DIME COMMUNITY BANCSHARES INC - 10-K Annual Report

Executive Summary

The Holding Company’s primary business is the operation of the Bank. The Company’s consolidated results of operations are dependent primarily on net interest income, which is the difference between the interest income earned on interest-earning assets, such as loans and securities, and the interest expense paid on interest-bearing liabilities, such as deposits and borrowings. The Bank additionally generates non-interest income such as service charges and other fees, as well as income associated with the Bank’s purchase of Bank Owned Life Insurance (“BOLI”). Non-interest expense primarily consists of employee compensation and benefits, federal deposit insurance premiums, data processing fees, marketing expenses and other operating expenses. The Company’s consolidated results of operations are also significantly affected by general economic and competitive conditions (particularly fluctuations in market interest rates), government policies, changes in accounting standards and actions of regulatory agencies.

The Bank’s primary strategy is to increase its household and deposit market shares in the communities which it serves, either through direct marketing, acquisitions or purchases of deposits. The Bank also seeks to increase its product and service utilization for each individual depositor. In addition, the Bank’s primary strategy includes the origination of, and investment in, mortgage loans, with an emphasis on multifamily residential and commercial real estate loans, reflecting the fact that a significant portion of the housing in the Bank's primary lending area is multifamily. Recently, the Bank has increased its portfolio of loans secured by mixed-use properties typically comprised of ground level commercial units and residential apartments on the upper floors.

The Company believes that multifamily residential and commercial real estate loans provide advantages as investment assets. Initially, they offer a higher yield than investment securities of comparable maturities or terms to repricing. Origination and processing costs for the Bank’s multifamily residential and commercial real estate loans are lower per thousand dollars of originations than comparable one-to four-family loan costs. In addition, the Bank’s market area has generally provided a stable flow of new and refinanced multifamily residential and commercial real estate loan originations. In order to address the higher credit risk associated with multifamily residential and commercial real estate lending, the Bank has developed underwriting standards that it believes are reliable in order to maintain consistent credit quality for its loans.

The Bank also strives to provide a stable source of liquidity and earnings through the purchase of investment grade securities; seeks to maintain the asset quality of its loans and other investments; and uses appropriate portfolio and asset/liability management techniques in an effort to manage the effects of interest rate volatility on its profitability and capital. In 2004, the Company experienced modest growth in assets, primarily in MBS available for sale and commercial real estate loans secured by mixed-use properties. Increases in real estate loan origination levels were driven by the continuation of low interest rates during 2003 and 2004, which were partially offset by an increase in principal repayments on loans and MBS resulting from increased customer refinance activities. Deposits grew in 2004 due to the success of various sales and marketing activities during the period, primarily for CDs and money market accounts.

Prior to January 2004, the overall low interest rate environment resulted in a greater decline in the average cost of interest bearing liabilities than the average yield on interest earning assets. During the year ended December 31, 2004, the continued low interest rate environment created the opposite effect, resulting in a greater decline in the average yield on interest earning assets than in the average cost of interest bearing liabilities. Additionally, both an increase in short-term interest rates during the latter part of the year ended December 31, 2004 and the 7.0% coupon trust preferred borrowing issued by the Company in March 2004 added to interest expense on borrowed funds during the year. As a result, both the net interest spread and the net interest margin, which had increased during most of 2002 and 2003, declined during the year ended December 31, 2004 when compared to the year ended December 31, 2003. Also contributing to the decline in net income during the year ended December 31, 2004 compared to the year ended December 31, 2003 was a $5.6 million decline in multifamily residential and commercial real estate loan prepayment fees.

The tightening of monetary policy by the FOMC during the second half of 2004 resulted in a narrowing spread between short and long-term interest rates, which negatively impacted the Company's earnings during 2004. Absent any future change in interest rates, the narrowing of spreads between long and short-term interest rates is currently expected to negatively impact the Company's earnings during the years ending December 31, 2005, 2006 and 2007, since the Company will experience a greater level of re-pricing of interest-bearing liabilities compared to interest-earning assets. (See "Item 7A. Quantitative and Qualitative Disclosures About Market Risk - Interest Sensitivity GAP"). Management believes that by funding a large portion of its long-term investments with core deposits, which have historically been less sensitive to interest rate fluctuations than wholesale funding, the negative impact upon the Company's future earnings that would otherwise result from the narrowing spread between short and long-term interest rates, could be partially mitigated. In addition, in the event that the spread between long and short-term interest rates were to increase during the years ending December 31, 2005 and 2006, the Company has attempted to position itself to benefit from this occurrence by: (i) not fully deploying its strong capital position during the low interest rate environments of 2003 and 2004; and (ii) maintaining a short-duration securities portfolio that is expected to provide a steady source of liquidity during 2005 and 2006.

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Critical Accounting Policies

Various elements of the Company’s accounting policies, by their nature, are inherently subject to estimation techniques, valuation assumptions and other subjective assessments. The Company’s policies with respect to the methodologies it uses to determine the allowance for loan losses, the valuation of MSR and asset impairment judgments (including the valuation of goodwill and intangible assets and other than temporary declines in the value of securities), and loan income recognition are the Company’s most critical accounting policies because they are important to the presentation of the Company’s financial condition and results of operations, involve a high degree of complexity and require management to make difficult and subjective judgments which often require assumptions or estimates about highly uncertain matters. The use of different judgments, assumptions and estimates could result in material variations in the Company's results of operations or financial condition.

The following is a description of the Company's critical accounting policies and an explanation of the methods and assumptions underlying their application. These policies and their application are reviewed periodically and at least annually with the Audit Committees of the Holding Company and the Bank.

Allowance for Loan Losses. The loan loss reserve methodology consists of several key components, including a review of the two elements of the Bank's loan portfolio, classified loans (i.e., non-performing loans, troubled-debt restructuring and impaired loans under Amended SFAS 114) and performing loans. At December 31, 2004, the majority of the allowance for loan losses was allocated to performing loans, which represented the overwhelming majority of the Bank's loan portfolio.

Performing loans are reviewed at least quarterly based upon the premise that there are losses inherent within the loan portfolio that have not been identified as of the date for which the review has been performed. As a result, the Bank calculates an allowance for loan losses related to its performing loans by deriving an expected loan loss percentage and applying it to its performing loans. In deriving the expected loan loss percentage, the Bank considers the following criteria: the Bank's historical loss experience; the age and payment history of the loans (commonly referred to as their "seasoned quality"); the type of loan (i.e., one- to four-family, multifamily residential, commercial real estate, cooperative apartment, construction or consumer); the underwriting history of the loan (i.e., whether it was underwritten by the Bank or a predecessor institution acquired subsequently by the Bank and, therefore, originally subjected to different underwriting criteria); both the current condition and recent history of the overall local real estate market (in order to determine the accuracy of utilizing recent historical charge-off data to derive the expected loan loss percentages); the level of, and trend in, non-performing loans; the level and composition of new loan activity; and the existence of geographic loan concentrations (as the overwhelming majority of the Bank's loans are secured by real estate properties located in the New York City metropolitan area) or specific industry conditions within the portfolio segments. Since these criteria affect the expected loan loss percentages that are applied to performing loans, changes in any one of them will effect the amount of the allowance and the provision for loan losses. The Bank applied the process of determining the allowance for loan losses consistently throughout the years ended December 31, 2004 and 2003.

Loans classified as Special Mention, Substandard or Doubtful are reviewed individually on a quarterly basis by the Loan Loss Reserve Committee to determine if specific reserves are appropriate. Under the guidance established by Amended SFAS 114, loans determined to be impaired (generally, non-performing and troubled-debt restructured multifamily residential and commercial real estate loans and non-performing one- to four-family loans in excess of $333,700) are evaluated in order to establish whether the estimated value of the underlying collateral determined based upon an independent appraisal is sufficient to satisfy the existing debt. For each loan that the Bank determines to be impaired, impairment is measured by the amount that the carrying balance of the loan, including all accrued interest, exceeds the estimate of its fair value. A specific reserve is established on all impaired loans to the extent of impairment and comprises a portion of the allowance for loan losses. The Loan Loss Reserve Committee's determination of the estimated fair value of the underlying collateral is subject to assumptions and judgments made by the committee. A specific valuation allowance could differ materially as a result of changes in these assumptions and judgments.

The recorded investment in loans deemed impaired was approximately $830,000, consisting of two loans, at December 31, 2004. There were no loans considered impaired by the Bank under Amended SFAS 114 as of December 31, 2003. The largest single impaired loan at December 31, 2004, which possessed an outstanding principal balance of $446,000, was removed from impaired status in January 2005. The average total balance of impaired loans was approximately $608,000 during the year ended December 31, 2004, $314,000 during the year ended December 31, 2003, $684,000 during the six months ended December 31, 2002, and $3.2 million during the year ended June 30, 2002. The increase in the average balance of impaired loans during the year ended December 31, 2004 resulted primarily from the addition of the two impaired loans totaling $830,000 during the period. The decrease in both the current and average balance of impaired loans during the years ended December 31, 2003 and 2002 resulted from the repayment in June 2002 of an impaired $2.9 million troubled-debt restructured loan. At December 31, 2004, reserves totaling $83,000 were allocated within the allowance for loan losses for impaired loans. At December 31, 2003, there was no reserve allocated within the allowance for loan losses for impaired loans.

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If approved by the Board of Directors, the Bank will additionally increase its valuation allowance in an amount recommended by the Loan Loss Reserve Committee to appropriately reflect the anticipated loss from any other loss classification category. Typically, the Bank's policy is to charge-off immediately all balances classified ''Loss'' and all charge-offs are recorded as a reduction of the allowance for loan losses. The Bank applied this process consistently throughout the years ended December 31, 2004 and 2003.

Although management believes that the Bank maintains its allowance for loan losses at appropriate levels, adjustments may be necessary if economic, market or other conditions in the future differ from the current operating environment. Although the Bank believes it utilizes the most reliable information available, the level of the allowance for loan losses remains an estimate subject to significant judgment. These evaluations are inherently subjective because, even though they are based upon objective data, it is management's interpretation of that data that determines the amount of the appropriate allowance. Therefore, the Company periodically reviews the actual performance and charge-off of its portfolio and compares them to the previously determined allowance coverage percentages. In doing so, the Company evaluates the impact that the previously mentioned variables may have on the portfolio to determine whether or not changes should be made to the assumptions and analyses.

In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses and the level of loans both in, and pending, foreclosure. Based on their judgments about information available to them at the time of their examination, the regulators may require the Bank to recognize adjustments to the allowance.

Valuation of MSR. The estimated origination and servicing costs of mortgage loans sold in which servicing rights are retained is allocated between the loans and the servicing rights based on their estimated fair values at the time of the loan sale. Servicing assets are carried at the lower of cost or fair value and are amortized in proportion to, and over the period of, net servicing income. The estimated fair value of loan servicing assets is determined by calculating the present value of estimated future net servicing cash flows, using assumptions of prepayments, defaults, servicing costs and discount rates that the Company believes market participants would use for similar assets. Capitalized loan servicing assets are stratified based on predominant risk characteristics of the underlying loans for the purpose of evaluating impairment. A valuation allowance is then established in the event the recorded value of an individual stratum exceeds fair value. All estimates and assumptions utilized in the valuation of the MSR are derived based upon actual historical results for either the Bank or its industry peers.

The fair value of MSR is sensitive to changes in assumptions. Fluctuations in prepayment speed assumptions have the most significant impact on the fair value of MSR. In the event that loan prepayment activities increase due to increased loan refinancing, the fair value of MSR would likely decline. In the event that loan prepayment activities decrease due to a decline in loan refinancing, the fair value of MSR would likely increase. Any measurement of MSR is limited by the existing conditions and assumptions utilized at a particular point in time, and would not necessarily be appropriate if applied at a different point in time.

Asset Impairment Adjustments. Certain of the Company’s assets are carried in its consolidated statements of financial condition at fair value or at the lower of cost or fair value. Management periodically performs analyses to test for impairment of these assets. Valuation allowances are established when necessary to recognize impairment of such assets. In addition to the impairment analyses related to loans and MSR discussed above, two other significant impairment analyses relate to the value of goodwill and other than temporary declines in the value of the Company's securities.

Goodwill is accounted for in accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," which was adopted on July 1, 2001. SFAS No. 142 eliminated amortization of goodwill and instead requires performance of an annual impairment test at the reporting unit level. As of both July 1, 2001 and December 31, 2004, the Company had goodwill totaling $55.6 million. Prior to adoption of SFAS No. 142, annual goodwill amortization expense totaled $4.6 million.

The Company identified a single reporting unit for purposes of its goodwill impairment testing. The impairment test is therefore performed on a consolidated basis and compares the Company's market capitalization (reporting unit fair value) to its outstanding equity (reporting unit carrying value). In accordance with the recommended provisions of SFAS No. 142, the Company utilizes its closing stock price as reported on the Nasdaq National Market on the date of the impairment test in order to compute market capitalization. The Company has designated the last day of its fiscal year as the annual date for impairment testing. The Company performed its annual impairment test as of December 31, 2004 and concluded that no potential impairment of goodwill existed since the fair value of the Company's reporting unit exceeded its carrying value. No events have occurred, nor circumstances changed, subsequent to December 31, 2004 that would reduce the fair value of the Company's reporting unit below its carrying value. Such events or changes in circumstances would require an immediate impairment test to be performed in accordance with SFAS No. 142. Differences in the identification of reporting units and the use of valuation techniques can result in materially different evaluations of impairment.

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Debt and equity securities that have readily determinable fair values are carried at fair value unless they are held to maturity. Estimated fair values for securities are based on published or securities dealers' market values. Debt securities are classified as held to maturity and carried at amortized cost only if the Company has a positive intent and ability to hold them to maturity. If not classified as held to maturity, such securities are classified as securities available for sale or as trading securities. Unrealized holding gains or losses on securities available for sale are excluded from net income and reported net of income taxes as other comprehensive income or loss. The Company conducts a periodic review and evaluation of its securities portfolio taking into account the severity, duration and intent with regard to the securities in order to determine if the decline in market value of any security below its amortized cost basis is other than temporary. If such decline is deemed other than temporary, the carrying amount of the security is adjusted through a valuation allowance. For the periods ended December 31, 2004 and 2003, there were no other-than temporary impairments in the securities portfolio.

Loan Income Recognition. Interest income on loans is recorded using the level yield method. Loan origination fees and certain direct loan origination costs are deferred and amortized as a yield adjustment over the contractual loan terms. Accrual of interest is discontinued when its receipt is in doubt, which typically occurs when a loan becomes 90 days past due as to principal or interest. Any interest accrued to income in the year when interest accruals are discontinued is reversed. Payments on nonaccrual loans are generally applied to principal. Management may elect to continue the accrual of interest when a loan is in the process of collection and the estimated fair value of the collateral is sufficient to satisfy the principal balance and accrued interest. Loans are returned to accrual status once the doubt concerning collectibility has been removed and the borrower has demonstrated performance in accordance with the loan terms and conditions.

Liquidity and Capital Resources

The Bank's primary sources of funding for its lending and investment activities include deposits, repayments of loans and MBS, investment security maturities and redemptions, Advances from the FHLBNY, and borrowing in the form of REPOS entered into with various financial institutions, including the FHLBNY. The Bank also sells selected multifamily residential and commercial real estate loans to FNMA, and long-term, one- to four-family residential real estate loans to either FNMA or SONYMA.

The Bank gathers deposits in direct competition with other savings banks, commercial banks and brokerage firms, many among the largest in the nation. In addition, it must also compete for deposit monies against the stock markets and mutual funds, especially during periods of strong performance in the equity markets. The Bank's deposit flows are affected primarily by the pricing and marketing of its deposit products compared to its competitors, as well as the market performance of depositor investment alternatives such as the U.S. bond or equity markets. To the extent that the Bank is responsive to general increases or declines in interest rates, its deposit flows should not be materially impacted. A favorable performance by the equity markets, however, could adversely impact the Company’s deposit flows.

Deposits increased $168.4 million during the year ended December 31, 2004 and $114.5 million during the year ended December 31, 2003. The increase in deposits during each of these periods reflected marketing efforts that helped generate additional deposit balances in CDs and core deposit accounts. Successful CD promotional campaigns implemented during the year ended December 31, 2004 resulted in CD growth totaling $159.6 million. Money market accounts realized the greatest growth during the year ended December 31, 2003, increasing $128.6 million.

During the year ended December 31, 2004, principal re-payments received on real estate loans totaled $540.8 million and on MBS totaled $206.5 million. During the year ended December 31, 2003, principal payments received on real estate loans totaled $972.6 million and on MBS totaled $364.2 million. The decreases during 2004 resulted from a reduction in customer refinance activities associated with mortgage-backed assets. The majority of this decline resulted from the significant number of loans that were satisfied or refinanced during 2003 as a result of historically low interest rates, which substantially reduced the level of loans likely to prepay or refinance during 2004.

