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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2004

Commission File Number 1-31565

NEW YORK COMMUNITY BANCORP, INC.

(Exact name of registrant as specified in its charter)

615 Merrick Avenue, Westbury, New York 11590

(Address of principal executive offices)

(Registrant’s telephone number, including area code)  (516) 683-4100

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 such 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 Exchange Act).     Yes  x    No  ¨

Par Value: $0.01

Classes of Common Stock

264,366,491

Number of shares outstanding at

May 5, 2004

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NEW YORK COMMUNITY BANCORP, INC.

FORM 10-Q

Quarter Ended March 31, 2004

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NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CONDITION

(in thousands, except share data)

See accompanying notes to unaudited consolidated financial statements.

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NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)

See accompanying notes to unaudited consolidated financial statements.

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NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

See accompanying notes to unaudited consolidated financial statements.

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NEW YORK COMMUNITY BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

See accompanying notes to unaudited consolidated financial statements.

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NEW YORK COMMUNITY BANCORP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Basis of Presentation

The accompanying unaudited consolidated financial statements include the accounts of New York Community Bancorp, Inc. and subsidiaries (the “Company”) and its wholly-owned subsidiary, New York Community Bank (the “Bank”).

The statements reflect all normal recurring adjustments that, in the opinion of management, are necessary to present a fair statement of the results for the periods presented. Certain reclassifications have been made to prior-year financial statements to conform to the 2004 presentation. There are no other adjustments reflected in the accompanying consolidated financial statements. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results of operations that may be expected for all of 2004.

On October 31, 2003, the Company merged with Roslyn Bancorp, Inc. (“Roslyn”) in a purchase transaction, resulting in the exchange of 0.75 Company common shares for each share of Roslyn common stock held at the merger date. At the same time, Roslyn Savings Bank merged with and into the Bank. The Company’s 2004 first quarter earnings reflect three months of combined operations.

Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s 2003 Annual Report to Shareholders and incorporated by reference into the Company’s 2003 Annual Report on Form 10-K.

Note 2. Basis of Consolidation

The unaudited consolidated financial statements include accounts of the Company and other entities in which the Company has a controlling financial interest. All inter-company balances and transactions have been eliminated.

The usual condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. However, a controlling financial interest may also exist in entities, such as special purpose entities (“SPEs”), through arrangements that do not involve voting interests. SPEs are an important part of the financial markets, providing market liquidity by facilitating investors’ access to specific portfolios of assets and risks. SPEs may be organized as trusts, partnerships, or corporations and are typically set up for a single, discrete purpose. SPEs are not operating entities and usually have no employees and a limited life.

There are two different accounting frameworks applicable to SPEs, depending on the nature of the entity and the Company’s relation to that entity; the qualifying SPE (“QSPE”) framework under Statement of Financial Accounting Standards (“SFAS”) No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities – a Replacement of Financial Accounting Standards Board (“FASB”) Statement No. 125” and the variable interest entity (“VIE”) framework under FASB Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). The QSPE framework is applicable when an entity transfers (sells) financial assets to an SPE meeting certain criteria. These criteria are designed to ensure that the activities of the SPE are essentially predetermined in their entirety at the inception of the vehicle and that the transferor cannot exercise control over the entity. Entities meeting these criteria are not consolidated by the transferors. When an SPE does not meet the QSPE criteria, consolidation is assessed pursuant to FIN 46. A VIE is defined as an entity that lacks enough equity investment at risk to permit the entity to finance its activities without additional subordinated financial support from other parties; has equity owners who are unable to make decisions; and/or has equity owners that do not absorb or receive the entity’s losses and returns. VIEs encompass vehicles traditionally viewed as SPEs

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and may also include other entities or legal structures, such as certain limited-purpose subsidiaries, trusts, or investment funds. FIN 46 requires a variable interest holder (counterparty to a VIE) to consolidate the VIE if that party will absorb a majority of the expected losses of the VIE, receive a majority of the residual returns of the VIE, or both. This party is considered the primary beneficiary of the entity. The determination of whether the Company meets the criteria to be considered the primary beneficiary of a VIE requires an evaluation of all transactions (such as investments, liquidity commitments, derivatives, and fee arrangements) with the entity. The foundation for this evaluation is an expected-loss calculation prescribed by FIN 46. It has been determined that the Company is not the primary beneficiary of its VIEs (statutory business trusts established in connection with the issuance of trust preferred securities) and, accordingly, the Company has deconsolidated those trusts in its unaudited consolidated financial statements.

Under FIN 46, investments in those trusts with regard to which the Company has significant influence over operating and financing decisions (generally defined as owning a voting or economic interest of 20% to 50%), are accounted for in accordance with the equity method of accounting. These investments are generally included in “other assets” in the unaudited consolidated statement of condition; the income or loss is included in “other income” in the unaudited consolidated statement of income. In December 2003, the FASB issued a revised FIN 46 (“FIN 46R”), which further delayed the effective date until March 31, 2004 for VIEs created prior to February 1, 2003, except for SPEs, which adopted FIN 46 or FIN 46R as of December 31, 2003.

Note 3. Stock-based Compensation

The Company had eight stock option plans at March 31, 2004 and five at March 31, 2003. As the Company applies Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for these plans, no compensation cost has been recognized.

Had compensation cost for the Company’s stock option plans been determined based on the fair value at the date of grant for awards made under those plans, consistent with the method set forth in SFAS No. 123, “Accounting for Stock-based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-based Compensation—Transition and Disclosure,” the Company’s net income and earnings per share would have been reduced to the pro forma amounts indicated below:

Please see the discussion of “Accounting for Stock Options” on page 8 of this filing.

