INDEPENDENCE COMMUNITY BANK CORP - 10-Q Quarterly Report

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-Q

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

OR

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-23229

INDEPENDENCE COMMUNITY BANK CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 11-3387931
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)

195 MONTAGUE STREET, BROOKLYN, NEW YORK 11201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)

(718) 722-5300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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 12-b-2 of the Exchange Act.

Yes [X] No [ ]

Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. At November 7, 2003,
the registrant had 54,404,554 shares of common stock ($.01 par value per share)
outstanding.

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INDEPENDENCE COMMUNITY BANK CORP.

TABLE OF CONTENTS

1

INDEPENDENCE COMMUNITY BANK CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

See accompanying notes to consolidated financial statements.
2

INDEPENDENCE COMMUNITY BANK CORP.

CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

See accompanying notes to consolidated financial statements.
3

INDEPENDENCE COMMUNITY BANK CORP.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

See accompanying notes to consolidated financial statements.

4

INDEPENDENCE COMMUNITY BANK CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

See accompanying notes to consolidated financial statements.
5

INDEPENDENCE COMMUNITY BANK CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION/FORM OF OWNERSHIP

Independence Community Bank was originally founded as a New York-chartered
savings bank in 1850. In April 1992, the Bank reorganized into the mutual
holding company form of organization pursuant to which the Bank became a wholly
owned stock savings bank subsidiary of a newly formed mutual holding company
(the "Mutual Holding Company").

On April 18, 1997, the Board of Directors of the Bank and the Board of
Trustees of the Mutual Holding Company adopted a Plan of Conversion to convert
the Mutual Holding Company to the stock form of organization and simultaneously
merge it with and into the Bank and all of the outstanding shares of Bank common
stock held by the Mutual Holding Company would be cancelled (the "Conversion").

As part of the conversion and reorganization, Independence Community Bank
Corp. (the "Company") was incorporated under Delaware law in June 1997. The
Company is regulated by the Office of Thrift Supervision ("OTS") as a registered
savings and loan holding company. The Company completed its initial public
offering on March 13, 1998, issuing 70,410,880 shares of common stock resulting
in proceeds of $685.7 million, net of $18.4 million of expenses. The Company
used $343.0 million, or approximately 50% of the net proceeds, to purchase all
of the outstanding stock of the Bank. The Company also loaned $98.9 million to
the Company's Employee Stock Ownership Plan (the "ESOP") which used such funds
to purchase 5,632,870 shares of the Company's common stock in the open market
subsequent to completion of the initial public offering. As part of the Plan of
Conversion, the Company formed the Independence Community Foundation (the
"Foundation") and concurrently with the completion of the initial public
offering donated 5,632,870 shares of common stock of the Company valued at the
time of their contribution at $56.3 million. The Foundation was established in
order to further the Company's and the Bank's commitment to the communities they
serve.

Additionally, the Bank established, in accordance with the requirements of
the New York State Banking Department (the "Department"), a liquidation account
for the benefit of depositors of the Bank as of March 31, 1996 and September 30,
1997 in the amount of $319.7 million, which was equal to the Bank's total equity
as of the date of the latest consolidated statement of financial condition
(August 31, 1997) appearing in the final prospectus used in connection with the
Conversion. The liquidation account is reduced as, and to the extent that,
eligible and supplemental eligible account holders (as defined in the Bank's
plan of conversion) have reduced their qualifying deposits as of each March
31st. Subsequent increases in deposits do not restore an eligible supplemental
account holder's interest in the liquidation account. In the event of a complete
liquidation of the Bank, each eligible account holder or supplemental eligible
account holder will be entitled to receive a distribution from the liquidation
account in an amount proportionate to the adjusted qualifying balances for
accounts then held.

In addition to the restriction described above, the Bank may not declare or
pay cash dividends on its shares of common stock if the effect thereof would
cause the Bank's stockholder's equity to be reduced below applicable regulatory
capital maintenance requirements or if such declaration and payment would
otherwise violate regulatory requirements.

The Bank provides financial services primarily to individuals and small to
medium-sized businesses within the New York City metropolitan area. The Bank is
subject to regulation by the Federal Deposit Insurance Corporation ("FDIC") and
the Department.

The Board of Directors declared the Company's twenty-first consecutive
quarterly cash dividend on October 24, 2003. The dividend amounted to $0.20 per
share of common stock and is payable on November 20, 2003 to stockholders of
record on November 6, 2003.

On October 25, 2002 the Company announced that its Board of Directors
authorized the tenth stock repurchase plan for up to an additional three million
shares of the Company's outstanding common shares. On July 24, 2003, the Company
announced that its Board of Directors authorized the eleventh stock repurchase
6

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

plan for up to an additional three million shares of the Company's issued and
outstanding common stock. The Company completed its tenth repurchase program and
commenced its eleventh repurchase program on August 26, 2003. As of September
30, 2003, a total of 209,671 shares had been repurchased at an average cost of
$32.82 per share and 2,790,329 shares remained to be purchased under the
eleventh repurchase plan. Repurchases will be made by the Company from time to
time in open-market transactions as, in the opinion of management, market
conditions warrant.

The repurchased shares are held as treasury stock. A portion of such shares
was utilized to fund the stock portion of the merger consideration paid in two
acquisitions of other financial institutions by the Company in prior years as
well as consideration paid in October 2002 to increase the Company's minority
equity investment in Meridian Capital Group LLC ("Meridian"), a New York-based
mortgage brokerage firm. Treasury shares also are being used to fund the
Company's stock benefit plans, in particular, the 1998 Stock Option Plan
("Option Plan"), the Directors Fee Plan and the 2002 Stock Incentive Plan
("Stock Incentive Plan").

During the nine months ended September 30, 2003, the Company repurchased
2,765,900 shares of its common stock at a cost of $77.8 million, or an average
cost of $28.15 per share. The Company also issued 794,161 shares of treasury
stock in connection with the exercise of options and the payment of directors
fees in shares of common stock at a value of $12.7 million. At September 30,
2003, the Company had repurchased a total of 33,512,516 shares pursuant to the
eleven repurchase programs at an aggregate cost of $553.9 million and reissued
11,745,925 shares at an aggregate value of $171.3 million.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Financial Statement Presentation

The accompanying consolidated financial statements of the Company were
prepared in accordance with instructions to Form 10-Q and therefore do not
include all the information or footnotes necessary for a complete presentation
of financial condition, results of operations and cash flows in conformity with
accounting principles generally accepted in the United States of America. All
normal, recurring adjustments which, in the opinion of management, are necessary
for a fair presentation of the consolidated financial statements have been
included. Certain reclassifications have been made to the prior years' financial
statements to conform with the current year's presentation. The Company uses the
equity method of accounting for investments in less than majority-owned
entities.

The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires that
management make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from those
estimates.

The results of operations for the nine months ended September 30, 2003 are
not necessarily indicative of the results to be expected for the year ending
December 31, 2003. These interim financial statements should be read in
conjunction with the Company's consolidated audited financial statements and the
notes thereto contained in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2002 ("2002 Annual Report").

Critical Accounting Estimates

The Company has identified the evaluation of the allowance for loan losses,
goodwill and deferred tax assets as critical accounting estimates where amounts
are sensitive to material variation. Critical accounting estimates are
significantly affected by management judgment and uncertainties and there is a
likelihood that materially different amounts would be reported under different,
but reasonably plausible, conditions or

7

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

assumptions. A description of these policies, which significantly affect the
determination of the Company's financial condition and results of operations are
summarized in Note 2 ("Summary of Significant Accounting Policies") of the
Consolidated Financial Statements in the 2002 Annual Report.

Stock Compensation Expense

For stock options granted prior to January 1, 2003, the Company used the
intrinsic value based methodology which measured compensation cost for such
stock options as the excess, if any, of the quoted market price of the Company's
stock at the date of the grant over the amount an employee or non-employee
director must pay to acquire the stock. To date, no compensation expense has
been recorded at the time of grant for stock options granted prior to January 1,
2003, since, for all granted options, the market price on the date of grant
equaled the amount employees or directors must pay to acquire the stock.
However, compensation expense has been recognized as a result of the accelerated
vesting of options occurring upon the retirement of senior officers. Under the
terms of the Company's option plans, unvested options held by retiring senior
officers and non-employee directors of the Company only vest upon retirement if
the Board of Directors or the Committee administering the option plan allow the
acceleration of the vesting of such unvested options.

Effective January 1, 2003, the Company recognizes stock-based compensation
expense on options granted subsequent to January 1, 2003 in accordance with the
fair value-based method of accounting described in Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation,
as amended." See Note 5 hereof.

Comprehensive Income

Comprehensive income includes net income and all other changes in equity
during a period, except those resulting from investments by owners and
distributions to owners. Other comprehensive income includes revenues, expenses,
gains and losses that under generally accepted accounting principles are
included in comprehensive income, but excluded from net income. Comprehensive
income and accumulated other comprehensive income are reported net of related
income taxes. Accumulated other comprehensive income consists of unrealized
gains and losses on available-for-sale securities, net of related income taxes
and the change in fair value of interest rate swap agreements, net of related
income taxes, designated as cash flow hedges.

Business

The Company's principal business is conducted through the Bank, which is a
full-service, community-oriented financial institution headquartered in
Brooklyn, New York. As of September 30, 2003, the Bank operated 79 banking
offices located in the greater New York Metropolitan area, which includes the
five boroughs of New York City, Nassau, Suffolk and Westchester counties of New
York and the northern New Jersey counties of Essex, Union, Bergen, Hudson and
Middlesex. The Company currently expects to expand its branch network through
the opening of approximately ten branch offices during the next twelve to
eighteen months. During the nine months ended September 30, 2003, the Company
opened six new branch offices, four in Manhattan, one in Queens and one in
northern New Jersey. During July 2003, the Company announced the expansion of
its commercial real estate lending activities to the Baltimore-Washington market
and Boca Raton, Florida market. The Company expects the loans to be generated in
these areas to be referred primarily by Meridian, which already has an
established presence in these market areas.

The Bank's deposits are insured by the Bank Insurance Fund and the Savings
Association Insurance Fund administered by the FDIC to the maximum extent
permitted by law. The Bank is subject to examination and regulation by the FDIC,
which is the Bank's primary federal regulator, and the Department, which is the
Bank's chartering authority and its primary state regulator. The Bank also is
subject to certain reserve requirements established by the Board of Governors of
the Federal Reserve System and is a member of the Federal Home Loan Bank
("FHLB") of New York, which is one of the 12 regional banks comprising the

8

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FHLB system. The Company is subject to the examination and regulation of the OTS
as a registered savings and loan holding company.

3. IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS

Obligations Associated with Disposal Activities

In July 2002, the FASB issued SFAS No. 146 "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS No. 146"). SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The
standard requires costs associated with exit or disposal activities to be
recognized when they are incurred rather than at the date of a commitment to an
exit or disposal plan. SFAS No. 146 is effective for exit or disposal activities
that are initiated after December 31, 2002, with earlier application permitted.
The adoption of SFAS No. 146 effective January 1, 2003 did not have a material
impact on the Company's financial condition or results of operations.

Accounting for Stock-Based Compensation

In December 2002, the FASB issued Statement of Financial Accounting
Standards No. 148 "Accounting for Stock-Based Compensation -- Transition and
Disclosure" ("SFAS No. 148"). SFAS No. 148 amends FASB Statement No. 123
"Accounting for Stock-Based Compensation" ("SFAS No. 123") to provide
alternative methods of transition to SFAS No. 123's fair value method of
accounting for stock-based employee compensation when a company changes from the
intrinsic value method to the fair value method of accounting for employee
stock-based compensation cost. SFAS No. 148 also amends the disclosure
provisions of SFAS No. 123 and APB Opinion No. 28 "Interim Financial Reporting"
to require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting policy with respect to stock-based employee
compensation on reported net income and earnings per share in both annual as
well as interim financial statements. The provisions of SFAS No. 148 are
effective for financial statements issued for fiscal years ending after December
15, 2002 and for financial reports containing condensed consolidated financial
statements for interim periods beginning after December 15, 2002. In January
2003, the Company announced that beginning in 2003 it will recognize
compensation expense on options granted subsequent to December 31, 2002 in
accordance with the fair value-based method of accounting described in SFAS No.
123, as amended. The implementation of SFAS No. 148 did not have a material
effect on the Company's financial condition or results of operations. See Note
5.

Consolidation of Variable Interest Entities

In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities". This interpretation of Accounting
Research Bulletin No. 51, "Consolidated Financial Statements", addresses
consolidation by business enterprises of variable interest entities with certain
characteristics. FIN 46 is effective immediately for all enterprises with
variable interests in variable interest entities created after January 31, 2003
and is effective beginning with the December 31, 2003 financial statements for
all variable interests in a variable interest entity that existed prior to
February 1, 2003. As of the date hereof, the Company does not anticipate that
the adoption of FIN 46 will have a material impact on the Company's financial
condition or results of operations.

Derivatives Instruments and Hedging Activities

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No. 149
amends and clarifies the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for

9

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

hedging activities. In addition, the statement clarifies when a contract is a
derivative and when a derivative contains a financing component that warrants
special reporting in the statement of cash flows. SFAS No. 149 is generally
effective prospectively for contracts entered into or modified, and hedging
relationships designated, after June 30, 2003. The adoption of SFAS No. 149 did
not have a material effect on the Company's financial condition or results of
operations.

Accounting for Certain Instruments with Characteristics of Both Liabilities
and Equity

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Instruments with Characteristics of Both Liabilities and Equity" ("SFAS No.
150"). SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. SFAS No. 150 requires that an issuer classify a financial instrument
that is within its scope, which may have previously been reported as equity, as
a liability (or an asset in some circumstances). This statement is effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003, except for mandatory redeemable financial instruments of nonpublic
companies. The adoption of SFAS No. 150 did not have a material impact on the
Company's financial condition or results of operations.