Maturities and calls of investment securities totaled $5.1 million during the year ended December 31, 2004 and $67.9 million during the year ended December 31, 2003, providing additional liquidity to the Company during these periods. During the period January 2002 through December 2003, the Company experienced calls on a large portion of its investment securities as a result of the low level of interest rates that prevailed during that period. The balance of callable securities during 2004 was greatly diminished due to the extensive call activity during 2003.

During the year ended December 31, 2004, the Company received proceeds of $127.1 million from the sale of MBS and $8.0 million from the sale of available for sale investment securities. During the year ended December 31, 2003, the Company received proceeds of $55.9 million from the sale of MBS. These sales were conducted for various business purposes, including, but not limited to, added liquidity and asset/liability management.

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The Bank implemented a program in December 2002 to originate and sell multifamily residential mortgage loans in the secondary market to FNMA while retaining servicing. The Bank underwrites these loans using its customary underwriting standards, funds the loans, and sells them to FNMA at agreed upon pricing. Typically, the Bank seeks to sell loans to FNMA with terms to maturity or repricing in excess of seven years from the origination date, since the Bank does not desire to hold such loans in its portfolio due to the heightened interest rate risk that they present. Under the terms of the sales program, the Bank retains a portion of the associated credit risk. Once established, such amount continues to increase as long as the Bank continues to sell loans to FNMA under the program. The Bank retains this level of exposure until the portfolio of loans sold to FNMA is paid in their entirety or the Bank funds claims by FNMA for the maximum loss exposure. During the years ended December 31, 2004 and 2003, respectively, the Bank sold $164.9 million and $87.1 million of loans to FNMA.

During the year ended December 31, 2004, REPOS increased $192.9 million compared to a net decline of $82.9 million during the year ended December 31, 2003. During the year ended December 31, 2004, management elected to utilize REPOS as the primary source of funding for growth in MBS. During the year ended December 31, 2004, the Company added REPOS with an average maturity of 1.9 years and a weighted average interest cost of 2.29% in order to fund securities purchases and/or loan originations.

During the year ended December 31, 2004, FHLBNY Advances declined $27.5 million, as management utilized REPOS and deposits as the primary sources for funding asset growth. During the year ended December 31, 2003, FHLBNY Advances decreased $21.0 million, as management elected to prepay and not replace $30.0 million of FHLBNY Advances. The average term to maturity on FHLBNY Advances that were not replaced during the year ended December 31, 2004 was 1.9 years.

In March 2004, the Company received net proceeds of $72.2 million from the issuance of debt in the form of Trust Preferred securities. These borrowings bear interest at a rate of 7.0% for 30 years and are callable at any time after 5 years. During the year ended December 31, 2004, the Company utilized a portion of the funds received from this issuance to repurchase its common stock, and invested the remaining balance in medium-term securities.

The Bank's primary uses of liquidity and capital resources are the origination of real estate loans and the purchase of mortgage-backed and other securities. During the years ended December 31, 2004 and 2003, real estate loan originations totaled $1.01 billion and $1.10 billion, respectively. A continued environment of low long-term interest rates during the period January 2003 through December 2004 contributed to the strong level of real estate loan originations during the years ended December 31, 2004 and 2003. Purchases of investment securities and MBS, which were $531.0 million during the year ended December 31, 2003, totaled $398.2 million for the year ended December 31, 2004. The heightened purchase activity during the year ended December 31, 2003 reflected both the replenishment of the MBS portfolio in response to high levels of amortization during the period and the acquisition of a greater volume of short-term securities earmarked for re-investment in real estate loans.

During the year ended December 31, 2004, the Holding Company repurchased 1,987,529 shares of its common stock into treasury. All shares were recorded at the acquisition cost, which totaled $38.2 million during the year. As of December 31, 2004, up to 1,417,556 shares remained available for purchase under authorized share purchase programs. Based upon the closing price of its common stock of $17.91 per share as of December 31, 2004, the Holding Company would utilize $25.4 million in order to purchase all of the remaining authorized shares.

The levels of the Bank's short-term liquid assets are dependent on its operating, financing and investing activities during any given period. The Bank monitors its liquidity position on a daily basis. In the event that the Bank should require funds beyond its ability to generate them internally, an additional source of funds is available through use of its borrowing line at the FHLBNY. At December 31, 2004, the Bank had an additional potential borrowing capacity of $507.0 million available should it purchase the minimum required level of FHLBNY common stock (i.e., 1/20^th of any new FHLBNY borrowings).

The Bank is subject to minimum regulatory capital requirements imposed by the OTS, which, as a general matter, are based on the amount and composition of an institution's assets. At December 31, 2004, the Bank was in compliance with all applicable regulatory capital requirements, and was considered "well-capitalized" for all regulatory purposes.

The Company's ratio of stockholders' equity to total assets was 8.34% and 9.55%, respectively, ay December 31, 2004 and 2003.

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Contractual Obligations

The Bank has outstanding at any time, a significant number of borrowings in the form of FHLBNY Advances or REPOS. The Holding Company also has an outstanding $25.0 million non-callable subordinated note payable due to mature in 2010, and $72.2 million of trust preferred borrowings from third parties due to mature in April 2034, which is callable at any time after April 2009.

The Bank is obligated under leases for certain rental payments due on its branches and equipment. A summary of borrowings and lease obligations at December 31, 2004 is as follows:

Contractual Obligations	Less than One Year	One Year to Three Years	Over Three Years to Five Years	Over Five Years	Total at December 31, 2004
	(Dollars in Thousands)
CD's	734,844	$190,354	$34,741	$12	$959,951
Borrowings (including subordinated note payable)	$245,000	$230,000	$90,584	$243,665	$809,249
Operating lease obligations	$1,004	$2,023	$1,653	$3,269	$7,949

Off-Balance Sheet Arrangements

As part of its business of originating loans, the Bank has outstanding commitments to extend credit to third parties, which are subject to strict credit control assessments. Since many of these loan commitments expire without being funded in whole or part, the contract amounts are not estimates of future cash flows.

	Less than One Year	One Year to Three Years	Over Three Years to Five Years	Over Five Years	Total at December 31, 2004
	(Dollars in Thousands)
Credit Commitments:
Available lines of credit	$50,868	$-	$-	$-	$50,868
Other loan commitments	57,407	-	-	-	57,407
Total Credit Commitments	$108,275	$-	$-	$-	$108,275

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Analysis of Net Interest Income

The Company's profitability, like that of most financial institutions, is dependent to a significant extent upon net interest income, which is the difference between interest income on interest-earnings assets, such as loans and securities, and interest expense on interest-bearing liabilities, such as deposits or borrowings. Net interest income depends on the relative amounts of interest-earning assets and interest-bearing liabilities, and the interest rate earned or paid on them. The following tables set forth certain information relating to the Company's consolidated statements of operations for the years ended December 31, 2004 and 2003, the unaudited year ended December 31, 2002, the six months ended December 31, 2002 and the unaudited six months ended December 31, 2001, and reflect the average yield on interest-earning assets and average cost of interest-bearing liabilities for the periods indicated. Such yields and costs are derived by dividing interest income or expense by the average balance of interest-earning assets or interest-bearing liabilities, respectively, for the periods indicated. Average balances are derived from daily balances. The yields and costs include fees that are considered adjustments to yields. All significant changes in average balances and income or expense are discussed in the comparison of operating results commencing on page 48.

	For the Year Ended December 31,
	2004			2003
			Average			Average
	Average		Yield/	Average		Yield/
	Balance	Interest	Cost	Balance	Interest	Cost
	(Dollars In Thousands)
Assets:
Interest-earning assets:
Real estate loans (1)	$2,393,862	$138,720	5.79%	$2,189,747	$145,704	6.65%
Other loans	3,325	235	7.07	3,609	273	7.56
Investment securities (2)	47,384	1,745	3.68	61,352	2,361	3.85
Mortgage-backed securities	618,471	21,091	3.41	511,848	17,984	3.51
Other	129,570	1,830	1.41	148,908	2,793	1.88
Total interest-earning assets	3,192,612	$163,621	5.12%	2,915,464	$169,115	5.80%
Non-interest earning assets	159,580			148,747
Total assets	$3,352,192			$3,064,211

Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
NOW, Super Now accounts	$41,535	$410	0.99%	$33,055	$344	1.04%
Money Market accounts	806,582	11,745	1.46	682,277	10,740	1.57
Savings accounts	367,746	1,938	0.53	368,451	2,405	0.65
Certificates of deposit	939,682	23,780	2.53	872,568	24,732	2.83
Borrowed Funds	726,083	29,903	4.12	656,187	32,842	5.00
Total interest-bearing liabilities	2,881,628	$67,776	2.35%	2,612,538	$71,063	2.72%
Checking accounts	93,845			89,389
Other non-interest-bearing liabilities	100,926			89,029
Total liabilities	3,076,399			2,790,956
Stockholders' equity	275,793			273,255
Total liabilities and stockholders' equity	$3,3,52,192			$3,064,211
Net interest spread (3)			2.77%			3.08%
Net interest income/ interest margin (4)		$95,845	3.00%		$98,052	3.36%
Net interest-earning assets	$310,984			$302,926
Ratio of interest-earning assets to interest-bearing liabilities			110.79%			111.60%

(1) In computing the average balance of loans, non-performing loans have been included. Interest income includes loan servicing fees as defined under SFAS No. 91, Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases—an amendment of FASB Statements No. 13, 60, and 65 and a rescission of FASB Statement No. 17 ("SFAS 91").

(2) Includes interest-bearing deposits in other banks.

(3) Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4) The interest margin represents net interest income as a percentage of average interest-earning assets.

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	For the Year Ended December 31,
	2003			2002 (Unaudited)
			Average			Average
	Average		Yield/	Average		Yield/
	Balance	Interest	Cost	Balance	Interest	Cost
	(Dollars In Thousands)
Assets:
Interest-earning assets:
Real estate loans (1)	$2,189,747	$145,704	6.65%	$2,124,952	$156,422	7.36%
Other loans	3,609	273	7.56	3,345	273	8.16
Investment securities (2)	61,352	2,361	3.85	118,316	4,909	4.15
Mortgage-backed securities	511,848	17,984	3.51	332,932	16,795	5.04
Other	148,908	2,793	1.88	128,820	3,515	2.73
Total interest-earning assets	2,915,464	$169,115	5.80%	2,708,365	$181,914	6.72%
Non-interest earning assets	148,747			139,042
Total assets	$3,064,211			$2,847,407

Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
NOW, Super Now accounts	$33,055	$344	1.04%	$29,767	$356	1.20%
Money Market accounts	682,277	10,740	1.57	535,820	11,841	2.21
Savings accounts	368,451	2,405	0.65	364,390	4,260	1.17
Certificates of deposit	872,568	24,732	2.83	759,976	27,678	3.64
Borrowed Funds	656,187	32,842	5.00	735,972	47,655	6.48
Total interest-bearing liabilities	2,612,538	$71,063	2.72%	2,425,925	$91,790	3.78%
Checking accounts	89,389			79,392
Other non-interest-bearing liabilities	89,029			89,293
Total liabilities	2,790,956			2,594,610
Stockholders' equity	273,255			252,797
Total liabilities and stockholders' equity	$3,064,211			$2,847,407

Net interest spread (3)			3.08%			2.93%
Net interest income/ interest margin (4)		$98,052	3.36%		$90,124	3.33%
Net interest-earning assets	$302,926			$282,440
Ratio of interest-earning assets to interest-bearing liabilities			111.60%			111.64%

(1) In computing the average balance of loans, non-performing loans have been included. Interest income includes loan servicing fees as defined under SFAS No. 91.

(2) Includes interest-bearing deposits in other banks.

(3) Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4) The interest margin represents net interest income as a percentage of average interest-earning assets.

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	For the Six Months Ended December 31,
	2002			2001 (Unaudited)
			Average			Average
	Average		Yield/	Average		Yield/
	Balance	Interest	Cost	Balance	Interest	Cost
	(Dollars In Thousands)
Assets:
Interest-earning assets:
Real Estate Loans (1)	$2,166,062	$78,275	7.23%	$1,995,364	$75,823	7.60%
Other loans	3,380	141	8.34	3,330	179	10.75
Investment securities (2)	124,456	2,455	3.95	103,405	2,773	5.36
Mortgage-backed securities	344,656	7,895	4.58	407,056	12,149	5.97
Other	126,160	1,703	2.70	108,612	2,212	4.07
Total interest-earning assets	2,764,714	$90,469	6.54%	2,617,767	$93,136	7.12%
Non-interest earning assets	138,461			130,866
Total assets	$2,903,175			$2,748,633

Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
NOW, Super Now accounts	$31,085	$189	1.21%	$26,606	$157	1.17%
Money Market accounts	584,743	6,016	2.04	369,822	6,637	3.56
Savings accounts	366,260	1,843	1.00	349,993	3,236	1.83
Certificates of deposit	794,116	13,583	3.39	698,136	16,474	4.68
Borrowed Funds	694,973	21,647	6.18	922,705	27,228	5.85
Total interest-bearing liabilities	2,471,177	$43,278	3.47%	2,367,262	$53,732	4.50%
Checking accounts	82,783			69,333
Other non-interest-bearing liabilities	90,979			78,014
Total liabilities	2,644,939			2,514,609
Stockholders' equity	258,236			234,024
Total liabilities and stockholders' equity	$2,903,175			$2,748,633
Net interest spread (3)			3.07%			2.61%
Net interest income/ interest margin (4)		$47,191	3.41%		$39,404	3.01%


Net interest-earning assets	$293,537			$250,505
Ratio of interest-earning assets to interest-bearing liabilities			111.88%			110.58%

(1) In computing the average balance of loans, non-performing loans have been included. Interest income includes loan servicing fees as defined under SFAS No. 91.

(2) Includes interest-bearing deposits in other banks.

(3) Net interest spread represents the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

(4) The interest margin represents net interest income as a percentage of average interest-earning assets.

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Rate/Volume Analysis. The following table represents the extent to which variations in interest rates and the volume of interest-earning assets and interest-bearing liabilities have affected interest income and interest expense during the periods indicated. Information is provided in each category with respect to: (i) variances attributable to fluctuations in volume (change in volume multiplied by prior rate), (ii) variances attributable to rate (changes in rate multiplied by prior volume), and (iii) the net change. Variances attributable to the combined impact of volume and rate have been allocated proportionately to the changes due to the volume and the changes due to rate.

	Year Ended December 31, 2004 Compared to Year Ended December 31, 2003 Increase/ (Decrease) Due to			Year Ended December 31, 2003 Compared to Year Ended December 31, 2002 Increase/ (Decrease) Due to
	Volume	Rate	Total	Volume	Rate	Total
	(Dollars In Thousands)
Interest-earning assets:
Real Estate Loans	$12,715	$(19,699)	$(6,984)	$4,570	$(15,288)	$(10,718)
Other loans	(20)	(18)	(38)	21	(21)	-
Investment securities	(525)	(91)	(616)	(2,278)	(270)	(2,548)
Mortgage-backed securities	3,683	(576)	3,107	7,655	(6,466)	1,189
Other	(313)	(650)	(963)	461	(1,183)	(722)
Total	$15,540	$(21,034)	$(5,494)	$10,429	$(23,228)	$(12,799)
Interest-bearing liabilities:
NOW and Super Now accounts	$86	$(20)	$66	$38	$(50)	$(12)
Money market accounts	1,857	(852)	1,005	2,783	(3,884)	(1,101)
Savings accounts	(15)	(452)	(467)	44	(1,899)	(1,855)
Certificates of deposit	1,784	(2,736)	(952)	3,656	(6,602)	(2,946)
Borrowed funds	3,167	(6,106)	(2,939)	(4,544)	(10,269)	(14,813)
Total	6,879	(10,166)	(3,287)	1,977	(22,704)	(20,727)
Net change in net interest income	$8,661	$(10,868)	$(2,207)	$8,452	$(524)	$7,928

	Six Months Ended
	December 31, 2002
	Compared to
	Six Months Ended
	December 31, 2001
	Increase/ (Decrease)
	Due to
	Volume	Rate	Total

Interest-earning assets:
Real Estate Loans	$6,315	$(3,863)	$2,452
Other loans	3	(41)	(38)
Investment securities	487	(805)	(318)
Mortgage-backed securities	(1,644)	(2,610)	(4,254)
Other	296	(805)	(509)
Total	$5,457	$(8,124)	$(2,667)
Interest-bearing liabilities:
NOW and Super Now accounts	$26	$6	$32
Money market accounts	3,035	(3,656)	(621)
Savings accounts	111	(1,504)	(1,393)
Certificates of deposit	1,957	(4,848)	(2,891)
Borrowed funds	(6,918)	1,337	(5,581)
Total	(1,789)	(8,665)	(10,454)
Net change in net interest income	$7,246	$541	$7,787

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Comparison of Financial Condition at December 31, 2004 and December 31, 2003

Assets. Assets totaled $3.38 billion at December 31, 2004, an increase of $405.6 million from total assets of $2.97 billion at December 31, 2003. The growth in assets occurred primarily in MBS available for sale and real estate loans, which increased $57.5 million and $306.9 million, respectively. During the year ended December 31, 2004, the Bank purchased $398.2 million of MBS available for sale. These purchases were intended to provide additional yield over other short-term investments, while offering liquidity to the Bank in future quarters when it may desire to deploy funds into higher yielding investments. Partially offsetting these purchases were principal payments received of $206.2 million and net sales proceeds of $127.1 million on MBS available for sale during the year ended December 31, 2004. During the year ended December 31, 2004, the Bank experienced a reduction in the historically high levels of principal repayments on MBS available for sale that occurred during 2003. This decline reflected a reduction in mortgage refinancing activity during the period as a result of the historically high levels of prepayments during 2003 that significantly reduced the total population of mortgage-backed assets likely to refinance in future years.