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Note 4. Borrowed Funds

The following is a summary of the Company’s borrowed funds at March 31, 2004:

At March 31, 2004, the Company had $445.9 million of outstanding junior subordinated deferrable interest debentures (“junior subordinated debentures”) held by nine trusts, as listed below, that issued guaranteed capital debentures (“capital securities”). The capital securities qualified as Tier 1 capital of the Company at quarter-end. The proceeds of each issuance were invested in a series of junior subordinated debentures of the Company. The underlying asset of each statutory business trust is the relevant debenture. The Company has fully and unconditionally guaranteed each of the obligations under each trust’s capital securities to the extent set forth in the guarantee. Each trust’s capital securities are subject to mandatory redemption, in whole or in part, upon repayment of the debentures at their stated maturity or earlier redemption. The following is a summary of the outstanding capital securities issued by each trust and the junior subordinated debentures issued by the Company to each trust as of March 31, 2004:

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Note 5. Estimated Net Periodic Pension Expense

The following table sets forth the disclosures required under SFAS No. 132 (Revised), “Employers’ Disclosures about Pensions and Other Postretirement Benefits” for the New York Community Bank Retirement Plan (the “Retirement Plan”):

As discussed in the notes to the consolidated financial statements presented in the Company’s 2003 Annual Report to Shareholders, the Company expects to contribute approximately $100,000 to the Retirement Plan in 2004.

Note 6. Impact of Accounting Pronouncements

Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity

In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.” SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity, and requires that an issuer classify financial instruments that are considered a liability (or an asset in some circumstances) when that financial instrument embodies an obligation of the issuer.

SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim period beginning after June 15, 2003. SFAS No. 150 had no impact on the Company’s consolidated statement of financial condition or results of operations upon implementation during the third quarter of 2003. In November 2003, the FASB also issued a staff position that indefinitely deferred the effective date of SFAS No. 150 for certain mandatorily redeemable non-controlling interests. The Company currently believes that the deferral of the effective date of SFAS No. 150 for certain mandatorily redeemable non-controlling interests will not have a material impact on its consolidated statement of financial condition or results of operations when implemented.

The issuance of SFAS No. 150 and FIN 46 has also resulted in the Federal Reserve Board announcing potential future reconsideration of trust preferred securities as elements of regulatory capital.

Accounting for Stock Options

In March 2004, the FASB published an Exposure Draft, “Share-based Payment, an Amendment of FASB Statements No. 123 and 95.” The Exposure Draft proposes changes in accounting that would replace existing requirements under SFAS 123 and APB Opinion No 25. Under the proposal, all forms of share-based payments to employees, including employee stock options, would be treated the same as other forms of compensation by recognizing the related cost in the income statement. The expense of the award would generally be measured at fair value at the grant date. Current accounting guidance requires that the expense relating to employee stock options only be disclosed in the footnotes to the financial statements.

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Accounting for Loan Commitments

In March 2004, the SEC issued Staff Accounting Bulletin (“SAB”) No. 105, “Application of Accounting Principles to Loan Commitments.” SAB No. 105 clarifies certain provisions of SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” which amended portions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and is effective for periods following March 31, 2004. Together, SAB No. 105 and SFAS No. 149 provide guidance with regard to accounting for loan commitments. Under SAB No. 105 and SFAS No. 149, loan commitments relating to the origination of mortgage loans that will be held for sale shall be accounted for as derivative instruments by the issuer of the commitment. At March 31, 2004, the Company had $70.1 million of one-to-four family loan commitments that will be held for sale upon origination. The adoption of SFAS No. 149 subsequent to March 31, 2004 did not have a material impact on the Company’s consolidated financial statements.

Deconsolidation of Trust Subsidiaries

In accordance with FIN 46R, the Company deconsolidated all of its trust subsidiaries on January 1, 2004, resulting in the Company recording, on a stand-alone basis, a liability to these trusts totaling $16.5 million under “borrowed funds” on the consolidated statements of financial condition. Previously, the liability was recorded in borrowed funds on the basis of the amount owed by the trust subsidiary. The impact of FIN 46R is further discussed in Notes 2 and 4 on pages 6 and 7 of this filing. The adoption of FIN 46R also resulted in the recording of the stand-alone Company’s investment in these trusts as an “other asset” in the consolidated statements of financial condition, equal to the $16.5 million increase in borrowed funds at March 31, 2004. The prior period consolidated financial statements are not retroactively adjusted for this pronouncement.

The Company’s existing interest rate swap agreements that were designated, and accounted for, as “fair value hedges,” were also impacted by the adoption of FIN 46R. The notional amount of the four interest rate swap agreements totaled $65.0 million at March 31, 2004 and equaled the amount of the fixed rate capital securities issued by the same four trust subsidiaries. The interest rate swap agreements, which convert fixed rate instruments to variable rate, have been redesignated to hedge the $65.0 million of the Company’s fixed rate junior subordinated debentures to four of its trust subsidiaries. The maturity dates, call features, and other critical terms of the “fair value hedges” match the terms of the junior subordinated debentures issued by the Company to each trust subsidiary.

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NEW YORK COMMUNITY BANCORP, INC.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-looking Statements and Associated Risk Factors

This filing, like many written and oral communications presented by New York Community Bancorp, Inc. (collectively with its subsidiaries, the “Company”) and its authorized officers, may contain certain forward-looking statements regarding the Company’s prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of said safe harbor provisions.

Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words “plan,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or similar expressions. The Company’s ability to predict results or the actual effects of its plans or strategies, including its merger with Roslyn, is inherently uncertain. Accordingly, actual results may differ materially from anticipated results.

Factors that could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to, changes in market interest rates, general economic conditions, legislation, and regulation; changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; changes in the quality or composition of the loan or investment portfolios; changes in deposit flows, competition, and demand for financial services, and loan, deposit, and investment products in the Company’s local markets; changes in accounting principles and guidelines; war or terrorist activities; and other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the Company’s operations, pricing, and services.

In addition to these factors, the following factors, among others, could cause the actual results of the Roslyn merger to differ materially from the expectations stated in this filing: the ability to successfully integrate the companies following the merger, including the retention of key personnel; the ability of the Company to effect the proposed balance sheet restructuring; the ability to fully realize the expected cost savings and revenues; and the ability to realize the expected cost savings and revenues on a timely basis.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this filing. Except as required by applicable law or regulation, the Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.

Critical Accounting Policies

The Company has identified the accounting policies below as critical to the understanding of the Company’s results of operations. Certain accounting policies are considered to be important to the portrayal of the Company’s financial condition, since they require management to make complex or subjective judgments, some of which may relate to matters that are inherently uncertain. The inherent sensitivity of the Company’s consolidated financial statements to these critical accounting policies and the judgments, estimates, and assumptions used therein could have a material impact on the Company’s results of operations or financial condition.