4. EARNINGS PER SHARE

Basic earnings per share ("EPS") is computed by dividing net income by the
weighted average number of common shares outstanding. Diluted EPS is computed
using the same method as basic EPS, but reflects the potential dilution of
common stock equivalents. Shares of common stock held by the ESOP that have not
been allocated to participants' accounts or are not committed to be released for
allocation and unvested shares held in the 1998 Recognition and Retention Plan
and Trust Agreement (the "Recognition Plan") are not considered to be
outstanding for the calculation of basic EPS. However, a portion of such shares
is considered in the calculation of diluted EPS as common stock equivalents of
basic EPS.

The following table is a reconciliation of basic and diluted
weighted-average common shares outstanding for the periods indicated.

10

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

At September 30, 2003 and September 30, 2002, there were 42,750 and 823,650
shares respectively, that could potentially dilute EPS in the future that were
not included in the computation of diluted EPS because to do so would have been
antidilutive.

5. BENEFIT PLANS

Employee Stock Ownership Plan

The Company established the ESOP for full-time employees in connection with
the Bank's Conversion. To fund the purchase in the open market of 5,632,870
shares of the Company's common stock, the ESOP borrowed funds from the Company.
The collateral for the loan is the common stock of the Company purchased by the
ESOP. The loan to the ESOP is being repaid principally from the Bank's
contributions to the ESOP over a period of 20 years. Dividends paid by the
Company on shares owned by the ESOP are also utilized to repay the debt. The
Bank contributed $5.2 million and $5.8 million to the ESOP during the nine
months ended September 30, 2003 and 2002, respectively. Dividends paid on ESOP
shares, which reduced the Bank's contribution to the ESOP and were utilized to
repay the ESOP loan, totaled $2.6 million and $2.0 million for the nine months
ended September 30, 2003 and 2002, respectively. The loan from the Company had
an outstanding principal balance of $84.8 million and $87.0 million at September
30, 2003 and December 31, 2002, respectively.

Shares held by the ESOP are held by an independent trustee for allocation
among participants as the loan is repaid. The number of shares released annually
is based upon the ratio that the current principal and interest payment bears to
the original aggregate principal and interest payments to be made. ESOP
participants become 100% vested in the ESOP after three years of service. Shares
allocated are first used to satisfy the employer matching contribution for the
401(k) Plan with the remaining shares allocated to the ESOP participants based
upon includable compensation in the year of allocation. Forfeitures from the
401(k) Plan match portions are used to reduce the employer 401(k) Plan match
while forfeitures from shares allocated to the ESOP participants will be
allocated among the participants. Compensation expense related to the 211,233
shares committed to be released during the nine months ended September 30, 2003
was $5.5 million, which was equal to the shares committed to be released by the
ESOP multiplied by the average fair value of the common stock during the period
in which they were committed to be released. At September 30, 2003, there were
1,135,892 shares allocated, 4,224,653 shares unallocated and 272,325 shares that
had been distributed to participants in connection with their withdrawal from
the ESOP. At September 30, 2003, the 4,224,653 unallocated shares had a fair
value of $148.3 million.

Recognition Plan

The Recognition Plan was implemented in September 1998, was approved by
stockholders in September 1998, and may make restricted stock awards in an
aggregate amount up to 2,816,435 shares (4% of the shares of common stock sold
in the Conversion excluding shares contributed to the Foundation). The objective
of the Recognition Plan is to enable the Company to provide officers, key
employees and non-employee directors of the Company with a proprietary interest
in the Company as an incentive to contribute to its success. During the year
ended March 31, 1999, the Recognition Plan purchased all 2,816,435 shares in
open market transactions. The Recognition Plan provides that awards may be
designated as performance share awards, subject to the achievement of
performance goals, or non-performance share awards which are subject solely to
time vesting requirements. Certain key executive officers have been granted
performance-based shares. These shares become earned only if annually
established corporate performance targets are achieved. On September 25, 1998,
the Committee administering the Recognition Plan issued grants covering
2,188,517 shares of stock of which 844,931 were deemed performance based. These
awards were fully vested as of September 30, 2003. The Committee granted
performance-based awards covering 11,000 shares in the year ended December 31,
2002 and non-performance share awards covering 88,522 shares, 91,637 shares and
105,363 shares

11

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

during the nine months ended September 30, 2003, the year ended December 31,
2002 and the nine months ended December 31, 2001, respectively.

The stock awards granted to date generally vest on a straight-line basis
over a four or five-year period beginning one year from the date of grant.
However, certain stock awards granted during the year ended December 31, 2002
will fully vest on the fourth anniversary of the date of grant. Subject to
certain exceptions, awards become 100% vested upon termination of employment due
to death, disability or retirement. However, senior officers and non-employee
directors of the Company who elect to retire, require the approval of the Board
of Directors or the Committee administering the Recognition Plan to accelerate
the vesting of these shares. The awards also become 100% vested upon a change in
control of the Company.

Compensation expense is recognized over the vesting period at the fair
market value of the common stock on the date of grant for non-performance share
awards. The expense related to performance share awards is recognized over the
vesting period at the fair market value on the measurement date. The Company
recorded compensation expense of $7.8 million and $7.2 million related to the
Recognition Plan for the nine months ended September 30, 2003 and 2002,
respectively. During the nine months ended September 30, 2003, the year ended
December 31, 2002 and the nine months ended December 31, 2001, the Committee
administering the Plan approved the accelerated vesting of awards covering
6,176, 4,400 and 42,247 shares due to the retirement of senior officers,
resulting in the recognition of $0.1 million, $0.1 million and $0.7 million of
compensation expense, respectively.

Stock Option Plans

The Company accounts for stock-based compensation on awards granted prior
to January 1, 2003 using the intrinsic value method. Since each option granted
prior to January 1, 2003 had an exercise price equal to the fair market value of
one share of the Company's stock on the date of the grant, no compensation cost
at date of grant has been recognized.

Beginning in 2003, the Company recognizes stock-based compensation expense
on options granted in 2003 and in subsequent years in accordance with the fair
value-based method of accounting described in SFAS No. 123. The fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model. There were 120,750 options granted during the nine months
ended September 30, 2003 and approximately $39,000 in compensation expense was
recognized under this statement.

1998 Stock Option Plan

The 1998 Stock Option Plan (the "Option Plan") was implemented in September
1998 and was approved by stockholders in September 1998. The Option Plan may
grant options covering shares aggregating in total 7,041,088 shares (10% of the
shares of common stock sold in the Conversion excluding the shares contributed
to the Foundation). Under the Option Plan, stock options (which expire ten years
from the date of grant) have been granted to officers, key employees and
non-employee directors of the Company. The option exercise price per share was
the fair market value of the common stock on the date of grant. Each stock
option or portion thereof is exercisable at any time on or after such option
vests and is generally exercisable until the earlier to occur of ten years after
its date of grant or six months after the date on which the optionee's
employment terminates (three years after termination of service in the case of
non-employee directors), unless extended by the Board of Directors to a period
not to exceed five years from the date of such termination. Subject to certain
exceptions, options become 100% exercisable upon termination of employment due
to death, disability or retirement. However, senior officers and non-employee
directors of the Company who elect to retire require the approval of the Board
of Directors or the Committee administering the Option Plan to accelerate the
vesting of options. Options become 100% vested upon a change in control of the
Company.

12

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

On September 25, 1998, the Board of Directors issued options covering
6,103,008 shares of common stock vesting over a five-year period at a rate of
20% per year, beginning one year from date of grant. These options were fully
vested as of September 30, 2003. The Board of Directors granted options covering
120,750 shares, 93,000 shares and 300,500 shares during nine months ended
September 30, 2003, the year ended December 31, 2002 and the nine months ended
December 31, 2001, respectively. These option awards generally vest on a
straight-line basis over a four or five-year period, beginning one year from the
date of grant. The granting of the options during the nine months ended
September 30, 2003 resulted in the recognition of approximately $39,000 of
compensation expense during such period as a result of the Company's earlier
adoption of SFAS No. 123. In the nine months ended September 30, 2003, the year
ended December 31, 2002 and the nine months ended December 31, 2001, the
Committee administering the Plan approved the accelerated vesting of 30,000,
8,000 and 105,617 options due to the retirement of senior officers, resulting in
$0.2 million, $0.1 million and $0.6 million of compensation expense,
respectively. At September 30, 2003, there were options covering 5,166,477
shares outstanding pursuant to the Option Plan.

2002 Stock Incentive Plan

The 2002 Stock Incentive Plan ("Stock Incentive Plan") was approved by
stockholders at the May 23, 2002 annual meeting. The Stock Incentive Plan may
grant options covering shares aggregating an amount equal to 2,800,000 shares.
The Stock Incentive Plan also provides for the ability to issue restricted stock
awards which cannot exceed 560,000 shares and which are part of the 2,800,000
shares. Options awarded to date under the Stock Incentive Plan generally vest
over a four-year period at a rate of 25% per year and expire ten years from the
date of grant. The Board of Directors granted options covering 789,650 shares
during the year ended December 31, 2002. The granting of these options did not
affect the Company's results of operations for the nine months ended September
30, 2003 or its statement of condition at September 30, 2003. There were no
options granted from the Stock Incentive Plan during the nine months ended
September 30, 2003. At September 30, 2003, there were 775,700 options and no
restricted share awards outstanding related to this plan.

Other Stock Plans

Broad National Bancorporation ("Broad") and Statewide Financial Corp.
("Statewide")(companies the Company acquired in 1999 and 2000, respectively)
maintained several stock option plans for officers, directors and other key
employees. Generally, these plans granted options to individuals at a price
equivalent to the fair market value of the stock at the date of grant. Options
awarded under the plans generally vested over a five-year period and expired ten
years from the date of grant. In connection with the Broad and Statewide
acquisitions, options which were converted by election of the option holders to
options to purchase the Company's common stock totaled 602,139 and became 100%
exercisable at the effective date of the acquisitions. At September 30, 2003,
there were 128,784 options outstanding related to these plans.

13

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table compares reported net income and earnings per share to
net income and earnings per share on a pro forma basis for the periods
indicated, assuming that the Company accounted for stock-based compensation
based on the fair value of each option grant as required by SFAS No. 123. The
effects of applying SFAS No. 123 in this pro forma disclosure are not indicative
of future amounts.

- ---------------

(1) Includes costs associated with restricted stock awards granted pursuant to
the Recognition Plan and stock option grants awarded under the various stock
option plans.

14

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

6. SECURITIES AVAILABLE-FOR-SALE

The amortized cost and estimated fair value of securities
available-for-sale at September 30, 2003 are as follows:

15

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The amortized cost and estimated fair value of securities
available-for-sale at December 31, 2002 are as follows:

7. LOANS AVAILABLE-FOR-SALE

Loans available-for-sale are carried at the lower of aggregate cost or fair
value and are summarized as follows:

Fannie Mae Loan Sale Program

The Company originates and sells multi-family residential mortgage loans in
the secondary market to Fannie Mae while retaining servicing. The Company
underwrites these loans using its customary underwriting standards, funds the
loans, and sells the loans to Fannie Mae at agreed upon pricing thereby
eliminating rate and basis exposure to the Company. The Company can originate
and sell loans to Fannie Mae for not more than $20.0 million per loan. During
the nine months ended September 30, 2003, the Company originated for

16

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

sale $1.43 billion and sold $1.53 billion of fixed-rate multi-family loans in
the secondary market with servicing retained by the Company. Under the terms of
the sales program, the Company retains a portion of the associated credit risk.
The Company has a 100% first loss position on each multi-family residential loan
sold to Fannie Mae under such program until the earlier to occur of (i) the
aggregate losses on the multi-family residential loans sold to Fannie Mae
reaching the maximum loss exposure for the portfolio as a whole or (ii) until
all of the loans sold to Fannie Mae under this program are fully paid off. The
maximum loss exposure is available to satisfy any losses on loans sold in the
program subject to the foregoing limitations. Substantially all the loans sold
to Fannie Mae under this program are newly originated using the Company's
underwriting guidelines. At September 30, 2003, the Company serviced $3.32
billion of loans sold to Fannie Mae pursuant to this program with a maximum
potential loss exposure of $180.5 million.

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

Although all of the loans serviced for Fannie Mae (both loans originated
for sale and loans sold from portfolio) are currently fully performing, the
Company has established a liability related to the fair value of the retained
credit exposure. This liability represents the amount that the Company would
have to pay a third party to assume the retained recourse obligation. The
estimated liability represents the present value of the estimated losses that
the portfolio is projected to incur based upon a standard Department of Housing
and Urban Development default curve with a range of estimated losses. At
September 30, 2003 the Company had a $6.9 million liability related to the fair
value of the retained credit exposure for loans sold to Fannie Mae.

As a result of retaining servicing on $3.47 billion of loans sold to Fannie
Mae, which include both loans originated for sale and loans sold from portfolio,
the Company had a $9.4 million servicing asset at September 30, 2003.

A summary of changes in loan servicing assets, which is included in other
assets, is summarized as follows:

17

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Fannie Mae DUS Program

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

ICM Capital is an integral part of the expansion of the Company's
multi-family lending activities along the East Coast and its operations will be
coordinated with those of Meridian. The Bank has a two-thirds ownership interest
in ICM Capital and Meridian, a Delaware limited liability company, has a
one-third ownership interest. There were no loans originated under this DUS
program during the quarter ended September 30, 2003 and ICM Capital did not
effect the Company's statement of condition or results of operations for the
quarter ended September 30, 2003.

Single-Family Loan Sale Program

Over the past few years, the Company has de-emphasized the origination for
portfolio of single-family residential mortgage loans in favor of higher
yielding loan products. In November 2001, the Company entered into a private
label program for the origination of single-family residential mortgage loans
through its branch network under a mortgage origination assistance agreement
with Cendant Mortgage Corporation, doing business as PHH Mortgage Services
("Cendant"). Under this program, the Company utilizes Cendant's mortgage loan
origination platforms (including telephone and Internet platforms) to originate
loans that close in the Company's name. The Company funds the loans directly,
and, under a separate loan and servicing rights purchase and sale agreement,
sells the loans and related servicing to Cendant on a non-recourse basis at
agreed upon pricing. During the nine months ended September 30, 2003, the
Company originated for sale $138.3 million and sold $136.5 million of
single-family residential mortgage loans through the program. In the future, the
Company may continue to originate certain adjustable and fixed-rate residential
mortgage loans for portfolio retention, but at significantly reduced levels.