Real estate loans (including loans held for sale) increased $306.9 million during the year ended December 31, 2004. During the year ended December 31, 2004, real estate loan originations totaled $1.01 billion, of which $962.5 million were multifamily residential and commercial real estate loans. Real estate loan origination levels were driven by the continuation of the low interest rate environment during the period January through December 2004. Offsetting the growth in real estate loans from originations were principal repayments totaling $540.8 million during the year ended December 31, 2004. Principal repayments, which include both regular amortization and prepayments, totaled $972.6 million during the year ended December 31, 2003. The decline reflected a reduction in overall loan refinancing activity during the period as the record level of loan refinancing during 2003 significantly reduced the total population of loans likely to refinance in future years.

Investment securities available for sale increased $17.7 million during the year ended December 31, 2004, due primarily to purchases of $30.1 million during the period that were partially offset by maturities and sales totaling $13.0 million.

Liabilities. Total liabilities increased $407.8 million during the year ended December 31, 2004. Deposits grew $168.4 million due to the success of various sales and marketing activities during the period, with virtually all of this growth experienced in CDs. In addition, escrow and other deposits increased $8.3 million during the period due to increased funding for real estate taxes.

During the year ended December 31, 2004, REPOS increased $192.9 million and FHLBNY Advances decreased $27.5 million. (See "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources").

In March 2004, the Company completed an offering of trust preferred securities in an aggregate amount of $72.2 million. The trust preferred securities, which bear a fixed interest rate of 7.0%, mature on April 14, 2034, and are callable without penalty at any time on or after April 15, 2009. These borrowings were undertaken in order to obtain funding for general business activities including, but not limited to, repurchases of common stock and payment of cash dividends.

Stockholders' Equity. Stockholders' equity decreased $2.2 million during the year ended December 31, 2004, due to the repurchase of $38.2 million of treasury stock, a net decrease in accumulated other comprehensive income or loss of $2.4 million, and the payment of cash dividends of $19.8 million during the period. These reductions in stockholders' equity were partially offset by net income of $46.2 million, an increase to stockholders' equity of $9.4 million related to the issuance of common stock for the exercise of stock options and tax benefits associated with both the 1996 and 2001 Stock Option Plans for Outside Directors, Officers and Employees of Dime Community Bancshares, Inc. ("Stock Option Plans") and the RRP, and an increase to equity of $2.6 million related to amortization of the Employee Stock Ownership Plan of Dime Community Bancshares, Inc. and Certain Affiliates ("ESOP") and RRP stock benefit plans. Both the ESOP and RRP have investments in the Holding Company's common stock that are recorded as reductions in stockholders' equity ("Contra Equity Balances"). As compensation expense is recognized on the ESOP and RRP, the Contra Equity Balances are reduced, resulting in an increase to their respective equity balances. This increase to equity offsets the decline in the Company's retained earnings related to the periodic ESOP and RRP expenses that are recorded. The stockholders' equity component of other comprehensive income decreased $2.4 million during the year ended December 31, 2004 as a result of a decline in the net unrealized gain on investment and mortgage-backed securities available for sale that was attributable to increases in short-term interest rates during 2004.

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Comparison of Financial Condition at December 31, 2003 and December 31, 2002

Assets. Assets totaled $2.97 billion at December 31, 2003, an increase of $25.3 million from total assets of $2.95 billion at December 31, 2002. The growth in assets was experienced primarily in MBS available for sale and real estate loans, which increased $101.3 million and $25.8 million, respectively. During the year ended December 31, 2003, the Bank purchased $531.0 million of MBS available for sale. These purchases were intended to provide both additional yield over other short-term investments as well as liquidity to the Bank in future quarters when it may desire to deploy funds into higher yielding investments. Partially offsetting these purchases were MBS principal repayments of $364.2 million and sales of $57.6 million during the year ended December 31, 2003. During the year ended December 31, 2003, the Bank experienced above average levels of principal repayments on MBS available for sale. These repayments were driven by above average mortgage refinancing activity during the period, which resulted from the continued low level of interest rates during the period January through December 2003.

In addition to growth in MBS available for sale, real estate loans increased $25.8 million during the year ended December 31, 2003. The majority of this growth was achieved in mixed use properties that are classified as commercial real estate loans. During the period, total real estate loan originations totaled $1.10 billion, of which $1.05 billion were multifamily residential and commercial real estate loans. The majority of the Bank's multifamily originations were retained in its portfolio. Real estate loan origination levels were driven by the continuation of the low interest rate environment during the period January through December 2003. Offsetting the growth in real estate loan originations were increases in principal prepayment levels during the year ended December 31, 2003 attributable to the low level of long-term interest rates during 2003. Principal repayments, which include both regular amortization and prepayments, totaled $972.6 million during the year ended December 31, 2003 as compared to $520.0 million during the year ended December 31, 2002.

Investment securities available for sale declined $67.5 million during the year ended December 31, 2003, due to maturities and calls of these securities during the period resulting from the continued low interest rate environment. Purchases of investment securities available for sale were immaterial during the year ended December 31, 2003.

Liabilities. Total liabilities increased $7.1 million during the year ended December 31, 2003. Deposits grew $114.5 million due to the success of various sales and marketing activities during the period, primarily for money market accounts. During the year ended December 31, 2003, successful promotional campaigns resulted in growth in money markets of $128.6 million, which was partially offset by a decline of $29.8 million in CDs, as higher-rate promotional CDs that were maturing were not renewed during the year.

During the year ended December 31, 2003, REPOS declined $82.9 million, while FHLBNY Advances declined $21.0 million. (See "Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources").

Stockholders' Equity. Stockholders' equity increased $18.2 million during the year ended December 31, 2003, due to the addition of net income of $51.3 million, the increase to equity of $11.7 million related to the issuance of stock for the exercise of stock options and tax benefits associated with the Stock Option Plans and the RRP, and the increase to equity of $2.6 million related to the amortization of the ESOP and RRP. Both the ESOP and RRP have Contra Equity Balances. As compensation expense is recognized on the ESOP and RRP, the Contra Equity Balances are reduced, resulting in an increase to their respective equity balances. This increase to equity offsets the decline in the Company's retained earnings related to the periodic ESOP and RRP expenses that are recorded.

All of the aforementioned increases to equity during the year ended December 31, 2003 were substantially offset by treasury stock purchases of $26.8 million, cash dividends of $15.8 million paid to shareholders and purchases of stock by the Benefit Maintenance Plan of Dime Community Bancshares, Inc. ("BMP") and RRP of $1.8 million during the same period, and a decline in the unrealized gain or loss on available for sale securities component of other comprehensive income of $2.9 million reflecting the general low level of interest rates.

Comparison of the Operating Results for the Years Ended December 31, 2004 and 2003

General. Net income was $46.2 million during the year ended December 31, 2004, a decrease of $5.1 million from net income of $51.3 million during the year ended December 31, 2003. During this comparative period, net interest income decreased $2.2 million, non-interest income decreased $4.6 million and non-interest expense increased $1.6 million, resulting in a decline in pre-tax income of $8.4 million. Income tax expense decreased $3.4 million as a result of the reduced pre-tax income.

Net Interest Income. Net interest income for the year ended December 31, 2004 decreased $2.2 million to $95.8 million from $98.1 million during the year ended December 31, 2003. This decrease was attributable to a decline of $5.5 million in interest income that was partially offset by a decline of $3.3 million in interest expense during the year ended December 31, 2004 compared to the year ended December 31, 2003. The net interest spread decreased 31 basis points from 3.08% for the year ended December 31, 2003 to 2.77% for the year ended December 31, 2004, and the net interest margin decreased 36 basis points from 3.36% to 3.00% during the same period.

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The decrease in both the net interest spread and net interest margin reflected a 68 basis point decline in the average yield on interest earning assets as a result of the continued repricing of assets during the historically low interest rate environment that has persisted over the past three years. In addition, prior to January 2004, the overall low interest rate environment resulted in a greater decline in the average cost of interest bearing liabilities than the decline in average yield on interest earning assets. During the year ended December 31, 2004, the continued low interest rate environment created the opposite effect, resulting in a greater decline in the average yield on interest earning assets than in the average cost of interest bearing liabilities. (See section entitled "Interest Income" below for a further discussion of these declines). As a result, both the net interest spread and the net interest margin, which had increased during most of 2003 and 2002, declined during the year ended December 31, 2004.

During the year ended December 31, 2004 compared to the year ended December 31, 2003, the average yield on real estate loans and MBS, which collectively comprised the great majority of the Company's interest earning assets, declined by 86 basis points and 10 basis points, respectively (See the discussion entitled "Interest Income" below for a further examination of these declines).

Partially offsetting the decline in the average yield on interest earning assets was a reduction of 37 basis points in the average cost of interest bearing liabilities. This resulted primarily from declines in the average cost of borrowings of 88 basis points and a decline in the average cost of CDs of 30 basis points, coupled with the movement of the overall composition of funding from higher-cost borrowings into deposits with a lower average cost (See the discussion entitled "Interest Expense" below for a further examination of these declines).

Interest Income. Interest income was $163.6 million during the year ended December 31, 2004, a decrease of $5.5 million from $169.1 million during the year ended December 31, 2003. Interest income on real estate loans, investment securities and other short term investments declined by $7.0 million, $616,000 and $963,000, respectively, during the year ended December 31, 2004 compared to the year ended December 31, 2003. Partially offsetting these declines was an increase of $3.1 million in interest income on MBS during the year ended December 31, 2004 compared to the year ended December 31, 2003.

The decline in interest income resulted from the historically low interest rate environment that existed during the period January 1, 2002 through December 31, 2004. That environment stimulated the refinancing and prepayment of higher rate loans in the Bank's portfolio, while also resulting in reduced rates on existing portfolio loans that repriced during the period January 1, 2003 to December 31, 2004 (although the levels of refinancing and prepayment did experience a slight decline during the year ended December 31, 2004 as a result of an increase in interest rates). The combination of these two factors resulted in a decline of 86 basis points in the average yield on real estate loans (the Bank's largest interest-earning asset) during the year ended December 31, 2004 compared to the year ended December 31, 2003. In addition, the average yield on MBS declined 10 basis points during the same period as a result of the high level of prepayments on portfolio securities during 2003 and 2002 as well as the purchase of new securities during the period January 1, 2002 through December 31, 2004 while rates were historically low. Finally, as a result of the low interest rate environment, the average yields on investment securities and other short-term investments also declined by 17 basis points and 47 basis points, respectively, during the year ended December 31, 2004 compared to the year ended December 31, 2003.

The Bank's general policy has been to emphasize growth in real estate loans as its primary interest-earning asset, and de-emphasize its investment and MBS portfolios, while loan origination demand is strong. However, as part of a specific investment strategy to achieve a desirable balance of yield and liquidity on short-term investments, the Bank purchased $398.2 million of MBS during the year ended December 31, 2004. This purchase level exceeded the level of MBS principal repayments of $206.5 million during the same period, and contributed to an overall increase of $106.6 million in the average balance of MBS during the year ended December 31, 2004 compared to the year ended December 31, 2003. As a result, the dollar amount of interest income on MBS increased by $3.1 million during the year ended December 31, 2004 compared to the year ended December 31, 2003, despite the decline in average yield of 10 basis points during the same period.

Interest Expense. Interest expense declined $3.3 million, to $67.8 million during the year ended December 31, 2004, from $71.1 million during the year ended December 31, 2003. The decrease resulted primarily from a reduction of $2.9 million in interest expense on borrowed funds, due to a decline of 88 basis points in the average cost of borrowed funds during the year ended December 31, 2004 compared to the year ended December 31, 2003.

During the twelve months ended December 31, 2003, the Company reduced its total borrowings by $103.9 million by either not replacing borrowings that matured or prepaying outstanding debt. During the year ended December 31, 2003, the Company incurred $4.1 million of expense on prepaid borrowings, which increased the average cost of borrowed funds by 63 basis points during the period. During the year ended December 31, 2004, the Company added $192.9 million of REPOS, and a $72.2 million trust preferred borrowing. The REPOS

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were added during the period of historically low interest rates; and, therefore, possessed a lower average cost than the existing average cost within the Company's total portfolio of borrowings, which was not materially impacted by the increases in short-term interest rates that occurred during the period June through December 2004. The trust preferred borrowing added 26 basis points to the average cost of borrowings during the year ended December 31, 2004. The combination of activity in these two periods resulted in an overall increase of $69.9 million in the average balance of borrowings during the year ended December 31, 2004 compared to the year ended December 31, 2003, but a decline of 88 basis points in their average cost.

During the year ended December 31, 2004 compared to the year ended December 31, 2003, the average cost of CDs, the next largest component of interest expense during the 2004 period, declined by 30 basis points, while their average balance increased by $67.1 million. The combination of these two events resulted in a reduction in interest expense of $952,000 during the year ended December 31, 2004 compared to the year ended December 31, 2003. The decline in interest rates offered on CDs reflected the continued low level of interest rates paid during the period January 1, 2002 through December 31, 2004, which was not materially impacted by the recent increase in short-term interest rates that occurred during the period June through December 2004. The increase in the average balance of CDs during the year ended December 31, 2004 compared to the year ended December 31, 2003 resulted from new promotional CDs added during the year ended December 31, 2004.

The average cost of savings accounts declined by 12 basis points during the comparative period, resulting in a $467,000 reduction in interest expense. The decline in average cost reflected reductions in interest rates paid by the Bank as a result of the overall interest rate environment in effect during 2004, which was not materially impacted by the recent increase in short-term interest rates that occurred during the period June through December 2004.

Interest expense on money market accounts increased $1.0 million during the year ended December 31, 2004 compared to the year ended December 31, 2003, due to an increase in average balance of $124.3 million during the period. The increase in average balance reflected successful deposit gathering promotions during the period July 1, 2003 to September 30, 2004. Partially offsetting the increase was a decline in the average cost of money market accounts of 11 basis points, reflecting reductions in interest rates paid by the Bank as a result of the overall low interest rate environment in effect during 2004, which was not materially impacted by the recent increase in short-term interest rates.

Provision for Loan Losses. The provision for loan losses was approximately $280,000 during both the years ended December 31, 2004 and 2003. (See "Item 1. Business - Allowance for Loan Losses").

Non-Interest Income. Non-interest income decreased $4.6 million, to $20.5 million, during the year ended December 31, 2004, from $25.1 million during the year ended December 31, 2003. The decline resulted primarily from decreased prepayment fee income of $5.6 million, due to a decrease in refinancing driven by the significant levels of refinancing that occurred during 2003, as well as increases in interest rates during the second half of 2004. The decline in prepayment fee income was partially offset by an increase of $1.0 million in the net gain recorded on the sale of loans, investment securities and MBS.

During the year ended December 31, 2004, the net gain on the sale of loans was $336,000. During the year ended December 31, 2003, the Company recorded a net gain of $1.6 million on the sale of loans (primarily multifamily residential) to FNMA. Increases in interest rates during 2004 reduced the level of gain recorded on loans sold from the Bank's portfolio to FNMA. The gain on portfolio loan sales to FNMA was significantly higher during 2003, when rates were at historic lows. During the year ended December 31, 2004, the Company recorded a net gain of $377,000 on the sale of investment and mortgage-backed securities. During the year ended December 31, 2003, the Company recorded a net loss of $1.9 million on the sale of investment and mortgage-backed securities. The sale of securities and associated loss during the year ended December 31, 2003 were incurred in connection with a balance sheet restructuring performed in October 2003.

Non-Interest Expense. Non-interest expense was $42.4 million during the year ended December 31, 2004, an increase of $1.6 million over the year ended December 31, 2003.

Salaries and benefits decreased $491,000, primarily as a result of a reduction of $1.6 million in benefits accrued under the BMP, which was partially offset by increased salaries resulting from both general salary increases and added staff.