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Allowance for Loan Losses

The allowance for loan losses is increased by the provision for loan losses charged to operations and reduced by reversals of the provision for loan losses or by net charge-offs. Management establishes the allowance for loan losses through a process that begins with estimates of probable loss inherent in the portfolio, based on various statistical analyses, and ends with an assessment of non-rated loans. These analyses consider historical and projected default rates and loss severities; internal risk ratings; and geographic, industry, and other environmental factors. In establishing the allowance for loan losses, management also considers the Company’s current business strategies and credit processes, including compliance with stringent guidelines it has established with regard to credit limitations, credit approvals, loan underwriting criteria, and loan workout procedures. The policy of the Bank is to segment the allowance to correspond to the various types of loans in the loan portfolio. These loan categories are assessed with specific emphasis on the underlying collateral, which corresponds to the respective levels of quantified and inherent risk.

The initial assessment takes into consideration non-performing and rated loans through the valuation of the collateral supporting each loan. Non-performing loans are risk-weighted based upon an aging schedule that typically depicts either (1) delinquency, a situation in which repayment obligations are at least 90 days in arrears, or (2) serious delinquency, a situation in which a legal foreclosure action has been initiated. Based upon this analysis, a quantified risk factor is assigned to each type of non-performing loan. This results in an allocation to the overall allowance for the corresponding type and severity of each non-performing loan category.

The final assessment for the allowance for loan losses includes the review of performing loans, also reviewed by collateral type, with similar risk factors being assigned. These risk factors take into consideration, among other matters, the borrower’s ability to pay and the Bank’s past loan loss experience with each type of loan. The performing loan categories are also assigned quantified risk factors, which result in allocations to the allowance that correspond to the individual types of loans in the portfolio.

In order to determine its overall adequacy, the allowance for loan losses is reviewed quarterly by management and the Mortgage and Real Estate Committee of the Board of Directors (the “Board”).

Various factors are considered, and processes followed, in determining the appropriate level of the allowance for loan losses. These factors and processes include, but are not limited to:

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While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary, based on changes in economic and local market conditions beyond management’s control. In addition, the Bank may be required to take certain charge-offs and/or recognize additions to the loan loss allowance, based on the judgment of the aforementioned regulators with regard to information provided to them during their examinations.

Employee Benefit Plans

The Company provides a range of benefits to its employees and retired employees, including pensions and post-retirement health care and life insurance benefits. The Company records annual amounts relating to these plans based on calculations specified by GAAP, which include various actuarial assumptions, such as discount rates, assumed rates of return, assumed rates of compensation increases, turnover rates, and health care cost trends. The Company reviews its actuarial assumptions on an annual basis and makes modifications to the assumptions based on current rates and trends when it is deemed appropriate to do so. As required by GAAP, the effect of the modifications are generally recorded or amortized over future periods. The Company believes that the assumptions utilized in recording its obligations under its employee benefit plans are reasonable, based upon the advice of its actuaries.

Investment in Debt and Equity Securities

The Company’s portfolio of available-for-sale securities is carried at estimated fair value, with any unrealized gains and losses, net of taxes, reported as accumulated other comprehensive income or loss in stockholders’ equity. Securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity and are carried at amortized cost. The market values of the Company’s securities, particularly fixed-rate mortgage-backed and –related securities, are affected by changes in interest rates. In general, as interest rates rise, the market value of fixed rate securities will decrease; as interest rates fall, the market value of fixed rate securities will increase. The Company conducts a periodic review and evaluation of the securities portfolio to determine if the decline in the fair value of any security below its carrying value is other than temporary. Estimated fair values for securities are based on published or securities dealers’ market values. If the Company deems any decline in value to be other than temporary, the security is written down to a new cost basis and the resulting loss is charged against earnings. There were no securities write-downs during the three months ended March 31, 2004.

Goodwill Impairment

Goodwill is presumed to have an indefinite useful life and is tested for impairment, rather than amortized, at the reporting unit level at least once a year. Impairment exists when the carrying amount of goodwill exceeds its implied fair value. If the fair value of a reporting unit exceeds its carrying amount at the time of testing, the goodwill of the reporting unit is not considered impaired. According to SFAS No. 142, “Goodwill and Other Intangible Assets,” quoted market prices in active markets are the best evidence of fair value and are to be used as the basis for the measurement, when available. Other acceptable valuation methods include present-value measurements based on multiples of earnings or revenues or similar performance measures.

For the purpose of goodwill impairment testing, the Company has identified one reporting unit. The Company performed its annual goodwill impairment test in June 2003 and determined that the fair value of the reporting unit was in excess of its carrying value, using the quoted market price of the Company’s common stock on the impairment testing date as the basis for determining fair value. As of the annual impairment test date, there was no indication of goodwill impairment.

Goodwill would be tested for impairment between annual tests if an event were to occur or circumstances were to change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. As of March 31, 2004, there were no such events or changes in circumstances. Differences in the identification of reporting units and the use of valuation techniques could result in materially different evaluations of impairment.

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Income Taxes

The Company has established reserves for possible payments to various taxing authorities with respect to the admissibility and timing of tax deductions. Management has made certain assumptions and judgments concerning the eventual outcome of these items. Such assumptions and judgments are continually reviewed to address any changes that may arise.

Overview

New York Community Bancorp, Inc. is the holding company for New York Community Bank (the “Bank”) and the third largest thrift in the nation, based on its current market capitalization. Unless otherwise stated, all references to share and per-share amounts in this filing have been adjusted to reflect 4-for-3 stock splits on February 17, 2004 and May 21, 2003.

The Bank currently serves its customers through a network of 141 banking offices in New York City, Long Island, Westchester County, and New Jersey. Of these, 88 are traditional branches (including one that opened on April 27, 2004), 52 are located in-store, and one is a customer service center. The Bank operates its branch network through seven community-based divisions, each of which represents the Bank in a specific county or community. In New York, the Bank operates through five divisions: Queens County Savings Bank, with 33 branches located in Queens; Roslyn Savings Bank, with 60 branches located on Long Island and one in the Bronx; Richmond County Savings Bank, with 23 locations on Staten Island; Roosevelt Savings Bank, with nine branches located in Brooklyn; and CFS Bank, with four branches located in Westchester County and one each in Manhattan and the Bronx. In New Jersey, the Bank operates through two divisions: First Savings Bank of New Jersey, with four branches located in Bayonne (Hudson County); and Ironbound Bank, with five branches in Essex and Union counties.

