Staten Island Bancorp (SIB) 10-Q/A 2002 Q3 Quarterly report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

(Mark one)

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

For the quarterly period ended September 30, 2002

OR

o 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 1-13503

Staten Island Bancorp, Inc.

(Exact name of registrant as specified in its charter)

Delaware	13-3958850
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
1535 Richmond Avenue Staten Island, New York	10314
(Address of principal executive office)	(Zip Code)
(718) 447-8880
(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  ý   No  o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.  The Registrant had 60,227,107 shares of Common Stock outstanding as of November 13, 2002.

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

TABLE OF CONTENTS

		PAGE
EXPLANATORY NOTE		1
Part I	FINANCIAL INFORMATION
	Item 1  Financial Statements
	Unaudited Consolidated Statements of Financial Condition (As of September 30, 2002 and December 31, 2001)	2
	Unaudited Consolidated Statements of Income (For the three and nine months ended September 30, 2002 and for the three and nine months ended September 30, 2001)	3
	Unaudited Consolidated Statement of Changes in Stockholders’ Equity (For the nine months ended September 30, 2002)	4
	Unaudited Consolidated Statements of Cash Flows (For the nine months ended September 30, 2002 and 2001)	5
	Notes to Unaudited Consolidated Financial Statements	6
	Item 2  Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Part II	OTHER INFORMATION
	Item 6  Exhibits and Reports on Form 8-K	32
	SIGNATURES	33
	CERTIFICATIONS	34

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-Q/A amends Items 1, 2 and 6 of the Quarterly Report on Form 10-Q of Staten Island Bancorp, Inc. (the “Company”) for the three months ended September 30, 2002, which was originally filed on November 14, 2002 (the “Original Filing”).  As discussed below, the Company’s consolidated financial statements at and for the three and nine months ended September 30, 2002 included herein have been restated.  Except for financial statement information and related disclosures that are specifically related to the restatement, all information contained in this report is stated as of the date of the Original Filing.  This amendment does not otherwise update information in the Original Filing to reflect facts or events occurring subsequent to the date of the Original Filing.  For additional information, see the Company’s Form 10-K/A for the year ended December 31, 2001 and Form 10-K for the year ended December 31, 2002 (SEC File No. 1-13503).

1

STATEN ISLAND BANCORP, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

	September 30, 2002 (Restated) (Unaudited)			December 31, 2001
	(000’s omitted, except share data)
ASSETS:
Cash and due from banks	$	113,753		$	116,846
Federal funds sold	395,000			38,000
Securities available for sale	1,088,032			1,425,739
Federal Home Loan Bank of New York capital stock	114,150			102,900
Loans, net of allowance for loan losses of $23.9 million and $20.0 million at September 30, 2002 and December 31, 2001, respectively	3,287,367			2,806,619
Loans held for sale	1,528,037			1,185,593
Accrued interest receivable	32,803			28,601
Bank premises and equipment, net	45,540			38,939
Intangible assets, net	58,094			58,871
Other assets	219,092			202,945
Total assets	$	6,881,868		$	6,005,053
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Savings	$	1,012,470		$	868,028
Certificates of deposit	1,153,951			1,083,900
Money market	579,961			350,558
NOW accounts	132,892			115,349
Demand deposits	574,654			483,493
Total deposits	3,453,928			2,901,328
Borrowed funds	2,746,151			2,451,762
Advances from borrowers for taxes and insurance	26,602			17,495
Accrued interest and other liabilities	64,680			70,665
Total liabilities	6,291,361			5,441,250
STOCKHOLDERS’ EQUITY: (1)
Common stock, par value $.01 per share, 100,000,000 shares authorized, 90,260,624 issued and 60,227,107 outstanding at September 30, 2002 and 90,260,624 issued and 62,487,286 outstanding at December 31, 2001	903			903
Additional paid-in-capital	581,907			569,959
Retained earnings	374,171			317,208
Unallocated common stock held by ESOP	(28,155		)	(30,215		)
Unearned common stock held by RRP	(9,052		)	(14,333		)
Treasury stock (30,033,517 shares at September 30, 2002 and 27,773,338 at December 31, 2001), at cost	(340,461		)	(289,469		)
	579,313			554,053
Accumulated other comprehensive income, net of taxes	11,194			9,750
Total stockholders’ equity	590,507			563,803
Total liabilities and stockholders’ equity	$	6,881,868		$	6,005,053

(1)Prior period share and related amounts have been adjusted to reflect the 2-for-1 stock split on November 19, 2001.

See accompanying notes to unaudited consolidated financial statements.

2

STATEN ISLAND BANCORP, INC., AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2002		2001		2002		2001
	(Restated)		(Restated)		(Restated)		(Restated)
	(000’s omitted, except per share data)
Interest Income:
Loans	$	79,552	$	66,721	$	225,190	$	190,552
Securities, available for sale	20,761		27,034		68,602		85,952
Federal funds sold	322		222		1,020		855
Total interest income	100,635		93,977		294,812		277,359
Interest Expense:
Savings and escrow	4,285		4,644		13,686		13,521
Certificates of deposit	9,837		13,101		29,994		41,237
Money market and NOW	4,423		3,052		11,765		7,180
Borrowed funds	29,821		31,276		86,340		99,098
Total interest expense	48,366		52,073		141,785		161,036
Net interest income	52,269		41,904		153,027		116,323
Provision for Loan Losses	3,349		2,600		9,839		3,800
Net interest income after provision for loan losses	48,920		39,304		143,188		112,523
Other Income (Loss):
Service and fee income	3,948		2,962		10,819		9,006
Net gain on loan sales	55,293		25,851		127,477		52,252
Unrealized gain on derivative transactions	14,033		—		13,013		—
Loan fees	7,252		4,311		19,095		10,505
Other income	1,917		1,831		8,626		5,378
Securities transactions	1,512		61		2,111		64
	83,955		35,016		181,141		77,205
Other Expenses:
Personnel	9,905		8,833		71,134		50,595
Commissions	33,735		12,802		75,479		27,535
Occupancy and equipment	4,085		3,248		11,520		9,504
Amortization of intangible assets	138		1,373		436		4,191
Data processing	1,643		1,528		5,016		4,518
Marketing	1,322		600		3,814		2,061
Professional fees	2,978		1,225		8,697		2,671
Other	10,363		6,539		28,135		16,677
Total other expenses	64,169		36,148		204,231		117,752
Income before provision for income taxes	68,706		38,172		120,098		71,976
Provision for Income Taxes	28,230		15,557		49,013		27,383
Income before cumulative effect of accounting change	40,476		22,615		71,085		44,593
Cumulative effect of change in accounting principle	4,731		—		4,731		—
Net Income	$	45,207	$	22,615	$	75,816	$	44,593
Earnings per Share Before Cumulative Effect of Accounting Change: (1)
Basic	$	0.73	$	0.37	$	1.27	$	0.73
Fully Diluted	$	0.70	$	0.37	$	1.21	$	0.72
Earnings per Share After Cumulative Effect of Accounting Change:(1)
Basic	$	0.81	$	0.37	$	1.35	$	0.73
Fully Diluted	$	0.78	$	0.37	$	1.30	$	0.72
Dividends Declared	$	0.12	$	0.08	$	0.33	$	0.23

(1)  Prior period amounts have been adjusted to reflect the 2-for-1 stock split on November 19, 2001.

See accompanying notes to unaudited consolidated financial statements.