A summary of mortgage-banking activity income is as follows for the periods
indicated:

Mortgage loan commitments to borrowers related to loans originated for sale
are considered a derivative instrument under SFAS No. 149. In addition, forward
loan sale agreements with Fannie Mae and Cendant also meet the definition of a
derivative instrument under SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). See Note 12 hereof.

18

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. LOANS RECEIVABLE, NET

The following table sets forth the composition of the Company's loan
portfolio at the dates indicated.

The loan portfolio is concentrated primarily in loans secured by real
estate located in the greater New York City metropolitan area. The real estate
loan portfolio is diversified in terms of risk and repayment sources. The
underlying collateral consists of multi-family residential apartment buildings,
single-family residential properties and owner occupied/non-owner occupied
commercial properties. The risks inherent in these portfolios are dependent not
only upon regional and general economic stability, which affects property
values, but also the financial well being and creditworthiness of the borrowers.

During July 2003, the Company announced the expansion of its commercial
real estate lending activities to the Baltimore-Washington market and the Boca
Raton, Florida market. The Company expects the loans to be referred primarily by
Meridian, which already has an established presence in these market areas. The
Company currently expects to originate (for both portfolio and for sale) between
$300.0 million and $500.0 million of loans in the first year of operations. The
Company will review this expansion program periodically and adjust its
origination target based on market acceptance, credit performance, profitability
and other relevant factors. The Company's current exposure to the
Baltimore-Washington market area consists primarily of $89.0 million of mortgage
warehouse lines of credit and $3.5 million of commercial real estate loans.

19

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In October 2003, the Bank entered into an agreement to acquire certain
mortgage warehouse lines of credit from The Provident Bank. The acquisition,
which is expected to be completed in November 2003, will increase the Company's
existing mortgage warehouse line of credit portfolio by $207 million in lines.

9. NON-PERFORMING ASSETS

The following table sets forth information with respect to non-performing
assets identified by the Company, including non-performing loans and other real
estate owned at the dates indicated. Non-performing loans consist of non-accrual
loans and loans 90 days or more past due as to interest and principal.

- ---------------
(1) Consists primarily of FHA home improvement loans and home equity loans and
lines of credit.

(2) Reflects loans that are 90 days or more past maturity which continue to make
payments on a basis consistent with the original repayment schedule.

(3) Net of related valuation allowances.

10. ALLOWANCE FOR LOAN LOSSES

The determination of the level of the allowance for loan losses and the
periodic provisions to the allowance charged to income is the responsibility of
management. In assessing the level of the allowance for loan losses, the Company
considers the composition of its loan portfolio, the growth of loan balances
within various segments of the overall portfolio, the state of the local (and to
a certain degree, the national) economy

20

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

as it may impact the performance of loans within different segments of the
portfolio, the loss experience related to different segments or classes of
loans, the type, size and geographic concentration of loans held by the Company,
the level of past due and non-performing loans, the value of collateral securing
the loan, the level of classified loans and the number of loans requiring
heightened management oversight. The continued shifting of the composition of
the loan portfolio to be more commercial-bank like by increasing the balance of
commercial real estate and business loans and mortgage warehouse lines of credit
may increase the level of known and inherent losses in the Company's loan
portfolio.

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

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

Management believes that, based on information currently available, the
Company's allowance for loan losses at September 30, 2003 was at a level to
cover all known and inherent losses in its loan portfolio at such date that were
both probable and reasonable to estimate. In the future, management may adjust
the level of its allowance for loan losses as economic and other conditions
dictate.

21

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

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

- ---------------
(1) Includes commercial business loans, mortgage warehouse lines of credit, home
equity loans and lines of credit, automobile loans and secured and unsecured
personal loans.

(2) Non-performing loans consist of (i) non-accrual loans and (ii) loans 90 days
or more past due as to interest or principal.

11. GOODWILL AND IDENTIFIABLE INTANGIBLE ASSETS

Effective April 1, 2001, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets" ("SFAS No. 142"), which resulted in discontinuing the
amortization of goodwill. Under SFAS No. 142, goodwill is instead carried at its
book value as of April 1, 2001 and any future impairment of goodwill will
generally be recognized as non-interest expense in the period of impairment.
However, under the terms of SFAS No. 142, identifiable intangibles (such as core
deposit premiums) with identifiable lives will continue to be amortized. Core
deposit intangibles held by the Company are amortized on a straight-line basis
over seven years.

The Company's goodwill was $185.2 million at September 30, 2003 and
December 31, 2002. The Company did not recognize an impairment loss as a result
of its most recent annual impairment test effective October 1, 2003. In
accordance with SFAS No. 142, the Company tests the value of its goodwill at
least annually.

22

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the Company's identifiable intangible assets
at the dates indicated:

The following sets forth the estimated amortization expense for the years
ended December 31:

2003........................................................ $1,855
2004........................................................ $ 191
2005........................................................ $ --

Amortization expense related to identifiable intangible assets was $0.1
million and $1.7 million for the quarters ended September 30, 2003 and 2002,
respectively, and $1.7 million and $5.3 million for the nine months ended
September 30, 2003 and 2002, respectively.

12. DERIVATIVE FINANCIAL INSTRUMENTS

The Company concurrently adopted the provisions of SFAS No. 133, and SFAS
No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging
Activities -- an amendment of FASB Statement No. 133" on January 1, 2001. The
Company adopted the provisions of SFAS No. 149 effective July 1, 2003. The
Company's derivative instruments outstanding during the nine months September
30, 2003, included interest rate swap agreements designated as cash flow hedges
of variable-rate FHLB borrowings, commitments to fund loans available-for-sale
and forward loan sale agreements.

The Company's use of derivative financial instruments creates exposure to
credit risk. This credit exposure relates to losses that would be recognized if
the counterparties fail to perform their obligations under the contracts. To
mitigate its exposure to non-performance by the counterparties, the Company
deals only with counterparties of good credit standing and establishes
counterparty credit limits.

Interest Rate Swap Agreements

During 2002, the Company, entered into $200.0 million of forward starting
interest rate swap agreements as part of its interest rate risk management
process to change the repricing characteristics of certain variable-rate
borrowings. These agreements qualified as cash flow hedges of anticipated
interest payments relating to $200.0 million of variable-rate FHLB borrowings
that the Company expected to draw down during 2003 to replace existing FHLB
borrowings that were maturing during 2003.

These interest rate swap agreements required the Company to make periodic
fixed-rate payments to the swap counterparties, while receiving periodic
variable-rate payments indexed to the three month London Inter-Bank Offered Rate
("LIBOR") from the swap counterparties based on a common notional amount and
maturity date. As a result, the net impact of the swaps was to convert the
variable interest payments on the $200.0 million FHLB borrowings to fixed
interest payments the Company would make to the swap counterparties. The
notional amounts of derivatives do not represent amounts exchanged by the
parties and, thus, are not a measure of the Company's exposure through its use
of derivatives. The amounts exchanged are determined by reference to the
notional amounts and the other terms of the derivatives.

During the third quarter of 2003, the $200.0 million of interest rate swap
agreements were cancelled as the Company drew down $200.0 million of fixed-rate
FHLB borrowings resulting in a loss of $3.5 million. The

23

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

$3.5 million was paid to the counterparty and is being amortized into interest
expense as a yield adjustment over five years, which is the period in which the
related interest on the variable rate borrowings effects earnings. The amount of
the yield adjustment was $0.1 million during the quarter ended September 30,
2003. There were no interest rate swap agreements outstanding as of September
30, 2003.

Loan Commitments for Loans Originated for Sale and Forward Loan Sale
Agreements

The Company adopted new accounting requirements relating to SFAS No. 149
which requires that mortgage loan commitments related to loans originated for
sale be accounted for as derivative instruments. In accordance with SFAS No. 133
and SFAS No. 149, derivative instruments are recognized in the statement of
financial condition at fair value and changes in the fair value thereof are
recognized in the statement of operations. The Company originates single-family
and multi-family residential loans for sale pursuant to programs with Cendant
and Fannie Mae. Under the structure of the programs, at the time the Company
initially issues a loan commitment in connection with such programs, it does not
lock in a specific interest rate. At the time the interest rate is locked in by
the borrower, the Company concurrently enters into a forward loan sale agreement
with respect to the sale of such loan at a set price in an effort to manage the
interest rate risk inherent in the locked loan commitment. The forward loan sale
agreement also meets the definition of a derivative instrument under SFAS No.
133. Any change in the fair value of the loan commitment after the borrower
locks in the interest rate is substantially offset by the corresponding change
in the fair value of the forward loan sale agreement related to such loan. The
period from the time the borrower locks in the interest rate to the time the
Company funds the loan and sells it to Fannie Mae or Cendant is generally 30
days. The fair value of each instrument will rise or fall in response to changes
in market interest rates subsequent to the dates the interest rate locks and
forward loan sale agreements are entered into. In the event that interest rates
rise after the Company enters into an interest rate lock, the fair value of the
loan commitment will decline. However, the fair value of the forward loan sale
agreement related to such loan commitment should increase by substantially the
same amount, effectively eliminating the Company's interest rate and price risk.

At September 30, 2003, the Company had $219.1 million of loan commitments
outstanding related to loans being originated for sale. Of such amount, $64.5
million related to loan commitments for which the borrowers had not entered into
interest rate locks and $154.6 million which were subject to interest rate
locks. At September 30, 2003, the Company had $154.6 million of forward loan
sale agreements. The fair market value of the loan commitments with interest
rate lock was a gain of $1.8 million and the fair market value of the related
forward loan sale agreements was a loss of $1.8 million at September 30, 2003.

13. RELATED PARTY TRANSACTIONS

The Company is engaged in certain activities with Meridian. Meridian is
deemed to be a "related party" of the Company as such term is defined in
Statement of Financial Accounting Standards No. 57. Such treatment is triggered
due to the Company's accounting for the investment in Meridian using the equity
method. The Company has a 35% minority equity investment in Meridian, a New
York-based mortgage brokerage firm. Meridian refers borrowers seeking financing
of their multi-family residential and/or commercial real estate loans to the
Company as well as to numerous other financial institutions.

All loans resulting from referrals from Meridian are underwritten by the
Company using its loan underwriting standards and procedures. Meridian receives
a fee from the borrower upon the funding of the loans by the Company. The
Company generally has not paid any referral fees to Meridian. In the future, the
Company may consider paying such fees if it is deemed necessary for competitive
reasons.

The loans originated by the Company resulting from referrals by Meridian
account for a significant portion of the Company's total loan originations. In
addition, referrals from Meridian accounted for the substantial majority of the
loans originated for sale in 2003. The ability of the Company to continue to

24

INDEPENDENCE COMMUNITY BANK CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

originate multi-family residential and commercial real estate loans at the
levels experienced in the past may be a function of, among other things,
maintaining the Meridian relationship.

During the third quarter of 2003, the Company announced that ICM Capital, a
newly formed subsidiary of the Bank, was approved as a DUS mortgage lender by
Fannie Mae. The Bank has a two-thirds ownership interest in ICM Capital and
Meridian has a one-third ownership interest.

Under the DUS program, ICM Capital will underwrite, fund and sell mortgages
on multi-family residential properties to Fannie Mae, with servicing retained.
Participation in the DUS program requires ICM Capital to shares the risk of loan
losses with Fannie Mae with one-third of all losses assumed by ICM Capital and
two-thirds of all losses assumed by Fannie Mae. ICM Capital will be an integral
part of the expansion of the Company's multi-family lending activities along the
East Coast and will work closely with Meridian. There were no loans originated
under this DUS program during the quarter ended September 30, 2003 and ICM
Capital did not effect the Company's statement of condition or results of
operations for the quarter ended September 30, 2003.

The Company has also entered into other transactions with Meridian in the
normal course of business. Meridian and several of its executive officers have
depository relationships with the Bank. In addition, the Bank has made five
residential mortgage loans in the ordinary course of the Bank's business to
certain of the individual executive officers of Meridian.

25

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

The Company's results of operations depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets, which principally consist of loans, mortgage-related securities and
investment securities, and interest expense on interest-bearing liabilities,
which consist of deposits and borrowings. Net interest income is determined by
the Company's interest rate spread (i.e., the difference between the yields
earned on its interest-earning assets and the rates paid on its interest-bearing
liabilities) and the relative amounts of interest-earning assets and
interest-bearing liabilities.

The Company's results of operations also are affected by (a) the provision
for loan losses resulting from management's assessment of the level of the
allowance for loan losses, (b) its non-interest income, including service fees
and related income, mortgage-banking activities and gains and losses from the
sales of loans and securities, (c) its non-interest expense, including
compensation and employee benefits, occupancy expense, data processing services,
amortization of intangibles, and (d) income tax expense.

The Bank is a community-oriented bank, which emphasizes customer service
and convenience. As part of this strategy, the Bank offers products and services
designed to meet the needs of its retail and commercial customers. The Company
generally has sought to achieve long-term financial strength and stability by
increasing the amount and stability of its net interest income and non-interest
income and by maintaining a high level of asset quality. In pursuit of these
goals, the Company has adopted a business strategy of controlled growth,
emphasizing commercial real estate and multi-family residential lending,
commercial business lending, mortgage warehouse lines of credit and retail and
commercial deposit products, while maintaining asset quality and stable
liquidity.

FORWARD LOOKING INFORMATION

In addition to historical information, this Quarterly Report on Form 10-Q
includes certain "forward-looking statements" based on current management
expectations. The Company's actual results could differ materially, as defined
in the Securities Act of 1933 and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), from management's expectations. Such
forward-looking statements include statements regarding management's current
intentions, beliefs or expectations as well as the assumptions on which such
statements are based. These forward-looking statements are subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are not subject to the Company's control. Stockholders and
potential stockholders are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties,
and that actual results may differ materially from those contemplated by such
forward-looking statements. Factors that could cause future results to vary from
current management expectations include, but are not limited to, general
economic conditions, legislative and regulatory changes, monetary and fiscal
policies of the federal government, changes in tax policies, rates and
regulations of federal, state and local tax authorities, changes in interest
rates, deposit flows, the cost of funds, demand for loan products, demand for
financial services, competition, changes in the quality or composition of the
Company's loan and investment portfolios, changes in accounting principles,
policies or guidelines, availability and cost of energy resources and other
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and fees.