The benefit costs associated with the ESOP and RRP increased $1.0 million during the year ended December 31, 2004 compared to the year ended December 31, 2003, due primarily to the recording of expense related to dividends paid on unallocated ESOP shares that commenced in 2004.

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Data processing costs increased $765,000 during the comparative period, and were primarily due to non-recurring charges approximating $640,000 associated with a data system conversion completed by the Company in November 2004, that affected loan servicing, retail deposit branch operations and accounting transaction processing.

Occupancy and equipment expenses increased $159,000 due to increased maintenance and utility costs and increased depreciation expense associated with recently acquired furniture and fixtures.

Income Tax Expense. Income tax expense decreased $3.4 million during the year ended December 31, 2004 compared to the year ended December 31, 2003, due primarily to a decline of $8.4 million in pre-tax net income. The effective tax rate approximated 37.5% during both the years ended December 31, 2004 and 2003.

Comparison of the Operating Results for the Year Ended December 31, 2003 and the Unaudited Year Ended December 31, 2002

General. Net income was $51.3 million during the year ended December 31, 2003, an increase of $6.7 million over net income of $44.6 million during the year ended December 31, 2002. During this comparative period, net interest income increased $7.9 million, non-interest income increased $5.1 million and non-interest expense increased $2.1 million, resulting in increased pre-tax income of $10.9 million. Income tax expense increased $4.2 million as a result of the increased pre-tax income.

Net Interest Income. Net interest income for the year ended December 31, 2003 increased $7.9 million, to $98.0 million, from $90.1 million during the year ended December 31, 2002. The increase was attributable to a decline of $20.7 million in interest expense that was partially offset by a decline of $12.8 million in interest income during the year ended December 31, 2003 compared to the year ended December 31, 2002. The net interest spread increased 15 basis points from 2.93% for the year ended December 31, 2002 to 3.08% for the year ended December 31, 2003, and the net interest margin increased 3 basis points from 3.33% to 3.36% during the same period.

The increase in both the net interest spread and net interest margin reflected a 106 basis point decline in the average cost of interest-bearing liabilities as a result of a shift in the composition of interest-bearing liabilities away from higher cost borrowings towards lower cost CDs, money market and other deposit accounts, and a decline of 148 basis points in the average cost of borrowed funds (96 basis points excluding prepayment expenses of $4.1 million and $8.4 million, respectively, incurred during the years ended December 31, 2003 and 2002). Borrowing costs declined during the year ended December 31, 2003 compared to the year ended December 31, 2002 due to declines in short-term and medium-term interest rates during 2002 and 2003. During the year ended December 31, 2003 compared to the year ended December 31, 2002, the average balance of deposits, including non-interest-bearing checking accounts, increased as a result of ongoing deposit marketing promotions and customer sales activities. In addition, the average balance of real estate loans increased during the year ended December 31, 2003 compared to the year ended December 31, 2002, and the average rate on real estate loans was typically less susceptible to reductions in interest rates than other interest-earning assets since real estate loans possess a longer average term to their maturity or next interest rate reset.

Interest Income. Interest income was $169.1 million during the year ended December 31, 2003, a decrease of $12.8 million from $181.9 million during the year ended December 31, 2002. Interest income on real estate loans and investment securities declined $10.7 million and $2.5 million, respectively, during the year ended December 31, 2003 compared to the year ended December 31, 2002. These declines were partially offset by an increase in interest income on MBS of $1.2 million during the same period.

The decline in interest income on real estate loans during the year ended December 31, 2003 compared to the year ended December 31, 2002 was attributable to a decrease of 71 basis points in average yield during the period that resulted from the reduction in long-term interest rates from October 2002 to June 2003. This decline in interest rates stimulated the refinancing and prepayment of higher rate loans in the Bank's portfolio, while also resulting in reduced rates on existing portfolio loans that repriced during the period October 1, 2002 to December 31, 2003. Partially offsetting the decline in interest income on real estate loans resulting from reductions in yield was an increase in interest income resulting from the increased average balance of real estate loans of $64.8 million during the year ended December 31, 2003 compared to the year ended December 31, 2002. During the year ended December 31, 2003, real estate loan originations totaled $1.10 billion, compared to $713.0 million for the year ended December 31, 2002. The increase was the result of declines in long-term interest rates experienced during the period which stimulated a wave of mortgage refinancing activities and contributed to higher property values and average loan origination amounts.

The Bank's general policy has been to emphasize growth in real estate loans as its primary interest-earning asset, and de-emphasize its investment and MBS portfolios while loan origination demand is strong. However, as part of a specific investment strategy to achieve a desirable balance of yield and liquidity on short-term investments in the prevailing interest rate environment, the Bank purchased $531.0 million of MBS during the year ended December 31, 2003. This purchase level exceeded the level of MBS principal repayments of $363.8 million and sales of $57.7 million during the same period. This resulted in an overall increase of $178.9 million in the average balance of MBS during the year ended December 31, 2003

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compared to the year ended December 31, 2002. However, due to the continuation of low interest rates during the period October 1, 2002 through December 31, 2003, the average yield on MBS declined from 5.04% during the year ended December 31, 2002 to 3.51% during the year ended December 31, 2003. The combination of these factors resulted in a net increase in interest income on MBS of $1.2 million during the year ended December 31, 2003 compared to the year ended December 31, 2002.

Interest income on investment securities declined $2.5 million as a result of a decline of $57.0 million in average balance during the year ended December 31, 2003 compared to the year ended December 31, 2002, and a reduction of 30 basis points in the average yield on these securities during the same period. The decline in average balance reflects maturity and call activity experienced on these securities as a result of the lower interest rate environment during the period January 1, 2003 through December 31, 2003. The decline in average yield reflects the decline in interest rates during the period January 1, 2003 through December 31, 2003, as higher coupon securities were called from the portfolio.

Interest income on other short-term investments decreased $722,000 during the year ended December 31, 2003 compared to the year ended December 31, 2002. The decline reflects the continued low level of short-term interest rates during 2003, as well as the decision by the FHLBNY not to pay a cash dividend to its shareholders during the quarter ended December 31, 2003, which resulted in a loss of approximately $400,000 of interest income by the Company.

Overall, the yield on interest-earning assets declined 92 basis points from 6.72% during the year ended December 31, 2002 to 5.80% during the year ended December 31, 2003. The continuation of low interest rates during the period January 1, 2003 through December 31, 2003 resulted in reductions in the average yield on MBS of 153 basis points and investment securities of 30 basis points during the year ended December 31, 2003 compared to the year ended December 31, 2002. The yield on real estate loans declined by 71 basis points during this period.

Interest Expense. Interest expense declined $20.7 million, to $71.1 million, during the year ended December 31, 2003, from $91.8 million during the year ended December 31, 2002. The decline in interest expense resulted primarily from a reduction of $14.8 million in interest expense on borrowed funds, which resulted from declines of $79.8 million in the average balance of borrowed funds and 148 basis points in the average cost of borrowed funds during the year ended December 31, 2003 compared to the year ended December 31, 2002.

During the twelve months ended December 31, 2003, the Company prepaid $82.0 million of borrowed funds, primarily higher cost REPOS, resulting in prepayment fees of $4.1 million being added to interest expense during the year ended December 31, 2003. During the twelve months ended December 31, 2002, the Company prepaid $297.0 million of borrowed funds, primarily REPOS, resulting in prepayment fees of $8.4 million being added to interest expense during the year ended December 31, 2002. These prepayments of borrowings resulted in the significant reduction in both average balance and average cost of borrowings during the year ended December 31, 2003 compared to the year ended December 31, 2002.

The average cost of CDs, the next largest component of interest expense, declined by 81 basis points, resulting in a reduction in interest expense of $2.9 million during the year ended December 31, 2003 compared to the year ended December 31, 2002. The average cost of money market accounts and savings accounts declined by 64 basis points and 52 basis points, respectively, during the same period, resulting in a reduction in interest cost of $1.1 million and $1.9 million, respectively. These declines in average cost all reflected reductions in interest rates offered by the Bank as a result of the overall interest rate environment in effect during the period January 2003 through December 2003. Substantially offsetting the declines in interest cost of CDs, money market accounts and savings accounts that resulted from reduced average costs was increased interest expense associated with increased average balances of $112.6 million in CDs, $146.5 million in money market accounts and $4.1 million in savings accounts during the year ended December 31, 2003 compared to the year ended December 31, 2002. These increased average balances reflected successful deposit gathering promotions of the Bank during the period January 1, 2003 to December 31, 2003.

Provision for Loan Losses. The provision for loan losses was $288,000 during the year ended December 31, 2003 and $240,000 during the year ended December 31, 2002. During the year ended December 31, 2003, the Company added $240,000 to its loan loss provision related to expected losses on real estate loans, and $48,000 to its loan loss provision related to expected losses on consumer loans (See "Item 1. Business - Allowance for Loan Losses").

Non-Interest Income. Non-interest income increased $5.1 million, to $25.1 million, during the year ended December 31, 2003, from $20.0 million during the year ended December 31, 2002.

During the year ended December 31, 2003, a net loss on the sale of MBS and other short-term investments totaled $1.9 million. During the year ended December 31, 2002, net gains on sales of equity investment securities totaled $2.0 million. During the years ended December 31, 2003 and 2002, the Bank recorded net gains of $1.6 million and $2.0 million, respectively, on the sale of loans, primarily from the sale of multifamily residential loans to FNMA.

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Service charges and other fees increased $1.5 million due primarily to increased fees on loans and deposits that resulted from both increased loan origination and attendant servicing (as a result of the low interest rate environment) and growth in deposit households as a result of ongoing deposit product promotions. Other non-interest income increased $8.0 million due to increased prepayment fee income of $8.0 million, as a result of prepayments related to the low interest rate environment.

Non-Interest Expense. Non-interest expense was $40.8 million during the year ended December 31, 2003, an increase of $2.1 million over the year ended December 31, 2002.

Salary and employee benefits increased $691,000 during the period due to general salary and staffing increases during the year ended December 31, 2003 compared to the year ended December 31, 2002. In addition, the increase in the average price of the Company's common stock during the year ended December 31, 2003 resulted in increased ESOP expense of $296,000 during the year ended December 31, 2003 compared to the year ended December 31, 2002. This increase was partially offset by a decrease of $223,000 of expense associated with the RRP for which the final vesting of the original grant of 1,309,275 shares concluded during 2002.

Occupancy and equipment expense increased $758,000 during the comparative period due primarily to a renovation program on existing branches that was not eligible to be capitalized, as well as from a full year of expenses due to the addition of the Glen Oaks branch, which commenced operations near the end of the June 2002, and the Bay Ridge Branch, which commenced operations in March 2002.

Data processing costs increased $411,000 during the comparative period due to additional systems activity related to growth in the loan portfolio and additional deposit activity.

Income Tax Expense. Income tax expense increased $4.2 million during the year ended December 31, 2003 compared to the year ended December 31, 2002, due primarily to an increase of $10.9 million in pre-tax net income.

Comparison of Operating Results for the Six Months Ended December 31, 2002 and the Unaudited Six Months Ended December 31, 2001

General. Net income was $23.5 million during the six months ended December 31, 2002, an increase of $6.0 million over net income of $17.5 million during the six months ended December 31, 2001. During the six months ended December 31, 2002 compared to the six months ended December 31, 2001, net interest income increased $7.8 million, non-interest income increased $5.2 million and non-interest expense increased $3.3 million, resulting in increased pre-tax income of $9.7 million. Income tax expense increased $3.7 million as a result of the increased pre-tax income.

Net Interest Income. Net interest income for the six months ended December 31, 2002 increased $7.9 million to $47.2 million from $39.3 million during the six months ended December 31, 2001. This increase was attributable to a decline of $10.5 million in interest expense that was partially offset by a decline of $2.7 million in interest income during the six months ended December 31, 2002 compared to the six months ended December 31, 2001. The net interest spread increased 46 basis points from 2.61% for the six months ended December 31, 2001 to 3.07% for the six months ended December 31, 2002, and the net interest margin increased 40 basis points from 3.01% to 3.41% during the same period.

The increase in both the net interest spread and net interest margin reflected a 103 basis point decline in the average cost of interest-bearing liabilities, as well as a shift in the composition of interest-bearing liabilities away from higher cost borrowings and towards lower cost money market and other deposit accounts. During the six months ended December 31, 2002 compared to the six months ended December 31, 2001, the average balance of deposits, including non-interest-bearing checking accounts, increased as a result of ongoing deposit marketing promotions and customer sales activities. In addition, the average balance of real estate loans increased during the six months ended December 31, 2002 compared to the six months ended December 31, 2001, and the average rate on real estate loans was less susceptible to fluctuations in interest rates than other interest-earning assets since real estate loans possess a longer average term to their maturity or next interest rate reset.

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During the period January 2001 through December 2001, the overnight inter-bank borrowing rate declined on eleven different occasions, moving from an initial rate of 6.5% to an ending rate of 1.75%. During the period January 2002 through October 2002, the overnight inter-bank borrowing rate remained constant at 1.75%. In November 2002, the overnight inter-bank borrowing rate declined to 1.25%. Because the Bank's liabilities generally possess a shorter average term to maturity than its assets, the net interest margin and net interest spread both benefited from the reductions in interest rates during 2001. A significant portion of the benefit of liabilities repricing to lower rates was realized during the period January 2002 through December 31, 2002.

Interest Income. Interest income was $90.5 million during the six months ended December 31, 2002, a decrease of $2.7 million from $93.1 million during the six months ended December 31, 2001. Declines in interest income on MBS of $4.3 million and on other short-term investments of $509,000 during the six months ended December 31, 2002 compared to the six months ended December 31, 2001 were partially offset by an increase in interest income on real estate loans of $2.5 million during the same period.

The Bank's general policy has been to emphasize growth in real estate loans as its primary interest-earning asset, and de-emphasize its investment and MBS portfolios while loan origination demand is strong. Consistent with this policy, total principal repayments on MBS exceeded net purchases of MBS by $117.2 million during the period October 1, 2001 through June 30, 2002. However, as part of a specific investment strategy to achieve a desirable balance of yield and liquidity on short-term investments, the Bank purchased $224.6 million of MBS during the six months ended December 31, 2002. This purchase level exceeded the level of principal repayments of $148.5 million during the same period. The combination of all activity during the period October 2001 through December 2002 resulted in an overall decline of $62.4 million in the average balance of MBS during the six months ended December 31, 2002 compared to the six months ended December 31, 2001. In addition, due to short-term interest rate reductions during the period January 2001 through December 2001, and the continuation of low short-term interest rates during the period January 1, 2002 through December 31, 2002, the average yield on MBS declined from 5.97% during the six months ended December 31, 2001 to 4.58% during the six months ended December 31, 2002.

The decline of $509,000 in interest income on short-term investments resulted from a decrease of 137 basis points in average yield on these investments, reflecting gradual reductions in interest rates during the period January 2001 through December 2001 and in late 2002. The decline in yields on these investments more than offset the increase in interest income that would have otherwise resulted from growth in their average balance of $17.5 million during the six months ended December 31, 2002 compared to the six months ended December 31, 2001. Growth in average balance during the period reflected increased liquid funds generated during the period January 2002 through December 2002 from both deposit growth and higher real estate loan and MBS principal repayments.

The increase in interest income on real estate loans was attributable to an increase of $170.7 million in the average balance of real estate loans resulting from real estate loan originations during the period January 1, 2002 through December 31, 2002. During the six months ended December 31, 2002 and 2001, real estate loan originations totaled $424.4 million and $263.5 million, respectively. Loan originations increased during the six months ended December 31, 2002 as a result of declines in long-term interest rates experienced during the period which stimulated a wave of mortgage refinancing activities and contributed to higher property values and average loan origination amounts.

Overall, the yield on interest-earning assets declined 58 basis points from 7.12% during the six months ended December 31, 2001 to 6.54% during the six months ended December 31, 2002. Declines in the overnight inter-bank borrowing rate brought about by the actions of the FOMC during the period January 2001 through December 2001, along with the continuation of low interest rates during the period January 1, 2002 through December 31, 2002, contributed to general decreases in interest rates, resulting in reductions in the average yield on MBS of 139 basis points, on investment securities of 141 basis points and on other (short-term) investments of 137 basis points during the six months ended December 31, 2002 compared to the six months ended December 31, 2001. The yield on real estate loans declined by only 37 basis points during this period. Real estate loans possess longer terms to maturity or interest rate repricing and, therefore, reacted slower than other interest-earning assets to the declines in long-term interest rates during the six months ended December 31, 2002.