3

STATEN ISLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY (Restated)

(UNAUDITED)

	Common Stock		Additional Paid-In Capital		Unallocated Common Stock Held By ESOP			Unearned Common Stock Held by RRP			Treasury Stock			Comprehensive Income		Retained Earnings			AccumulatedOtherComprehensive Income (Loss) Net of Tax		Total
	(000’s omitted, except share data)
Balance January 1, 2002	$	903	$	569,959	$	(30,215	)	$	(14,333	)	$	(289,469	)	$	—	$	317,208		$	9,750	$	563,803
Change in unrealized appreciation (depreciation) on securities, net of reclassification adjustment and tax effect														1,444					1,444		1,444
Allocation of 343,356 ESOP shares			4,549		2,060																6,609
Vesting of 578,330 RRP Shares			561					5,281													5,842
Exercise of 860,148 stock options			589								9,171										9,760
Compensation expense recognized from variable award plan			6,249																		6,249
Dividends Paid ($0.33 per share)																(18,853		)			(18,853		)
Treasury stock purchases (3,120,327) at cost											(60,163		)								(60,163		)
Net Income														75,816		75,816					75,816
Balance September 30, 2002	$	903	$	581,907	$	(28,155	)	$	(9,052	)	$	(340,461	)	$	77,260	$	374,171		$	11,194	$	590,507

See accompanying notes to unaudited consolidated financial statements.

4

STATEN ISLAND BANCORP, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001

(UNAUDITED)

	For the Nine Months Ended September 30,
	2002 (Restated)				2001 (Restated)
	(000’s omitted)
Cash Flows From Operating Activities:
Net Income	$		75,816		$		44,593
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and software amortization	4,486				3,001
(Accretion) and amortization of bond and mortgage premiums and discount	(238			)	27
Amortization of intangible assets	436				4,191
Securities impairment charges	100				—
Realized (gain) loss on sale of available for sale securities	(2,211			)	(64			)
Expense charge relating to allocation and earned portions of employee benefit plan	19,289				18,458
Provision for loan losses	9,839				3,800
Increase in cash surrender value of BOLI	(5,626			)	(5,378			)
Gain on sale of loans held for sale	(127,477			)	(52,252			)
Unrealized loss on derivative transactions	(13,013			)	—
Origination of loans held for sale	(4,507,766			)	(2,544,518			)
Purchase of loans held for sale	(440,089			)	(348,765			)
Proceeds from sale of loans held for sale	4,426,861				1,720,795
Repayment of loans held for sale	324,833				545,776
Increase in net deferred loan fees and costs	(9,879			)	(4,311			)
Increase in accrued interest receivable	(4,202			)	(1,272			)
Increase in other assets	(10,746			)	(33,166			)
Increase in accrued interest and other liabilities	3,122				19,452
Deferred income taxes	10,399				2,670
Net cash used in operating activities	(246,066			)	(626,963			)
Cash Flows From Investing Activities:
Maturities and amortization of mortgage-backed securities and CMO’s	440,066				237,963
Maturities and amortization of all other available for sale securities	54,799				113,181
Sales of mortgage-backed securities and CMO’s	169,655				76,410
Sales of all other available for sale securities	187,296				132,426
Purchases of mortgage-backed securities and CMO’s	(405,869			)	(176,830			)
Purchases of all other available for sale securities	(116,534			)	(82,665			)
Principal collected on loans	744,126				767,886
Loans made to customers	(1,369,425			)	(772,550			)
Sales of loans	129,027				—
Capital expenditures	(10,312			)	(3,229			)
Net cash (used in) provided by investing activities	(177,171			)	292,592
Cash Flows From Financing Activities:
Net increase in deposit accounts	552,600				335,278
Increase in borrowings	294,389				127,054
Cash dividends paid	(18,853			)	(15,487			)
Purchase of treasury stock	(60,163			)	(84,741			)
Exercise of stock options	9,171				2,507
Net cash provided by financing activities	777,144				364,611
Net increase in cash and cash equivalents	353,907				30,240
Cash and cash equivalents, beginning of year	154,846				104,103
Cash and cash equivalents, end of period	$	508,753			$	134,343
Supplemental Disclosures Of Cash Flow Information:
Cash paid for-
Interest	$	142,010			$	164,466
Income taxes	$	48,261			$	19,666
Transferred to ORE	$	10,912			$	632

See accompanying notes to unaudited consolidated financial statements.

5

STATEN ISLAND BANCORP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Item 1. Financial Information

ORGANIZATION AND FORM OF OWNERSHIP

SI Bank & Trust (the “Bank”) was originally founded as a New York State chartered savings bank in 1864. In August 1997, the Bank converted to a federally chartered mutual savings bank and is now regulated by the OTS. On April 16, 1997, the Board of Directors of the Bank adopted a Plan of Conversion to convert from a federally chartered mutual savings bank to a federally chartered stock savings bank with the concurrent formation of a holding company (the “Conversion”).  Staten Island Bancorp, Inc. (the “Company”) completed its initial public offering and Conversion on December 22, 1997 and issued 45,130,312 shares of common stock, $.01 par value per share.

The Company, on November 19, 2001, paid a stock dividend of one share for each share of stock held (two-for-one stock split) to shareholders of record on November 5, 2001. At September 30, 2002 the number of shares issued was 90,260,624 and the number of shares outstanding was 60,227,107. All share amounts and earnings per share amounts have been adjusted for the stock split.

The Bank has the following wholly owned subsidiaries:

SIB Mortgage Corp. (the “Mortgage Company”) was incorporated in the State of New Jersey in 1998. The Mortgage Company currently originates loans in 42 states and, as of September 30, 2002, had assets totaling $1.7 billion of which $1.5 billion were loans held for sale.

Staten Island Funding Corporation (“SIFC”) is a wholly owned subsidiary of SIBIC, incorporated in the State of Maryland in 1998 for the purpose of establishing a real estate investment trust (“REIT”). The assets of SIFC totaled $705.8 million at September 30, 2002.

SIB Investment Corporation (“SIBIC”) was incorporated in the State of New Jersey in 1998 for the purpose of managing certain investments of the Bank. The Bank transferred the common stock and a majority of the preferred stock of SIFC to SIBIC. The consolidated assets of SIBIC at September 30, 2002 were $947.2 million.

SIB Financial Services Corporation (“SIBFSC”) was incorporated in the State of New York in January 2000. SIBFSC was formed as a licensed life insurance agency to sell the products of the SBLI USA Mutual Life Insurance Co. In the second quarter of 2002, this subsidiary began to offer certain non-deposit investment products such as mutual funds and annuities along with additional insurance products using a third party vendor. The assets of SIBFSC were $854,181 as of September 30, 2002.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Staten Island Bancorp, Inc. (the “Company”) and subsidiaries conform to generally accepted accounting principles and to general practice within the banking industry.

BASIS OF FINANCIAL STATEMENT PRESENTATION

The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank, and the Bank’s subsidiaries. The Bank’s wholly owned subsidiaries are the Mortgage Company, SIBIC, SIFC and SIBFSC. All significant intercompany transactions and balances are eliminated in consolidation.

The unaudited consolidated financial statements included herein reflect all normal recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations for the three-month and nine-month periods ended September 30, 2002 are not necessarily indicative of the results to be expected for the year ending December 31, 2002. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2001.

6

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported assets, liabilities, revenues and expenses as of the dates of the financial statements. Actual results could differ significantly from those estimates.

BUSINESS

Staten Island Bancorp, Inc. is the holding company for SI Bank & Trust. The Bank, which is a full service community oriented savings bank, operates 17 full service branches on Staten Island, two full service branches in Brooklyn, six full service branches in Ocean County, New Jersey, two full service branches in Monmouth County, New Jersey, four full service branches in Union County, New Jersey and three full service branches in Middlesex County, New Jersey. The Bank also has a lending center and a Trust Department on Staten Island, New York. Commercial lending offices are also located in Bay Ridge, Brooklyn, New York and the Howell, New Jersey branch.