In addition to operating the largest supermarket banking franchise in the New York metro region, the Bank ranks among the region’s leading producers of multi-family mortgage loans. The majority of the Company’s multi-family loans are made on rent-controlled and rent–stabilized buildings in the five boroughs of New York City.

The Company combines the strengths of four financial institutions: Queens County Bancorp, Inc., which changed its name to New York Community Bancorp, Inc. on November 21, 2000; Haven Bancorp, Inc. (“Haven”), which was acquired by the Company in a purchase transaction on November 30, 2000; Richmond County Financial Corp. (“Richmond County”), which merged with and into the Company in a purchase transaction on July 31, 2001; and Roslyn Bancorp, Inc. (“Roslyn”), which merged with and into the Company in a purchase transaction that was announced on June 27, 2003 and completed four months later, on October 31st.

Reflecting the 4-for-3 stock split on February 17, 2004, an offering of 13.5 million shares of the Company’s common stock completed on January 30, 2004, and 2,144,374 shares repurchased in the first quarter of 2004, the number of shares outstanding at March 31, 2004 was 270,889,752. Included in the latter number were 1,179,833 shares repurchased under the Board’s five million-share repurchase authorization on February 26, 2004. An additional five million-share repurchase was authorized on April 20, 2004, to commence upon completion of the earlier authorization; as of May 5, 2004, a total of 3,148,478 shares had been repurchased under the authorization on April 20, 2004.

At March 31, 2004, the Company had total assets of $26.5 billion, up $3.1 billion, or 13.0%, from the balance recorded at December 31, 2003. Loans, net, represented $10.8 billion, or 40.9%, of total assets at the close of the current first quarter, and were up $418.7 million, or 4.0%, from the 2003 year-end amount. In the first quarter of 2004, the Company originated total loans of $1.1 billion (a first quarter record), including $706.1 million secured by multi-family buildings. At March 31, 2004, multi-family loans represented $7.8 billion, or 71.4%, of total loans outstanding, signifying an increase of $426.9 million, or 5.8%, from the balance at year-end 2003. The increase in assets was also fueled by an increase in securities investments, reflecting the leveraging of the net proceeds of the Company’s follow-on common stock offering completed on January 30th, which totaled $399.5 million. At March

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31, 2004, securities totaled $12.1 billion, up $2.6 billion, or 27.6%, from the balance recorded at December 31, 2003. Included in the March 31, 2004 amount were $8.3 billion of securities available for sale and $3.8 billion of securities held to maturity.

On the liability side of the balance sheet, core deposits rose $173.8 million, or 2.9%, to $6.1 billion, tempering a $475.8 million, or 10.9%, decline in certificates of deposit (“CDs”) to $3.9 billion. The net effect was a $302.0 million, or 2.9%, decline in total deposits to $10.0 billion from the level recorded at December 31, 2003. Borrowed funds totaled $12.7 billion at March 31, 2004, up $2.7 billion, or 27.7%, from the year-end 2003 balance; the increase reflects the Company’s leveraged growth strategy. The growth of the balance sheet was largely funded through the Company’s use of Wall Street brokerage firm and Federal Home Loan Bank of New York (“FHLB-NY”) repurchase agreements, and by the cash flows produced by the securities portfolio.

Consistent with its actions in the wake of its previous merger transactions, the Company is in the process of restructuring the post-Roslyn merger balance sheet. As more of the Company’s cash flows are deployed into multi-family loan production, such loans will likely be restored to their pre-merger concentration, while the portfolio of securities will be reduced through sales, repayments, and redemptions and the portfolios of one-to-four family loans and other loans will be reduced through repayments or sales. With regard to liabilities, the Company would expect to see a continued rise in low-cost core deposits in tandem with a reduction in higher cost CDs. At the same time, the Company’s borrowed funds will increasingly consist of repurchase agreements with Wall Street brokerage firms.

Stockholders’ equity totaled $3.4 billion at March 31, 2004, signifying a $527.9 million, or 18.4%, increase from the balance recorded at year-end 2003. Excluding the goodwill and core deposit intangibles (“CDI”) stemming from the Company’s merger transactions, which totaled $1.9 billion and $96.1 million, respectively, the Company had tangible stockholders’ equity of $1.4 billion at March 31, 2004. The latter amount was equivalent to 5.55% of tangible assets and a tangible book value per share of $5.11, based on 265,924,052 shares. The increase in tangible stockholders’ equity reflects a $62.7 million, or 93.0%, rise in net income to $130.0 million and a $25.6 million increase in other cash contributions to tangible stockholders’ equity to $30.5 million.

In the first quarter of 2004, the Company utilized the growth in its stockholders’ equity to distribute dividends totaling $55.8 million and to repurchase 2,144,374 shares of the Company’s common stock for a total of $69.5 million.

In the first quarter of 2004, the Company took steps to enhance its tangible capital levels, generating net proceeds of $399.5 million through the aforementioned follow-on offering of 13.5 million shares of its common stock. Of the net proceeds generated, $300.0 million were contributed to the Bank, which used the funds for various purposes, including loan production. The remaining proceeds were primarily used by the Company for the payment of dividends, share repurchases, and the purchase of short-term money market investments.

In the first quarter of 2004, the Company increased its quarterly cash dividend for the fifth consecutive quarter; the $0.21 per share dividend was 50.0% higher than the dividend paid in the first quarter of 2003. In the second quarter of 2004, the upward trend continued, with the Board raising the quarterly cash dividend 19.0% to $0.25 per share.

Fueled by interest-earning asset growth, and the three-month benefit of the Roslyn merger, the Company recorded first quarter 2004 net income of $130.0 million, up 93.0% from $67.4 million in the first quarter of 2003. The first quarter 2004 amount was equivalent to $0.48 on a diluted per share basis, representing a 29.7% increase from $0.37 in the first quarter of 2003.

Recent Events

Dividend Increase

On April 20, 2004, the Board of Directors of the Company declared a quarterly cash dividend of $0.25 per share, payable on May 17, 2004 to shareholders of record at May 3, 2004. The $0.25 dividend is $0.04, or 19.0%, higher than the split-adjusted dividend paid in the first quarter of 2004 and $0.09, or 56.3%, higher than the split-adjusted dividend paid in May 2003.

