NATIONAL CONSUMER COOPERATIVE BANK /DC/ - 10-Q Quarterly Report

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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended MARCH 31, 2003 Commission file number 2-99779
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NATIONAL CONSUMER COOPERATIVE BANK
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(Exact name of registrant as specified in its charter)

1725 EYE STREET, NW, SUITE 600, WASHINGTON, D.C. 20006
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(Address of principal executive offices)

Registrant's telephone number, including area code (202) 336-7700
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /.

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes / / No /X/.

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.

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National Consumer Cooperative Bank
(doing business as National Cooperative Bank)
and Subsidiaries

INDEX

PART I FINANCIAL INFORMATION

2

NATIONAL COOPERATIVE BANK
CONSOLIDATED BALANCE SHEETS

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

3

NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended March 31, 2003 and 2002
(Unaudited)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

4

NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

5

National Cooperative Bank
Consolidated Statement of Changes in Members' Equity
For the three months ended March 31, 2003
(Unaudited)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

6

National Cooperative Bank
Consolidated Statement of Changes in Members' Equity
For the three months ended March 31, 2002
(UNAUDITED)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

7

NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2003 and 2002
(Unaudited)

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS

8

NATIONAL COOPERATIVE BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2003 and 2002
(Unaudited)

Supplemental schedule of investing and financing activities:

9

NATIONAL COOPERATIVE BANK
CONDENSED NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
March 31, 2003
(Unaudited)

1. Basis of Presentation

The interim consolidated financial statements presented in this Quarterly
Report on Form 10-Q are in conformity with accounting principles generally
accepted in the United States of America which have been applied on a consistent
basis and follow general practice within the banking industry. In our opinion
these interim consolidated financial statements include all normal recurring
adjustments necessary to fairly present our results of operations, financial
condition and cash flows. The preparation of financial statements requires the
use of estimates and assumptions that affect the amounts reported. Actual
results could differ from those estimates and the results of operations for the
three months ended March 31, 2003 are not necessarily indicative of the results
to be expected for all of 2003. For comparability, certain prior period amounts
have been reclassified to conform to current period presentation. The financial
statements contained herein should be read in conjunction with the financial
statements and accompanying notes in our Annual Report on Form 10-K.

2. Critical Accounting Policies and Estimates

As noted above, management has prepared the consolidated interim financial
statements in conformity with accounting principles generally accepted in the
United States of America. Accordingly, management is required to make certain
estimates, judgments and assumptions that it believes to be reasonable based
upon the information available. These estimates, judgments, and assumptions
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of net interest income,
noninterest income and noninterest expense. The following accounting policies
comprise those that management believes involve estimates, judgments and
assumptions that are the most critical to aid in fully understanding and
evaluating our reported financial results: allowance for loan losses, servicing
assets and interest-only receivables, derivative instruments and hedging, and
income taxes.

We discuss the assumptions involved in applying these policies in our Annual
Report on Form 10-K. We evaluate our accounting estimates and assumptions on an
on-going basis. As of March 31, 2003, we have not made any significant changes
to the estimates and assumptions used in applying our critical accounting
policies from our audited 2002 financial statements. While we believe our
estimates and assumptions are reasonable based on historical experience and
other factors, actual results could differ from those estimates and these
differences could be material to the financial statements.

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3. Cash, Cash Equivalents and Investment Securities

As of March 31, 2003, NCB's portfolios of cash and cash equivalents and
investment securities, had an average maturity of 369 days with interest rates
in those portfolios varying from 1.141% to 8.125%, and were comprised of the
following:

As of December 31, 2002, NCB's portfolios of cash and cash equivalents and
investment securities were comprised of the following:

At March 31, 2003 and December 31, 2002, the investments in the
available-for-sale portfolio were recorded at aggregate fair value.

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Restricted cash of $0.8 million as of March 31, 2003 and December 31, 2002
is held by a trustee for the benefit of certificate holders in the event of a
loss on certain loans sold in 1993. At March 31, 2003 and December 31, 2002, the
remaining balance of 1993 loans totaled $0.6 million and $5.7 million,
respectively. The restricted cash will become available to NCB I, Inc. as the
principal balance of the respective loans decreases. The loans sold have
original maturities of ten to fifteen years.