The Mortgage Company does retail business as Ivy Mortgage and wholesale business as SIB Mortgage Corp. and is headquartered in Branchburg, New Jersey. The Mortgage Company originates loans in 42 states and sells most of such loans to investors on servicing released basis with standard mortgage company representations and warranties thereby generating fee income for the Bank. The Bank, in its efforts to manage interest rate risk and maintain yields, retains for its own portfolio certain loans originated by the Mortgage Company.

The Bank’s deposits are insured by the Bank Insurance Fund (“BIF”) to the maximum extent permitted by law. The Bank is subject to examination and regulation by the Office of Thrift Supervision (“OTS”), which is the Bank’s chartering authority and primary regulator. The Bank is also regulated by the Federal Deposit Insurance Corporation (“FDIC”), the administrator of the BIF. The Bank is also subject to certain reserve requirements established by the Board of Governors of the Federal Reserve System (“FRB”) and is a member of the Federal Home Loan Bank (“FHLB”) of New York, which is one of the 12 regional banks comprising the FHLB system.

7

EARNINGS PER SHARE

Earnings per share are computed by dividing net income by the weighted average number of shares of common stock outstanding and potential common shares, adjusted for the unallocated aggregate 5.1 million shares held by the Company’s Employee Stock Ownership Plan (“ESOP”) and Recognition and Retention Plan (“RRP”) shares in accordance with the Statement of Positions 93-6.  Earnings per share has been computed based on the following for the three months and nine months ended September 30, 2002 and 2001.

	Three Months Ended September 30,(unaudited)				Nine Months Ended September, 30, (unaudited)
	2002		2001		2002		2001
	(restated)		(restated)		(restated)		(restated)
	(000’s omitted, except per share amounts)
Income before cumulative effect of accounting change	$	40,476	$	22,615	$	71,085	$	44,593
Cumulative effect of change in accounting principle	4,731		—		4,731		—
Net income	$	45,207	$	22,615	$	75,816	$	44,593
Divided by:
Weighted average common shares outstanding	55,297		59,790		56,071		61,075
Weighted average potential common shares	2,278		1,266		2,463		800
Total weighted average common shares and potential common shares outstanding	57,575		61,056		58,534		61,875
Earnings per Share Before Cumulative Effect of Accounting Change:
Basic	$	0.73	$	0.37	$	1.27	$	0.73
Fully diluted	$	0.70	$	0.37	$	1.21	$	0.72
Earnings per Share After Cumulative Effect of Accounting Change:
Basic	$	0.81	$	0.37	$	1.35	$	0.73
Fully diluted	$	0.78	$	0.37	$	1.30	$	0.72

The computation of diluted earnings per share includes weighted average common shares outstanding and potential common shares.  Potential common shares that are antidilutive are not included in the computation of diluted earnings per share.

ACCOUNTING FOR GOODWILL

The Company adopted Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets”, (“SFAS 142”) effective January 1, 2002.  In accordance with SFAS No. 142, the Company is no longer required to amortize goodwill resulting from acquisitions.  At the effective date, the Company had goodwill of $55.3 million, which included core deposit intangibles of $2.4 million.  An annual impairment test of the goodwill will be conducted to determine if there is a need to writedown the goodwill.  Prior to adoption of SFAS 142, the quarterly goodwill amortization expense totaled approximately $1.5 million.

8

The proforma results if SFAS 142 had been adopted in the prior periods is as follows:

	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	2002		2001		2002		2001
	(restated)		(restated)		(restated)		(restated)
	(000’s omitted) (Unaudited)
NET INCOME
Reported net income	$	45,207	$	22,615	$	75,816	$	44,593
Add back goodwill amortization, net of tax	17		713		73		2,120
Adjusted net income	$	45,224	$	23,328	$	75,889	$	46,713
BASIC EARNINGS PER SHARE
Reported basic earnings per share	$	0.81	$	0.37	$	1.35	$	0.73
Goodwill amortization, net of tax	—		0.01		0.07		0.03
Adjusted basic earnings per share	$	0.81	$	0.38	$	1.42	$	0.76
DILUTED EARNINGS PER SHARE
Reported diluted earnings per share	$	0.78	$	0.37	$	1.30	$	0.72
Goodwill amortization, net of tax	—		0.01		—		0.03
Adjusted diluted earnings per share	$	0.78	$	0.38	$	1.30	$	0.75

The carrying amount of goodwill and other intangible assets (in 000’s) at September 30, 2002 and December 31, 2001 is as follows:

	As of September 30, 2002 (unaudited)						As of December 31, 2001
	Original Amount		Accumulated Amortization		Net Carrying Value		Original Amount		Accumulated Amortization		Net Carrying Value
Goodwill	$	64,591	$	11,516	$	53,075	$	64,322	$	11,443	$	52,879
Core deposit intangibles	2,895		862		2,033		2,895		500		2,395
Total	$	67,486	$	12,378	$	55,108	$	67,217	$	11,943	$	55,274

Estimated future amortization expense (in 000’s) related to the core deposit intangibles, is as follows:

For the year ending:

2002	$	483
2003	483
2004	483
2005	483
2006	463

DERIVATIVE FINANCIAL INSTRUMENTS

The Mortgage Company currently utilizes certain derivative instruments, primarily forward delivery commitments, in its efforts to manage interest rate risk associated with its mortgage loan commitments and mortgage loans held for sale. Prior to the closing and funds disbursement on a single-family residential mortgage loan, the Mortgage Company generally extends an interest-rate locked commitment to the borrower. Such commitment obligates the Mortgage Company to close the mortgage at a specified rate of interest provided the conditions to closing are satisfied. However, a period of 15 to 90 days, or more, generally elapses between the time such commitment is issued and the time that the Mortgage Company sells the closed mortgage loan into the secondary market. During such time, the Mortgage Company is subject to risk that market rates of interest may change, coupled with the fact that the price that investors will pay for mortgage loans purchased from the Mortgage Company is dependent, in part, on the difference between the interest rate on such loans and the then current rate on long-term (generally 10-year) U.S. Treasury bonds plus a margin (with any such difference referred to as the spread). If market rates of interest rise, the spread between locked loans and the U.S. Treasury rate will widen and investors generally will pay less to purchase such loans resulting in a reduction in the amount of the Mortgage Company’s gain recognized on sale or, possibly, a loss. In an effort to mitigate such interest rate risk, substantially at

9

the same time the Mortgage Company extends an interest rate locked commitment to its borrower, the Mortgage Company enters into forward delivery sales commitments pursuant to which it agrees to deliver whole mortgage loans to various investors or to issue Fannie Mae and/or Freddie Mac mortgage-backed securities. These forward sales delivery commitments, which amounted to $1.5 billion at September 30, 2002, establish the price the Mortgage Company will receive upon the sale of the related mortgage loan, thereby mitigating certain interest rate risk (the Mortgage Company still will have certain execution risk, that is, risk related to its ability to close and deliver to its investors the mortgage loans it has committed to sell to them pursuant to these forward delivery commitments). At September 30, 2002, the Company had mandatory forward delivery commitments outstanding amounting to $1.5 billion. Such commitments are comprised of the following: $275.3 million in allocated single whole loan sales, $766.7 million of allocated bulk whole loan sales and $475.3 million of unallocated forward securities sales. At September 30, 2002, the Mortgage Company had no forward commitments allocated to Fannie Mae or Freddie Mac securities. The unallocated forward securities sales had market depreciation of $1.7 million at September 30, 2002 compared to $295.0 million of unallocated forward securities sales with a market depreciation of $1.3 million at June 30, 2002.