Interest Expense. Interest expense declined $10.5 million, to $43.3 million during the six months ended December 31, 2002, from $53.8 million during the six months ended December 31, 2001. The decline in interest expense resulted substantially from a reduction of $5.6 million in interest expense on borrowed funds, which resulted from a decline of $227.7 million in the average balance of borrowed funds during the six months ended December 31, 2002 compared to the six months ended December 31, 2001. The average cost of CDs, the next largest component of interest expense, declined by 129 basis points, resulting in a reduction in interest expense of $2.9 million during the six months ended December 31, 2002 compared to the six months ended December 31, 2001. The average cost of money market accounts and savings accounts also declined by 152 basis points and 83 basis points, respectively, during the same period, resulting in a reduction in interest cost of $621,000 and $1.4 million, respectively. These declines in average cost all reflected reductions in interest rates offered by the Bank as a result of the overall interest rate environment in effect during the period January 2002 through December 2002.

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Provision for Loan Losses. The provision for loan losses was $120,000 during both the six months ended December 31, 2002 and 2001 (See "Item 1. Business - Allowance for Loan Losses").

Non-Interest Income. Non-interest income increased $5.2 million to $10.8 million during the six months ended December 31, 2002, from $5.6 million during the six months ended December 31, 2001. The increase resulted primarily from increased prepayment fee income (included in other non-interest income) of $2.8 million, as loan prepayments increased during the period due to both declines in interest rates during the period January 2001 through December 2001 and continued low interest rates during the period January 2002 through December 2002. In addition, fee income grew $365,000 due primarily to additional loan fees of $213,000 resulting from increased origination activity, and an increase of $90,000 in deposit customer fees resulting from growth in deposit activity.

Under the terms of an agreement entered into in December 2002, the Bank sold approximately $73.4 million of recently-originated multifamily residential loans to FNMA during December 2002, recording a pre-tax gain of $2.0 million on these loan sales. Otherwise, gains and losses on the sale of assets were immaterial during the six months ended December 31, 2002 and 2001.

Non-Interest Expense. Non-interest expense was $20.4 million during the six months ended December 31, 2002, an increase of $3.3 million over the six months ended December 31, 2001.

Salary and employee benefits increased $2.5 million during the six months ended December 31, 2002 compared to the six months ended December 31, 2001, as a result of increased salaries and staffing during the six months ended December 31, 2002, reflecting growth in personnel added to satisfy needs created by the increased size of the Bank, as well as growth in loans and deposit balances, and added deposit products during the six months ended December 31, 2002 compared to the six months ended December 31, 2001. The benefit cost associated with the BMP increased $1.1 million during the six months ended December 31, 2002 compared to the six months ended December 31, 2001 due to the accelerated expense accruals of 12-month expenses over a 6-month period. The accelerated expense accruals resulted from a change in expense accrual methodology resulting from the change in the fiscal year-end of both the Holding Company and Bank from June 30^th to December 31^st. The benefit costs associated with the ESOP, which are calculated based upon the average market value of the Holding Company's common stock, additionally increased $300,000 due to an increase in the average market value of the Holding Company's common stock during the six months ended December 31, 2002 compared to the six months ended December 31, 2001.

Data processing costs increased $144,000 during the six months ended December 31, 2002 compared to the six months ended December 31, 2001, due to additional systems activity related to growth in the loan portfolio and additional deposit activity.

Other expenses increased $899,000 during the period due primarily to growth in advertising expenses of $152,000, as well as an increase in administrative costs totaling approximately $200,000 associated with the change in fiscal year-end and six-month report period ending December 31, 2002.

Income Tax Expense. Income tax expense increased $3.7 million during the six months ended December 31, 2002 compared to the six months ended December 31, 2001, due primarily to an increase of $9.7 million in pre-tax net income.

Comparison of Operating Results for the Years Ended June 30, 2002 and 2001

General. Net income was $38.7 million during the year ended June 30, 2002, an increase of $13.5 million over net income of $25.2 million during the year ended June 30, 2001. During the year ended June 30, 2002 compared to the year ended June 30, 2001, net interest income increased $14.7 million, the provision for loan losses declined $500,000, non-interest income increased $5.5 million and non-interest expense increased $335,000, resulting in increased pre-tax income of $20.4 million. Goodwill amortization, which was $4.6 million during the year ended June 30, 2001, was eliminated during the year ended June 30, 2002 pursuant to the adoption of SFAS 142 effective July 1, 2001, partially offsetting an increase of $5.0 million in non-interest expense. Income tax expense increased $7.0 million as a result of the increased pre-tax income.

Net Interest Income. Net interest income for the year ended June 30, 2002 increased $14.7 million to $82.3 million from $67.6 million during the year ended June 30, 2001. This growth was attributable to both an increase of $2.9 million in interest income and a decline of $11.8 million in interest expense during the year ended June 30, 2002 compared to the year ended June 30, 2001. The net interest spread increased 38 basis points from 2.32% for the year ended June 30, 2001 to 2.70% for the year ended June 30, 2002, and the net interest margin increased 36 basis points from 2.76% to 3.12% during the same period.

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The increase in net interest spread and net interest margin both reflected a 78 basis point decline in the average cost of interest-bearing liabilities, as well as a shift in the composition of interest-bearing liabilities away from higher cost borrowings and towards lower cost money market and other deposit accounts. During the year ended June 30, 2002 compared to the year ended June 30, 2001, the average balance of deposits, including non-interest-bearing checking accounts, increased as a result of ongoing deposit marketing promotions and customer sales activities. In addition, the average balance of real estate loans increased during the twelve months ended June 30, 2002, and the average rate on real estate loans was less susceptible to changes in interest rates than other interest-earning assets since real estate loans possess a longer average term to their maturity or next interest rate reset.

During the period January 2001 through December 2001, the FOMC reduced the overnight inter-bank borrowing rate on eleven different occasions, moving from a beginning rate of 6.5% to an ending rate of 1.75%. Because the Bank's liabilities generally possess a shorter average term to maturity than its assets, the net interest margin and net interest spread both benefited from these reductions in interest rates.

The increase in net interest margin additionally reflected growth in the ratio of interest-earning assets to interest-bearing liabilities from 109.33% during the year ended June 30, 2001 to 110.99% during the year ended June 30, 2002, reflecting additional equity generated during the period, a portion of which was invested in interest-earning assets.

Interest Income. Interest income was $184.6 million during the year ended June 30, 2002, an increase of $2.9 million from $181.7 million during the year ended June 30, 2001. Increased interest income on real estate loans of $13.9 million during the year ended June 30, 2002 compared to the year ended June 30, 2001 was partially offset by declines in interest income on MBS of $7.8 million, on investment securities of $2.5 million and on other short-term investments of $558,000 during the same period. As part of its ongoing strategy, the Bank continued to emphasize growth in real estate loans as its primary interest-earning asset, and de-emphasized its securities portfolio while loan origination demand was strong. The increase in interest income on real estate loans was attributable to an increase of $223.9 million in the average balance of real estate loans resulting from real estate loan originations during the period July 1, 2000 through June 30, 2002 as a result of lower interest rates. During the years ended June 30, 2002 and 2001, real estate loan originations totaled $552.5 million and $398.3 million, respectively. The increase reflected lower interest rates.

The decline of $7.8 million in interest income on MBS and $2.5 million on investment securities resulted from declines in both the average interest rate and average balance of these assets. During the year ended June 30, 2002 compared to the year ended June 30, 2001, the average balance of MBS declined $71.0 million and investment securities declined $13.1 million, due to principal repayments, maturities and calls of these securities (as a result of lower interest rates) that were partially offset by purchase activity. Interest income on other short-term investments declined by $558,000 due to a decline of 288 basis points in average yield during the year ended June 30, 2002 compared to the year ended June 30, 2001, reflecting declines in short-term interest rates during the period January 2001 through December 2001.

Overall, the yield on interest-earning assets declined 40 basis points from 7.41% during the year ended June 30, 2001 to 7.01% during the year ended June 30, 2002. Declines in the overnight inter-bank borrowing rate brought about by actions of the FOMC during the period January 2001 through December 2001 contributed to general decreases in interest rates, resulting in a reduction in the average yield of 86 basis points on MBS, 155 basis points on investment securities and 288 basis points on other (short-term) investments during the year ended June 30, 2002 compared to the year ended June 30, 2001. The yield on real estate loans declined by only 16 basis points during this period. Real estate loans possess longer terms to maturity or interest rate repricing and, therefore, reacted slower than other interest-earning assets to the declines in interest rates during the twelve months ended June 30, 2002.

Interest Expense. Interest expense declined $11.8 million, to $102.2 million during the year ended June 30, 2002, from $114.0 million during the year ended June 30, 2001. The decline in interest expense resulted substantially from a reduction of $10.5 million in interest expense on borrowed funds, which resulted from a decline of $166.2 million in the average balance of borrowed funds during the year ended June 30, 2002 compared to the year ended June 30, 2001. The average cost of CDs, the next largest component of interest expense, declined by 103 basis points, resulting in a reduction in interest expense of $3.8 million during the year ended June 30, 2002 compared to the year ended June 30, 2001. The average cost of money market accounts also declined 142 basis points during the same period. The average cost of savings accounts declined 44 basis points during the year ended June 30, 2002 compared to the year ended June 30, 2001, resulting in a decline in interest cost of $1.7 million during the period. These declines in average cost all reflected reductions in interest rates due to actions of the FOMC during the period January 2001 through December 2001.

Interest expense on money market accounts increased $4.1 million during the year ended June 30, 2002 compared to the year ended June 30, 2001, despite the decline of 142 basis points in average cost during the period, resulting from an increase of $235.7 million in the average balance of these deposits during this period. The growth in the average balance of money market accounts resulted from ongoing marketing promotions related to these accounts.

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Provision for Loan Losses. The provision for loan losses was $240,000 during the year ended June 30, 2002, compared to $740,000 during the year ended June 30, 2001. During the quarter ended December 31, 2000, an additional provision of $500,000 was recorded related to a loan added to troubled-debt restructurings. The provision of $240,000 during the year ended June 30, 2002 reflected the growth in the loan portfolio during the 12-month period ended June 30, 2002. Due to net charge-offs of $329,000 recorded during the year ended June 30, 2002, the allowance for loan losses declined $89,000 during the same period. During the year ended June 30, 2002, overall asset quality required no additional provisions beyond the $240,000 allocated to cover loan portfolio growth during the period.

Non-Interest Income. Non-interest income increased $5.5 million, to $14.8 million, during the year ended June 30, 2002, from $9.3 million during the year ended June 30, 2001. The increase resulted primarily from increased prepayment fee income (included in other non-interest income) of $3.9 million, as loan prepayments increased during the period due to declines in interest rates. In addition, fee income increased $277,000 during the year due to increased deposit customer fees resulting from both added depositors and changes in fees charged during the period. During the year ended June 30, 2002, a gain on the sale of securities and other assets of $2.1 million was recorded, primarily from the sale of equity investments. During the year ended June 30, 2001, a gain of $1.0 million on the sale of securities and other assets was recorded which also related primarily to sales of equity investments. The gains on sales of equity securities during the twelve months ended June 30, 2002 were utilized to offset a portion of expenses associated with the prepayment of FHLBNY Advances during the year.

Non-Interest Expense. Non-interest expense was $35.4 million during the year ended June 30, 2002, $335,000 above the level during the year ended June 30, 2001.

Salary and employee benefits increased $3.4 million during the year ended June 30, 2002 compared to the year ended June 30, 2001, as a result of growth in management and employees added to satisfy needs created by the following: (1) growth in loan portfolio balance; (2) growth in deposit balances; (3) added deposit products; and (4) two new retail branches. The employee benefit costs associated with the ESOP, which are calculated based upon the average market value of the Holding Company's common stock, increased $778,000 due to an increase in the average market value of the Holding Company's common stock during the period, and were offset by the reduction of $776,000 in expenses associated with the RRP, as the amortization of the initial stock awards under the RRP was completed on February 1, 2002.

Goodwill amortization expense declined $4.6 million during the year ended June 30, 2002 compared to the year ended June 30, 2001. Effective July 1, 2001, goodwill amortization was eliminated in accordance with the adoption of SFAS 142 (See Note 1 to the Consolidated Financial Statements and "Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies").

Increased data processing costs of $332,000 during the twelve months ended June 30, 2002 compared to the year ended June 30, 2001 resulted from additional systems activity related to growth in the loan portfolio and additional deposit activity.

Other expenses increased $1.2 million during the twelve months ended June 30, 2002 compared to the twelve months ended June 30, 2001, due primarily to growth in public relations expenses of $206,000, marketing expenses of $345,000, as well as various branch administrative expenses such as supplies, postage and protective services associated with increased customer activities and two new branches added during the twelve month period ended June 30, 2002.

Income Tax Expense. Income tax expense increased $7.0 million during the year ended June 30, 2002 compared to the year ended June 30, 2001, due primarily to an increase of $20.4 million in pre-tax net income. The effective tax rate decreased from 38.5% to 37.1% during the period, due to the implementation of certain operational and investment activities that resulted in a reduction in the Company's effective tax rate.

Impact of Inflation and Changing Prices

The Financial Statements and Notes thereto presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering the changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased costs of operations. Unlike industrial companies, nearly all of the Company's consolidated assets and liabilities are monetary in nature. As a result, interest rates have a greater impact on the Company's consolidated performance than do the effects of general levels of inflation. Interest rates do not necessarily fluctuate in the same direction or to the same extent as the price of goods and services.

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Recently Issued Accounting Standards

In March 2004, the Emerging Issues Task Force ("EITF") reached a consensus on Issue No. 03-1, "The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments" ("EITF 03-1"). EITF 03-1 provides guidance for determining when an investment is other-than-temporarily impaired, including whether an investor has the ability and intent to hold an investment until recovery. In addition, EITF 03-1 contains disclosure requirements regarding impairments that have not been recognized as other than temporary. Except as discussed in the following paragraph, the guidance for evaluating whether an investment is other-than-temporarily impaired was to be applied in other-than-temporary impairment evaluations made in reporting periods beginning after June 15, 2004. The disclosures were effective in annual financial statements for fiscal years ending after December 15, 2003 for investments accounted for under SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities." For all other investments within the scope of this Issue, the disclosures are effective in annual financial statements for fiscal years ending after June 15, 2004. The additional disclosures for cost method investments are effective for fiscal years ending after June 15, 2004. Comparative information for periods prior to initial application is not required.

In October 2004, the FASB issued proposed staff position ("FSP") EITF Issue 03-1-a, "Implementation Guidance for the Application of Paragraph 16 of EITF Issue No. 03-1, 'The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.'" The proposed staff position provided implementation guidance with respect to debt securities that are impaired solely due to interest rates and/or sector spreads and analyzed for other-than-temporary impairment under paragraph 16 of EITF 03-1. In addition, in November 2004, the FASB indefinitely delayed the effective date for the measurement and recognition guidance contained in paragraphs 10 through 20 of EITF 03-1. Additionally, the FASB issued a proposed staff position EITF Issue No. 03-1-1, which indefinitely delayed the effective date of measurement and recognition guidance contained in paragraphs 10 through 20 of EITF 03-1. Management will evaluate the impact of adopting the application of the guidance for evaluating an other-than-temporary impairment upon issuance of the guidance. However, management is applying current guidance in evaluating losses for other than temporary impairment.

In November 2004, the EITF issued EITF No. 04-5, "Investors' Accounting for an Investment in a Limited Partnership When the Investor is the Sole General Partner and the Limited Partners Have Certain Rights" ("EITF 04-5"). EITF 04-5 provides a framework for addressing the question of when a sole general partner, as defined in EITF 04-5, should consolidate a limited partner. In response to EITF 04-5, the FASB issued Statement of Position 78-9-a ("SOP 78-9-a"), which will amend Statement of Position 78-9, "Accounting for Investments in Real Estate Ventures" ("SOP 78-9"), in order to provide consistency between participation rights and consolidation of partnership interests defined in SOP 78-9 and EITF 04-5. Management does not expect that the adoption of either EITF 04-5 or SOP 78-9-a will have a material impact upon the Company's consolidated statement of financial condition or results of operations.

In December 2004, the FASB issued SFAS No. 152, "Accounting for Real Estate Time-Sharing Transactions - an amendment of FASB Statements No. 66 and 67," ("SFAS 152"). SFAS 152 amends SFAS 66 to reference the financial accounting and reporting guidance for real estate time-sharing transactions provided in American Institute of Certified Public Accountants ('AICPA') Statement of Position 04-2, "Accounting for Real Estate Time-Sharing Transactions" ("SOP 04-2"). SFAS 152 also amends SFAS 67 to state that the guidance for both incidental operations and the costs incurred to sell the real estate projects does not apply to real estate time-sharing transactions. Under SFAS 152, guidance for operations and costs associated with time-sharing transactions will be provided by SOP 04-2. The provisions of SFAS 152 are effective for fiscal years beginning after June 15, 2005. The adoption of SFAS No. 152 is not expected to have a material impact on the Company’s consolidated statement of financial condition or results of operations.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary Assets- an amendment of APB Opinion No. 29," ("SFAS 153"). SFAS 153 amends APB Opinion No. 29 by eliminating the specific exception for nonmonetary exchanges of similar productive assets, and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. Under SFAS 153, a nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of SFAS 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted for nonmonetary asset exchanges occurring in fiscal periods beginning after December 16, 2004. The adoption of SFAS No. 153 is not expected to have a material impact on the Company’s consolidated statement of financial condition or results of operations .