The Company undertakes no obligation to update or revise any
forward-looking statements to reflect changed assumptions, the occurrence of
unanticipated events or changes to future operating results over time.

AVAILABLE INFORMATION

The Company is a public company and files annual, quarterly and special
reports, proxy statements and other information with the Securities and Exchange
Commission (the "SEC"). Members of the public may read and copy any document the
Company files at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Members of the public can request copies of these
documents by writing to the SEC and paying a fee for the copying cost. Please
call the SEC at 1-800-SEC-0330 for more information

26

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

CHANGES IN FINANCIAL CONDITION

General

Total assets increased by $911.4 million from $8.02 billion at December 31,
2002 to $8.93 billion at September 30, 2003 primarily due to increases of $1.15
billion in the securities available-for-sale portfolio, $40.7 million in cash
and cash equivalents and $38.2 million in other assets, partially offset by a
$235.1 million decline in the loan portfolio and a $91.8 million decrease in
loans available-for-sale. This increase was funded primarily through the use of
borrowings, the growth in deposits and the issuance of $150.0 million of 3.5%
Fixed Rate/Floating Rate Subordinated Notes Due 2013 ("Notes").

Cash and Cash Equivalents

Cash and cash equivalents increased from $199.1 million at December 31,
2002 to $239.8 million at September 30, 2003. The $40.7 million increase in
liquidity was primarily due to the high levels of cash flow received from loan
refinancings and accelerated prepayments of mortgage-related securities, which
funds had yet to be fully redeployed into other interest-earning assets.

Securities Available-for-Sale

The aggregate securities available-for-sale portfolio (which includes
investment securities and mortgage-related securities) increased $1.15 billion,
or 90.8%, from $1.26 billion at December 31, 2002 to $2.41 billion at September
30, 2003. The increase was funded primarily through the use of borrowings, the
growth in deposits and from the reinvestment of funds from accelerated loan
repayments into such assets.

The Company's mortgage-related securities portfolio increased $1.06 billion
to $2.10 billion at September 30, 2003 compared to $1.04 billion at December 31,
2002. The securities were comprised of $1.76 billion of AAA rated CMOs, $125.1
million of CMOs which were issued or guaranteed by Freddie Mac, Fannie Mae or
GNMA ("Agency CMOs") and $214.0 million of mortgage-backed pass through
certificates which were also issued or guaranteed by Freddie Mac, Fannie Mae or
GNMA. The increase in the portfolio was primarily due to purchases of $2.25
billion of AAA rated CMOs with a weighted average yield of 4.91% and $228.0
million of Agency CMOs with a weighted average yield of 4.77%. Partially
offsetting these increases were proceeds totaling approximately $1.39 billion
received from normal and accelerated principal repayments.

The Company's investment securities portfolio increased $84.5 million to
$309.4 million at September 30, 2003 compared to $224.9 million at December 31,
2002. The increase was primarily due to $210.8 million of purchases, primarily
$75.0 million of federal agency securities with a 4.68% weighted average yield
and $109.1 million of preferred securities with a weighted average yield of
4.70%. Partially offsetting the purchases were sales of $28.4 million and a call
of a Federal Agency bond for $75.0 million.

At September 30, 2003, the Company had a $7.7 million net unrealized gain,
net of tax, on available-for-sale investment and mortgage-related securities as
compared to a $7.6 million net unrealized gain at December 31, 2002.

27

Loans Available-for-Sale

Loans available-for-sale decreased by $91.8 million to $22.6 million at
September 30, 2003 from $114.4 million at December 31, 2002. The decrease in
multi-family loans available-for-sale was a result of significant loan volume
which existed at the end of the fourth quarter of 2002 and the time delay
between the date of origination and the date of sale to Fannie Mae, which
usually occurs within seven days. The Company originates and sells multi-family
residential mortgage loans in the secondary market to Fannie Mae while retaining
servicing. As part of these transactions, the Company retains a portion of the
associated credit risk. During the nine months ended September 30, 2003, the
Company originated $1.43 billion and sold $1.53 billion of loans to Fannie Mae
under this program and as a result serviced $3.32 billion of loans with a
maximum potential loss exposure of $180.5 million. Multi-family loans available
for sale at September 30, 2003 totaled $15.2 million compared to $106.8 million
at December 31, 2002.

The Company also originates and sells single-family residential mortgage
loans under a mortgage origination assistance agreement with Cendant. The
Company funds the loans directly and sells the loans and related servicing to
Cendant. The Company originated $138.3 million and sold $136.5 million of such
loans during the nine months ended September 30, 2003. Single-family residential
mortgage loans available for sale totaled $7.4 million and $7.6 million at
September 30, 2003 and December 31, 2002, respectively.

Both programs were established in order to further the Company's ongoing
strategic objective of increasing non-interest income related to lending and/or
servicing revenue.

Loans, net

Loans, net decreased by $234.1 million or 4.1% to $5.50 billion at
September 30, 2003 from $5.74 billion at December 31, 2002. The Company
continues to focus on expanding its higher yielding portfolios of commercial
real estate, commercial business and variable-rate mortgage warehouse lines of
credit as part of its business plan. The Company is also committed to remaining
a leader in the multi-family residential loan market. The Company originated for
its own portfolio during the nine months ended September 30, 2003 approximately
$902.5 million of mortgage loans compared to $679.8 million for the nine months
ended September 30, 2002. Although the Company continues to originate for
portfolio, total loans decreased due to the combination of the heavy run off in
the single-family residential portfolio, the accelerated rate of repayments in
the multi-family residential portfolio and an increase in originating assets for
sale as opposed to portfolio retention due to the yields available on such
assets in the current interest rate environment. The steepening of the yield
curve should provide the Company with the opportunity to bring a greater
proportion of higher yielding loans to portfolio.

Multi-family residential loans decreased $46.8 million to $2.39 billion at
September 30, 2003 compared to $2.44 billion at December 31, 2002. The decrease
was primarily due to repayments of $601.5 million, which was partially offset by
$558.2 million of originations for portfolio retention. In prior periods, the
Company has put a greater emphasis on selling the majority of the multi-family
residential loans it originated due to the low interest rate environment. As
interest rates begin to rise, the Company expects to increase the portion of
loans it originates which are retained for portfolio. During the third quarter
of 2003, due to the steepening of the yield curve, the Company originated 45% of
all multi-family loans for portfolio compared to 22% originated for portfolio
during the second quarter of 2003. As a result of these activities, multi-family
residential loans comprised 42.8% of the total loan portfolio at September 30,
2003 compared to 41.9% at December 31, 2002.

Commercial real estate loans increased to $1.40 billion at September 30,
2003 from $1.31 billion at December 31, 2002. The increase for the nine months
ended September 30, 2003 of $88.7 million was primarily due to $335.0 million of
originations partially offset by $240.4 million of loan repayments and $5.9
million of loan charge-offs. As a result of these activities, commercial real
estate loans comprised 25.1% of the total loan portfolio at September 30, 2003
compared to 22.6% at December 31, 2002.

Commercial business loans decreased $41.2 million, or 6.9%, from $598.3
million at December 31, 2002 to $557.1 million at September 30, 2003. The
decrease was primarily due to $235.3 million of repayments partially offset by
$194.8 million of originations and advances during the nine months ended
September 30,

28

2003. As a result of our customers' view of the current economic environment,
the Company has experienced a slowdown in commercial business loan activity in
the current year. Commercial business loans comprised 10.0% of the total loan
portfolio at September 30, 2003 compared to 10.3% at December 31, 2002.

Mortgage warehouse lines of credit are secured short-term advances extended
to mortgage-banking companies to fund the origination of one-to-four family
mortgages. Advances under mortgage warehouse lines of credit decreased $81.0
million from $692.4 million at December 31, 2002 to $611.4 million at September
30, 2003. The decrease was due to the decline in the refinance market as a
result of the higher interest rate environment. At September 30, 2003, there
were $667.8 million of unused lines of credit related to mortgage warehouse
lines of credit. The Company anticipates a further decline in this portfolio as
interest rates rise and the current refinance market slows down. In October
2003, the Bank entered into an agreement to acquire certain mortgage warehouse
lines of credit from The Provident Bank. The acquisition, which is expected to
be completed in November 2003, will increase the Company's existing mortgage
warehouse line of credit portfolio by $207 million in lines. Mortgage warehouse
lines of credit comprised 11.0% of the total loan portfolio at September 30,
2003 compared to 11.9% at December 31, 2002.

Single-family residential and cooperative apartment loans decreased $223.9
million from an aggregate of $556.3 million at December 31, 2002 to an aggregate
of $332.4 million at September 30, 2003. The decline was due to increased
repayments as a result of the current interest rate environment combined with
the decreased emphasis on originating these loans for portfolio in favor of
higher yielding commercial real estate and business loans. The Company
originates and sells single-family residential mortgage loans to Cendant as
previously discussed.

Non-Performing Assets

Non-performing assets as a percentage of total assets at September 30, 2003
amounted to 0.51% compared to 0.52% at December 31, 2002. The Company's
non-performing assets, which consist of non-accrual loans, loans past due 90
days or more as to interest or principal and accruing and other real estate
owned acquired through foreclosure or deed-in-lieu thereof, increased by $4.2
million or 10.1% to $45.8 million at September 30, 2003 from $41.6 million at
December 31, 2002. The increase in non-performing assets was primarily due to a
$6.5 million increase in non-accrual loans, primarily commercial real estate
loans, which was partially offset by a decrease of $2.3 million in loans
contractually past maturity but which are continuing to pay in accordance with
their original repayment schedule. At September 30, 2003, the Company's
non-performing assets consisted of $45.6 million of non-accrual loans (including
$21.1 million of commercial real estate loans, $20.2 million of commercial
business loans, $2.3 million of single-family residential loans and $1.3 million
of multi-family residential loans), $0.2 million of loans past due 90 days or
more as to principal and accruing, $37,000 of loans past due 90 days or more as
to interest and accruing and $15,000 of other real estate owned.

Allowance for Loan Losses

The Company's allowance for loan losses amounted to $79.6 million at
September 30, 2003, as compared to $80.5 million at December 31, 2002. At
September 30, 2003, the Company's allowance amounted to 1.43% of total loans and
173.7% of total non-performing loans compared to 1.38% and 193.6%, respectively
at December 31, 2002. The Company's allowance decreased $0.9 million during the
nine months ended September 30, 2003 primarily due to a $3.5 million provision
for loan losses offset by net charge-offs of $4.4 million or 0.1% of average
total loans.

In assessing the level of the allowance for loan losses and the periodic
provisions to the allowance charged to income, the Company considers the
composition and outstanding balance of its loan portfolio, the growth or decline
of loan balances within various segments of the overall portfolio, the state of
the local (and to a certain degree, the national) economy as it may impact the
performance of loans within different segments of the portfolio, the loss
experience related to different segments or classes of loans, the type, size and
geographic concentration of loans held by the Company, the level of past due and
non-performing loans, the value of collateral securing loans, the level of
classified loans and the number of loans requiring heightened

29

management oversight. The continued shifting of the composition of the loan
portfolio to be more commercial-bank like by increasing the balance of
commercial real estate and business loans and mortgage warehouse lines of credit
may increase the level of known and inherent losses in the Company's loan
portfolio.

The Company has identified the evaluation of the allowance for loan losses
as a critical accounting estimate where amounts are sensitive to material
variation. Critical accounting estimates are significantly affected by
management judgment and uncertainties and there is a likelihood that materially
different amounts would be reported under different, but reasonably plausible,
conditions or assumptions. The allowance for loan losses is considered a
critical accounting estimate because there is a large degree of judgment in (i)
assigning individual loans to specific risk levels (pass, special mention,
substandard, doubtful and loss), (ii) valuing the underlying collateral securing
the loans, (iii) determining the appropriate reserve factor to be applied to
specific risk levels for criticized and classified loans (special mention,
substandard, doubtful and loss) and (iv) determining reserve factors to be
applied to pass loans based upon loan type. To the extent that loans change risk
levels, collateral values change or reserve factors change, the Company may need
to adjust its provision for loan losses which would impact earnings.

Management has discussed the development and selection of this critical
accounting estimate with the Audit Committee of the Board of Directors and the
Audit Committee has reviewed the Company's disclosure relating to it in this
Management's Discussion and Analysis ("MD&A").

Management believes the allowance for loan losses at September 30, 2003 was
at a level to cover the known and inherent losses in the portfolio that were
both probable and reasonable to estimate. In the future, management may adjust
the level of its allowance for loan losses as economic and other conditions
dictate. Management reviews the allowance for loan losses not less than
quarterly.

Goodwill and Intangible Assets

Effective April 1, 2001, the Company adopted SFAS No. 142, which resulted
in discontinuing the amortization of goodwill. Under SFAS No. 142, goodwill is
carried at its book value as of April 1, 2001 and any future impairment of
goodwill will be recognized as non-interest expense in the period of impairment.
However, under the terms of SFAS No. 142, identifiable intangible assets with
identifiable lives continue to be amortized.

The Company's goodwill, which aggregated $185.2 million at September 30,
2003, resulted from the acquisitions of Broad and Statewide as well as the
acquisition in January 1996 of Bay Ridge Bancorp, Inc. The Company's $0.3
million of identifiable intangible assets at September 30, 2003 resulted
primarily from one branch office purchase transaction effected in fiscal 1996.
The Company's intangible assets decreased by $1.7 million to $0.3 million at
September 30, 2003 from $2.0 million at December 31, 2002. The decrease was a
result of amortization of the identifiable intangible assets. The amortization
of identified intangible assets will continue to reduce net income until such
intangible assets are fully amortized. However, the remaining identified
intangibles as of September 30, 2003 will be amortized by April 2004.