Prior to the quarter ended September 30, 2002, the Company had not accounted for loan commitments as derivatives. However, the Financial Accounting Standards Board (“FASB”) issued Statement 133 Implementation Issue C13 (“Issue C13”) in March 2002, which provides additional guidance requiring certain loan commitments to be accounted for as derivatives under FASB Statement No. 133 (“Statement 133”). Pursuant to Issue C13, the Mortgage Company identified certain interest rate locked loan commitments that should be accounted for as derivative instruments as of July 1, 2002, the effective implementation date. The interest rate locked loan commitments are recorded at fair value upon implementation, with changes in fair value recorded in current period earnings and classified as a loan basis adjustment.

To implement the guidance of Issue C13, which is reported as a change in accounting principle, the Mortgage Company recorded a cumulative pre-tax gain of $8.1 million ($4.7 million after taxes) during the quarter ended September 30, 2002, representing the mark to market of certain loan commitments as of July 1, 2002. During the third quarter of 2002, the Mortgage Company also recognized current period pre-tax income due to the net change in fair value of locked loan commitments of $14.1 million.

As previously disclosed above, the Mortgage Company uses derivative instruments (forward sales) to hedge the interest rate locked commitments. To the extent that loans held for sale are not allocated to these derivatives, the changes in fair value of these derivatives are also recorded to current period earnings as a loan basis adjustment.

The net asset arising from the value of these derivative instruments at September 30, 2002 was $19.4 million. The value of this asset will be adjusted monthly based on market interest rates and the level of unallocated forward securities sales and locked loan commitments. Generally, the value of locked loan commitments will increase in a falling interest rate environment and decrease in a rising interest rate environment. The goal of the Company is to offset the change in the market value of locked loan commitments with the change in the market value of forward securities sales.

10

SECURITIES - AVAILABLE  FOR SALE

The following table sets forth certain information regarding amortized cost and estimated fair values of the Company’s available for sale securities and Federal Home Loan Bank of New York stock at September 30, 2002 and December 31, 2001.

	September 30, 2002(unaudited)				December 31, 2001
	AmortizedCost		FairValue		AmortizedCost		FairValue
	(000’s omitted)				(000’s omitted)
Bonds-Available for Sale:
U.S. Treasuries	$	1,005	$	1,012	$	1,035	$	1,082
Govt. Sponsored Agencies	19,904		21,253		55,476		56,470
Industrial and Finance	118,378		114,473		184,964		178,077
Foreign	250		250		250		250
Total Debt Securities	139,537		136,988		241,725		235,879
G.N.M.A. - M.B.S	8,173		8,609		10,347		10,642
F.H.L.M.C. - M.B.S	250,454		260,015		295,432		299,975
F.N.M.A. - M.B.S	368,678		382,123		326,927		331,991
Agency C.M.O.s	104,061		105,332		128,564		130,116
Privately Issued C.M.O.s	162,125		163,231		337,272		343,201
Total Mortgage-Backed and Mortgage Related Securities	893,491		919,310		1,098,542		1,115,925
Total Bonds - Available for Sale	1,033,028		1,056,298		1,340,267		1,351,804
Equity securities:
Preferred Stock	6,598		6,528		20,352		19,842
Common Stock	1,416		1,498		16,279		19,744
FHLB Common Stock	114,150		114,150		102,900		102,900
IIMF Capital Appreciation Fund	27,531		23,708		31,229		34,349
Total Equity Securities	149,695		145,884		170,760		176,835
Total securities available for sale and FHLB common stock	$	1,182,723	$	1,202,182	$	1,511,027	$	1,528,639

11

LOAN PORTFOLIO COMPOSITION

The following table sets forth the composition of the Company’s held for investment loans at the dates indicated.

	September 30, 2002
	(unaudited)			December 31, 2001
	(000’s omitted)
Mortgage loans:(1)
Single-family residential	$	2,528,621		$	2,062,897
Multi-family residential	54,184			48,783
Commercial real estate	413,891			335,260
Construction and land	175,487			245,515
Home equity	18,015			12,815
Total mortgage loans	3,190,198			2,705,270
Other loans:
Student loans	162			288
Passbook loans	8,794			7,477
Commercial business loans	43,128			60,898
Other consumer loans	54,536			42,356
Total other loans	106,620			111,019
Total loans	3,296,818			2,816,289
Plus (less):
Premium on loans purchased	4,107			5,135
Allowance for loan losses	(23,908		)	(20,041		)
Deferred loan costs	10,350			5,236
Loans, net	$	3,287,367		$	2,806,619

(1)Mortgage loans held for sale at September 30, 2002 and December 31, 2001, were $1.5 billion and $1.2 billion, respectively, and are not included in this table.

12

DELINQUENT LOANS

The following table sets forth information concerning delinquent loans at the dates indicated.  The amounts presented represent the total outstanding principal balances of the related held in portfolio and held for sale loans, rather than the actual payment amounts which are past due.

	September 30, 2002
90 Days or More	(unaudited)		December 31, 2001
	(000’s omitted)
Mortgage loans:
Single-family residential	$	942	$	5,432
Multi-family residential	—		—
Commercial real estate	—		—
Construction and land	102		509
Home equity	30		30
Total mortgage loans	1,074		5,971
Other loans:
Commercial business loans	—		774
Other loans	301		468
Total other loans	301		1,242
Total	$	1,375	$	7,213

	September 30, 2002
60-89 Days	(unaudited)		December 31, 2001
	(000’s omitted)
Mortgage loans:
Single-family residential	$	5,631	$	5,945
Multi-family residential	—		162
Commercial real estate	69		1,510
Construction and land	191		5,339
Home equity	297		258
Total mortgage loans	6,188		13,214
Other loans:
Commercial business loans	1,015		42
Other loans	524		586
Total other loans	1,539		628
Total	$	7,727	$	13,842

	September 30, 2002
30-59 Days	(unaudited)		December 31, 2001
	(000’s omitted)
Mortgage loans:
Single-family residential	$	13,961	$	15,634
Multi-family residential	—		567
Commercial real estate	3,043		3,848
Construction and land	3,013		9,113
Home equity	120		62
Total mortgage loans	20,137		29,224
Other loans:
Commercial business loans	3,422		1,257
Other loans	1,388		2,645
Total other loans	4,810		3,902
Total	$	24,947	$	33,126

13

LOANS PAST DUE 90 DAYS OR MORE AND STILL ACCRUING AND NON-ACCRUING ASSETS

The following table sets forth information with respect to non-accruing loans, other real estate owned,  repossessed assets, loans past due 90 days or more and still accruing, and non-accruing securities.

