 million received from principal repayments and sales of $158.3 million. The purchases during the year ended December 31, 2004 primarily consisted of $697.2 million of AAA rated CMOs with an average yield of 4.75%, $44.0 million of Agency CMOs with a weighted average yield of 4.41%, and $98.6 million of Fannie Mae pass through certificates with a weighted average yield of 4.11%.

      At December 31, 2004, the contractual maturity of approximately 88.5% of the Company’s mortgage-related securities was within five years. The actual maturity of a mortgage-related security is generally less than its stated maturity due to repayments of the underlying mortgages. Prepayments at a rate different than that anticipated will affect the yield to maturity. The yield is based upon the interest income and the amortization of any premium or discount related to the mortgage-backed security. In accordance with generally accepted accounting principles used in the United States (“GAAP”), premiums and discounts are amortized over the estimated lives of the securities, which decrease and increase interest income, respectively. The repayment assumptions used to determine the amortization period for premiums and discounts can significantly affect the yield of mortgage-related securities, and these assumptions are reviewed periodically to reflect actual prepayments. If prepayments are faster than anticipated, the life of the security may be shortened and may result in the acceleration of any unamortized premium. Although repayments of underlying mortgages depend on many factors, including the type of mortgages, the coupon rate, the age of mortgages, the geographical location of the underlying real estate collateralizing the mortgages and general levels of market interest rates, the difference between the interest rates on the underlying mortgages and the prevailing mortgage interest rates generally is the most significant determinant of the rate of repayments. During periods of falling mortgage interest rates, if the coupon rate of the underlying mortgages exceeds the prevailing market interest rates offered for mortgage loans, refinancing generally increases and accelerates the repayment of the underlying mortgages and the related security. Under those circumstances, the Company may be subject to reinvestment risk to the extent that the Company’s mortgage-related securities amortize or repay faster than anticipated and the Company is not able to reinvest the proceeds of such repayments and prepayments at comparable rates. During 2004, as mortgage rates increased, the Company experienced a decrease in repayments, prepayments and maturities to $997.1 million for the year ended December 31, 2004 compared to $1.63 billion for the year ended December 31, 2003. As a result, the Company also experienced a corresponding decline in the amortization of premium to $19.4 million for the year ended December 31, 2004 compared to $26.2 million for the year ended December 31, 2003.

      The following table sets forth the activity in the Company’s mortgage-related securities portfolio during the periods indicated, all of which are available-for-sale.

     Investment Securities. The Company has the authority to invest in various types of liquid assets, including U.S. Treasury obligations, securities of various federal agencies and of state and municipal governments, preferred securities, mutual funds, equity securities and corporate and trust obligations. The Company’s investment securities portfolio increased $157.4 million to $454.3 million at December 31, 2004 compared to $296.9 million at December 31, 2003. The increase was due to $469.9 million of securities acquired from SIB combined with purchases of $186.3 million consisting in large part of preferred securities and securities issued by federal agencies, which purchases were partially offset by the proceeds received from maturities, calls and repayments of $332.3 million and from sales of $155.5 million of securities. The sales consisted of $104.1 million of corporate bonds, with a weighted average yield of 3.74%, $39.0 million of preferred securities, with a weighted average yield of 3.24%, and $10.0 million of federal agencies with a weighted average yield of 4.30%. Calls and maturities consisted primarily of $273.9 million federal agency securities with a weighted average yield of 3.63%, $19.4 million of preferred securities with a weighted average yield of 5.13%, $12.9 million of treasury notes and bonds with a weighted average yield of 1.74% and $10.0 million of corporate bonds with a weighted average yield of 6.24%.

      Prior to December 31, 2004, the Company held as part of its available-for-sale portfolio $72.5 million of investment grade Fannie Mae preferred equity securities, predominately bearing fixed-rates, with aggregate unrealized losses of $12.7 million ($8.3 million after-tax). Such unrealized losses were treated as a reduction of other comprehensive income and thus, a reduction to equity. However, as a result of recent events at Fannie Mae, the Company recorded these previously unrealized losses as an other-than-temporary impairment as of December 31, 2004. Consequently, the aggregate amortized cost of these securities were reduced by $12.7 million and a corresponding other-than-temporary impairment charge to net loss on securities was recognized. This non-cash charge reduced diluted earnings per share by $0.12 for the year ended December 31, 2004 but did not reduce stockholders’ equity or related capital ratios since it was previously recorded as an unrealized loss in stockholders’ equity. At December 31, 2004, these securities had an effective yield of 6.47% and were rated AA- and Aa3 by Standard & Poor’s and Moody’s.

      The following table sets forth the activity in the Company’s investment securities portfolio, all of which are available-for-sale, during the periods indicated.

     The following table sets forth information regarding the amortized cost and fair value of the Company’s investment and mortgage-related securities at the dates indicated.

      The following table sets forth certain information regarding the contractual maturities of the Company’s investment and mortgage-related securities at December 31, 2004, all of which were classified as available-for-sale.