In December , 2004, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment, ("SFAS 123R"), that addresses the accounting for share-based payment transactions (e.g., stock options and awards of restricted stock) in which an employer receives employee services in exchange for equity securities of the company or liabilities that are based on the fair value of the company’s equity securities. The proposed statement, if adopted as proposed, would eliminate APB 25 and would generally require that such transactions be accounted for using a fair-value-based method and the recording of compensation expense rather than optional pro forma disclosure. Adoption of SFAS 123R is required for quarterly periods beginning after June 15, 2005. Management of the Company is still evaluating the impact of adoption of SFAS 123R upon its consolidated financial position and results of operations.

-57-

In May 2004, the FASB issued FASB Statement Position No. 106-2 ("FSP 106-2") to provide guidance on accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the "Act"), to employers that sponsor postretirement health care plans which provide prescription drug benefits. FSP 106-2 supersedes FSP SFAS 106-1, Accounting and Disclosure Requirements Related to Medicare Prescription Drug, Improvement and Modernization Act. FSP SFAS 106-2 applies only to sponsors of single-employer defined benefit postretirement health care plans for which (1) the employer has concluded that prescription drug benefits available under the plan to some or all participants, for some or all future years, are "actuarially equivalent" to Medicare Part D and thus qualify for the subsidy provided by the Act, and (2) the expected subsidy will offset or reduce the employer's share of the cost of the underlying postretirement prescription drug coverage on which the subsidy is based. FSP 106-2 provides guidance on measuring the accumulated postretirement benefit obligation ("APBO") and net periodic postretirement benefit cost, and the effects of the Act on the APBO. Since the Company is currently assessing whether the benefits provided by its postretirement benefit medical plan are actuarially equivalent to Medicare Part D under the Act, the measure of the APBO or net periodic postretirement benefit cost disclosed in the consolidated financial statements did not reflect any amount associated with the subsidy.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Delaware (State or other jurisdiction of incorporation or organization)		11-3297463 (I.R.S. employer identification number)
209 Havemeyer Street, Brooklyn, NY (Address of principal executive offices)		11211 (Zip Code)

TABLE OF CONTENTS

	Page
PART I
Item 1. Business
General	3
Market Area, Competition and Factors That May Affect Future Results	4
Lending Activities	5
Asset Quality	11
Allowance for Loan Losses	14
Investment Activities	15
Sources of Funds	19
Subsidiary Activities	22
Personnel	23
Federal, State and Local Taxation	23
Federal Taxation	23
State and Local Taxation	23
Regulation	24
General	24
Regulation of Federal Savings Associations	24
Regulation of Holding Company	31
Federal Securities Laws	32
Item 2. Properties	32
Item 3. Legal Proceedings	32
Item 4. Submission of Matters to a Vote of Security Holders	32
PART II
Item 5. Market for the Company’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	33
Item 6. Selected Financial Data	34
Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations	36
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	58
Item 8. Financial Statements and Supplementary Data	63
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	63
Item 9A. Controls and Procedures	63
PART III
Item 10. Directors and Executive Officers of the Company	65
Item 11. Executive Compensation	65
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters	66
Item 13. Certain Relationships and Related Transactions	67
Item 14. Principal Accounting Fees and Services	67
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K	67
Signatures	68

	At December 31,						At June 30,
	2004	Percent of Total	2003	Percent of Total	2002	Percent of Total	2002	Percent of Total	2001	Percent of Total	2000	Percent of Total
	(Dollars in Thousands)
Real Estate loans:
Multifamily residential	$1,917,447	76.63%	$1,734,904	79.07%	$1,730,102	79.74%	$1,694,422	79.92%	$1,541,531	78.60%	$1,349,854	78.33%
Commercial real estate	424,060	16.95	309,810	14.12	265,485	12.23	243,694	11.49	196,503	10.02	118,576	6.88
One- to four-family	126,225	5.04	124,047	5.65	145,808	6.72	155,013	7.31	189,651	9.67	215,648	12.51
Cooperative apartment	11,853	0.47	13,798	0.63	16,451	0.76	17,766	0.84	22,936	1.17	27,465	1.59
FHA/VA insured	4,209	0.17	4,646	0.21	5,215	0.24	5,565	0.26	6,450	0.33	7,536	0.44
Construction and land acquisition	15,558	0.62	2,880	0.13	1,931	0.09	-	-	-	-	-	-
Total mortgage loans	2,499,352	99.88	2,190,085	99.81	2,164,992	99.78	2,116,460	99.82	1,957,071	99.79	1,719,079	99.75
Other loans:
Student loans	61	0.00	295	0.01	420	0.02	502	0.03	827	0.04	990	0.06
Depositor loans	1,318	0.06	2,371	0.11	1,552	0.07	1,520	0.07	1,589	0.08	1,900	0.11
Consumer installment and other	1,537	0.06	1,406	0.07	2,781	0.13	1,715	0.08	1,729	0.09	1,348	0.08
Total other loans	2,916	0.12	4,072	0.19	4,753	0.22	3,737	0.18	4,145	0.21	4,238	0.25
Gross loans	2,502,268	100.00%	2,194,157	100.00%	2,169,745	100.00%	2,120,197	100.00%	1,961,216	100.00%	1,723,317	100.00%
Net unearned costs (fees)	(463)		(1,517)		332		57		(855)		(2,017)
Allowance for loan losses	(15,543)		(15,018)		(15,458)		(15,370)		(15,459)		(14,785)
Loans, net	$2,486,262		$2,177,622		$2,154,619		$2,104,884		$1,944,902		$1,706,515
Loans serviced for others:
One- to four-family and cooperative apartment	$29,524		$33,671		$34,683		$35,752		$42,175		$47,909
Multifamily residential	295,800		157,774		73,384		-		63		281
Total loans serviced for others	$325,324		$191,445		$108,067		$35,752		$42,238		$48,190

	For the Year Ended December 31,			For the Six Months Ended December 31,		For the Year Ended June 30,
	2004	2003	2002	2002	2001	2002	2001	2000
(Dollars in Thousands)
Gross loans:
At beginning of period	$2,194,157	$2,169,745	$2,055,825	$2,120,197	$1,961,216	$1,961,216	$1,723,317	$1,386,194
Real estate loans originated:
Multifamily residential	774,832	917,904	616,276	358,137	242,433	504,770	355,804	453,682
Commercial real estate	187,655	126,185	56,063	39,542	15,280	27,900	37,591	28,824
One- to four-family (1)	36,363	28,259	18,846	19,969	3,608	16,343	2,346	3,165
Cooperative apartment	1,048	1,839	1,469	956	861	1,208	1,245	744
Equity lines of credit	6,488	21,469	19,535	4,961	690	1,676	-	-
Construction	6,844	4,549	805	805	-	620	1,339	24
Total mortgage loans originated	1,013,230	1,100,205	712,994	424,370	262,872	552,517	398,325	486,439
Other loans originated	3,166	3,866	3,997	2,159	2,593	3,410	8,585	8,937
Total loans originated	1,016,396	1,104,071	716,991	426,529	265,465	555,927	406,910	495,376
Less:
Principal repayments	540,827	976,779	521,880	298,181	168,808	392,507	166,948	156,306
Loans sold (2)	167,458	102,880	81,191	78,800	1,914	4,305	1,835	1,518
Mortgage loans transferred to Other Real Estate Owned	-	-	-	-	134	134	228	429
Gross loans at end of period	$2,502,268	$2,194,157	$2,169,745	$2,169,745	$2,055,825	$2,120,197	$1,961,216	$1,723,317

	At December 31, 2004
	Real Estate Loans
	Multifamily Residential	Commercial Real Estate	One- to Four- Family	Cooperative Apartment	FHA/VA Insured	Construction	Other Loans	Total Loans
(Dollars In Thousands)
Amount due:
One year or less	$25,807	$13,202	$39,722	$7,720	$47	$15,558	$2,916	$104,972
After one year:
More than one year to three years	183,953	30,862	6,431	790	-	-	-	222,036
More than three years to seven years	1,436,574	298,885	21,258	669	-	-	-	1,757,386
More than seven years to ten years	180,870	38,151	21,193	986	2,830	-	-	244,030
More than ten years to twenty years	90,061	42,960	27,848	1,688	1,332	-	-	163,889
Over twenty years	182	-	9,773	-	-	-	-	9,955
Total due or repricing after one year	1,891,640	410,858	86,503	4,133	4,162	-	-	2,397,296
Total amounts due or repricing, gross	$1,917,447	$424,060	$126,225	$11,853	$4,209	$15,558	$2,916	$2,502,268

	Due after December 31, 2005
	Fixed	Adjustable	Total
(Dollars in Thousands)
Mortgage loans:
Multifamily residential	$311,717	$1,579,923	$1,891,640
Commercial real estate	90,483	320,375	410,858
One- to four-family	65,566	20,937	86,503
Cooperative apartment	2,844	1,289	4,133
Construction	-	-	-
FHA/VA insured	4,162	-	4,162
Other loans	-	-	-
Total loans	$474,772	$1,922,524	$2,397,296

	Special Mention		Substandard
	Number	Amount	Number	Amount
	(Dollars in Thousands)
Mortgage Loans:
Multifamily residential	4	$2,142	4	$830
One- to four-family	5	534	2	229
Cooperative apartment	6	172	2	62
Commercial real estate	-	-	-	-
Total Mortgage Loans	15	2,848	8	1,121
Other Real Estate Owned	-	-	-	-
Total	15	$2,848	8	$1,121

	At or for the Year Ended December 31,			At or for the Six Months Ended December 31,		At or for the Year Ended June 30,
	2004	2003	2002	2002	2001	2002	2001	2000
	(Dollars in Thousands)
Total loans outstanding at end of period ⁽¹⁾	$2,501,805	$2,192,640	$2,170,077	$2,170,077	$2,055,562	$2,120,254	$1,960,361	$1,721,200
Average total loans outstanding ⁽¹⁾	$2,397,187	$2,206,003	$2,128,297	$2,169,442	$1,998,694	$2,042,923	$1,819,336	$1,563,656
Allowance for loan losses:
Balance at beginning of period	$15,018	$15,458	$15,492	$15,370	$15,459	$15,459	$14,785	$15,081
Provision for loan losses	280	288	240	120	120	240	740	240
Charge-offs
Multifamily residential	-	-	(42)	-	(71)	(113)	-	-
Commercial real estate	-	-	-	-	-	-	(6)	-
One- to four-family	(3)	(2)	(169)	(33)	(20)	(156)	(13)	(500)
FHA/VA insured	-	-	-	-	-	-	-	-
Cooperative apartment	-	(1)	(79)	-	-	-	(14)	(24)
Other	(155)	(60)	-	(11)	(12)	(80)	(48)	(21)
Total charge-offs	(158)	(63)	(290)	(44)	(103)	(349)	(81)	(545)
Recoveries	25	34	16	12	16	20	15	9
Reserve for loan commitments transferred from (to) other liabilities	378	(699)	-	-	-	-	-	-
Balance at end of period	$15,543	$15,018	$15,458	$15,458	$15,492	$15,370	$15,459	$14,785
Allowance for loan losses to total loans at end of period	0.62%	0.68%	0.71%	0.71%	0.75%	0.72%	0.79%	0.86%
Allowance for loan losses to total non-performing loans at end of period	1,065.32	2,860.57	730.53	730.53	815.80	723.98	505.53	334.43
Allowance for loan losses to total non-performing loans and troubled-debt restructurings at end of period	1,065.32	2,860.57	730.53	730.53	321.21	723.98	258.43	288.71
Ratio of net charge-offs to average loans outstanding during the period	-	-	-	-	-	0.02%	-	0.03%

	For the Year Ended December 31,		For the Six Months Ended December 31,	For the Year Ended June 30,
	2004	2003	2002	2002
	(Dollars in Thousands)
Amortized cost at beginning of period	$464,671	$359,304	$285,201	$433,097
Purchases, net	271,221	473,389	224,579	37,218
Principal repayments	(206,455)	(364,208)	(149,556)	(184,835)
Premium amortization, net	(3,363)	(3,814)	(920)	(279)
Amortized cost at end of period	$526,074	$464,671	$359,304	$285,201

	At December 31, 2004
	Held to Maturity			Available for Sale
	Amortized Cost	Fair Value	Weighted Average Yield	Amortized Cost	Fair Value	Weighted Average Yield
	(Dollars in Thousands)
Mortgage-backed securities:
Due within 1 year	-	-	-	-	-	-
Due after 1 year but within 5 years	$465	$485	7.97%	$899	$933	5.66%
Due after 5 years but within 10 years	-	-	-	29,217	28,975	3.98
Due after ten years	-	-	-	495,494	489,512	4.01
Total	465	485	7.97	525,610	519,420	4.01

U.S. Treasury and agency:
Due within 1 year	-	-	-	10,000	9,961	2.29
Due after 1 year but within 5 years	-	-	-	2,999	2,995	2.88
Due after 5 years but within 10 years	-	-	-	-	-	-
Due after ten years	-	-	-	-	-	-
Total	-	-	-	12,999	12,956	2.43

Corporate and other:
Due within 1 year	-	-	-	1,036	1,032	6.75
Due after 1 year but within 5 years	585	589	7.26	997	986	2.80
Due after 5 years but within 10 years	-	-	-	1000	1,025	5.00
Due after ten years	-	-	-	38,525	38,841	4.04
Total	585	589	7.26	41,558	41,884	4.10

Total:
Due within 1 year	-	-	-	11,036	10,993	2.71
Due after 1 year but within 5 years	1,050	1,074	7.58	4,895	4,914	3.37
Due after 5 years but within 10 years	-	-	-	30,217	30,000	4.01
Due after ten years	-	-	-	534,019	528,353	4.01
Total	$1,050	$1,074	7.58%	$580,167	$574,260	3.98%

	Year Ended December 31,			Six Months Ended December 31,		Year Ended June 30,
	2004	2003	2002	2002	2001	2002
	(Dollars in Thousands)
Deposits	$3,445,897	$3,055,095	$3,012,112	$1,556,645	$1,332,182	$2,787,649
Withdrawals	3,315,462	2,978,932	2,728,969	1,435,740	1,191,845	2,485,046
Deposits greater than Withdrawals	130,435	76,163	283,143	120,905	140,337	302,603
Interest credited	37,936	38,340	48,670	26,236	26,565	48,999
Total increase in deposits	$168,371	$114,503	$331,813	$147,141	$166,902	$351,602

Maturity Period	Amount	Weighted Average Rate
(Dollars in Thousands)
Within three months	$102,780	2.36%
After three but within six months	85,622	2.58
After six but within twelve months	23,259	2.32
After 12 months	51,544	3.27
Total	$263,205	2.61%

	At December 31, 2004			At December 31, 2003			At December 31, 2002
	Amount	Percent of Total Deposits	Weighted Average Rate	Amount	Percent of Total Deposits	Weighted Average Rate	Amount	Percent of Total Deposits	Weighted Average Rate
	(Dollars in Thousands)
Savings accounts	$362,656	16.41%	0.56%	$366,592	17.96%	0.55%	$362,400	18.80%	0.78%
CDs	959,951	43.44	2.52	800,350	39.20	2.64	830,140	43.08	3.21
Money market accounts	749,040	33.89	1.40	745,387	36.51	1.35	616,762	32.00	1.90
NOW and Super NOW accounts	45,178	2.04	1.08	37,043	1.81	1.02	31,822	1.65	1.24
Checking accounts	93,224	4.22	-	92,306	4.52	-	86,051	4.47	-
Totals	$2,210,049	100.00%	1.68%	$2,041,678	100.00%	1.65%	$1,927,175	100.00%	2.16%

	Period to Maturity at December 31, 2004
Interest Rate Range	One Year or Less	Over One Year to Three Years	Over Three Years to Five Years	Over Five Years	Total at December 31, 2004	Total at December 31, 2003	Total at December 31, 2002
(Dollars in Thousands)
2.00% and below	$337,826	$27,034	$11	-	$364,871	$353,485	$173,179
2.01% to 3.00%	351,053	104,744	216	$6	456,019	182,233	297,770
3.01% to 4.00%	21,372	14,146	34,312	6	69,836	162,063	176,384
4.01% to 5.00%	12,035	31,994	202	-	44,231	50,109	95,512
5.01% and above	12,558	12,436	-	-	24,994	52,460	87,295
Total	$734,844	$190,354	$34,741	$12	$959,951	$800,350	$830,140