The Company performs a goodwill impairment test on an annual basis. The
Company did not recognize an impairment loss as a result of its annual
impairment test effective October 1, 2003. The goodwill impairment test compares
the fair value of a reporting unit with its carrying amount, including goodwill.
If the fair value of a reporting unit exceeds its carrying amount, goodwill of
the reporting unit is considered not impaired. If the carrying amount of a
reporting unit exceeds its fair value, goodwill is considered impaired and the
Company must measure the amount of impairment loss, if any.

The fair value of an entity with goodwill may be determined by a
combination of quoted market prices, a present value technique or multiples of
earnings or revenue. Quoted market prices in active markets are the best
evidence of fair value and are to be used as the basis for the measurement, if
available. However, the market price of an individual equity security (and thus
the market capitalization of a reporting unit with publicly traded equity
securities) may not be representative of the fair value of the reporting unit as
a whole. The quoted market price of an individual equity security, therefore,
need not be the sole measurement basis of the fair value of a reporting unit. A
present value technique is another method with which to estimate the fair

30

value of a group of net assets. If a present value technique is used to measure
fair value, estimates of future cash flows used in that technique shall be
consistent with the objective of measuring fair value. Those cash flow estimates
shall incorporate assumptions that marketplace participants would use in their
estimates of fair value. If that information is not available without undue cost
and effort, an entity may use its own assumptions. A third method of estimating
the fair value of a reporting unit, is a valuation technique based on multiples
of earnings or revenue.

The Company currently uses a combination of quoted market prices of its
publicly traded stock and multiples of earnings in its goodwill impairment test.

The Company has identified the goodwill impairment test as a critical
accounting estimate due to the various methods (quoted market price, present
value technique or multiples of earnings or revenue) and judgment involved in
determining the fair value of an entity. A change in judgment could result in
goodwill being considered impaired which would result in a charge to
non-interest expense in the period of impairment.

Management has discussed the development and selection of this critical
accounting estimate with the Audit Committee of the Board of Directors and the
Audit Committee has reviewed the Company's disclosure relating to it in this
MD&A.

Bank Owned Life Insurance ("BOLI")

The Company holds BOLI policies to fund certain future employee benefit
costs and to provide attractive tax-exempt returns to the Company. The BOLI is
recorded at its cash surrender value and changes in such value are recorded in
non-interest income. BOLI increased $5.9 million to $174.3 million at September
30, 2003 compared to $168.4 million at December 31, 2002 as a result of an
increase in the cash surrender value of the BOLI.

Other Assets

Other assets increased $38.2 million from $232.2 million at December 31,
2002 to $270.5 million at September 30, 2003. The increase was primarily due to
a $21.8 million increase in FHLB stock and an $18.0 million increase in accounts
receivable as a result of a trade date/settlement date issue on securities sold
as of September 30, 2003 for which proceeds were received in October 2003. Such
increases were partially offset by a $4.8 million decrease in net deferred tax
assets.

Net deferred tax assets decreased by $4.8 million to $64.4 million at
September 30, 2003 compared to $69.2 million at December 31, 2002. The Company
uses the liability method to account for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax basis of assets and liabilities and are measured
using the enacted tax rates and laws expected to be in effect when the
differences are expected to reverse. The Company must assess the deferred tax
assets and establish a valuation allowance where realization of a deferred asset
is not considered "more likely than not." The Company generally uses the
expectation of future taxable income in evaluating the need for a valuation
allowance. Since the Company has reported taxable income for Federal, state and
local income tax purposes in each of the past two years and in management's
opinion, in view of the Company's previous, current and projected future
earnings, such deferred tax assets are expected to be fully realized, except for
the deferred tax asset reflecting the fair market value of Holding Company
common stock contributed to the Foundation at its inception in March 1998. A
valuation allowance was established due to the possibility that the deferred tax
asset would not be fully utilized. The effect of the valuation allowance was to
decrease paid-in-capital.

The Company has identified the valuation of deferred tax assets as a
critical accounting estimate due to the judgment involved in projecting future
taxable income, determining when differences are expected to be reversed and
establishing a valuation allowance. Changes in management's judgments and
estimates may have an impact on the Company's net income.

31

Management has discussed the development and selection of this critical
accounting estimate with the Audit Committee of the Board of Directors and the
Audit Committee has reviewed the Company's disclosure relating to it in this
MD&A.

Deposits

Deposits increased $244.1 million or 4.9% to $5.18 billion at September 30,
2003 compared to $4.94 billion at December 31, 2002. The increase was due to net
deposit inflows totaling $203.5 million as well as interest credited of $40.6
million.

Complementing the increased emphasis on expanding commercial and consumer
relationships, lower costing core deposits (consisting of all deposit accounts
other than certificates of deposit) grew by $398.9 million, or 11.9%, to $3.75
billion at September 30, 2003 compared to $3.35 billion at December 31, 2002.
This increase reflects both the continued successful implementation of the
Company's business strategy of increasing core deposits as well as the current
interest rate environment. Execution of this strategy is evidenced by the
increase in core deposits to approximately 72.3% of total deposits at September
30, 2003 compared to 67.8% of total deposits at December 31, 2002.

The Company focuses on the growth of core deposits as a key element of its
asset/liability management process to lower interest expense and thus increase
net interest margin given that these deposits have a lower cost of funds than
certificates of deposit and FHLB borrowings. Core deposits also reduce liquidity
fluctuations since these accounts generally are considered to be less likely
than certificates of deposit to be subject to disintermediation. In addition,
these deposits improve non-interest income through increased customer related
fees and service charges. The weighted average interest rate paid on core
deposits was 0.47% compared to 2.19% for certificates of deposit and 3.76% for
borrowings for the quarter ended September 30, 2003.

Borrowings

Borrowings increased $484.8 million to $2.42 billion at September 30, 2003
compared to $1.93 billion at December 31, 2002 due to a $635.0 million increase
in FHLB repurchase agreements and a $100.0 million increase in FHLB overnight
deposits, partially offset by a $250.2 million decrease in FHLB advances. During
the nine months ended September 30, 2003, the Company borrowed $700.0 million of
short-term low costing floating-rate FHLB borrowings, investing the funds
primarily in mortgage-backed securities with characteristics designed to
minimize both interest rate risk and extension risk while maximizing yield.
These borrowings mature within 30 days and have a weighted average interest rate
of 1.10%. The Company anticipates replacing a portion of these short-term
borrowings with lower costing core deposits. The Company also replaced $200.0
million of borrowings that matured in 2003 at a weighted average interest rate
of 5.77% with fixed-rate five-year borrowings at a weighted average rate of
3.89% and paid off $215.2 million of borrowings that matured at a weighted
average interest rate of 5.35%.

The Company is managing its leverage position and has a borrowing to asset
ratio of 27.0% at September 30, 2003 and 24.1% at December 31, 2002.

Subordinated Notes

On June 20, 2003, the Bank issued $150.0 million aggregate principal amount
of 3.5% Fixed Rate/ Floating Rate Subordinated Notes Due 2013. The Notes bear
interest at a fixed rate of 3.5% per annum for the first five years, and convert
to a floating rate thereafter until maturity based on the US Dollar three-month
LIBOR plus 2.06%. Beginning on June 20, 2008 the Bank has the right to redeem
the Notes at par plus accrued interest. The net proceeds of $148.2 million were
used for general corporate purposes. The Notes qualify as Tier 2 capital of the
Bank under the capital guidelines of the FDIC.

32

Equity

The Holding Company's stockholders' equity totaled $949.8 million at
September 30, 2003, compared to $920.3 million at December 31, 2002. The $29.5
million increase was primarily due to net income of $100.7 million, amortization
of the earned portion of restricted stock grants of $7.8 million, $6.0 million
related to the ESOP shares committed to be released for the nine months ended
September 30, 2003. In addition, increases were also attributable to $15.3
million related to the exercise of stock options and related tax benefit and the
issuance of shares in payment of director fees and a $7.0 million increase in
the net unrealized gain on securities available-for-sale. These increases were
partially offset by a $78.1 million reduction in capital resulting from the
purchase during the nine months ended September 30, 2003 of 2,765,900 shares of
common stock in connection with the Holding Company's open market repurchase
programs, a $24.5 million decrease due to dividends declared and a $5.0 million
decrease in the fair value of interest rate swaps, net of tax, as a result of
the cancellation of the swaps.

33

Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest income from interest-earning
assets and the resultant average yields; (ii) the total dollar amount of
interest expense on interest-bearing liabilities and the resultant average rate;
(iii) net interest income; (iv) the interest rate spread; and (v) the net
interest margin. Information is based on average daily balances during the
indicated periods and is annualized where appropriate.

- ---------------
(1) The average balance of loans receivable includes loans available-for-sale.
Also includes non-performing loans, interest on which is recognized on a
cash basis.

(2) Includes home equity loans and lines of credit, FHA and conventional home
improvement loans, student loans, automobile loans, passbook loans and
secured and unsecured personal loans.

(3) Includes federal funds sold, interest-earning bank deposits and FHLB stock.

(4) Includes NOW and checking accounts.

(5) Trust preferred securities redeemed effective June 30, 2002.

34

RATE/VOLUME ANALYSIS

The following table sets forth the effects of changing rates and volumes on
net interest income of the Company. Information is provided with respect to (i)
effects on interest income attributable to changes in volume (changes in volume
multiplied by prior rate) and (ii) effects on interest income attributable to
changes in rate (changes in rate multiplied by prior volume). The combined
effect of changes in both rate and volume has been allocated proportionately to
the change due to rate and the change due to volume.

- ---------------
(1) Includes home equity loans and lines of credit, FHA and conventional home
improvement loans, student loans, automobile loans, passbook loans and
secured and unsecured personal loans.

COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2003 AND 2002

General

The Company reported an 8.5% increase in diluted earnings per share to
$0.64 for the quarter ended September 30, 2003 compared to $0.59 for the quarter
ended September 30, 2002. Net income increased 5.4% to $33.7 million for the
quarter ended September 30, 2003 compared to $31.9 million for the quarter ended
September 30, 2002.

On a linked quarter basis, net income decreased $0.4 million, or 1.2%, from
$34.1 million for the quarter ended June 30, 2003 while diluted earnings per
share decreased 1.5% from $0.65 for the quarter ended June 30, 2003.

35

Net Interest Income

Net interest income decreased by $9.4 million or 12.1% to $68.3 million for
the quarter ended September 30, 2003 as compared to $77.7 million for the
quarter ended September 30, 2002. The decrease was due to a $15.7 million
decrease in interest income partially offset by a $6.3 million decrease in
interest expense. The decline in net interest income primarily reflected the 92
basis point decrease in net interest margin, offset in part, by a $904.6 million
increase in average interest-earning assets during the quarter ended September
30, 2003, as compared to the same period in the prior year.

The Company's net interest margin decreased 92 basis points to 3.29% for
the quarter ended September 30, 2003 compared to 4.21% for the quarter ended
September 30, 2002. The average yield on interest-earning assets declined 147
basis points for the quarter ended September 30, 2003 compared to the quarter
ended September 30, 2002 which was partially offset by a decline of 63 basis
points in the cost of average interest-bearing liabilities.

The compression in net interest margin was primarily attributable to
accelerated loan repayments combined with the accelerated premium amortization
of mortgage-related securities. The Company has continued to experience
accelerated repayments in its multi-family residential mortgage loans and
single-family and cooperative loan portfolios, while new assets for portfolio
retention are being originated at lower yields. The Company has also experienced
accelerated rates of repayment in its mortgage-related securities portfolio, a
significant portion of which was purchased at a premium, resulting in
accelerated premium amortization. The Company expects, based upon the current
yield curve, that the repayment rate of the mortgage-related securities
portfolio and the associated premium amortization should moderate in the months
ahead. It is expected that the yield on the mortgage-related securities
portfolio will return to normalized levels as a result of this moderation.

On a linked quarter basis, net interest margin declined sharply and was
3.29% for the quarter ended September 30, 2003, a decrease of 48 basis points
from the quarter ended June 30, 2003. For the quarter ended September 30, 2003,
the weighted average interest rate earned on interest-earning assets declined 59
basis points compared to the quarter ended June 30, 2003. By comparison, the
weighted average interest rate paid on interest-bearing liabilities declined 13
basis points compared to the quarter ended June 30, 2003. The decrease in the
cost of funds reflected the continuation of the Company's strategy of increasing
lower costing core deposits combined with the partial repricing of its deposit
base. The accelerated premium amortization, which correlates with the principal
repayments of the mortgage-related securities portfolio, reduced net interest
margin by 19 basis points for the quarter ended September 30, 2003 compared to
the quarter ended June 30, 2003.

Interest income decreased by $15.7 million to $106.0 million for the
quarter ended September 30, 2003 compared to $121.7 million for the quarter
ended September 30, 2002. Interest income on loans declined $16.8 million due
primarily to a decrease in the yield on the average loan portfolio of 72 basis
points to 6.25% for the quarter ended September 30, 2003 from 6.97% for the
quarter ended September 30, 2002. Contributing to the unfavorable variance, were
lower average outstanding loan balances of $350.9 million compared to the prior
year quarter.

The decrease in the average balance of loans is partially attributable to a
$299.2 million decline in the average balance of the single-family and
cooperative loan portfolios which management has decided to let run-off as
maintenance of such portfolio does not coincide with the Company's overall
business model. The Company does, however, originate single-family loans for
sale through its private label program with Cendant. Also contributing to the
decline in average loans was a decrease in the average balance of multi-family
residential mortgage loans of $547.6 million, due in part, to the sale of $257.6
million of multi-family residential mortgage loans in the fourth quarter of
2002. In addition, the Company has continued to experience accelerated
repayments in this portfolio and has also put a greater emphasis on selling the
majority of the multi-family residential loans it originated due to the low
interest rate environment. As interest rates begin to rise, the Company expects
to increase the portion of loans it originates which are retained for portfolio.
In addition, the average balance of commercial business loans decreased by
$222.2 million from $779.4 million to $557.2 million for the quarters ended
September 30, 2002 and September 30, 2003, respectively.