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Share Repurchase Authorization

On April 20, 2004, the Board of Directors of the Company authorized the repurchase of up to five million shares of the Company’s common stock. The repurchase of shares commenced upon completion of the Company’s five million-share repurchase authorized on February 26, 2004.

Financial Condition

At March 31, 2004, the Company recorded total assets of $26.5 billion, signifying a $3.1 billion, or 13.0%, increase from the balance recorded at December 31, 2003. The growth in total assets was fueled by organic loan production and the leveraged growth of the Company’s securities portfolio. Additional funding stemmed from the proceeds of the Company’s aforementioned common stock offering on January 27th and from the liquidity of the securities portfolio.

Loans, net, increased $418.7 million, or 4.0%, to $10.8 billion at March 31, 2004 from $10.4 billion at December 31, 2003. The growth of the loan portfolio was driven by an increase in mortgage loans secured by multi-family buildings and commercial real estate properties, as well as an increase in construction loans. Mortgage loans represented $10.8 billion, or 40.7%, of total assets at March 31, 2004, and were up $595.2 million, or 5.8%, from the year-end 2003 amount. The increase reflects year-to-date mortgage originations totaling $1.1 billion, net of principal repayments totaling $491.3 million.

The production of multi-family loans continued to be the Company’s primary focus during the first quarter of 2004. Multi-family loans represented $706.1 million, or 65.9%, of first quarter 2004 loan originations and $7.8 billion, or 72.3%, of mortgage loans outstanding at March 31st. The quarter-end balance was up $426.9 million, or 5.8%, from the year-end 2003 balance, equivalent to an annualized growth rate of 23.2%. The Company also grew its commercial real estate and construction loan portfolios during the current first quarter. Commercial real estate loans increased $133.7 million, or 9.3%, to $1.6 billion, and construction loans increased $93.6 million, or 14.5%, to $737.1 million from December 31, 2003 to March 31, 2004.

The Company also maintained its policy of originating one-to-four family mortgage loans and consumer loans on a conduit basis, and selling such loans to a third party within ten business days of such loans being closed. Reflecting this policy, and a high volume of repayments during the quarter, one-to-four family loans decreased $58.9 million, or 8.1%, to $672.1 million at March 31, 2004, representing 6.2% of mortgage loans outstanding at that date.

Other loans decreased $177.7 million, or 57.0%, to $133.9 million at the close of the current first quarter, reflecting the Company’s conduit policy and the sale of $129.9 million of home equity loans acquired in the Roslyn merger during the first quarter of 2004.

The first quarter of 2004 was the Company’s 38th consecutive quarter without any net charge-offs against the allowance for loan losses. In addition, the balance of non-performing loans declined to $29.7 million, representing 0.27% of loans, net, at March 31, 2004 from $34.3 million, representing 0.33% of loans, net, at December 31, 2003. Non-performing assets totaled $29.9 million, representing 0.11% of total assets, at the close of the current first quarter, an improvement from $34.4 million, representing 0.15% of total assets, at December 31, 2003. The reduction in non-performing loans drove the improvement in non-performing assets, and offset an increase of $129,000 in foreclosed real estate to $221,000.

In the absence of any net charge-offs or provisions for loan losses, the loan loss allowance was maintained at $78.3 million, equivalent to 263.79% of non-performing loans and 0.72% of loans, net, at March 31, 2004.

The Company continued to capitalize on the steepness of the yield curve in the first quarter of 2004, investing borrowed funds into securities with attractive yields and limited extension risk. This leveraged growth strategy is reflected in the $2.6 billion net increase in total securities to $12.1 billion at March 31, 2004 from the balance recorded at December 31, 2003. During this time, securities available for sale rose $2.0 billion, or 32.1%, to $8.3 billion, while securities held to maturity rose $603.9 million, or 18.7%, to $3.8 billion.

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The increase in available-for-sale securities reflects a $2.0 billion, or 36.9%, rise in mortgage-backed and -related securities, offset by a $12.2 million, or 1.6%, decline in debt and equity securities. The increase in held-to-maturity securities reflects a rise of $719.4 million, or 60.7%, in the debt and equity securities portfolio, which was offset by a decline of $115.5 million, or 5.7%, in the mortgage-backed and –related securities portfolio.

Other assets totaled $765.6 million at March 31, 2004, up $131.2 million, or 20.7%, from the total at year-end 2003. Included in the first quarter 2004 amount was the Company’s investment in Bank-owned Life Insurance (“BOLI”), which rose $104.1 million to $479.1 million, primarily reflecting an additional purchase of $100.0 million and an increase in the cash surrender value of the policies in the current three-month period.

Consistent with the Company’s leveraged growth strategy, borrowed funds totaled $12.7 billion at March 31, 2004, up $2.7 billion from the balance recorded at December 31, 2003. The increase primarily reflects a $2.6 billion, or 38.3%, rise in repurchase agreements to $9.3 billion, coupled with a $144.8 million rise in FHLB-NY advances to $2.5 billion. Unsecured senior debt totaled $203.5 million at March 31, 2004, down $1.4 million from the balance at year-end 2003.

In accordance with the requirements of FASB Interpretation No. 46 (“FIN 46”) and its revision, FIN 46R, the Company deconsolidated its wholly-owned subsidiary trusts in the first quarter of 2004. The trusts were formed to issue mandatorily redeemable preferred securities (“trust preferred securities”) and totaled $590.1 million at December 31, 2003. The deconsolidation resulted in the Company recording preferred stock of subsidiaries totaling $162.0 million and junior subordinated debentures totaling $445.9 million at March 31, 2004, representing the remaining balance of borrowed funds at that date. For a further discussion of FIN 46 and 46R, please see Note 4 on page 7 of this filing.