	At or for the Fiscal Year Ended December 31,		At or for the Six Months Ended December 31,	At or for the Fiscal Year Ended June 30,
	2004	2003	2002	2002
	(Dollars in Thousands)
Balance outstanding at end of period	$205,584	$12,675	$95,541	$97,717
Average interest cost at end of period	2.48%	4.96%	5.68%	5.61%
Average balance outstanding during the period	$129,426	$71,302	$97,941	$260,988
Average interest cost during the period (1)	2.34%	8.86%	5.35%	4.47%
Carrying value of underlying collateral at end of period	$219,311	$12,967	$85,226	$95,994
Estimated fair value of underlying collateral	$216,754	$13,045	$87,479	$96,093
Maximum balance outstanding at month end during the year	$220,649	$86,020	$98,728	$395,444

	At June 30,
	2002		2001		2000
	Allocated Amount	Percent of Loans in Each Category to Total Loans(1)	Allocated Amount	Percent of Loans in Each Category to Total Loans(1)	Allocated Amount	Percent of Loans in Each Category to Total Loans(1)
	(Dollars in Thousands)
Impaired loans	$88	0.01%	$775	0.21%	$130	0.15%
Multifamily residential	11,843	80.12	10,190	80.98	10,000	78.65
Commercial real estate	2,167	11.52	1,214	7.78	1,095	6.92
One-to four- family	1,094	7.33	3,005	9.48	3,176	12.23
Cooperative apartment	162	0.84	184	1.17	254	1.60
Construction	-	-	-	-	-	-
Other	16	0.18	91	0.38	130	0.45
Total	$15,370	100.00%	$15,459	100.00%	$14,785	100.00%

	At December 31,						At June 30,
	2004		2003		2002		2002
	Amortized Cost	Fair Value	Amortized Cost	Fair Value	Amortized Cost	Fair Value	Amortized Cost	Fair Value
	(Dollars in Thousands)
Mortgage-backed securities:
CMOs and REMICs	$480,865	$474,459	$428,847	$426,017	$292,541	$293,928	$209,476	$213,579
FHLMC	1,454	1,493	7,509	7,680	15,896	16,289	10,069	10,351
FNMA	29,250	29,125	3,381	3,510	8,122	8,435	11,681	12,005
GNMA	14,505	14,828	24,934	25,582	42,745	44,388	53,975	55,686
Total mortgage-backed securities	526,074	519,905	464,671	462,789	359,304	363,040	285,201	291,621
Investment securities:
U.S. Treasury and agency	12,999	12,956	5,011	5,026	52,741	53,289	85,050	85,823
Other	42,143	42,473	32,442	32,799	52,463	52,110	53,136	53,639
Total investment securities	55,142	55,429	37,453	37,825	105,204	105,399	138,186	139,462
Net unrealized (loss) gain (1)	(5,906)	-	(1,570)	-	3,833	-	7,553	-
Total securities, net	$575,310	$575,334	$500,554	$500,614	$468,341	$468,439	$430,940	$431,083

	At December 31,						At June 30,
	2004		2003		2002		2002
	Amortized Cost	Fair Value	Amortized Cost	Fair Value	Amortized Cost	Fair Value	Amortized Cost	Fair Value
	(Dollars in Thousands)
Held-to-Maturity:
Mortgage-backed securities (1)	$465	$485	$770	$822	$2,249	$2,337	$3,275	$3,409
Investment securities (2)	585	589	710	718	825	835	875	884
Total Held-to-Maturity	$1,050	$1,074	$1,480	$1,540	$3,074	$3,172	$4,150	$4,293

Available-for-Sale:
Mortgage-backed securities:
Pass-through securities	$44,744	$44,961	$35,054	$35,950	$64,514	$66,775	$72,450	$74,633
CMOs and REMICs	480,865	474,459	428,847	426,017	292,541	293,928	209,476	213,579
Total mortgage-backed securities available for sale	525,609	519,420	463,901	461,967	357,055	360,703	281,926	288,212
Investment securities (2)	54,557	54,840	36,743	37,107	104,379	104,564	137,311	138,578
Net unrealized (loss) gain (3)	(5,906)	-	(1,570)	-	3,833	-	7,553	-
Total Available-for-Sale	$574,260	$574,260	$499,074	$499,074	$465,267	$465,267	$426,790	$426,790
Total securities, net	$575,310	$575,334	$500,554	$500,614	$468,341	$468,439	$430,940	$431,083

	As of December 31, 2004
	Actual		Minimum Capital Requirement
	Amount	Ratio	Amount	Ratio
	(Dollars in Thousands)
Tangible	$256,955	7.88%	$48,937	1.5%
Leverage Capital	256,955	7.88	130,498	4.0
Risk-based capital	261,835	12.83	163,247	8.0

	At or for the Fiscal Year Ended December 31,		At or for the Six Months Ended December 31,	At or for the Fiscal Year Ended June 30,
	2004	2003	2002	2002
	(Dollars in Thousands)
Balance outstanding at end of period	$506,500	$534,000	$555,000	$575,000
Average interest cost at end of period	4.21%	3.85%	4.11%	5.07%
Weighted average balance outstanding during the period	$515,626	$559,726	$572,024	$565,520
Average interest cost during the period (1)	4.00%	3.98%	4.90%	5.90%
Maximum balance outstanding at month end during period	$534,000	$574,000	$590,000	$582,500

Subsidiary	Year/ State of Incorporation	Primary Business Activities

Havemeyer Equities, Inc.	1977 / New York	Ownership of DSBW Preferred Funding Corp.
Boulevard Funding Corp.	1981 / New York	Currently inactive
Havemeyer Investments, Inc.	1997 / New York	Sale of non-FDIC insured investment products
DSBW Preferred Funding Corp.	1998 / Delaware	Real Estate Investment Trust investing in multifamily residential and commercial real estate loans
DSBW Residential Preferred Funding Corp.	1998 / Delaware	Real Estate Investment Trust investing in one- to four-family real estate loans
842 Manhattan Avenue Corp.	1995/ New York	Management and ownership of real estate
Dime Reinvestment Corporation	2004 / Delaware	Community Development Entity. Currently inactive.

	At December 31, 2004
	Tangible Capital	Leverage Capital	Risk-Based Capital
GAAP capital	$309,190	$309,190	$309,190
Non-allowable assets:
Core deposit intangible	(48)	(48)	(48)
Loan servicing asset	(250)	(250)	(250)
Accumulated other comprehensive income	3,701	3,701	3,701
Goodwill	(55,638)	(55,638)	(55,638)
General valuation allowance	-	-	15,543
Adjustment for recourse provision on loans sold	-	-	(10,663)
Regulatory capital	256,955	256,955	261,835
Minimum capital requirement	48,937	130,498	163,247
Regulatory capital excess	$208,018	$126,457	$98,588

	Twelve Months Ended December 31, 2004			Twelve Months Ended December 31, 2003
Quarter Ended	Dividends Declared	High Sales Price	Low Sales Price	Dividends Declared	High Sales Price	Low Sales Price
March 31^st	$0.13	$21.38	$19.67	$0.09	$15.66	$12.40
June 30^th	0.14	20.81	15.97	0.09	17.56	14.85
September 30^th	0.14	17.61	15.60	0.11	18.67	15.33
December 31^st	0.14	18.78	16.04	0.11	21.27	15.35

Period	Total Number Shares Purchased	Average Price Paid Per Share	Total Number of Shares Purchased as Part of a Publicly Announced Programs	Maximum Number of Shares that May Yet be Purchased Under the Programs
October 2004	80,000	$16.97	80,000	1,645,060
November 2004	116,404	17.34	116,404	1,528,656
December 2004	111,100	17.87	111,100	1,417,556

	At or for the Twelve Months Ended December 31,			At or for the Six Months Ended December 31,	At or for the Twelve Months Ended June 30,
	2004	2003	2002	2002	2002	2001	2000

Selected Financial Condition Data:
Total assets	$3,377,266	$2,971,661	$2,946,374	$2,946,374	$2,810,132	$2,721,744	$2,502,139
Loans, net (1)	2,486,262	2,177,622	2,154,619	2,154,619	2,104,884	1,944,902	1,706,515
Mortgage-backed securities	519,885	462,737	362,952	362,952	291,488	438,447	442,690
Investment securities (2)	80,750	64,517	140,279	140,279	173,818	139,523	181,033
Federal funds sold and other short-term investments	103,291	95,286	114,291	114,291	76,474	36,619	9,449
Goodwill	55,638	55,638	55,638	55,638	55,638	55,638	60,254
Deposits	2,210,049	2,041,678	1,927,175	1,927,175	1,780,034	1,428,432	1,219,148
Borrowings	809,249	571,675	675,541	675,541	697,717	995,288	1,014,027
Stockholders' equity	281,721	283,919	265,737	265,737	249,741	227,116	207,169
Tangible Stockholders' equity	229,013	228,026	206,325	206,325	189,827	164,513	149,464
Selected Operating Data:
Interest income	$163,621	$169,115	$181,914	$90,469	$184,581	$181,648	$165,623
Interest expense on deposits and borrowings	67,776	71,063	91,790	43,278	102,244	114,043	98,820
Net interest income	95,845	98,052	90,124	47,191	82,337	67,605	66,803
Provision for losses	280	288	240	120	240	740	240
Net interest income after provision for loan losses	95,565	97,764	89,884	47,071	82,097	66,865	66,563
Non-interest income	20,513	25,122	19,999	10,765	14,837	9,292	5,043
Non-interest expense	42,407	40,809	38,696	20,368	35,431	35,096	34,015
Income before income tax	73,671	82,077	71,187	37,468	61,503	41,061	37,591
Income tax expense	27,449	30,801	26,565	14,008	22,826	15,821	15,217
Net income	$46,222	$51,276	$44,622	$23,460	$38,677	$25,240	$22,374

	At or for the Twelve Months Ended December 31,			At or for the Six Months Ended December 31,	At or for the Twelve Months Ended June 30,
	2004	2003	2002	2002	2002	2001	2000

SELECTED FINANCIAL RATIOS AND OTHER DATA (3):
Return on average assets	1.38%	1.67%	1.57%	1.62%	1.40%	0.97%	0.93%
Return on average stockholders' equity	16.76	18.76	17.65	18.17	16.07	11.67	10.65
Stockholders' equity to total assets at end of period	8.34	9.55	9.02	9.02	8.89	8.34	8.28
Tangible equity to tangible assets at end of period	6.88	7.82	7.15	7.15	6.90	6.19	6.11
Loans to deposits at end of period	113.20	107.39	112.60	112.60	119.11	137.24	141.18
Loans to interest-earning assets at end of period	78.04	77.89	77.85	77.85	79.65	76.13	73.10
Net interest spread (4)	2.77	3.08	2.93	3.07	2.70	2.32	2.48
Net interest margin (5)	3.00	3.36	3.33	3.41	3.12	2.76	2.91
Average interest-earning assets to average interest-bearing liabilities	110.79	111.60	111.64	111.88	110.99	109.33	110.04
Non-interest expense to average assets	1.27	1.33	1.36	1.40	1.28	1.35	1.41
Core non-interest expense to average assets (6)	1.24	1.30	1.28	1.37	1.25	1.14	1.24
Efficiency ratio (7)	36.67	33.05	36.49	36.41	37.29	46.25	46.33
Core efficiency ratio (6) (7)	35.96	32.38	34.44	35.67	36.42	39.08	40.77
Effective tax rate	37.26	37.53	37.32	37.39	37.11	38.53	40.48
Dividend payout ratio	42.97	30.10	25.00	25.81	24.61	33.63	34.74
Per Share Data:
Diluted earnings per share	$1.28	$1.37	$1.17	$0.62	$1.03	$0.67	$0.56
Cash dividends paid per share	0.55	0.41	0.29	0.16	0.25	0.23	0.19
Book value per share	7.58	7.45	6.91	6.91	6.45	5.94	5.26
Tangible book value per share	6.16	5.98	5.36	5.36	4.90	4.30	3.79
Asset Quality Ratios and Other Data:
Net charge-offs	$133	$29	$274	$32	$329	$66	$536
Total non-performing loans	1,459	525	2,116	2,116	2,123	3,058	4,421
Other real estate owned, net	-	-	134	134	114	370	381
Non-performing loans to total loans	0.06%	0.02%	0.10%	0.10%	0.10%	0.16%	0.26%
Non-performing loans and real estate owned to total assets	0.04	0.02	0.08	0.08	0.08	0.13	0.19
Allowance for Loan Losses to:
Non-performing loans	1,065.32%	2,860.57%	730.53%	730.53%	723.98%	505.53%	334.43%
Total loans (8)	0.62	0.68	0.71	0.71	0.72	0.79	0.86
Regulatory Capital Ratios: (Bank only)
Tangible capital	7.88%	7.97%	7.19%	7.19%	6.91%	6.10%	5.76%
Leverage capital	7.88	7.97	7.19	7.19	6.91	6.10	5.76
Risk-based capital	12.83	15.03	13.17	13.17	12.94	12.57	11.62
Earnings to Fixed Charges Ratios (9):
Including interest on deposits	2.09x	2.15x	1.78x	1.87x	1.60x	1.36x	1.38x
Excluding interest on deposits	3.46	3.50	2.49	2.73	2.16	1.64	1.70
Full Service Branches	20	20	20	20	20	18	18

At December 31, 2004	3 Months or Less	More than 3 Months to 6 Months	More than 6 Months to 1 Year	More than 1 Year to 3 Years	More than 3 Years to 5 Years	More than 5 Years	Non-interest bearing	Total
	(Dollars in Thousands)
Interest-Earning Assets (1):
Mortgages and other loans	$87,601	$87,600	$175,202	$693,891	$693,891	$763,620	-	$2,501,805
Investment securities	23,210	-	10,993	4,057	10,210	6,955	-	55,425
Mortgage-backed securities (2)	34,652	34,652	69,304	164,285	93,050	123,942	-	519,885
Other short-term investments	103,291	-	-	-	-	-	-	103,291
FHLBNY capital stock	25,325	-	-	-	-	-	-	25,325
Total interest- earning assets	274,079	122,252	255,499	862,233	797,151	894,517	-	3,205,731
Less:
Allowance for loan losses	-	-	-	-	-	-	$(15,543)	(15,543)
Net interest-earning assets	274,079	122,252	255,499	862,233	797,151	894,517	(15,543)	3,190,188
Non-interest-earning assets	-	-	-	-	-	-	187,078	187,078
Total assets	$274,079	$122,252	$255,499	$862,233	$797,151	$894,517	$171,535	$3,377,266
Interest-Bearing Liabilities
Savings accounts	$12,573	$12,146	$23,068	$76,808	$58,072	$179,989	-	$362,656
NOW and Super NOW accounts	4,179	3,792	6,565	14,916	4,616	11,110	-	45,178
Money market accounts	147,935	118,718	171,727	147,724	77,479	85,457	-	749,040
Certificates of deposit	330,763	288,769	115,314	190,353	34,752	-	-	959,951
Borrowed funds	185,000	-	60,000	230,000	90,584	146,500	-	712,084
Subordinated notes	-	-	-	-	-	25,000		25,000
Trust preferred securities						72,165		72,165
Interest-bearing escrow	-	-	-	-	-	1,800	-	1,800
Total interest- bearing liabilities	680,450	423,425	376,674	659,801	265,503	522,021	-	2,927,874
Checking accounts	-	-	-	-	-	-	$93,224	93,224
Other non-interest bearing liabilities	-	-	-	-	-	-	74,447	74,447
Stockholders' equity	-	-	-	-	-	-	281,721	281,721
Total liabilities and stockholders' equity	$680,450	$423,425	$376,674	$659,801	$265,503	$522,021	$449,392	$3,377,266
Positive (Negative) interest sensitivity GAP per period	$(406,371)	$(301,173)	$(121,175)	$202,432	$531,648	$372,496	-
Positive (Negative) cumulative interest sensitivity GAP	$(406,371)	$(707,544)	$(828,719)	$(626,287)	$(94,639)	$277,857	-
Cumulative interest sensitivity GAP as a percent of total assets	(12.03)%	(20.95)%	(24.54)%	(18.54)%	(2.80)%	8.23%	-
Cumulative total interest-earning assets as a percent of cumulative total interest-bearing liabilities	40.28%	35.90%	44.03%	70.74%	96.07%	109.49%	-

	At December 31, 2004
	Net Portfolio Value					At December 31, 2003
	Dollar Amount	Dollar Change	Percentage Change	NPV Ratio	Basis Point Change in NPV Ratio	NPV Ratio	Basis Point Change in NPV Ratio	Board Approved NPV Limit
Interest Rate Scenario
+ 200 Basis Points	$291,494	$(96,643)	(24.90)%	8.94%	(250)	9.49%	(157)	6.0%
+ 100 Basis Points	340,277	(47,860)	(12.33)	10.23	(121)	10.59	(47)	7.0
Pre-Shock	388,137	-	-	11.44	-	11.06	-	8.0
- 100 Basis Points	419,152	31,015	7.99	12.17	73	10.71	(35)	8.0
- 200 Basis Points	N/A	N/A	N/A	N/A	N/A	N/A	N/A	8.0