Restricted cash of $4.1 million as of March 31, 2003 and December 31,
2002,is held for the benefit of Rabobank International under the terms of the
Agreement. The restricted cash is in the form of an Equity Reserve Account
maintained at M&T Bank and represents 3% of the loan purchase capacity under the
terms of the Agreement.

The remaining $4.9 million of restricted cash at March 31, 2003 relates to
a recourse obligation as discussed in Note 10.

Included in investments available-for-sale are investment securities
designated for the retirement of the Class A subordinated debt of $12.8 million
and $12.4 million as of March 31, 2003 and December 31, 2002, respectively.
NCB has the ability to prepay $0.5 million per year, pending approval from
senior note holders.

4. Loans Held For Sale

Loans held for sale by category, were as follows:

5. Loans and Lease Financing

Loans and leases outstanding, by category, were as follows:

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6. Impaired Assets

Impaired loans, comprised of non-accrual loans and real estate owned at March
31, 2003 and December 31, 2002, totaled $1.5 million and $5.4 million,
respectively. At March 31, 2003, included in the allowance for loan losses is
$0.3 million, which relates to the total impaired loan balance of $1.5 million.
The average balance of impaired loans was $2.9 million and $7.9 million for the
quarter ended March 31, 2003 and for the year ended December 31, 2002,
respectively. During 2003 and 2002, the interest collected on the non-accrual
loans was applied to reduce the outstanding principal.

At March 31, 2003 and December 31, 2002, there were commitments of $8.3
million and $5.5 million, respectively to lend additional funds to borrowers
whose loans were impaired.

At March 31, 2003 there was $0.2 million of real estate owned property and
no real estate owned property at December 31, 2002.

7. Allowance for Loan Losses

The following is a summary of the activity in the allowance for loan losses
during the three months ended March 31:

The allowance for loan losses was 1.9% of loans and lease financing,
excluding loans held for sale, at March 31, 2003 and December 31, 2002,
respectively.

8. Segment Reporting

NCB's reportable segments are strategic business units that provide diverse
products and services within the financial services industry. NCB has five
reportable segments: Commercial Lending, Real Estate Lending, Warehouse Lending,
Retail and Consumer Lending and Other. The Commercial Lending segment provides
financial services to cooperative and member-owned businesses. The Real Estate
Lending segment originates and services multi-family cooperative real estate
loans and commercial real estate loans nationally, with a concentration in New
York City. The Warehouse Lending segment originates real estate and commercial
loans for sale in the secondary market. The Retail and Consumer Lending segment
provides traditional banking services such as lending and deposit gathering to
retail, corporate and commercial customers. The Other segment consists of NCB's
unallocated parent company income and expense, and net interest income from
investments and corporate debt after allocations to segments.

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NCB evaluates segment performance based on net income before taxes. The
accounting policies of the segments are substantially the same as those
described in the summary of significant accounting policies in the most recent
annual report. Certain overhead expenses are allocated to each operating segment
based on the number of employees and other factors relevant to expenses
incurred. Also included in overhead and support is depreciation allocated based
on equipment usage.

The following is the segment reporting for the three months ended March 31,
2003 and March 31, 2002 (dollars in thousands):

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9. Derivative Instruments and Hedging

Results related to the hedging of warehouse loans and investment securities
held-for-sale are summarized below and included in the captions entitled "Gain
On Sale of Loans" and "gain on sale of investment securities available-for-sale"
in the accompanying Consolidated Statements of Income (in thousands):

The contract or notional amounts and the respective estimated fair value of
NCB's financial futures contracts and interest rate swaps at March 31, are as
follows (dollars in thousands):

NCB is exposed to credit loss in the event of nonperformance by its
counterparties in the aggregate amount of $9.4 million at March 31, 2003. NCB
does not anticipate nonperformance by any of its counterparties.