The Company also realized an increase in core deposits, primarily due to an increase in NOW and money market and non-interest-bearing accounts since year-end 2003. Core deposits totaled $6.1 billion and $6.0 billion, respectively, at March 31, 2004 and December 31, 2003, representing 61.2% and 57.8% of total deposits at the respective dates. While core deposits continued to rise in volume and concentration, CDs continued to decline. CDs represented $3.9 billion, or 38.8%, of total deposits at the close of the current first quarter, as compared to $4.4 billion, or 42.2%, of the total at year-end 2003. The shift from CDs to lower cost core deposits has been a steady transition, and is indicative of management’s emphasis on attracting such deposits and the unwillingness of many customers to commit their savings to long-term accounts during a period of historically low market interest rates. The decline in CDs also reflects management’s efforts to encourage customers with maturing CDs to invest in alternative investment products, such as annuities, when appropriate.

Stockholders’ equity totaled $3.4 billion at March 31, 2004, equivalent to a book value of $12.77 per share, based on 265,924,052 shares. At December 31, 2003, stockholders’ equity was $527.9 million lower, and equivalent to a book value of $11.40, based on 251,580,425 shares. The increase reflects first quarter 2004 net income of $130.0 million, proceeds of $399.5 million from the follow-on offering on January 30th, additional net contributions to stockholders’ equity totaling $58.6 million, and a $65.1 million increase in the accumulated comprehensive gain. These contributing factors were partly offset by first quarter 2004 dividend distributions totaling $55.8 million and the allocation of $69.5 million toward the repurchase of 2,144,374 shares of the Company’s common stock.

At March 31, 2004, the Company continued to exceed the minimum federal requirements for leverage, Tier 1, and total risk-based capital, with leverage capital equal to 8.47% of adjusted average assets, and Tier 1 and total risk-based capital equal to 16.50% and 18.30% of risk-weighted assets, respectively. The respective minimum federal requirements are 5.00%, 6.00%, and 10.00%.

Mortgage and Other Loans

The Company produced a record level of first quarter loan originations in the three months ended March 31, 2004, underscoring the strength of its lending capacity. Originations totaled $1.1 billion in the current first quarter,

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up 38.9% from $771.1 million in the first quarter of 2003. Included in the March 31, 2004 amount were mortgage loans totaling $1.1 billion and other loans totaling $16.9 million. Reflecting the volume of loans produced, and the offsetting impact of repayments, mortgage loans outstanding rose 5.8% to $10.8 billion at March 31, 2004 from $10.2 billion at December 31, 2003.

The Company’s principal asset consists of multi-family loans on rent-controlled and rent-stabilized buildings, primarily located in Manhattan, Queens, and Brooklyn, three of the five boroughs of New York City. Consistent with management’s emphasis on this type of lending, multi-family loans accounted for $706.1 million, or 65.9%, of loans originated in the first quarter of 2004. In addition, multi-family loans represented $1.3 billion, or 79.7%, of the Company’s pipeline at April 20, 2004. While the Company expects to close such loans by the end of the year, its ability to do so may be impacted by such factors as a change in market interest rates or economic conditions, or an increase in competition from other thrifts and banks.

At March 31, 2004, multi-family loans totaled $7.8 billion, representing 72.3% of total mortgage loans outstanding, up $426.9 million, or 5.8%, from the balance recorded at December 31, 2003. While the high volume of originations was partly offset by first quarter 2004 repayments totaling $279.3 million, the net growth rate achieved in the current first quarter suggests that the portfolio will grow 23% by December 31, 2004. At March 31, 2004, the average loan in the multi-family loan portfolio had a principal balance of $2.5 million and a loan-to-value ratio of 57.4%. The average expected weighted life of the portfolio was 3.3 years at quarter-end.

The remainder of the loan portfolio at March 31, 2004 consisted of commercial real estate loans totaling $1.6 billion, construction loans totaling $737.1 million, and one-to-four family loans totaling $672.1 million. The portfolio of commercial real estate loans rose $133.7 million, or 9.3%, during the first three months of 2004, reflecting originations totaling $166.7 million. The portfolio of construction loans increased $93.6 million, or 14.5%, to $737.1 million, reflecting three-month originations of $144.2 million. The one-to-four family loan portfolio decreased $58.9 million, or 8.1%, during the first quarter of 2004. The decrease in one-to-four family loans reflects the volume of prepayments experienced during the quarter and the Company’s policy of selling the one-to-four family loans it originates to a third-party conduit within ten days of the loans being closed.

Other loans declined $177.7 million, or 57.0%, from the balance recorded at December 31, 2003 to $133.9 million at March 31, 2004. The reduction was primarily due to the sale of $129.9 million of home equity loans acquired in the Roslyn merger, and the continuation of the Company’s conduit policy. Reflecting the Company’s practice of originating one-to-four family and other loans for sale to a third party within ten days of closing, the balance of other loans at March 31, 2004 and December 31, 2003 included $6.2 million and $7.6 million of loans held for sale.

The reduction in other loans was sufficiently offset by the growth in mortgage loans during the quarter to produce a $418.7 million, or 4.0%, increase in loans, net, to $10.8 billion at March 31, 2004. At April 20, 2004, the pipeline of loans totaled $1.7 billion, suggesting that the Company is on track to achieve significant loan growth over the course of the year.

Asset Quality

The Company’s record of asset quality was extended in the first quarter of 2004. In addition to realizing a reduction in non-performing loans and non-performing assets, the first quarter of 2004 was the Company’s 38th consecutive quarter without any net charge-offs being recorded against the allowance for loan losses. The last net charge-off recorded by the Company dates back to the fourth quarter of 1994.

At March 31, 2004, the balance of non-performing loans totaled $29.7 million, an improvement from $34.3 million at December 31, 2003. Non-performing loans represented 0.27% of loans, net, at the close of the current first quarter, as compared to 0.33% at December 31, 2003. Included in non-performing loans at March 31, 2004 were non-accrual mortgage loans totaling $27.7 million and other non-accrual loans totaling $2.0 million.

A loan is generally classified as a “non-accrual loan” when it is 90 days past due and management has determined that the collectibility of the loan is doubtful. When a loan is placed on “non-accrual” status, the Bank ceases the accrual of interest owed, and previously accrued interest is charged against interest income. A loan is generally returned to accrual status when the loan is less than 90 days past due and the Bank has reasonable assurance that the loan will be fully collectible.

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The improvement in non-performing loans resulted in an improvement in non-performing assets, which totaled $29.9 million, representing 0.11% of total assets, at March 31, 2004. At December 31, 2003, non-performing assets totaled $34.4 million, representing 0.15% of total assets at that date. The March 31, 2004 and December 31, 2003 amounts included other real estate owned of $221,000 and $92,000, respectively.