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options (a)	Weighted Average Exercise Price of Outstanding Options (b)	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans [Excluding Securities Reflected in Column (a)] (c)

Equity compensation plans approved by the Company's shareholders	2,679,435	$11.87	1,851,256(1)

Equity compensation plans not approved by the Company's shareholders	-	-	-

Name	Title
/s/ VINCENT F. PALAGIANO Vincent F. Palagiano	Chairman of the Board and Chief Executive Officer (Principal executive officer)
/s/ MICHAEL P. DEVINE Michael P. Devine	President and Chief Operating Officer and Director
/s/ KENNETH J. MAHON Kenneth J. Mahon	Executive Vice President and Chief Financial Officer and Director (Principal Financial Officer and Principal Accounting Officer)
/s/ ANTHONY BERGAMO Anthony Bergamo	Director
/s/ GEORGE L. CLARK, JR. George L. Clark, Jr.	Director
/s/ STEVEN D. COHN Steven D. Cohn	Director
/s/ PATRICK E. CURTIN Patrick E. Curtin	Director
/s/ JOSEPH H. FARRELL Joseph H. Farrell	Director
/s/ FRED P. FEHRENBACH Fred P. Fehrenbach	Director
/s/ JOHN J. FLYNN John J. Flynn	Director
/s/ STANLEY MEISELS Stanley Meisels	Director
/s/ LOUIS V. VARONE Louis V. Varone	Director

	Page
Report of Independent Registered Public Accounting Firm	70
Consolidated Statements of Financial Condition at December 31, 2004 and 2003	71
Consolidated Statements of Operations for the years ended December 31, 2004 and 2003, the six months ended December 31, 2002 and the year ended June 30, 2002	72
Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended December 31, 2004 and 2003, the six months ended December 31, 2002 and the year ended June 30, 2002	73
Consolidated Statements of Cash Flows for the years ended December 31, 2004 and 2003, the six months ended December 31, 2002 and the year ended June 30, 2002	74
Notes to Consolidated Financial Statements	75-111

	December 31, 2004	December 31, 2003
ASSETS:
Cash and due from banks	$26,581	$24,073
Federal funds sold and short-term investments	103,291	95,286
Encumbered investment securities held-to-maturity (estimated fair value of $589 and $718 at December 31, 2004 and 2003, respectively) (Note 3):	585	710
Unencumbered investment securities available-for-sale (Note 3)	54,840	37,107
Mortgage-backed securities held-to-maturity (estimated fair value of $485 and $822 at December 31, 2004 and 2003, respectively) (Note 4):
Encumbered	166	267
Unencumbered	299	503
	465	770
Mortgage-backed securities available-for-sale (Note 4):
Encumbered	235,401	38,692
Unencumbered	284,019	423,275
	519,420	461,967
Loans (Note 5):
Real estate	2,493,398	2,186,518
Other loans	2,916	4,072
Less allowance for loan losses (Note 6)	(15,543)	(15,018)
Total loans, net	2,480,771	2,175,572
Loans held for sale	5,491	2,050
Premises and fixed assets, net (Note 8)	16,652	16,118
Federal Home Loan Bank of New York capital stock (Note 9)	25,325	26,700
Goodwill (Note 1)	55,638	55,638
Other assets (Notes 7, 14 and 15)	88,207	75,670
Total Assets	$3,377,266	$2,971,661
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Due to depositors (Note 10):
Interest bearing deposits	$2,116,825	$1,949,372
Non-interest bearing deposits	93,224	92,306
Total deposits	$2,210,049	$2,041,678
Escrow and other deposits (Note 7)	48,284	39,941
Securities sold under agreements to repurchase (Note 11)	205,584	12,675
Federal Home Loan Bank of New York advances (Note 12)	506,500	534,000
Subordinated notes payable (Note 13)	25,000	25,000
Trust Preferred securities payable (Note 13)	72,165	-
Other liabilities (Note 14 and 15)	27,963	34,448
Total Liabilities	3,095,545	2,687,742
Commitments and Contingencies (Note 16)
Stockholders' Equity:
Preferred stock ($0.01 par, 9,000,000 shares authorized, none issued or outstanding at December 31, 2004 and 2003)	-	-
Common stock ($0.01 par, 125,000,000 shares authorized, 50,111,988 shares and 49,160,657 shares issued at December 31, 2004 and 2003, respectively, and 37,165,740 shares and 38,115,111 shares outstanding at December 31, 2004 and 2003, respectively)	501	492
Additional paid-in capital	198,183	185,991
Retained earnings (Note 2)	258,237	231,771
Accumulated other comprehensive loss, net of deferred taxes	(3,228)	(846)
Unallocated common stock of Employee Stock Ownership Plan ("ESOP") (Note 15)	(4,749)	(5,202)
Unearned and unallocated common stock of Recognition and Retention Plan ("RRP") (Note 15)	(2,612)	(2,617)
Common stock held by Benefit Maintenance Plan ("BMP') (Note 15)	(7,348)	(5,584)
Treasury stock, at cost (12,946,248 shares and 11,045,546 shares at December 31, 2004 and 2003, respectively) (Note 18)	(157,263)	(120,086)
Total Stockholders' Equity	281,721	283,919
Total Liabilities And Stockholders' Equity	$3,377,266	$2,971,661

	Fiscal Year Ended December 31,		Six Months Ended December 31,	Fiscal Year Ended June 30,
	2004	2003	2002	2002
Interest income:
Loans secured by real estate	$138,720	$145,704	$78,275	$153,970
Other loans	235	273	141	311
Mortgage-backed securities	21,091	17,984	7,895	21,049
Investment securities	1,745	2,361	2,455	5,227
Other	1,830	2,793	1,703	4,024
Total interest income	163,621	169,115	90,469	184,581

Interest expense:
Deposits and escrow	37,873	38,221	21,631	49,008
Borrowed funds	29,903	32,842	21,647	53,236
Total interest expense	67,776	71,063	43,278	102,244
Net interest income	95,845	98,052	47,191	82,337
Provision for loan losses	280	288	120	240

Net interest income after provision for loan losses	95,565	97,764	47,071	82,097

Non-interest income:
Service charges and other fees	6,296	6,518	2,687	4,699
Net gain on sales of loans	336	1,594	2,033	20
Net gain (loss) on sales and redemptions of securities, deposits and other assets	377	(1,897)	(21)	2,146
Income from Bank owned life insurance	1,957	2,118	1,122	2,201
Prepayment fee income	9,797	15,432	4,270	4,610
Other	1,750	1,357	674	1,161

Total non-interest income	20,513	25,122	10,765	14,837

Non-interest expense:
Salaries and employee benefits	19,880	20,371	10,549	17,061
ESOP and RRP compensation expense	3,573	2,542	1,216	2,990
Occupancy and equipment	5,213	5,054	2,221	4,099
Data processing costs	3,459	2,694	1,149	2,139
Federal deposit insurance premiums	343	330	151	276
Other	9,939	9,818	5,082	8,866

Total non-interest expense	42,407	40,809	20,368	35,431

Income before income taxes	73,671	82,077	37,468	61,503
Income tax expense	27,449	30,801	14,008	22,826

Net income	$46,222	$51,276	$23,460	$38,677

Earnings per Share:
Basic	$1.31	$1.43	$0.65	$1.08
Diluted	$1.28	$1.37	$0.62	$1.03

	Fiscal Year Ended December 31		Six Months Ended December 31,	Fiscal Year Ended June 30
	2004	2003	2002	2002
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock (Par Value $0.01):
Balance at beginning of period	$492	$479	$473	$458
Shares issued in exercise of options	9	13	6	15
Balance at end of period	501	492	479	473
Additional Paid-in Capital:
Balance at beginning of period	185,991	172,301	162,004	151,081
Cash paid for fractional shares and adjustment from cash dividend	(12)	(2)	(2)	(17)
Stock options exercised	4,007	5,316	2,439	6,689
Release of treasury stock for shares acquired by BMP	742	-	-	-
Tax benefit of RRP shares and stock options exercised	5,212	6,382	6,977	2,822
Amortization of excess fair value over cost - ESOP stock	2,243	1,998	882	1,429
Balance at end of period	198,183	185,991	172,300	162,004
Retained earnings:
Balance at beginning of period	231,771	196,309	179,060	150,264
Net income for the period	46,222	51,276	23,460	38,677
Cash dividends declared and paid	(19,756)	(15,814)	(6,211)	(9,881)
Balance at end of period	258,237	231,771	196,309	179,060
Accumulated other comprehensive (loss) income:
Balance at beginning of period	(846)	2,076	2,166	4,030
Change in other comprehensive (loss) income during the period, net of deferred taxes	(2,382)	(2,922)	(90)	(1,864)
Balance at end of period	(3,228)	(846)	2,076	2,166
Employee Stock Ownership Plan:
Balance at beginning of period	(5,202)	(5,661)	(5,895)	(6,365)
Amortization of earned portion of ESOP stock	453	459	234	470
Balance at end of period	(4,749)	(5,202)	(5,661)	(5,895)
Recognition and Retention Plan:
Balance at beginning of period	(2,617)	(2,641)	(2,711)	(2,899)
Common stock acquired by RRP	(103)	(84)	(73)	(964)
Amortization of earned portion of RRP stock	108	108	143	1,152
Balance at end of period	(2,612)	(2,617)	(2,641)	(2,711)
Common Stock Held by BMP:
Balance at beginning of period	(5,584)	(3,867)	(3,867)	(2,659)
Common stock acquired	(1,764)	(1,717)	-	(1,208)
Balance at end of period	(7,348)	(5,584)	(3,867)	(3,867)
Treasury Stock:
Balance at beginning of period	(120,086)	(93,258)	(81,489)	(66,799)
Release of treasury stock for shares acquired by BMP	1,021	-	-	-
Purchase of treasury shares, at cost	(38,198)	(26,828)	(11,769)	(14,690)
Balance at end of period	(157,263)	(120,086)	(93,258)	(81,489)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net Income	$46,222	$51,276	$23,460	$38,677
Minimum pension liability, net of (tax) benefit of $(1,604) during the six months ended December 31, 2002 and $1,604 during the fiscal year ended June 30, 2002	-	-	1,908	(1,908)
Reclassification adjustment for securities sold, net of (taxes) benefit of $(173) and $799 during the years ended December 31, 2004 and 2003, respectively, $8 during the six months ended December 31, 2002 and $(929) during the year ended June 30, 2002	(203)	937	10	(1,090)
Net unrealized securities (losses) gains arising during the period, net of benefit (taxes) of $1,856 and $3,288 during the years ended December 31, 2004 and 2003, respectively, $1,710 during the six months ended December 31, 2002, and $(965) during the year ended June 30, 2002	(2,179)	(3,859)	(2,008)	1,134
Comprehensive Income	$43,480	$48,354	$23,370	$36,813

	Fiscal Year Ended December 31,		Six Months Ended December 31,	Fiscal Year Ended June 30,
	2004	2003	2002	2002
CASH FLOWS FROM OPERATING ACTIVITIES:	(Dollars In thousands)
Net Income	$46,222	$51,276	$23,460	$38,677
Adjustments to reconcile net income to net cash provided by operating activities
Net gain on investment and mortgage backed securities called	-	-	-	(11)
Net (gain) loss on investment and mortgage backed securities sold	(377)	1,736	18	(2,018)
Net gain on sale of loans held for sale	(336)	(1,594)	(2,033)	(20)
Net loss (gain) on sales and disposals of other assets	-	161	3	(117)
Net depreciation and amortization	4,411	5,408	1,832	1,556
ESOP and RRP compensation expense	2,645	2,565	1,259	3,051
Provision for loan losses	280	288	120	240
Originations of loans sold during the period	(170,564)	(99,987)	(81,158)	(2,538)
Proceeds from sales of loans	167,458	104,117	78,800	4,325
Decrease (Increase) in cash surrender value of Bank Owned Life Insurance	2,043	(2,118)	(1,122)	(2,201)
(Increase) Decrease in net deferred income tax asset	(4,444)	(8,669)	(5,927)	(431)
(Increase) Decrease in other assets and other real estate owned	(8,461)	19,201	(5,596)	2,797
(Decrease) Increase in other liabilities	(6,485)	(6,795)	6,216	3,748
Net cash provided by Operating Activities	32,392	65,589	15,872	47,058
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in federal funds sold and short-term investments	(8,005)	18,769	(37,796)	(39,855)
Proceeds from maturities of investment securities held-to-maturity	125	115	50	755
Proceeds from maturities of investment securities available-for-sale	5,000	49,746	8,875	7,045
Proceeds from calls of investment securities held-to-maturity	-	-	-	2,155
Proceeds from calls of investment securities available-for-sale	-	18,000	32,030	25,211
Proceeds from sales of investment securities available-for-sale	7,959	-	988	8,589
Proceeds from sales and calls of mortgage backed securities available-for-sale	127,107	55,904	-	5,005
Purchases of investment securities available-for-sale	(30,074)	(292)	(9,281)	(87,082)
Purchases of mortgage backed securities available-for-sale	(398,210)	(531,029)	(224,579)	(42,218)
Principal collected on mortgage backed securities held-to-maturity	305	1,479	1,026	4,885
Principal collected on mortgage backed securities available-for-sale	206,150	362,729	148,530	179,950
Net increase in loans	(305,479)	(25,827)	(45,464)	(161,989)
Purchases of fixed assets, net	(1,742)	(1,950)	(1,323)	(1,593)
Sale (purchase) of Federal Home Loan Bank of New York capital stock	1,375	8,190	(525)	10,017
Net cash used in Investing Activities	(395,489)	(44,166)	(127,469)	(89,125)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in due to depositors	168,371	114,503	147,141	351,602
Net increase (decrease) in escrow and other deposits	8,342	3,263	(9,028)	5,746
Increase (Decrease) in securities sold under agreements to repurchase	192,909	(82,866)	(2,176)	(330,071)
(Repayments of) Proceeds from Federal Home Loan Bank of New York advances	(27,500)	(21,000)	(20,000)	32,500
Proceeds from Trust Preferred borrowings	72,165	-	-	-
Common stock issued for exercise of stock options and tax benefits of RRP	9,388	11,706	9,420	9,511
Purchase of common stock by the RRP and BMP	(103)	(1,801)	(73)	(2,172)
Cash dividends paid to stockholders and cash disbursed in payment of stock dividends	(19,769)	(15,814)	(6,211)	(9,898)
Purchase of treasury stock	(38,198)	(26,828)	(11,769)	(14,690)
Net cash provided by (used in) Financing Activities	365,605	(18,837)	107,304	42,528
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS	2,508	2,586	(4,293)	461
CASH AND DUE FROM BANKS, BEGINNING OF PERIOD	24,073	21,487	25,780	25,319
CASH AND DUE FROM BANKS, END OF PERIOD	$26,581	$24,073	$21,487	$25,780
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes	$32,239	$28,907	$5,216	$16,748
Cash paid for interest	$66,629	$71,843	$44,893	$104,606
Transfer of loans to other real estate owned	$ -	$ -	$ -	$134
Change in accumulated other comprehensive income, net of taxes	$(2,382)	$(2,922)	$(90)	$(1,864)
Change in minimum pension liability, net of deferred taxes	$-	$-	$1,908	$(1,908)

Buildings		2.22% to 2.50% per year
Furniture, fixtures and equipment		10% per year
Computer equipment		33.33% per year

	Fiscal Year Ended December 31,		Six Months Ended December 31,	Fiscal Year Ended June 30,
	2004	2003	2002	2002
Numerator:
Net Income per the Consolidated Statement of Operations	$46,222	$51,276	$23,460	$38,677
Denominator:
Average shares outstanding utilized in the calculation of basic EPS	35,318,858	35,922,777	36,287,111	35,865,035

Unvested shares of RRP	29,766	44,754	64,564	211,156
Common stock equivalents resulting from the dilutive effect of "in-the-money" stock options	863,376	1,382,726	1,512,513	1,493,262
Average shares outstanding utilized in the calculation of diluted EPS	36,212,000	37,350,257	37,864,188	37,569,453

Goodwill:	Fiscal Year Ended December 31,		Six Months Ended December 31,	Fiscal Year Ended June 30,
	2004	2003	2002	2002
Original Amount	$73,107	$73,107	$73,107	$73,107
Accumulated Amortization	(17,469)	(17,469)	(17,469)	(17,469)
Net Carrying Value	$55,638	$55,638	$55,638	$55,638

Core Deposit Intangible:	Fiscal Year Ended December 31		Six Months Ended December 31,	Fiscal Year Ended June 30,
	2004	2003	2002	2002
Original Amount	$4,950	$4,950	$4,950	$4,950
Accumulated Amortization	(4,902)	(4,077)	(3,252)	(2,840)
Net Carrying Value	$48	$873	$1,698	$2,110