Partially offsetting the above decreases in the average balance of loans
was an increase in the commercial real estate portfolio which increased by
$267.3 million due to management's strategy of shifting to higher yielding loan
products. In addition, the average balance of mortgage warehouse lines of credit
increased $382.7 million, in part, due to the additional utilization of the
lines of credit. The increase in this floating rate portfolio has been funded in
part with the liquidity

36

resulting from the accelerated prepayment of loans and investment securities.
However, towards the end of the third quarter, as the yield curve steepened and
the refinance market slowed, the demand for warehouse funding softened.

Income on investment securities increased $1.6 million due to an increase
in the average outstanding balance of investment securities of $132.3 million
and an increase in the average yield of 40 basis points to 4.23% for the quarter
ended September 30, 2003 compared to the same period in 2002.

Interest income on mortgage-related securities decreased $1.7 million
during the quarter ended September 30, 2003 compared to the quarter ended
September 30, 2002 as a result of a 300 basis point decrease in the yield earned
from 5.51% for the quarter ended September 30, 2002 to 2.51% for the quarter
ended September 30, 2003. Partially offsetting this decrease was a $1.02 billion
increase in the average balance of these securities. The increase in the average
balance was funded by the use of borrowings, the growth in deposits and from the
reinvestment of funds from accelerated loan payments.

The decline in yield earned on the mortgage-related securities portfolio
was the result of a combination of the low interest rate environment along with
accelerated premium amortization. The Company has continued to experience
accelerated rates of repayment in its mortgage-related securities portfolio, a
significant portion of which was purchased at a premium, resulting in
accelerated premium amortization. This premium amortization, which correlates
with the principal repayments of the mortgage-related securities portfolio,
reduced net interest income by $12.0 million for the quarter ended September 30,
2003 compared to $1.4 million for the quarter ended September 30, 2002 and $6.0
million for the quarter ended June 30, 2003. At September 30, 2003 the Company
had $1.89 billion of CMOs with a related premium of $25.5 million and a
remaining life of approximately 2.5 years.

Income on other interest-earning assets increased $0.5 million in the
current quarter compared to the prior year quarter primarily due to an increase
in the dividends received on FHLB stock of $0.6 million. On September 22, 2003,
the Board of Directors of the FHLB of New York announced that it would suspend
the dividend to its stockholders in the fourth quarter of 2003. This
announcement did not affect the Company's Statement of Financial Condition as of
September 30, 2003 or its results of operations for the quarter ended September
30, 2003. As of September 30, 2003, the Company had $123.3 million of FHLB
stock. The Company received $1.4 million of FHLB dividends during the quarter
ended September 30, 2003.

Interest expense decreased $6.3 million or 14.4% to $37.6 million for the
quarter ended September 30, 2003 as compared to the quarter ended September 30,
2002. This decrease primarily reflects a 65 basis point decrease in the average
rate paid on deposits to 0.94% for the quarter ended September 30, 2003 compared
to 1.59% for the quarter ended September 30, 2002. This decrease was partially
offset by a $304.4 million increase in the average balance of deposits. The
average balance of core deposits increased $529.1 million, or 16.1%, to $3.81
billion for the quarter ended September 30, 2003 compared to $3.28 billion for
the quarter ended September 30, 2002. Core deposits are defined as all deposits
other than certificates of deposit. Lower costing core deposits represented
approximately 72.3% of total deposits at September 30, 2003 compared to 66.3% at
September 30, 2002. This increase reflects the success of the Company's strategy
of lowering its overall cost of funds while emphasizing the expansion of its
commercial and consumer relationships.

On a linked quarter basis, the average aggregate balance of deposits
increased by $104.0 million. The average balance of lower costing core deposits
grew by $156.1 million while the average balance of higher costing certificates
of deposit decreased by $52.1 million in the quarter ended September 30, 2003
compared with the quarter ended June 30, 2003.

Interest expense on borrowings decreased $0.4 million due to a decline in
the average rate paid on such borrowings of 107 basis points from 4.83% in the
quarter ended September 30, 2002 to 3.76% in the quarter ended September 30,
2003. Partially offsetting the decline in the average rate paid was an increase
of $519.5 million in the average balance of FHLB borrowings as the Company
utilized borrowings as an interim funding source. During the nine months ended
September 30, 2003, the Company borrowed $700.0 million of short-term low
costing floating-rate FHLB borrowings, and invested the funds primarily in
mortgage-backed securities with characteristics designed to minimize both
interest rate and extension risk while maximizing yield. The Company anticipates
replacing a portion of these short-term borrowings with lower costing core
deposits. The Company also replaced $200.0 million of borrowings that matured in
2003 at a weighted average interest rate of 5.77% with fixed-rate five-year
borrowings at a weighted average interest rate of 3.89% and paid off $215.2
million of borrowings that matured at a weighted average interest rate of 5.35%.

37

Interest expense on subordinated notes was $1.4 million during the quarter
ended September 30, 2003. At the end of the second quarter of 2003, the Company
issued $150.0 million in Notes (as previously discussed).

Provision for Loan Losses

The Company's provision for loan losses decreased $2.0 million for the
quarter ended September 30, 2003 compared to the quarter ended September 30,
2002. As a result of the lower than anticipated growth in the portfolio and the
continued high quality of the Company's loan portfolio, management did not
record a provision for loan losses in the third quarter of 2003.

In assessing the level of the allowance for loan losses and the periodic
provision charged to income, the Company considers the composition of its loan
portfolio, the growth of loan balances within various segments of the overall
portfolio, the state of the local (and to a certain degree, the national)
economy as it may impact the performance of loans within different segments of
the portfolio, the loss experience related to different segments or classes of
loans, the type, size and geographic concentration of loans held by the Company,
the level of past due and non-performing loans, the value of collateral securing
the loan, the level of classified loans and the number of loans requiring
heightened management oversight.

Non-performing assets as a percentage of total assets totaled 51 basis
points at September 30, 2003 compared to 44 basis points at September 30, 2002.
Non-performing assets increased 29.8% to $45.8 million at September 30, 2003
compared to $35.3 million at September 30, 2002. The $10.5 million increase was
primarily due to an increase of $12.0 million in non-accrual loans which was
partially offset by a $1.4 million decrease on loans that are contractually past
due 90 days or more as to maturity, although current as to monthly principal and
interest payments. The $12.0 million increase in non-accrual loans was primarily
due to a $9.8 million increase in non-accrual commercial real estate loans
(primarily attributable to a $12.4 million loan) together with a $2.7 million
increase in non-accrual commercial business loans, partially offset by a
decrease of $0.7 million in non-accrual single-family residential and
cooperative loans. The Company's allowance for loan losses to total loans
amounted to 1.43% and 1.35% of total loans at September 30, 2003 and September
30, 2002, respectively.

Non-Interest Income

The Company continues to stress and emphasize the development of fee-based
income throughout its operations. As a result of a variety of initiatives, the
Company experienced a 67.0% increase in non-interest income, from $17.8 million
for the quarter ended September 30, 2002 to $29.7 million for quarter ended
September 30, 2003.

One revenue channel that the Company stresses and which is a primary driver
of non-interest income, is earnings from the Company's mortgage-banking
activities. In the quarter ended September 30, 2003, revenue from the Company's
mortgage-banking business amounted to $7.6 million compared to $2.8 million in
the quarter ended September 30, 2002. The Company originates for sale
multi-family residential loans in the secondary market to Fannie Mae with the
Company retaining servicing on all loans sold. Under the terms of the sales
program, the Company also retains a portion of the associated credit risk. At
September 30, 2003, the Company's maximum potential exposure related to
secondary market sales to Fannie Mae under this program was $180.5 million. The
Company also has a program with Cendant to originate and sell single-family
residential mortgage loans and servicing in the secondary market. See Note 7
hereof.

As a result of the current interest rate environment and as part of the
Company's business model, the majority of the multi-family residential loans the
Company originated were sold in the secondary market. The loans are sold,
servicing retained, to Fannie Mae. The Company sold multi-family residential
mortgage loans totaling $463.2 million during the quarter ended September 30,
2003 compared to $201.5 million during the quarter ended September 30, 2002. On
a linked quarter basis, the Company sold $496.0 million of multi-family
residential mortgage loans to Fannie Mae in the quarter ended June 30, 2003. In
addition, the Company sold $58.7 million of single-family residential loans
during the quarter ended September 30, 2003 compared to $31.5 million during the
quarter ended September 30, 2002.

Mortgage-banking activities for the quarter ended September 30, 2003
reflected $5.6 million in gains, $2.2 million of origination fees and $1.3
million in servicing fees partially offset by $1.6 million of amortization of
servicing assets. Included in the $5.6 million of gains were $0.8 million of
provisions recorded related to the retained credit exposure on multi-family
residential loans sold to Fannie Mae. This category also included a $3.5 million
increase in the fair value of

38

loan commitments for loans originated for sale and a $3.5 million decrease in
the fair value of forward loan sale agreements which are entered into with
respect to the sale of such loans. The $4.8 million increase in revenue from
mortgage-banking activities for the quarter ended September 30, 2003 compared to
the prior year quarter was primarily due to an increase on the gain on sales of
loans to Fannie Mae of $3.5 million and an $0.8 million increase in origination
fees. The Company recorded $7.0 million of income from mortgage-banking
activities in the quarter ended June 30, 2003.

Service fee income increased by $6.1 million, or 52.0% for the quarter
ended September 30, 2003 compared to the quarter ended September 30, 2002.
Included in service fee income are prepayment and modification fees on loans.
These fees are effectively a partial offset to the decreases realized in the net
interest margin. Prepayment fees increased $4.9 million to $6.8 million for the
quarter ended September 30, 2003 compared to $1.9 million for the quarter ended
September 30, 2002. Modification and extension fees increased $0.2 million to
$0.9 million for the quarter ended September 30, 2003 compared to $0.7 million
for the quarter ended September 30, 2002. On a linked quarter basis, the total
of these combined fees decreased by $0.2 million from $7.9 million for the
quarter ended June 30, 2003 compared to $7.7 million for the quarter ended
September 30, 2003 reflecting the softening of the refinance market.

Another component of service fees are revenues generated from the branch
system which grew by $0.5 million, or 6.5%, to $8.5 million for the quarter
ended September 30, 2003 compared to the quarter ended September 30, 2002. The
increase was primarily due to increased service fees on deposit accounts
resulting from the growth in core deposits together with fees from expanded
products and services.

In addition, the Company also recorded an increase for the quarter ended
September 30, 2003 of approximately $0.8 million in the cash surrender value of
BOLI compared to the quarter ended September 30, 2002. During the latter part of
the fourth quarter of 2002, the Company increased its holdings in BOLI by $50.0
million. On a linked quarter basis, income related to BOLI increased slightly to
$2.3 million for the quarter ended September 30, 2003 as compared to $2.2
million for the quarter ended June 30, 2003.

Other non-interest income increased $0.1 million to $2.0 million for the
three months ended September 30, 2003 compared to $1.9 million for the three
months ended September 30, 2002. The increase is primarily attributable to
income from the Company's equity investment in Meridian, which increased to 35%
in the fourth quarter of 2002 and a $0.3 million gain on the sale of the Mail
Boxes Etc. franchise that was owned by Mitchamm Corp., a subsidiary of the
Company. The increase was partially offset by the absence of gains of $1.3
million on the sale of two surplus bank facilities sold in the normal course of
business during the quarter ended September 30, 2002.

Non-Interest Expenses

Non-interest expense increased $2.2 million, or 5.1%, to $45.6 million for
the quarter ended September 30, 2003 compared to $43.4 million for the quarter
ended September 30, 2002. This increase was primarily attributable to increases
of $1.8 million in compensation and benefits and $1.3 million in occupancy costs
which were partially offset by a $1.5 million decrease in the amortization of
identifiable intangible assets.

Compensation and employee benefits expense increased $1.8 million or 8.0%
to $24.8 million for the quarter ended September 30, 2003 as compared to $23.0
million for the same period in the prior year. The increase in compensation and
benefits expense for the comparable periods was primarily attributable to
expansion of the Company's commercial and retail banking and lending operations
during the past year. In particular, the increase was due to increases of $3.0
million in compensation expenses, $0.4 million in stock-related benefit plan
costs and $0.6 million in post-retirement benefits. Partially offsetting these
increases were lower management incentive costs of $2.2 million.

Occupancy costs increased $1.3 million or 23.3% to $6.7 million for the
quarter ended September 30, 2003 as compared to the quarter ended September 30,
2002. The increase in occupancy costs is a result of the increased number of
branch facilities resulting from the continuation of the de novo branch
expansion program as well as the expansion of the commercial real estate lending
activities to the Baltimore-Washington market.

Advertising expenses increased by $0.3 million from $1.6 million in the
quarter ended September 30, 2002 to $1.9 million in the quarter ended September
30, 2003.

39

Amortization of identifiable intangible assets decreased by $1.5 million to
$0.1 million for the quarter ended September 30, 2003 compared to the quarter
ended September 30, 2002. The decrease was due to intangible assets from a
branch purchase transaction effected in fiscal 1996 being fully amortized during
the quarter ended March 31, 2003.

Other non-interest expenses decreased $0.1 million to $9.4 million from
$9.5 million for the quarter ended September 30, 2003 compared to the same
period in the prior year. Other non-interest expenses include such items as
professional services, business development expenses, equipment expenses,
recruitment costs, office supplies, commercial bank fees, postage, insurance,
telephone expenses and maintenance and security.

On a linked quarter basis, non-interest expense decreased $1.7 million to
$45.6 million for the quarter ended September 30, 2003 from $47.3 million for
the quarter ended June 30, 2003. The decrease was due in large part to a $1.9
million decrease in compensation and benefits and a $0.7 million decrease in
other non-interest expense partially offset by a $0.7 million increase in
occupancy costs. The decrease in compensation and benefits of $1.9 million
primarily consisted of decreases of $0.8 million in medical costs and $1.4
million in management incentive costs, partially offset by a $0.4 million
increase in stock-related benefit plan costs due to a higher stock price. The
$0.7 million increase in occupancy costs was a result of the continuation of the
de novo branch expansion program and the expansion of the commercial real estate
lending activities.