In the absence of any net charge-offs or provisions for loan losses, the loan loss allowance was maintained at $78.3 million, representing 263.79% of non-performing loans and 0.72% of loans, net, at March 31, 2004. At December 31, 2003, the same allowance represented 228.01% of non-performing loans and 0.75% of loans, net. Based upon all relevant and presently available information, management believes that the current allowance for loan losses is adequate.

At March 31, 2004, the balance of non-accrual mortgage loans included one large commercial credit acquired in the Roslyn merger. The credit consisted of a $9.0 million loan secured by two assisted living facilities in the New York metro region. A court-appointed receiver has operated the facilities since commencement of the borrowers’ consolidated bankruptcy filing in November 2001. In the second quarter of 2004, the properties were put up to bid, with the Company emerging as the successful bidder; the facilities are now in the process of being marketed for sale. Independent third parties have valued the facilities and, based upon such independent opinion, management believes that no allocation of the allowance for loan losses to this credit was warranted as of March 31, 2004.

For more information regarding asset quality and the loan loss allowance, see the discussion of the provision for loan losses and the discussion of the allowance for loan losses in this filing.

Asset Quality Analysis

Debt, Equity, and Mortgage-backed and -related Securities

The Company continued to pursue its strategy of leveraged growth during the current first quarter, as it leveraged the proceeds of the common stock offering completed on January 30, 2004. Capitalizing on the steep yield curve, the Company increased its investments in mortgage-backed and –related securities, corporate bonds, and U.S. Government agency obligations that featured attractive spreads and limited extension risk. The result was a $2.6 billion net rise in total securities to $12.1 billion, including a $2.0 billion, or 32.1%, increase in securities available for sale to $8.3 billion and a $603.9 million increase in securities held to maturity to $3.8 billion at March 31, 2004.

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Mortgage-backed securities represented $7.5 billion, or 90.8%, of available-for-sale securities at the close of the current first quarter, as compared to $5.5 billion, or 87.6%, at December 31, 2003. The remainder of the available-for-sale portfolio at March 31, 2004 consisted of debt and equity securities. Included in the latter amount was preferred stock totaling $127.9 million, up $5.6 million; corporate bonds totaling $144.8 million, up $17.9 million; and capital trust notes totaling $419.8 million, up $20.0 million from the year-end 2003 amount.

At March 31, 2004, mortgage-backed securities represented $1.9 billion, or 50.3%, of total held-to-maturity securities, while debt and equity securities represented the remaining $1.9 billion, or 49.7%. U.S. Government agency obligations represented $1.4 billion, or 72.1%, of debt and equity securities held to maturity at quarter-end, signifying a $719.3 million, or 110.1%, increase from the balance recorded at December 31, 2003. The remainder of the held-to-maturity debt and equity securities portfolio primarily consisted of corporate bonds totaling $239.9 million, and capital trust notes totaling $275.5 million. While corporate bonds were up $190,000 from the year-end 2003 level, capital trust notes declined $116,000 over the three-month period.

The market value of mortgage-backed and –related securities held to maturity at March 31, 2004 was $2.0 billion, representing 102.5% of the carrying value of such securities at that date. At the same time, the market value of debt and equity securities held to maturity was $1.9 billion, representing 101.0% of the carrying value of such securities at March 31, 2004.

At March 31, 2004, the Company also had stock in the FHLB-NY totaling $193.5 million, as compared to $170.9 million at year-end 2003. The amount of FHLB-NY stock held is a function of the Company’s utilization of FHLB-NY borrowings, which totaled $4.0 billion at March 31, 2004.

Securities sales, repayments, and redemptions generated cash flows of $1.3 billion during the current first quarter; purchases of securities totaled $3.8 billion during this time.

Sources of Funds

On a stand-alone basis, the Company has four primary sources of funding for the payment of dividends, share repurchases, and other corporate uses: dividends paid to the Company by the Bank; capital raised through the issuance of debt instruments; capital raised through the issuance of stock; and maturities of, and income from, investments. The Bank’s ability to pay dividends to the Company is generally limited by New York State banking law and regulations and the regulations of the Federal Deposit Insurance Corporation (the “FDIC”).

The Bank’s traditional sources of funds are the deposits it gathers and the line of credit it maintains with the FHLB-NY. The Bank’s line of credit is collateralized by stock in the FHLB-NY and by certain securities and mortgage loans under a blanket pledge agreement in an amount equal to 110% of outstanding borrowings. In recent quarters, the Bank has obtained additional funding in the form of repurchase agreements, either with the FHLB-NY or major Wall Street brokerage firms. Cash flows from the interest and principal payments received on loans and from the interest on, and repayment, redemption, and sale of, mortgage-backed and other investment securities have been another significant funding source during the past several months.

Capitalizing on the steep yield curve, the Company has increased its use of borrowed funds to invest in securities featuring attractive spreads and low extension risk. In connection with this strategy, borrowed funds totaled $12.7 billion at March 31, 2004, up $2.7 billion from the balance recorded at December 31, 2003. The increase reflects a $144.8 million rise in FHLB-NY advances to $2.5 billion and a $2.6 billion rise in repurchase agreements to $9.3 billion. Of the latter amount, $7.8 billion, or 84.4%, consisted of agreements with Wall Street brokerage firms and $1.5 billion, or 15.6%, consisted of agreements with the FHLB-NY. The remainder of the Company’s borrowed funds at March 31, 2004 consisted of issued debt totaling $811.4 million.

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The Company’s funding sources at March 31, 2004 also reflect four interest rate swap agreements into which it entered in the second quarter of 2003. The agreements effectively converted four of the Company’s junior subordinated debentures from fixed to variable rate instruments. Under these agreements, which were designated, and accounted for, as “fair value hedges” aggregating $65.0 million, the Company receives a fixed interest rate equal to the interest due to the holders of the capital securities and pays a floating interest rate which is tied to the three-month LIBOR. The maturity dates, call features, and other critical terms of these derivative instruments match the terms of the junior subordinated debentures. As a result, no net gains or losses were recognized in earnings with respect to these hedges. At March 31, 2004, a $1.7 million liability, representing the fair value of the interest rate swap agreements, was recorded in “other liabilities.” An offsetting adjustment was made to the carrying amount of the junior subordinated debentures to recognize the change in their fair value.