	September 30, 2002
	(unaudited)			December 31, 2001
	(000’s omitted)
Non-Accruing Loan Assets
Mortgage loans:
Single-family residential	$	12,346		$	7,663
Multi-family residential	247			—
Commercial real estate	1,667			4,086
Construction and land	840			2,117
Home equity	76			38
Other loans:
Commercial business loans	180			558
Other consumer loans	639			631
Total non-accrual loans	15,995			15,093
Other real estate owned and repossessed assets, net	7,841			1,227
Total non-accruing loan assets	23,836			16,320
Loans past due 90 days or more and still accruing	1,375			7,213
Non-accruing loan assets and loans past due 90 days or more and still accruing	$	25,211		$	23,533
Total non-accruing loans and real estate owned and repossessed assets to total HFI* & HFS** loans	0.50		%	0.41		%
Total non-accruing loans and real estate owned and repossessed assets to total assets	0.35		%	0.27		%
Total non-accrual loans to total HFI* & HFS** loans	0.33		%	0.38		%
Total non-accrual loans to total assets	0.23		%	0.25		%

*   Held for Investment

** Held for Sale

14

ALLOWANCE FOR LOAN LOSSES

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

	Nine Months EndedSeptember 30, (unaudited)						Year Ended December 31,
	2002			2001			2001
	(000’s omitted)
Allowance at beginning of period	$	20,041		$	14,638		$	14,638
Provisions	9,839			3,800			8,757
Charge-offs:
Mortgage loans:
Construction, land and land development	—			—			—
Single-family residential	4,887			67			1,854
Multi-family residential	—			—			—
Commercial real estate	—			—			—
Other loans	1,787			1,961			2,411
Total charge-offs	6,674			2,028			4,265
Recoveries:
Mortgage loans:
Construction, land and land development	15			—			—
Single-family residential	7			129			131
Multi-family residential	—			—			—
Commercial real estate	—			—			—
Other loans	680			504			780
Total recoveries	702			633			911
Allowance at end of period	$	23,908		$	17,043		$	20,041
Allowance for possible loan losses to total non-accruing loans at end of period	149.47		%	117.29		%	132.78		%
Allowance for possible loan losses to total loans at end of period	0.50		%	0.47		%	0.50		%

15

RESTATEMENT

The Company previously announced that it would restate its financial results for the three and nine months ended September 30, 2002 due to certain adjustments which are summarized below.

In the fourth quarter of 2002 management determined that the effective tax rate of the consolidated company was 41.1% instead of the 37.5% used in the first quarter of 2002, 38.4% used in the second quarter of 2002 and 38.5% used in the third quarter of 2002. The increase in the effective tax rate was due to the level of income as compared to the permanent tax differences and the various state tax rates in the states that the Company operates in.  As a result for the first nine months of 2002 management determined to increase the tax expense by $3.8 million rather than recording the entire amount due to the change in the tax rate in the fourth quarter of 2002.  The impact on the three months ended September 30, 2002 was an additional $1.8 million in tax expense from the originally reported amount.

For further information regarding the Company’s restatement at and for the periods ending December 31, 2002 and December 31, 2001 refer to the Company’s Annual Report for 2002 as filed on Form 10-K and the Company’s Annual Report for 2001 as filed on Form 10-K/A.

The following is a summary of the effect of restatement on the Company’s consolidated financial statements at or for the periods reflected.

	Selected Balance Sheet Data At September 30, 2002(unaudited)
	As Previously Reported		As Restated
	(000’s omitted)
Accrued interest and other liabilities	$	60,880	$	64,680
Retained earnings	377,972		374,171
Total stockholders’ equity	594,307		590,507

	Summary Income Statement Data For the Three Months Ended September 30, 2002 (unaudited)				Summary Income Statement Data For the Nine Months Ended September 30, 2002 (unaudited)
	As Previously Reported		As Restated		As Previously Reported		As Restated
	(000’s omitted, except per share data)
Provision for Income Taxes	$	26,430	$	28,230	$	45,213	$	49,013
Net Income	47,007		45,207		79,616		75,816
Earnings per share Before Cumulative Effect of Accounting Change
Basic	$	0.76	$	0.73	$	1.34	$	1.27
Fully diluted	0.73		0.70		1.30		1.21
Earnings per share After Cumulative Effect of Accounting Change
Basic	$	0.84	$	0.81	$	1.42	$	1.35
Fully diluted	0.81		0.78		1.38		1.29

16

	Selected Cash Flow Data For the Nine Months Ended September 30, 2002 (unaudited)
	As PreviouslyReported		As Restated
	(000’s omitted)
Net Income (1)	$	79,616	$	75,816

(1)The change in net income of $3.8 million reflects the increase in the provision for income taxes — see discussion noted above.  As a result of this change there was a corresponding increase in the liability for income taxes.  All other changes in the cash flow reflect the cumulative impact of restatements and reclassifications made in prior 2002 and 2001 reported amounts.

17

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q/A contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by and information currently available to management. In addition, in portions of this document the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “should” and similar expressions, or the negative thereof, as they relate to the Company or the Company’s management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to forward-looking events and are subject to certain risks, uncertainties and assumptions. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.

CHANGES IN FINANCIAL CONDITION

The Company’s total assets amounted to $6.9 billion at September 30, 2002 compared to total assets of $6.0 billion at December 31, 2001. The increase of $876.8 million or 14.6% was due primarily to an increase of $357.0 million in federal funds sold, an increase of $480.7 million in loans, net and a $342.4 million increase in loans held for sale. These increases were partially offset by a $337.7 million decrease in the securities available for sale portfolio. The increase in federal funds sold was due to the cash flow requirements of the Mortgage Company. The increase in loans, net was primarily due to loan originations of $897.4 million by the Bank and the retention of $472.0 million in loans originated by the Mortgage Company for the Bank’s portfolio, partially offset by repayments of $1.1 billion. The loan originations by the Bank during the nine months ended September 30, 2002 were primarily residential loans and, to a lesser extent, loans secured by commercial real estate. This level of originations reflects the current market demand in the current low rate environment along with the Bank’s continued business development efforts to originate both commercial and residential real estate loans in its primary market area. The Mortgage Company’s originations retained for the Bank’s portfolio are primarily relatively higher yielding adjustable rate single-family residential mortgage loans. The increase in loans held for sale was due to the record level of loan originations at the Mortgage Company which is being driven by market demand as well as expansion of the Mortgage Company’s branch network. For the first nine months of 2002, the Mortgage Company had loan originations of $5.0 billion and loan sales of $4.8 billion. The Mortgage Company’s originations continue to be driven by market demand in this low rate environment with over 70% of the current application volumes being refinance transactions. The Mortgage Company continues to look for market expansion opportunities and to review its current operations and product mix to maintain a profitable level of originations in all interest rate environments. The decrease in securities available for sale was due to increased paydowns on amortizing securities due to the current rate environment and securities sales to restructure the Company’s portfolio to reduce exposure to prepayment risk, to generate funding for loan originations and to improve the overall credit quality of the Company’s investment portfolio.

Deposits at September 30, 2002 totaled $3.5 billion compared to $2.9 billion at December 31, 2001. The increase of $552.6 million or 19.0% was primarily due to a $229.4 million increase in money market accounts, a $144.4 million increase in savings accounts and a $91.2 million increase in demand deposits. The increase in money market accounts was primarily due to the “Bank Edge” account which is a higher yielding money market account which also requires the opening of a non-interest bearing DDA account and is promoted primarily in the Bank’s Brooklyn and New Jersey markets. The growth in savings accounts was due to the current interest rate environment and the current uncertainty of the stock market. The increase in demand deposits was due to the Bank’s continued business development efforts to obtain primarily commercial demand deposits. Core deposits, which consist of savings, money market, NOW and DDA accounts, represented 66.6% of deposits at September 30, 2002 compared to 62.6% at December 31, 2001.

The Bank primarily relies on competitive pricing of its deposit products, quality customer service and long-standing relationships with customers to attract and retain deposits. In 2002, the Bank’s branch network grew to 34 locations with the opening of four new branches in the State of New Jersey. The Bank plans to continue this strategy of opening de-novo branches to increase deposits and expand its market area when acceptable locations can be found.

The Company’s borrowings at September 30, 2002 were $2.7 billion or 39.9% of assets compared to $2.5 billion or 40.8% of assets at December 31, 2001. The increase of $294.4 million was primarily used to fund loan originations at the Mortgage Company. Borrowings at September 30, 2002 consisted of Federal Home Loan Bank advances of $1.9 billion and repurchase agreements of $803.6 million, including $298.8 million of repurchase

18

agreements between the Mortgage Company and two individual financial institutions. The Mortgage Company’s obligations under these repurchase agreements are fully guaranteed by the Bank.