Compliance with changing regulation of corporate governance and public
disclosure may result in additional expenses. Changing laws, regulations and
standards relating to corporate governance and public disclosure, including the
Sarbanes-Oxley Act of 2002, new SEC regulations and recently adopted revisions
to the listing requirements of The Nasdaq Stock Market, are creating uncertainty
for companies such as ours. The Company is committed to maintaining high
standards of corporate governance and public disclosure. Compliance with the
various new requirements is expected to result in increased general and
administrative expenses and a diversion of management time and attention from
revenue-generating activities to compliance activities.

INCOME TAXES

Income tax expense amounted to $18.7 million and $18.2 million for the
quarter ended September 30, 2003 and 2002, respectively. The increase recorded
in the 2003 period reflected the $2.3 million increase in the Company's income
before provision for income taxes partially offset by a decrease in the
Company's effective tax rate for the quarter ended September 30, 2003 to 35.8%
compared to 36.3% for the quarter ended September 30, 2002. As of September 30,
2003, the Company had a net deferred tax asset of $64.4 million compared to
$65.6 million at September 30, 2002.

COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
AND 2002

General

The Company reported a 13.7% increase in diluted earnings per share to
$1.91 for the nine months ended September 30, 2003 compared to $1.68 for the
nine months ended September 30, 2002. Net income increased 9.1% to $100.7
million for the nine months ended September 30, 2003 compared to $92.3 million
for the nine months ended September 30, 2002.

Net Interest Income

Net interest income decreased by $17.0 million or 7.3% to $215.3 million
for the nine months ended September 30, 2003 as compared to $232.3 million for
the nine months ended September 30, 2002. The decrease was due to a $38.7
million decrease in interest income and a $21.7 million decrease in interest
expense. The decline in net interest income primarily reflects the 59 basis
point decrease in net interest margin, offset in part, by a $545.4 million
increase in average interest-earning assets during the nine months ended
September 30, 2003, as compared to the same period in the prior year.

The Company's net interest margin decreased 59 basis points to 3.66% for
the nine months ended September 30, 2003 compared to 4.25% for the nine months
ended September 30, 2002. The average yield on interest-earning assets declined
113 basis points for the nine months ended September 30, 2003 compared to the
nine months ended September 30, 2002 which was partially offset by a decline of
61 basis points in the cost of average interest-bearing liabilities.

40

The compression in net interest margin was primarily attributable to
accelerated loan repayments combined with the accelerated premium amortization
of mortgage-related securities. The Company has continued to experience
accelerated repayments in its multi-family residential mortgage loans and
single-family and cooperative loan portfolios, while new assets for portfolio
retention are being originated at lower yields. The Company has also experienced
accelerated rates of repayment in its mortgage-related securities portfolio, a
significant portion of which was purchased at a premium, resulting in
accelerated premium amortization. The Company expects, based upon the current
yield curve, that the repayment rate of the mortgage-related portfolio and the
associated premium amortization should moderate in the months ahead. It is
expected that the yield on the mortgage-related securities portfolio will return
to normalized levels as a result of this moderation.

Interest income decreased by $38.7 million to $327.9 million for the nine
months ended September 30, 2003 compared to $366.6 million for the nine months
ended September 30, 2002. Interest income on loans declined $41.2 million due
primarily to a decrease in the yield on the average loan portfolio of 63 basis
points to 6.46% from 7.09% for the nine months ended September 30, 2003 and
September 30, 2002, respectively. Contributing to the unfavorable variance, were
lower average outstanding loan balances of $226.6 million compared to the prior
year.

The decrease in the average balance of loans is partially attributable to a
decline in the average balance of the single-family and cooperative loan
portfolios of $293.1 million which management has decided to let run-off as they
do not coincide with the Company's overall business model. The Company does,
however, originate single-family loans for sale through its private label
program with Cendant. Also contributing to the decline in average loans was a
decrease in the average balance of multi-family residential mortgage loans of
$416.6 million due, in part, to the sale of $257.6 million of multi-family
residential mortgage loans in the fourth quarter of 2002. In addition, the
Company has continued to experience accelerated repayments in this portfolio and
has also put a greater emphasis on selling the majority of the multi-family
residential loans it originated due to the low interest rate environment. As
interest rates begin to rise, the Company expects to increase the percent of
loans originated for portfolio. In addition, the average balance of commercial
business loans decreased by $182.4 million from $744.0 million to $561.6 million
for the nine months ended September 30, 2002 and September 30, 2003,
respectively.

Partially offsetting the above decreases in the average balance of loans
was an increase in the commercial real estate portfolio which increased by
$277.2 million due to management's strategy of shifting to higher yielding loan
products. In addition, the average balance of mortgage warehouse lines of credit
increased $333.2 million, in part, due to the additional utilization of the
lines of credit. The increase in this floating rate portfolio has been funded in
part with the liquidity resulting from the accelerated prepayment of loans and
investment securities. However, towards the end of the third quarter, as the
yield curve steepened and the refinance market slowed, the demand for warehouse
funding softened.

Income on investment securities increased $4.4 million due to an increase
in the average outstanding balance of investment securities of $140.3 million
partially offset by a decline in the average yield of 32 basis points to 4.49%
from 4.81% for the nine months ended September 30, 2003 and September 30, 2002,
respectively.

Interest income on mortgage-related securities decreased $5.9 million
during the nine months ended September 30, 2003 compared to the nine months
ended September 30, 2002 as a result of a 248 basis point decrease in the yield
earned from 5.83% for the nine months ended September 30, 2002 to 3.35% for the
nine months ended September 30, 2003. Partially offsetting this decrease was a
$561.3 million increase in the average balance of these securities. The increase
in the average balance was funded by the use of borrowings, the growth in
deposits and from the reinvestment of funds from accelerated loan payments.

The decline in yield earned on the mortgage-related securities portfolio
was a combination of the low interest rate environment along with accelerated
premium amortization. The Company has continued to experience accelerated rates
of repayment in its mortgage-related securities portfolio, a significant portion
of which was purchased at a premium, resulting in accelerated premium
amortization. This premium amortization, which correlates with the principal
repayments of the mortgage-related securities portfolio, reduced net interest
income by $21.6 million for the nine months ended September 30, 2003 compared to
$2.6 million for the nine months ended September 30, 2002.

Income on other interest-earning assets increased $1.1 million in the
current nine-month period compared to the prior year period primarily due to a
$1.3 million increase in dividends received from FHLB stock held by the Company.

41

Interest expense decreased $21.7 million or 16.2% to $112.6 million for the
nine months ended September 30, 2003 as compared to the nine months ended
September 30, 2002. This decrease primarily reflects a 68 basis point decrease
in the average rate paid on deposits to 1.06% for the nine months ended
September 30, 2003 compared to 1.74% for the nine months ended September 30,
2002. This decrease was partially offset by a $206.8 million increase in the
average balance of deposits. The average balance of core deposits increased
$427.3 million, or 13.3%, to $3.64 billion for the nine months ended September
30, 2003 compared to $3.21 billion for the nine months ended September 30, 2002.
Lower costing core deposits represented approximately 72.3% of total deposits at
September 30, 2003 compared to 66.3% at September 30, 2002. This increase
reflects the success of the Company's strategy to lower its overall cost of
funds and emphasize its expanding commercial and consumer relationships.

Interest expense on borrowings increased $0.6 million due to an increase of
$348.8 million in the average balance of FHLB borrowings partially offset by a
decline in the average rate paid on such borrowings of 74 basis points from
4.94% in the nine months ended September 30, 2002 to 4.20% in the nine months
ended September 30, 2003. The increase in average balances was the result of the
Company borrowing $700.0 million of short-term low costing floating-rate FHLB
borrowings during the nine months ended September 30, 2003 which was partially
offset by the repayment of $215.2 million of borrowings that matured in 2003.
The funds were invested primarily in mortgage-backed securities. The Company
anticipates replacing a portion of these short-term borrowings with lower
costing core deposits.

Interest expense on subordinated notes was $1.6 million during the nine
months ended September 30, 2003. At the end of the second quarter of 2003, the
Company issued $150.0 million of Notes.

Interest expense on trust preferred securities decreased $0.5 million
compared to the prior year nine month period. The trust preferred securities
were assumed as part of the Broad acquisition in July 1999. In accordance with
the terms of the trust indenture, all of the outstanding trust preferred
securities totaling $11.5 million, were redeemed at $10.00 per share, effective
June 30, 2002. The redemption was effected due to the high interest rate paid on
the trust preferred securities in relation to the current interest rate
environment.

Provision for Loan Losses

The Company's provision for loan losses decreased $2.5 million to $3.5
million for the nine months ended September 30, 2003 compared to the nine months
ended September 30, 2002.

Non-performing assets as a percentage of total assets totaled 51 basis
points at September 30, 2003 compared to 44 basis points at September 30, 2002.
Non-performing assets increased 29.8% to $45.8 million at September 30, 2003
compared to $35.3 million at September 30, 2002. The $10.5 million increase was
primarily due to an increase of $12.0 million in non-accrual loans which was
partially offset by a $1.4 million decrease on loans that are contractually past
due 90 days or more as to maturity, although current as to monthly principal and
interest payments. The $12.0 million increase in non-accrual loans was primarily
due to a $9.8 million increase in non-accrual commercial real estate loans
(primarily attributable to a $12.4 million loan previously discussed) together
with a $2.7 million increase in non-accrual commercial business loans, partially
offset by a decrease of $0.7 million in non-accrual single-family residential
and cooperative loans. The Company's allowance for loan losses to total loans
amounted to 1.43% and 1.35% of total loans at September 30, 2003 and September
30, 2002, respectively.

Non-Interest Income

The Company experienced a 65.2% increase in non-interest income, from $50.7
million for the nine months ended September 30, 2002 to $83.9 million for nine
months ended September 30, 2003.

In the nine months ended September 30, 2003, revenue from the Company's
mortgage-banking business amounted to $23.3 million compared to $7.5 million in
the nine months ended September 30, 2002. The Company originates for sale
multi-family residential loans in the secondary market to Fannie Mae with the
Company retaining servicing on all loans sold. See Note 7 hereof.

The Company sold multi-family residential mortgage loans totaling $1.53
billion during the nine months ended September 30, 2003 compared to $624.5
million during the nine months ended September 30, 2002. In addition, the
Company sold $136.5 million of single-family residential loans during the nine
months ended September 30, 2003 compared to $96.3 million during the nine months
ended September 30, 2002.
42

Mortgage-banking activities for the nine months ended September 30, 2003
reflected $17.0 million in gains, $8.3 million of origination fees and $2.3
million in servicing fees partially offset by $4.4 million of amortization of
servicing assets. Included in the $17.0 million of gains were $2.7 million of
provisions recorded related to the retained credit exposure on multi-family
residential loans sold. This category also included a $0.7 million increase in
the fair value of loan commitments for loans originated for sale and a $0.7
million decrease in the fair value of forward loan sale agreements which are
entered into with respect to the sale of such loans. The $15.8 million increase
in revenue from mortgage-banking activities for the nine months ended September
30, 2003 compared to the nine months in the prior year was primarily due to an
aggregate increase on the gain on sales of loans to Fannie Mae and Cendant of
$13.3 million combined with a $3.3 million increase in origination fees
partially offset by a $2.0 million increase in amortization of loan servicing
asset.

Service fee income increased by $15.3 million, or 43.9% for the nine months
ended September 30, 2003 compared to the nine months ended September 30, 2002.
Included in service fee income are prepayment and modification fees on loans
which are a partial offset to the decreases realized in the net interest margin.
Prepayment fees increased $11.3 million to $17.4 million for the nine months
ended September 30, 2003 compared to $6.1 million for the nine months ended
September 30, 2002. Modification and extension fees increased $0.8 million to
$3.2 million for the nine months ended September 30, 2003 compared to $2.4
million for the nine months ended September 30, 2002.

Another component of service fees are revenues generated from the branch
system which grew by $2.7 million, or 11.9%, to $25.6 million for the nine
months ended September 30, 2003 compared to the nine months ended September 30,
2002. The increase was primarily due to increased service fees on deposit
accounts resulting from the growth in core deposits together with fees from
expanded products and services.

In addition, the Company also recorded an increase for the nine months
ended September 30, 2003 of approximately $1.8 million in the cash surrender
value of BOLI compared to the nine months ended September 30, 2002. During the
latter part of the fourth quarter of 2002, the Company increased its holdings in
BOLI by $50.0 million.

Other non-interest income increased $0.5 million to $3.5 million for the
nine months ended September 30, 2003 compared to $3.0 million for the nine
months ended September 30, 2002. The increase was primarily attributable to
income from the Company's equity investment in Meridian as well as a $0.3
million gain on the sale of Mail Boxes Etc. The increase was partially offset by
the absence of gains of $1.3 million on the sale of two surplus bank facilities
sold in the normal course of business during 2002.

Non-Interest Expenses

Non-interest expense increased $6.7 million, or 5.0%, to $138.9 million for
the nine months ended September 30, 2003 compared to $132.2 million for the nine
months ended September 30, 2002. This increase was primarily attributable to
increases of $6.3 million in compensation and benefits, $1.4 million in
occupancy costs and $1.5 million in other non-interest expense which were
partially offset by a $3.6 million decrease in the amortization of identifiable
intangible assets.

Compensation and employee benefits expense increased $6.3 million or 9.1%
to $75.4 million for the nine months ended September 30, 2003 as compared to
$69.1 million for the same period in the prior year. The increase in
compensation and benefits expense for the comparable periods was primarily
attributable to expansion of the Company's commercial and retail banking and
lending operations during the past year. The Company established a private
banking/ wealth management group during the first quarter of 2002 to broaden and
diversify its customer base and continued its de novo branch expansion through
the opening of several facilities during 2002. In particular, the increase was
due to increases of $7.9 million in compensation expenses, $1.5 million in
retirement expenses $0.4 million in stock-related benefit plan costs and $0.5
million in post-retirement health care benefit costs. Partially offsetting these
increases were lower management incentive costs of $4.9 million.