10. Receivables Sold With Recourse

In September 1998, NCB entered into a Credit Support and Collateral Pledge
Agreement (the Agreement) with Fannie Mae in connection with NCB's sale of
conventional multifamily and multifamily cooperative mortgage loans to Fannie
Mae and Fannie Mae's issuance of Guaranteed Mortgage Pass-Through Securities
backed by the loans sold by NCB. Under the Agreement, NCB agreed to be
responsible for certain losses related to the loans sold to Fannie Mae and to
provide collateral in the form of letters of credit to be held by a trustee to
secure the obligation for such losses. The Agreement allows for reductions in
the initial obligation as

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either losses are paid by NCB or when the obligation, as adjusted for any losses
paid, exceeds 12% of the unpaid principal balance of the covered loans.

The Letter of Credit maintained under the Agreement (as subsequently
amended for additional sales) was approximately $12.4 million as of March 31,
2003 and December 31, 2002, respectively. The unpaid principal balance of the
loans covered by the Agreement was $291.9 million as of March 31, 2003 compared
with $293.2 million as of December 31, 2002. Since the inception of the
Agreement, NCB has not been required to reimburse Fannie Mae for any losses.
Additionally, the loans covered by the recourse obligations have not paid down
substantially enough to warrant a reduction in the collateral provided by NCB
under the terms of the Agreement.

In January 2003, NCB purchased from NCB Development Corporation the
recourse obligation under an agreement with Fannie Mae covering loans sold by
NCB to Fannie Mae. As of March 31, 2003 the unpaid principal balance was $114.8
million. As collateral for the associated recourse, NCB was required to deposit
$4.9 million in a restricted cash account with a designated custodian.

11. Financial Instruments With Off-Balance Sheet Risk

NCB is a party to financial instruments with off-balance sheet risk. These
financial instruments may include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit and interest rate risk in excess of the amount recognized in the balance
sheets. The contract amounts of those instruments reflect the exposure that NCB
has in particular classes of financial instruments. Unless noted otherwise, NCB
does not require collateral or other security to support off-balance sheet
financial instruments.

NCB's exposure to credit loss in the event of nonperformance by the other
parties to the commitments to extend credit and standby letters of credit
written is represented by the contract or notional amounts of those instruments.
NCB uses the same credit policies in making commitments and conditional
obligations as it does for on-balance sheet instruments.

In the normal course of business, NCB makes loan commitments which are not
reflected in the accompanying financial statements. The commitments to extend
credit are agreements to lend to a customer as long as there is no violation of
any condition established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being completely
drawn upon, the total commitment amounts do not necessarily represent future
cash requirements. NCB evaluates each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed necessary by
NCB upon extension of credit, is based on management's credit evaluation of the
counterparty. Collateral varies but may include accounts receivable; inventory;
property, plant and equipment; and residential and income-producing commercial
properties.

Standby letters of credit can be either financial or performance-based.
Financial standby letters of credit obligate NCB to disburse funds to a third
party if the customer fails to repay an outstanding loan or debt instrument.
Performance letters of credit obligate NCB to disburse funds if the customer
fails to perform a contractual obligation including obligations of a
non-financial nature. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
NCB had only financial standby letters of credit at March 31, 2003 and
March 31, 2002.

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Guarantee fees associated with the standby letters of credit range from
0.25% to 2.25% of the commitment amount. The standby letters of credit mature
throughout 2003 to 2007.

The contract or notional amounts and the respective estimated fair value of
NCB's commitments to extend credit and standby letters of credit at March 31,
are as follows (dollars in thousands):

At March 31, 2003, a liability of $1.6 million was recorded in other
liabilities in the Consolidated Balance Sheet representing the fair value of
standby letters of credit either issued or modified subsequent to December 31,
2002.

The above commitment amounts are not reflected in the Consolidated Balance
Sheet and many of the commitments will expire without being drawn upon. Such
commitments are issued only upon careful evaluation of the financial condition
of the customer.