Stockholders’ equity amounted to $590.5 million at September 30, 2002 and $563.8 million at December 31, 2001 or 8.6% and 9.4% of total assets at such dates, respectively. The increase of $26.7 million was due to net income of $75.8 million, an allocation of Employee Stock Ownership Plan (“ESOP”) and Recognition and Retention Plan (“RRP”) shares resulting in an increase of $12.5 million, the exercise of 860,148 stock options resulting in an increase of $9.8 million, an increase of $6.2 million from accounting for the stock option plan and a $1.4 million increase in the unrealized appreciation on securities available for sale, net of taxes. These increases were partially offset by the purchase of 3.1 million shares of the Company’s common stock at a cost of $60.2 million and aggregate cash dividend payments of $18.9 million. The tangible book value per share of the Company’s common stock was $8.90 at September 30, 2002 compared to $8.08 at December 31, 2001.

RESULTS OF OPERATIONS

The Company reported net income of $45.2 million or $0.78 per fully diluted share for the third quarter of 2002 compared to net income of $22.6 million or $0.37 per fully diluted share for the third quarter of 2001.  Included in the earnings for the third quarter of 2002 is an after tax increase of $4.7 million or, $0.08 per fully diluted share, reflecting the cumulative effect (at June 30, 2002) of a change in accounting principle for certain loan commitments as derivative instruments.  Net income before the cumulative change in accounting for loan commitments was $0.70 per fully diluted share for the third quarter of 2002.   The results for the three months ended September 30, 2002 also include an after tax credit of $8.3 million or $0.14 per diluted share reflecting the increase in fair value during the current period of certain loan commitments and an after tax increase of $7.4 million or $0.13 per fully diluted share related to the accounting for the Company’s stock option plan as a variable plan.  The Company’s net income per diluted share for the third quarter of 2002, excluding the previously mentioned three items was $0.43.

For the nine month period ended September 30, 2002, the Company reported net income of $75.8 million or $1.30 per diluted share compared to net income of $44.6 million or $0.72 per diluted share for the comparable time period last year.  Net income per diluted share before the cumulative change in accounting for loan commitments and the increase in fair value of loan commitments in the current period was $1.08 compared to $0.72 per diluted share for the first nine months of 2001. For the nine month period ended September 30, 2002 the after tax expense related to the Company’ stock option plan being accounted for as a variable plan was $3.4 million or $0.06 per fully diluted share.

The return on average equity and average assets for the three months ended September 30, 2002 was 29.93% and 2.64%, respectively, compared to 15.71% and 1.57%, respectively, for the comparable period in the prior year.

The return on average equity and average assets for the nine-month period ended September 30, 2002 was 17.53% and 1.58%, respectively, compared to 10.34% and 1.08%, respectively, for the nine-month period ended September 30, 2001.

The increase in net income for the quarter ended September 30, 2002, before considering the change in accounting principle, compared to the same quarter one year ago was due to an increase of $48.9 million in other income and a $10.4 million increase in net interest income. These increases were partially offset by a $28.0 million increase in total other expenses, a $12.7 million increase in the provision for income taxes and a $748,947 increase in the provision for loan losses.

The increase in net income for the nine-month period ended September 30, 2002 before considering the change in accounting principle, compared to the same nine-month period one year ago was due to an increase of $103.9 million in total other income and a $36.7 million increase in net interest income. These increases were partially offset by a $86.5 million increase in total other expenses, a $6.0 million increase in the provision for loan losses and a $21.6 million increase in the provision for income taxes.

19

AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID (unaudited)

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 resulting average yields; (ii) the total dollar amount of interest expense on interest-bearing liabilities and the resulting average rate; (iii) net interest income; (iv) interest rate spread; and (v) net interest margin.  Information is based on average daily balances during the indicated periods.

	Three Months Ended September 30, (unaudited)
	2002						2001
	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
	(000’s omitted)
Interest-earning assets:
Loans receivable (1):
Real estate loans	$	4,576,827	$	77,382	6.71	%	$	3,445,149	$	64,162	7.39	%
Other loans	106,516		2,170		8.09	%	113,393		2,559		8.95	%
Total loans	4,683,343		79,552		6.74	%	3,558,542		66,721		7.44	%
Securities (2)	1,496,641		20,761		5.50	%	1,680,739		27,034		6.38	%
Other interest-earning assets (3)	81,017		322		1.57	%	39,428		222		2.24	%
Total interest-earning assets	6,261,001		100,635		6.38	%	5,278,709		93,977		7.06	%
Noninterest-earning assets	537,595						420,060
Total assets	$	6,798,596					$	5,698,769
Interest-bearing liabilities:
Deposits:
NOW and money market deposits	$	685,731	4,423		2.56	%	$	358,101	3,052		3.38	%
Savings and escrow accounts	1,032,947		4,285		1.65	%	820,782		4,644		2.24	%
Certificates of deposit	1,136,876		9,837		3.43	%	1,013,335		13,101		5.13	%
Total	2,855,554		18,545		2.58	%	2,192,218		20,797		3.76	%
Total Other Borrowings	2,748,914		29,821		4.30	%	2,410,145		31,276		5.15	%
Total interest-bearing liabilities	5,604,468		48,366		3.42	%	4,602,363		52,073		4.49	%
Noninterest-bearing liabilities (4)	594,869						525,278
Total liabilities	6,199,337						5,127,641
Stockholders’ equity	599,259						571,128
Total liabilities and stockholders’ equity	$	6,798,596					$	5,698,769
Net interest-earning assets	$	656,533					$	676,346
Net interest income/interest rate spread			$	52,269	2.95	%			$	41,904	2.57	%
Net interest margin					3.31	%					3.15	%
Ratio of average interest-earning assets to average interest-bearing liabilities					111.71	%					114.70	%

(1)   The average balance of loans receivable includes non-accruing loans, interest on which is recognized on a cash basis.

(2)   Securities include the Bank’s investment in FHLB of New York stock.

(3)   Includes money market accounts, federal funds sold and interest-earning bank deposits.

(4)   Consists primarily of demand deposit accounts.

20

	Nine Months Ended September 30,(unaudited)
	2002						2001
	Average Balance		Interest		Average Yield/Cost		Average Balance		Interest		Average Yield/Cost
	(000’s omitted)
Interest-earning assets:
Loans receivable (1):
Real estate loans	$	4,180,795	$	218,563	6.99	%	$	3,231,687	$	182,406	7.55	%
Other loans	106,172		6,627		8.35	%	116,791		8,146		9.33	%
Total loans	4,286,967		225,190		7.02	%	3,348,478		190,552		7.61	%
Securities (2)	1,575,795		68,602		5.82	%	1,772,115		85,952		6.48	%
Other interest-earning assets (3)	88,063		1,020		1.55	%	35,381		855		3.23	%
Total interest-earning assets	5,950,825		294,812		6.62	%	5,155,974		277,359		7.19	%
Noninterest-earning assets	479,564						387,833
Total assets	6,430,389						5,543,807
Interest-bearing liabilities:
Deposits:
NOW and money market deposits	609,746		11,765		2.58	%	297,520		7,180		3.23	%
Savings and escrow accounts	982,074		13,686		1.86	%	804,935		13,521		2.25	%
Certificates of deposit	1,106,180		29,994		3.63	%	1,004,515		41,237		5.49	%
Total	2,698,000		55,445		2.75	%	2,106,970		61,938		3.93	%
Total Other Borrowings	2,584,847		86,340		4.47	%	2,366,795		99,098		5.60	%
Total interest-bearing liabilities	5,282,847		141,785		3.59	%	4,473,765		161,036		4.81	%
Noninterest-bearing liabilities (4)	569,328						494,998
Total liabilities	5,852,175						4,968,763
Stockholders’ equity	578,214						575,044
Total liabilities and stockholders’ equity	$	6,430,389					$	5,543,807
Net interest-earning assets	$	667,978					$	682,209
Net interest income/interest rate spread			$	153,027	3.04	%			$	116,323	2.38	%
Net interest margin					3.44	%					3.02	%
Ratio of average interest-earning assets to average interest-bearing liabilities					112.64	%					115.25	%

___________________

(1)   The average balance of loans receivable includes non-accruing loans, interest on which is recognized on a cash basis.