Occupancy costs increased $1.4 million for the nine months ended September
30, 2003 compared with the nine months ended September 30, 2002. The increase in
occupancy costs is a result of the increased number of branch facilities
resulting from the continuation of the de novo branch expansion program as well
as the expansion of the commercial real estate lending activities to the
Baltimore-Washington market.

Advertising expenses increased by $0.7 million from $4.7 million in the
nine months ended September 30, 2002 to $5.4 million in the nine months ended
September 30, 2003.
43

Amortization of identifiable intangible assets decreased by $3.6 million to
$1.7 million for the nine months ended September 30, 2003 compared to the nine
months ended September 30, 2002. The decrease was due to intangible assets from
a branch purchase transaction effected in fiscal 1996 being fully amortized
during the quarter ended March 31, 2003.

Other non-interest expenses increased $1.5 million to $29.9 million for the
nine months ended September 30, 2003 compared to $28.5 million for the same
period in the prior year. Other non-interest expenses include such items as
professional services, business development expenses, equipment expenses,
recruitment costs, office supplies, commercial bank fees, postage, insurance,
telephone expenses and maintenance and security. The aforementioned increases
were attributable, in part, to the corporate expansion associated with a broader
banking footprint, de novo banking activities, the expanded retail sales force
and the introduction of new products and services.

Income Taxes

Income tax expense amounted to $56.0 million and $52.5 million for the nine
months ended September 30, 2003 and 2002, respectively. The increase recorded in
the 2003 period reflected the $11.9 million increase in the Company's income
before provision for income taxes partially offset by a decrease in the
Company's effective tax rate for the nine months ended September 30, 2003 to
35.7% compared to 36.2% for the nine months ended September 30, 2002. As of
September 30, 2003, the Company had a net deferred tax asset of $64.4 million
compared to $65.6 million at September 30, 2002.

REGULATORY CAPITAL REQUIREMENTS

The following table sets forth the Bank's compliance with applicable
regulatory capital requirements at September 30, 2003.

- ---------------
(1) Reflects the 4.0% requirement to be met in order for an institution to be
"adequately capitalized" under applicable laws and regulations.

(2) The Bank is categorized as "well capitalized" under the regulatory framework
for prompt corrective action. To be categorized "well capitalized", the Bank
must maintain Tier 1 leverage capital of 5%, Tier 1 risk-based capital of 6%
and total risk-based capital of 10%.

LIQUIDITY AND COMMITMENTS

The Company's liquidity, represented by cash and cash equivalents, is a
product of its operating, investing and financing activities. The Company's
primary sources of funds are deposits, the amortization, prepayment and maturity
of outstanding loans, mortgage-related securities, the maturity of debt
securities and other short-term investments and funds provided from operations.
While scheduled payments from the amortization of loans, mortgage-related
securities and maturing debt securities and short-term investments are
relatively predictable sources of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions and
competition. In addition, the Company invests excess funds in federal funds sold
and other short-term interest-earning assets that provide liquidity to meet
lending requirements. Prior to fiscal 1999, the Company generated sufficient
cash through its deposits to fund its asset generation, using borrowings from
the FHLB of New York only to a limited degree as a source of funds. However, due
to the Company's continued focus on expanding its commercial real estate and
business loan portfolios, the Company increased its FHLB borrowings to $2.42
billion at September 30, 2003. At September 30, 2003, the Company had the
ability to borrow from the FHLB up to an additional $233.4 million on a secured
basis, utilizing mortgage-related loans and securities as collateral.

44

Liquidity management is both a daily and long-term function of business
management. Excess liquidity is generally invested in short-term investments
such as federal funds sold, U.S. Treasury securities or preferred securities. On
a longer term basis, the Company maintains a strategy of investing in its
various lending products. The Company uses its sources of funds primarily to
meet its ongoing commitments, to pay maturing certificates of deposit and
savings withdrawals, fund loan commitments and maintain a portfolio of
mortgage-related securities and investment securities. Certificates of deposit
at September 30, 2003 scheduled to mature in one year or less totaled $1.14
billion, or 79.8% of total certificates of deposit. Based on historical
experience, management believes that a significant portion of maturing deposits
will remain with the Company. The Company anticipates that it will continue to
have sufficient funds, together with borrowings, to meet its current
commitments.

The following table sets forth the Company's off-balance sheet financial
instruments at September 30, 2003 and December 31, 2002.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

General

Market risk is the risk of loss arising from adverse changes in the fair
value of financial instruments. As a financial institution, the Company's
primary component of market risk is interest rate risk. Interest rate risk is
defined as the sensitivity of the Company's current and future earnings to
changes in the level of market rates of interest. Market risk arises in the
ordinary course of the Company's business, as the repricing characteristics of
its assets do not match those of its liabilities. Based upon the Company's
nature of operations, the Company is not subject to foreign currency exchange or
commodity price risk. The Company's various loan portfolios, concentrated
primarily within the greater New York City metropolitan area (which includes
parts of northern New Jersey and southern Connecticut), are subject to risks
associated with the local economy. The Company does not own any trading assets.

Net interest margin represents net interest income as a percentage of
average interest-earning assets. Net interest margin is directly affected by
changes in the level of interest rates, the relationship between rates, the
impact of interest rate fluctuations on asset prepayments, the level and
composition of assets and liabilities and the credit quality of the loan
portfolio. Management's asset/liability objectives are to maintain a strong,
stable net interest margin, to utilize its capital effectively without taking
undue risks and to maintain adequate liquidity.

Management responsibility for interest rate risk resides with the Asset and
Liability Management Committee ("ALCO"). The committee is chaired by the Chief
Financial Officer, and includes the Chief Executive Officer, Chief Credit
Officer and the Company's senior business-unit and financial executives.
Interest rate risk management strategies are formulated and monitored by ALCO
within policies and limits approved by the Board of Directors. These policies
and limits set forth the maximum risk which the Board of Directors deems
prudent, govern permissible investment securities and off-balance sheet
instruments, and identify acceptable counterparties to securities and
off-balance sheet transactions.

ALCO risk management strategies allow for the assumption of interest rate
risk within the Board approved limits. The strategies are formulated based upon
ALCO's assessments of likely market developments and trends in the Company's
lending and consumer banking businesses. Strategies are developed with the aim
of enhancing the Company's

45

net income and capital, while ensuring the risks to income and capital from
adverse movements in interest rates are acceptable.

The Company's strategies to manage interest rate risk include (i)
increasing the interest sensitivity of its mortgage loan portfolio through the
use of adjustable-rate loans or relatively short-term (primarily five years)
balloon loans, (ii) originating relatively short-term or variable-rate consumer
and commercial business loans as well as mortgage warehouse lines of credit,
(iii) investing in securities available-for-sale, primarily mortgage-related
instruments with maturities or estimated average lives of less than five years,
(iv) promoting stable savings, demand and other transaction accounts,
(v)utilizing variable-rate borrowings which have imbedded derivatives to cap the
cost of borrowings, (vi) using interest rate swaps to modify the repricing
characteristics of certain variable-rate borrowings, (vii) entering into forward
loan sale agreements to offset rate risk on rate-locked loan commitments
originated for sale, (viii) maintaining a strong capital position and (ix)
maintaining a relatively high level of liquidity and/or borrowing capacity.

As part of the overall interest rate risk management strategy, management
has entered into derivative instruments to minimize significant unplanned
fluctuations in earnings and cash flows caused by interest rate volatility. The
interest rate risk management strategy at times involves modifying the repricing
characteristics of certain borrowings and entering into forward loan sale
agreements to offset rate risk on rate locked loan commitments on loans being
originated for sale so that changes in interest rates do not have a significant
adverse effect on net interest income, net interest margin and cash flows.
Derivative instruments that management periodically uses as part of its interest
rate risk management strategy include interest rate swaps and forward loan sale
agreements.

At September 30, 2003, the Company had $219.1 million of loan commitments
outstanding related to loans being originated for sale. Of such amount, $64.5
million related to loan commitments for which the borrowers had not entered into
interest rate locks and $154.6 million which were subject to interest rate
locks. At September 30, 2003, the Company had $154.6 million of forward loan
sale agreements. The fair market value of the interest rate lock loan commitment
was a gain of $2.8 million and the fair value of the forward loan sale agreement
was a loss of $2.8 million at September 30, 2003.

The credit risk associated with these derivative instruments is the risk of
non-performance by the counterparty to the agreements. However, management does
not anticipate non-performance by the counterparties and monitors and controls
the risk through its asset/liability management procedures.

Management uses a variety of analyses to monitor the sensitivity of net
interest income, primarily a dynamic simulation model complemented by a
traditional interest rate gap analysis.

Net Interest Income Simulation Model

The simulation model measures the sensitivity of net interest income to
changes in market interest rates. The simulation involves a degree of estimation
based on certain assumptions that management believes to be reasonable. Factors
considered include contractual maturities, prepayments, repricing
characteristics, deposit retention and the relative sensitivity of assets and
liabilities to changes in market interest rates.

The Board has established certain limits for the potential volatility of
net interest income as projected by the simulation model. Volatility is measured
from a base case where rates are assumed to be flat. Volatility is expressed as
the percentage change, from the base case, in net interest income over a
12-month period.

The model is kept static with respect to the composition of the balance
sheet and, therefore does not reflect management's ability to proactively manage
asset composition in changing market conditions. Management may choose to extend
or shorten the maturities of the Company's funding sources and redirect cash
flows into assets with shorter or longer durations.

Based on the information and assumptions in effect at September 30, 2003,
the model shows that a 200 basis point gradual increase in interest rates over
the next twelve months would decrease net interest income by $7.9 million or
2.53%.

Gap Analysis

Gap analysis complements the income simulation model, primarily focusing on
the longer term structure of the balance sheet. 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 an institution's
"interest rate sensitivity gap." An asset or liability
46

is said to be interest rate sensitive within a specific time period if it will
mature or reprice within that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that same time period. A gap is
considered positive when the amount of interest rate sensitive assets exceeds
the amount of interest rate sensitive liabilities. A gap is considered negative
when the amount of interest rate sensitive liabilities exceeds the amount of
interest rate sensitive assets. At September 30, 2003, the Company's one-year
cumulative gap position was a positive 3.73%, compared to a positive 3.68% at
December 31, 2002. A positive gap will generally result in the net interest
margin increasing in a rising rate environment and decreasing in a falling rate
environment. A negative gap will generally have the opposite results on the net
interest margin.

The following gap analysis table sets forth the amounts of interest-earning
assets and interest-bearing liabilities outstanding at September 30, 2003, that
are anticipated by the Company, using certain assumptions based on historical
experience and other market-based data, to reprice or mature in each of the
future time periods shown. The amount of assets and liabilities shown which
reprice or mature during a particular period was determined in accordance with
the earlier of the term to reprice or the contractual maturity of the asset or
liability.

The gap analysis is an incomplete representation of interest rate risk. The
gap analysis sets forth an approximation of the projected repricing of assets
and liabilities at September 30, 2003 on the basis of contractual maturities,
anticipated prepayments, callable features and scheduled rate adjustments for
selected time periods. The actual duration of mortgage loans and
mortgage-related securities can be significantly affected by changes in mortgage
prepayment activity. The major factors affecting mortgage prepayment rates are
prevailing interest rates and related mortgage refinancing opportunities.
Prepayment rates will also vary due to a number of other factors, including the
regional economy in the area where underlying collateral is located, seasonal
factors and demographic variables.

In addition, the gap analysis does not account for the effect of general
interest rate movements on the Company's net interest income because the actual
repricing dates of various assets and liabilities will differ from the Company's
estimates and it does not give consideration to the yields and costs of the
assets and liabilities or the projected yields and costs to replace or retain
those assets and liabilities. Callable features of certain assets and
liabilities, in addition to the foregoing, may also cause actual experience to
vary from that indicated. The uncertainty and volatility of interest rates,
economic conditions and other markets which affect the value of these call
options, as well as the financial condition and strategies of the holders of the
options, increase the difficulty and uncertainty in predicting when they may be
exercised.

Among the factors considered in our estimates are current trends and
historical repricing experience with respect to similar products. As a result,
different assumptions may be used at different points in time. Within the one
year time period, money market accounts were assumed to decay at 55%, savings
accounts were assumed to decay at 30% and NOW accounts were assumed to decay at
40%. Deposit decay rates (estimated deposit withdrawal activity) can have a
significant effect on the Company's estimated gap. While the Company believes
such assumptions are reasonable, there can be no assurance that assumed decay
rates will approximate actual future deposit withdrawal activity.

47

The following table reflects the repricing of the balance sheet, or "gap"
position at September 30, 2003.

- ---------------

(1) Based upon contractual maturity, repricing date, if applicable, and
management's estimate of principal prepayments. Includes loans
available-for-sale.

(2) Based upon contractual maturity, repricing date, if applicable, and
projected repayments of principal based upon experience. Amounts exclude the
unrealized gains/(losses) on securities available-for-sale.

(3) Includes interest-earning cash and due from banks, overnight deposits and
FHLB stock.

ITEM 4. CONTROLS AND PROCEDURES

Our management evaluated, with the participation of our Chief Executive
Officer and Chief Financial Officer, the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the
Securities Exchange Act of 1934) as of the end of the period covered by this
report. Based on such evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures are
designed to ensure that information required to be disclosed by us in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the SEC's rules and regulations and are operating in an effective manner.

No change in our internal control over financial reporting (as defined in
Rule 13a-15(f) or 15(d)-15(f) under the Securities Exchange Act of 1934)
occurred during the most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.

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OTHER INFORMATION

b) Reports on Form 8-K

49

SIGNATURES

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 thereunto duly authorized.

INDEPENDENCE COMMUNITY BANK CORP.

Date: November 12, 2003 By: /s/ ALAN H. FISHMAN
----------------------------------------------------
Alan H. Fishman
President and
Chief Executive Officer

Date: November 12, 2003 By: /s/ FRANK W. BAIER
----------------------------------------------------
Frank W. Baier
Executive Vice President
Chief Financial Officer and Treasurer