12. New Accounting Standards

On January 22, 2003, the FASB directed its staff to prepare a ballot draft
of "Accounting for Certain Financial Instruments with Characteristics of
Liabilities and Equity." The final statement is expected to be issued in 2003.
The proposed standard establishes guidelines for issuers' classification as
liabilities in the statement of financial position of financial instruments that
have characteristics of both liabilities and equity, including financial
instruments that are mandatorily redeemable on a fixed or determinable date.
This statement does not affect NCB at the present time, but will be complied
with when and if it becomes necessary.

In November 2002, the Financial Accounting Standards Board issued
Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting and Disclosure
Requirements for Guarantors, including Indirect Guarantees of Indebtedness of
Others: an Interpretation of FASB Statements No. 5, 57 and 107 and rescission of
FASB Interpretation No. 34." Under FIN 45, a liability must be recognized at the
inception of certain guarantees whether or not payment is probable. When the
guarantor has assumed a "stand-ready" obligation, the fair value of the
guarantee must be recorded as a liability. This interpretation was effective at
December 31, 2002, with the disclosure provisions of FIN 45 effective in 2002
and the accounting provisions effective in 2003. Adoption of FIN 45 did not have
a material effect on the consolidated financial statements. See footnote 11
"Financial Instruments With Off-Balance Sheet Risk".

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities:
an interpretation of ARB No.51." This interpretation addresses the issue of
consolidation of variable interest entities, which were previously commonly
referred to as special-purpose entities ("SPEs"). Generally, in a variable

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interest entity the equity investment at risk is not sufficient to allow the
entity to function without subordinated financial support from other parties
that absorb some of the expected losses and the equity investors do not have the
essential characteristics of a controlling financial interest, as defined.
According to FIN 46, if a business has a controlling financial interest in a
variable interest entity, the assets, liabilities and operating results of the
variable interest entity should be consolidated with the business even if the
business does not have voting control of the variable interest entity. FIN 46
applies immediately to variable interest entities created after January 31, 2003
and to interests in variable interest entities acquired after that date. FIN 46
also applies to the first interim of fiscal periods beginning after June 15,
2003 for those variable interest entities in which a business holds an interest
that was acquired before February 1, 2003. NCB is currently still evaluating
whether or not it has any variable interest entities.

On April 30, 2003, the Financial Accounting Standards Board issued SFAS 149,
"Amendment of Statement 133 on Derivative Instruments and Hedging Activities"
(SFAS 149). SFAS 149 amends and clarifies accounting for derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities under Statement 133. SFAS 149 requires that contracts with
comparable characteristics be accounted for similarly, clarifies under what
circumstances a contract with an initial net investment meets the
characteristics of a derivative, and clarifies when a derivative contains a
financing component that warrants reporting in the statement of cash flows. SFAS
149 is effective on a prospective basis for contracts entered into or modified
after June 30, 2003 and for hedging relationships designated after June 30,
2003. NCB is currently evaluating the impact SFAS 149 will have on its
operations.

13. Subsequent Events

On May 9, 2003, NCB extended the maturity dates on its $350 million
commitment revolving line of credit facilities. $175 million of the facility was
extended from May 12, 2003 to May 7, 2004 and $175 million was extended from
February 11, 2005 to May 17, 2006.

On May 14, 2003, NCB issued $15 million of 5.67% medium term notes due
May 15, 2013. NCB has the option to call this MTN at Par on May 15, 2006 and
semi-annually thereafter.

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NATIONAL COOPERATIVE BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002

SUMMARY

NCB's net income for the quarter ended March 31, 2003 was $12.0 million. This
was a 202.4% or $8.0 million increase compared with $4.0 million for the quarter
ended March 31, 2002. The primary factors affecting this increase were a $6.5
million increase in gain on sale of loans and gain on sale of investments
available-for-sale; a $1.3 million increase in loan related fees; and a
$0.9 million decrease in the provision for loan losses.

Total assets decreased 2.5% or $31.5 million to $1.21 billion at March 31,
2003 from $1.24 billion at December 31, 2002. The decline in assets was
primarily the result of a sale of $55.1 million in investment securities.

The annualized return on average total assets was 4.0% and 1.3% for the first
three months of 2003 and 2002, respectively. The annualized return on average
equity was 26.7% and 9.7% for the quarter ended March 31, 2003 and 2002,
respectively.