(2)   Securities include the Bank’s investment in FHLB of New York stock.

(3)   Includes money market accounts, federal funds sold and interest-earning bank deposits.

(4)   Consists primarily of demand deposit accounts.

21

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 change in interest due to both volume and rate has been allocated proportionately between volume and rate based on the absolute dollar amounts of the change in each.

	Three Months Ended September 30,2002 compared to 2001(unaudited)
	Increase (decrease) due to
	Rate			Volume			Total
	(000’s omitted)
Interest-earning assets:
Loans receivable:
Real estate loans	$	(6,339	)	$	19,559		$	13,220
Other loans	(239		)	(150		)	(389		)
Total loans receivable	(6,578		)	19,409			12,831
Securities	(3,492		)	(2,781		)	(6,273		)
Other interest-earning assets	(81		)	181			100
Total interest-earning assets	(10,151		)	16,809			6,658
Interest-bearing liabilities:
Deposits:
NOW and money market deposits	(885		)	2,256			1,371
Savings and escrow accounts	(1,402		)	1,043			(359		)
Certificates of deposit	(4,719		)	1,455			(3,264		)
Total	(7,006		)	4,754			(2,252		)
Borrowings	(5,519		)	4,064			(1,455		)
Total interest-bearing liabilities	(12,525		)	8,818			(3,707		)
Net change in net interest income	$	2,374		$	7,991		$	10,365
	Nine Months Ended September 30,2002 compared to 2001(unaudited)
	Increase (decrease) due to
	Rate			Volume			Total
	(000’s omitted)
Interest-earning assets:
Loans receivable:
Real estate loans	$	(14,255	)	$	50,412		$	36,157
Other loans	(814		)	(705		)	(1,519		)
Total loans receivable	(15,064		)	49,707			34,638
Securities	(8,335		)	(9,015		)	(17,350		)
Other interest-earning assets	(617		)	782			165
Total interest-earning assets	(24,021		)	41,474			17,453
Interest-bearing liabilities:
Deposits:
NOW and money market deposits	(1,681		)	6,266			4,585
Savings and escrow accounts	(2,525		)	2,690			165
Certificates of deposit	(15,092		)	3,849			(11,243		)
Total	(19,298		)	12,805			(6,493		)
Borrowings	(21,310		)	8,552			(12,758		)
Total interest-bearing liabilities	(40,608		)	21,357			(19,251		)
Net change in net interest income	$	16,587		$	20,117		$	36,704

22

INTEREST INCOME

The Company’s interest income for the three months ended September 30, 2002 was $100.6 million compared to $94.0 million for the three months ended September 30, 2001. The increase of $6.6 million was due to a $12.8 million increase in interest income from loans which was partially offset by a $6.3 million decrease in interest income from securities. The increase in interest income from loans was due to a $1.1 billion increase in the average balance of loans which was partially offset by a 70 basis point decrease in the average yield on loans to 6.74% for the third quarter of 2002 from 7.44% for the third quarter of 2001. The increase in the average balance of the loan portfolio was due to increased originations at the Bank, the retention of an increased amount of relatively higher yielding loans originated by the Mortgage Company for the Bank’s portfolio and the record loan origination volumes at the Mortgage Company resulting in increased balances in loans held for sale. The decrease in the average yield on loans was due to the low interest rate environment resulting in the increased amortization and satisfaction of loans being replaced by lower yielding originations and the downward repricing of adjustable rate loans. The decrease in interest income from securities was due to a $184.1 million decline in the average balance of the securities portfolio and an 88 basis point decline in the average yield on the securities portfolio to 5.50% for the third quarter of 2002. The decrease in the average balance of the securities portfolio was due to accelerated paydowns of amortizing securities primarily due to the current interest rate environment and the use of the cash flows generated from such paydowns to fund higher yielding loan originations at both the Bank and the Mortgage Company. During the quarter, the Company also sold $306.4 million in securities to restructure the securities available for sale portfolio to reduce exposure to prepayment risk, generate additional funding for loan commitments and to improve the overall credit quality of the portfolio.

Total interest income for the nine-month period ended September 30, 2002 was $294.8 million compared to $277.4 million for the first nine months of 2001. The increase of $17.4 million was due to a $34.6 million increase in interest income from loans which was partially offset by a $17.4 million decrease in interest income from securities. The increase in interest income from loans was due to a $938.5 million increase in the average balance of loans which was partially offset by a 59 basis point decline in the average yield on loans to 7.02% for the first nine months of 2002 from 7.61% for the same period in 2001. The increase in the average balance and decline in the average yield was due to substantially the same reasons as previously disclosed above in the discussion of interest income for the quarter ended September 30, 2002. The decrease in interest income from securities was due to a $196.3 million decline in the average balance of securities and a 66 basis point decline in the average yield on securities to 5.82% for the first nine months of 2002. The decline in the average balance and average yield of the securities portfolio was primarily due to the lower interest rate environment resulting in increased amortization and reinvestment of the cash flow in lower yielding securities. The decline in the average balance of the securities portfolio in the first nine months of 2002 was due to sales of $364.7 million, and amortization, repayments and maturities of $494.9 million which were partially offset by purchases of $522.4 million.

INTEREST EXPENSE

The Company’s total interest expense for the three months ended September 30, 2002 was $48.4 million compared to $52.1 million for the comparable time period last year. The decrease in interest expense was primarily due to a $3.3 million decrease in interest expense on certificates of deposit as a result of the average cost of certificates of deposit declining to 3.43% for the third quarter of 2002 compared to 5.13% for the third quarter of 2001, which was partially offset by a $123.5 million increase in the average balance of certificates of deposit. The decline in the average cost of certificates of deposit was due to the lower interest rates over the past twelve months resulting in the reinvestment of funds from certificate maturities at lower interest rates than the maturing certificates. The increase in the average balance was due to deposit growth resulting primarily from branch expansion.

For the first nine months of 2002 the Company’s interest expense was $141.8 million compared to $161.0 million for the first nine months of 2001. The decrease of $19.2 million was due to an $11.2 million decrease in interest expense on certificates of deposit and a $12.8 million decrease in interest expense on borrowed funds. These two decreases were partially offset by a $4.6 million increase in interest expense on money market and NOW accounts. The decrease in interest expense on certificates of deposit was due to a decline in the average cost to 3.63% for the first nine months of 2002 from 5.49% for the first nine months of 2001 which was partially offset by a $101.7 million increase in the average balance of certificates of deposit. The decrease in the interest expense on borrowed funds was due to a 113 basis point decline in the average cost to 4.47% for the first nine months of 2002

23

compared to 5.60% for the comparable time period last year which was partially offset by a $218.1 million increase in the average balance of borrowings. The decline in the average cost of borrowings was due to the repricing of borrowings at lower rates than those which matured and were repaid during the period. The increase in the average balance of borrowings was primarily due to the increased funding needs of the Mortgage Company. The increase in interest expense for money market and NOW accounts was due to a $312.2 million increase in the average balance of money market and NOW accounts partially offset by a decrease in the average cost to 2.58% from 3.23% for the first nine months of 2002 and 2001, respectively. The increase in the average balance of money market and NOW accounts was due to the promotion of a premium money market account which required the opening of a DDA account to develop banking relationships in new markets and, to a lesser extent, branch expansion. The decline in the average cost was due to the lower interest rate environment over the past twelve months.