Asset growth was also funded by a modest increase in core deposits during the three months ended March 31, 2004. Core deposits totaled $6.1 billion at that date, and represented 61.2% of total deposits, up from $6.0 billion, representing 57.8% of total deposits, at December 31, 2003. The increase in core deposits was fueled by a $252.5 million, or 11.0%, rise in NOW and money market accounts to $2.6 billion and a $10.7 million, or 1.5%, increase in non-interest-bearing accounts to $730.9 million. These increases served to offset an $89.3 million, or 3.0%, decline in savings accounts to $2.9 billion.

The increase in core deposits was partly offset by a simultaneous decline in CDs to $3.9 billion, representing 38.8% of total deposits, from $4.4 billion, representing 42.2% of total deposits, at December 31, 2003. The 10.9% reduction in CDs was consistent with management’s practice of allowing the run-off of higher cost “hot money” deposits and transitioning customers, when appropriate, into revenue-producing annuities and mutual funds sold by the Bank. The net effect of the decline in CDs and the rise in core deposits was a $302.0 million decline in total deposits to $10.0 billion at March 31, 2004.

Significant funding also stemmed from the cash flows generated by the high volume of loan repayments and from the sale, repayment, and redemption of securities. Cash flows from loans totaled $419.3 million in the current first quarter, while cash flows from securities totaled $1.3 billion during this time.

Asset and Liability Management and the Management of Interest Rate Risk

The Company manages its assets and liabilities to reduce its exposure to changes in market interest rates. The asset and liability management process has three primary objectives: to evaluate the interest rate risk inherent in certain balance sheet accounts; to determine the appropriate level of risk, given the Company’s business strategy, operating environment, capital and liquidity requirements, and performance objectives; and to manage that risk in a manner consistent with the Board of Directors’ approved guidelines.

The Company’s primary market risk lies in its exposure to interest rate volatility. The Company accordingly manages its assets and liabilities to reduce its exposure to changes in market interest rates.

In the process of managing its interest rate risk, the Company has pursued the following strategies: (1) emphasizing the origination and retention of multi-family and commercial real estate loans, which tend to refinance within three to five years; (2) originating one-to-four family and consumer loans on a conduit basis and selling them without recourse; and (3) investing in fixed rate mortgage-backed and mortgage-related securities with estimated weighted average lives of two to seven years. These strategies take into consideration the stability of the Company’s core deposits and its non-aggressive pricing policy with regard to certificates of deposit.

The actual duration of mortgage loans and mortgage-backed and –related securities can be significantly impacted by changes in prepayment levels and market interest rates. Mortgage prepayments will vary due to a number of factors, including the economy in the region where the underlying mortgages were originated; seasonal factors; demographic variables; and the assumability of the underlying mortgages. However, the largest determinants of prepayments have been prevailing interest rates and the related mortgage refinancing opportunities. Management monitors interest rate sensitivity so that adjustments in the asset and liability mix can be made on a timely basis when deemed appropriate. To enhance its management of interest rate risk, the Company engaged in four interest rate swap transactions midway through the second quarter of 2003. Under the terms of the swap, the fixed interest rate on $65.0 million of the Company’s capital securities was converted to a variable rate. The Company does not currently participate in any other activities involving hedging or the use of off-balance sheet derivative financial instruments.

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Interest Rate Sensitivity Analysis

The matching of assets and liabilities may be analyzed by examining the extent to which such assets and liabilities are “interest rate sensitive” and by monitoring a bank’s interest rate sensitivity “gap.” An asset or liability is said to be interest rate sensitive within a specific time period if it will mature or reprice within that period of time. The interest rate sensitivity gap is defined as the difference between the amount of interest-earning assets maturing or repricing within a specific time frame and the amount of interest-bearing liabilities maturing or repricing within that same period of time. In a rising interest rate environment, an institution with a negative gap would generally be expected, absent the effects of other factors, to experience a greater increase in the cost of its interest-bearing liabilities than it would in the yield on its interest-earning assets, thus producing a decline in its net interest income. Conversely, in a declining rate environment, an institution with a negative gap would generally be expected to experience a lesser reduction in the yield on its interest-earning assets than it would in the cost of its interest-bearing liabilities, thus producing an increase in its net interest income.

In the first three months of 2004, the Company continued to grow its portfolio of multi-family, commercial real estate, and construction loans while, at the same time, realizing a reduction in the portfolio of one-to-four family and consumer loans. In addition, the Company continued to invest in securities of shorter duration, primarily in the form of mortgage-backed securities and, to a lesser extent, corporate bonds and U.S. Government agency obligations. At the same time, the Company continued to take advantage of the favorable yield curve, maintaining its strategy of leveraged asset growth. Reflecting the leveraged growth of its balance sheet, the Company’s one-year gap was a negative 11.58% at March 31, 2004, as compared to the negative 0.63% one-year gap recorded at December 31, 2003.

The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at March 31, 2004, which, based on certain assumptions stemming from the Bank’s historical experience, are expected to reprice or mature in each of the future time periods shown. Except as stated below, the amounts of assets and liabilities shown as repricing or maturing during a particular time period were determined in accordance with the earlier of (1) the term to repricing, or (2) the contractual terms of the asset or liability. The table sets forth an approximation of the projected repricing of assets and liabilities at March 31, 2004 on the basis of contractual maturities, anticipated prepayments, and scheduled rate adjustments within a three-month period and subsequent selected time intervals. For mortgage and other loans (both adjustable- and fixed-rate), prepayment rates were assumed to range up to 55% annually. Mortgage-backed and mortgage-related securities were assumed to prepay at rates between 10% and 50% per year. Savings accounts were assumed to decay at a rate of 5% for the first five years and 15% for the years thereafter. NOW and money market accounts were assumed to decay at an annual rate of 20% and 50%, respectively.

Prepayment and deposit decay rates can have a significant impact on the Company’s estimated gap. While the Company believes its assumptions to be reasonable, there can be no assurance that assumed prepayment and decay rates will approximate actual future loan prepayments and deposit withdrawal activity.

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INTEREST RATE SENSITIVITY ANALYSIS