Net Interest Income

Net interest income for the quarter ended March 31, 2003 increased $0.1
million or 0.9% to $8.3 million compared with $8.2 million for the quarter ended
March 31, 2002.

For the quarter ended March 31, 2003, interest income decreased 8.8% or $1.7
million to $17.5 million compared with $19.2 million for the quarter ended March
31, 2002. Most of the decrease resulted from lower yields on the loans and lease
portfolios. The annualized yield on total average earning assets declined to
5.94% in 2003 from 6.76% in 2002. The average volume of interest earning assets
increased 3.7% in 2003 to $1.2 billion compared to $1.1 billion during the same
period in 2002.

Interest expense for the quarter ended March 31, 2003 decreased $1.8 million
or 16.0% to $9.2 million compared with $11.0 million for the quarter ended March
31, 2002. The decline in interest expense resulted from a decrease in overall
yield on total interest bearing liabilities from 4.38% in 2002 to 3.73% in 2003,
as well as a slight decrease in the amount of average interest bearing
liabilities in 2003 compared with 2002.

See Table 1 for detailed information on the increases and decreases in
interest income and interest expense.

As shown in Table 1, the net interest spread decreased 17 basis points to
2.21% from 2.38% for the three months ended March 31, 2003. The net interest
yield on earning assets was 2.82% and 2.90% for the three months ended March 31,
2003 and 2002, respectively.

Non-interest Income

Total non-interest income increased $8.3 million or 126.4% from $6.5 million
during the quarter ended March 31, 2002 to $14.8 million for the quarter ended
March 31, 2003. Non-interest income is composed of loan fees, gains or losses on
sale of loans, servicing fees, excess yield income, and other income.

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Gain on sale of loans of $7.4 million in 2003, which represented 50.0% of
non-interest income, increased 91.3% or $3.5 million from $3.9 million for the
same period in 2002. The increase resulted from improved investor spreads in
2003 compared with 2002. Sales for the three months ended March 31, 2003 and
2002 were $151.6 million and $148.0 million, respectively.

Gain on sale of investments available for sale was $3.0 million for the
quarter ended March 31, 2003. The gain resulted from the sale of $55.1 million
of mortgage backed securities (MBS) that had been obtained from Fannie Mae in a
swap of loans for MBS in December 2002.

Servicing fee income remains a stable source of non-interest income for NCB
in 2003. NCB's servicing fee income increased from $0.8 million in 2002 to $1.2
million in 2003 due to growth in the volume of loans serviced which increased
from $2.6 billion as of March 31, 2002 to $3.0 billion as of March 31, 2003.

Loan fees include those fees which NCB earns related to the extension of
credit, including commitment fees, letter of credit fees, and late and
pre-payment penalty fees. In addition, loan fees include fees earned by NCB from
the administration of its grocery loan conduit program. For the three months
ended March 31, 2003, loan fees increased $1.3 million due to higher loan and
lease prepayment fees, letter of credit fees, commitment fees and fees from the
conduit program.

In total, non-interest income amounted to 64.0% of total net revenue (net
interest income plus non-interest income) in 2003 compared with 44.2% in 2002.

Non-interest Expense

Non-interest expense for the quarter ended March 31, 2003 increased 9.5% or
$0.9 million to $10.3 million compared with $9.4 million for the comparable
period of the prior year. Compensation and employee benefits, which remains the
single largest component of non-interest expense, increased 23.8% or $1.2
million compared to the three months ended March 31, 2002. The increase is
attributable to an increase in staff, as well as an increase in bonus
allocations based on net income.

Annualized non-interest expense as a percentage of average assets was 3.4%
and 3.1% for the three months ended March 31, 2003 and 2002, respectively.

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Table 1
RATE RELATED ASSETS AND LIABILITIES
(dollars in thousands)

The accompanying notes are an integral part of these financial statements.

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Provision for Income Taxes

The federal income tax provision is determined on the basis of non-member
income generated by NCB, FSB (NCBSB) and reserves set aside for the retirement
of Class A notes and dividends on Class C stock. NCB's subsidiaries are also
subject to varying levels of state taxation. The income tax provision was $600
thousand and $320 thousand for the three months ended March 31, 2003 and 2002,
respectively.

Cash, Cash Equivalents and Investment Securities

Cash, cash equivalents and investment securities totaled $144.8 million at
March 31, 2003, a decrease of $38.7 million or 21.1% from $183.5 million at
year-end 2002. The decrease was primarily related to the sale of MBS. NCB held
FNMA MBS of $55.1 million at December 31, 2002, which were sold during the first
quarter of 2003. As a percentage of average earning assets, cash, cash
equivalents and investment securities decreased to 13.4% at March 31, 2003 from
15.9% at December 31, 2002.

Allowance for Loan Losses

The allowance for loan losses at March 31, 2003 was $13.9 million, down 4.7%
from $14.6 million at December 31, 2002. The allowance during the period was
impacted by loans charged-off of $1.0 million, recoveries of loans previously
charged-off of $0.1 million and the provision of $0.2 million. The $1.0 million
of loans charged-off includes $0.8 million from one borrower, which was
charged-off in March. NCB's annualized provision for loan losses as a percentage
of loans and lease financing, excluding loans held for sale, was 0.12% for the
three months ended March 31, 2003 and 0.58% for the three months ended March 31,
2002.

The allowance for loan losses as a percentage of loans and lease financing,
excluding loans held for sale, was 1.9% at March 31, 2003 and December 31, 2002,
respectively. Management considers the current allowance to be adequate to
absorb known and inherent risks in the loan portfolio.

As shown in Table 3, total impaired assets (non-accruing loans and real estate
owned) decreased 71.6% from $5.4 million at December 31, 2002 to $1.5 million at
March 31, 2003. Impaired assets as a percentage of loans and leases outstanding,
excluding loans held for sale, was 0.22% at March 31, 2003 compared with 0.72%
at year-end 2002. Impaired assets as a percentage of total capital were 0.8% and
3.1% at March 31, 2003 and December 31, 2002, respectively.

The majority of NCB's loans are to cooperatives in industries such as
owner-occupied multi-family residential housing, food distribution, health care,
and financial services. NCB bases credit decisions on the cash flows of its
customers and views collateral as a secondary source of repayment.

The real estate portfolio contains a concentration of loans in the New York
City area; however, the majority of loans are to seasoned housing cooperatives
with low loan-to-value ratios. NCB also has minimal credit exposure to highly
leveraged

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transactions, commercial real estate and construction loans. NCB has no foreign
loan exposure.

TABLE 2
Changes in Net Interest Income
(dollars in thousands)

For the three months ended March 31, 2003 compared to March 31, 2002

* Average monthly balances
**Changes in interest income and interest expense due to changes in rate and
volume have been allocated to "change in average volume" and "change in
average rate" in proportion to the absolute dollar amounts in each.

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INTEREST BEARING LIABILITIES
(dollars in thousands)

*Includes current portion of long-term debt

Interest bearing liabilities decreased $32.4 million to $968.2 million at
March 31, 2003 from $1,000.6 million at December 31, 2002.

For the first three months of 2003, deposits at NCB, FSB (NCBSB) increased
10.4% to $407.1 million compared with $369.0 million at December 31, 2002. The
increase was attributable to an on-going strategic campaign to attract local and
national deposit accounts and cooperative customers. Average maturity of the
certificates of deposits is 14.6 months at March 31, 2003 compared with 11.9
months at December 31, 2002. Deposits are a major portion of interest bearing
liabilities - 42.1% and 36.9% at March 31, 2003 and December 31, 2002,
respectively.

At March 31, 2003, total short-term and long-term borrowings (including
subordinated debt) decreased 11.2% or $70.6 million to $561.0 million in
comparison to December 31, 2002 of $631.6 million. NCBSB had advances of $0 and
$4.8 million from the Federal Home Loan Bank at March 31, 2003, and December 31,
2002, respectively. At March 31, 2003, included in the short-term borrowings
were revolving lines of credit of $2.0 million; commercial paper with a face
value of $78.0 million and $36.4 million in borrowings from cooperative
customers. At December 31, 2002, included in the short-term borrowings were
revolving lines of credit of $50.5 million; commercial paper with a face value
of $148.4 million and $18 million in borrowings from cooperative customers.
Long-term debt, excluding current portion, increased 12.1% from year-end 2002
due to the new issuance of $50.0 million and the maturity of $15.0 million under
the long-term facilities.

At March 31, 2003, NCB had $350.0 million of committed revolving lines of
credit available of which $2.0 million was outstanding in comparison to December
31, 2002 of $23.0 million. $175.0 million of this facility is available until
February 11, 2005 and the remaining $175.0 million is available until May 12,
2003. In addition, NCB had bid lines available of $22.5 million and outstanding
of $0 at March 31, 2003 in comparison to $27.5 million available and outstanding
at December 31, 2002.

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At March 31, 2003 and December 31, 2002, under its medium-term note program,
NCB had remaining authority approval to issue up to $290.0 million and $305.0
million,, respectively. As of March 31, 2003 and December 31, 2002, NCB had
$89.0 million and $104.0 million, respectively, outstanding under this program.
In addition, as of March 31, 2003 and December 31, 2002, NCB had outstanding
$165.0 million and $115.0 million, respectively, of private placements issued to
various institutional investors.

At March 31, 2003, NCB has $30 million remaining capacity of private placement
issuances under an Uncommitted Master Shelf Agreement with an institutional
investor.

TABLE 3
Impaired Assets
(dollars in thousands)

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

No material changes in NCB's market risk profile occurred from December 31,
2002 to March 31, 2003.

ITEM 4. CONTROLS AND PROCEDURES

(a) Within the 90-day period prior to the date of this report, the Company's
management, including its Chief Executive Officer and Chief Financial Officer,
evaluated the Company's disclosure controls and procedures pursuant to Exchange
Act Rule 13a-14. Based upon that evaluation, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures are functioning effectively to provide reasonable
assurance that the Company can meet its obligations to disclose in a timely
manner material information required to be included in the Company's reports
under the Exchange Act.

(b) There have been no significant changes in the Company's internal controls
or in other factors, which could significantly affect those internal controls
subsequent to the date the Company's management carried out its evaluation.

Part II OTHER INFORMATION

Item 1. Legal Proceedings

In the normal course of business we are involved in various types of litigation
and disputes, which may lead to litigation. The Company has determined that
pending or unasserted legal actions will not have a material impact on its
financial condition or future operations.

Item 6. Exhibits

(a) The following exhibits are filed as part of this report:

Exhibit 10.35 First Amendment to Fourth Amended and Restated Loan
Agreement with Fleet Bank as Agent.

Exhibit 13 NCB 2002 Annual Report

Exhibit 99.1 Certification Statement of Chief Executive Officer of NCB
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 99.2 Certification Statement of Chief Financial Officer of NCB
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b) NCB did not file any reports on Form 8-K during the quarter for which
this report is filed.

26

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.

NATIONAL CONSUMER COOPERATIVE BANK

Date: MAY 14, 2003
---------------------

By: /s/
--------------------------------
Richard L. Reed,
Managing Director,
Chief Financial Officer

By: /s/
--------------------------------
E. Michael Ramberg
Vice President,
Corporate Controller

27

CERTIFICATIONS

I, Charles E. Snyder, Chief Executive Officer of National Consumer
Cooperative Bank, certify that:

1. I have reviewed this quarterly report on Form 10-Q of National Consumer
Cooperative Bank;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to

28

the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

/s/ Charles E. Snyder
Charles E. Snyder
Chief Executive Officer

29

I, Richard L. Reed, Chief Financial Officer of National Consumer
Cooperative Bank, certify that:

1. I have reviewed this quarterly report on Form 10-Q of National Consumer
Cooperative Bank;

2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to

30

the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

/s/ Richard L. Reed
Richard L. Reed
Chief Financial Officer

31