NET INTEREST INCOME

Net interest income for the third quarter of 2002 was $52.3 million compared to $41.9 million for the third quarter of 2001. The increase of $10.4 million or 24.8% resulted primarily from favorable changes in volume and, to a lesser extent, rate. Average interest earning assets increased $982.3 million primarily due to increases in loans, net and loans held for sale. The favorable change in net interest income was primarily due to a decrease in the average cost for certificates of deposit and borrowed funds, resulting from lower market interest rates, which was partially offset by lower yielding interest earning assets and the impact of asset and liability repricing in the year 2002 compared with 2001.

The Company’s net interest rate spread and net interest margin for the three-month period ended September 30, 2002 was 2.95% and 3.31%, respectively, compared to 2.57% and 3.15%, respectively for the three months ended September 30, 2001.

For the nine month period ended September 30, 2002, net interest income was $153.0 million compared to $116.3 million for the nine months ended September 30, 2001. The increase of $36.7 million or 31.6% resulted from a $794.9 million increase in average interest earning assets and a 42 basis point increase in net interest margin. The increase in earning assets was primarily due to increases in loans, net and loans held for sale. The increase in the net interest rate margin was due primarily to a significant decrease in the cost of interest bearing liabilities which was partially offset by a decrease in the yield on interest earning assets.

The Company’s net interest rate spread and net interest margin for the nine-month period ended September 30, 2002 was 3.04% and 3.44%, respectively, compared to 2.38% and 3.02%, respectively, for the comparable period last year.

The improvement in the Company’s net interest rate spread and net interest rate margin in comparison to last year continues to be driven primarily by growth in earning assets and lower funding costs as a result of the lower interest rate environment, however, the net interest rate spread and net interest margin decreased in the quarter ended September 30, 2002 compared to the quarter ended June 30, 2002. Based on the current interest rate environment and the slope of the yield curve, this decreasing trend may continue. To partially offset this trend, the Company will continue to retain some of the relatively higher yielding loans originated by the Mortgage Company and closely monitor its repricing of interest bearing liabilities. In this low interest rate environment, decreases in net interest income could be offset, in whole or part, by increased gains on loan sales generated by the Mortgage Company.

PROVISION FOR LOAN LOSSES

The provision for loan losses for the third quarter of 2002 was $3.3 million compared to $2.6 million for the third quarter of 2001. The increase in the provision for loan losses was due to the increase in net chargeoffs, increased loan originations at both the Bank and Mortgage Company and current economic conditions. Net chargeoffs for the third quarter of 2002 were $2.4 million of which $1.9 million related to mortgage banking operations.

For the nine-month period ended September 30, 2002, the provision for loan losses was $9.8 million compared to $3.8 million for the comparable period last year. The increase in the provision for loan losses was primarily due to the increase in net chargeoffs, increased balances in loans, net and current economic conditions.

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The increase in net chargeoffs to $6.0 million for the nine month period in 2002 compared to $2.0 million for the comparable period in 2001 was due to $1.7 million in chargeoffs on loans transferred to other real estate owned (“OREO”), and $3.2 million in chargeoffs related to mortgage banking activities. These activities primarily represent the impairment charge on loans in non-accrual status prior to their sale at below market prices.

Total non-accruing loans and OREO amounted to $23.8 million at September 30, 2002 compared to $16.3 million at December 31, 2001. The increase of $7.5 million was due primarily to a $6.6 million increase in the balance of OREO. This increase was driven by the addition of two properties with an aggregate outstanding balance of $6.4 million. The Company has entered into a contract to sell the property with a carrying value of $4.6 million at no additional loss. The other property is a single-family residential property with a carrying value of $1.8 million and the borrower has claimed bankruptcy. The Company will aggressively pursue a buyer for this property and anticipates a sale in the first quarter of 2003 at no additional loss based on the current appraisal value.

Non-accrual loans at September 30, 2002 totaled $16.0 million compared to $15.1 million at December 31, 2001. The overall level of non-accrual loans has increased slightly, due primarily to the level of non-accrual single-family residential loans increasing to $12.3 million at September 30, 2002 compared to $7.7 million at December 31, 2001. The increase in single-family non-accrual loans at September 30, 2002 was primarily offset by declines in non-accrual construction loans, and non-residential properties. Certain of the single-family residential non-accruing loans are partially insured and the Company does not presently anticipate any losses on such loans.

The allowance for loan losses at September 30, 2002 was $23.9 million or 149.47% of non-accruing loans compared to $20.0 million or 132.78% of non-accruing loans at December 31, 2001. The activity in the allowance for loan losses consisted of chargeoffs of $6.7 million, recoveries of $702,731 and a provision of $9.8 million for the first nine months of 2002. In determining the appropriate level of the allowance for loan losses, the Company on a quarterly basis will review the mix and volume of the loan portfolio and its inherent risks, the level of non-accruing loans and delinquencies, historical loss experience, local and national economic condition including the direction of real estate values and current trends in regulatory supervision. While no assurance can be given that future chargeoffs or additional provisions over the current level will not be necessary, management believes, based on its ongoing review and the current level of non-accruing loans and delinquencies, that the current level of the allowance for loan losses is adequate.

TOTAL OTHER INCOME

Total other income was $84.0 million for the three months ended September 30, 2002 compared to $35.0 million for the three months ended September 30, 2001.  The increase of $47.4 million was due to a $29.4 million increase in net gains on loan sales, a $14.0 million increase in unrealized gains on derivative transactions, a $2.9 million increase in loan fees and a $1.4 million increase in net securities gains.  The increase in net gains on loan sales was primarily due to the $1.8 billion in loan sales in the third quarter of 2002 compared to loan sales of $853.2 million in comparable time period last year.  The increase in unrealized gains on derivative transactions was due to the change in market value of certain locked loan commitments from the time the commitment is locked in until the loan closes or the end of the period, net of corresponding hedging activity.  See the “Segment Reporting” and “Derivative Financial Instruments” notes in the financial statements for additional  information.  The increase in loan fees was primarily due to the increase in loan origination volumes at the Mortgage Company.   The increase in net gains on securities transactions was due to the Company’s restructuring of the securities available for sale portfolio, to realize gains on certain higher yielding mortgage backed securities before accelerated pay-downs, to generate funds for loan originations at the Mortgage Company and to improve the overall credit quality of the portfolio.  This program resulted in sales of $306.4 million of securities of which $8.3 million were collateral bond obligations, $169.7 million were mortgage backed securities, $69.5 million consisted of other debt securities, and $29.1 million consisted of equity securities.

Total other income for the nine months ended September 30, 2002 was $181.1 million compared to $77.2 million for the nine months ended September 30, 2001.  The increase of $103.9 million was due a $75.2 million increase in net gains on loan sales, a $13.0 million increase in unrealized gains on derivative transactions, an $8.6 million increase in loan fees, a $3.2 million increase in other income and a $2.1 million increase in net gains on security transactions. The increase in net gains on loan sales was primarily due to the increased volume of loan sales at the Mortgage Company.  The reasons for the increase in unrealized gains on derivative transactions and loan fees

25

are the same as previously discussed for the quarter ended September 30, 2002.  The increase in other income is due to the receipt of a one time liquidating dividend from the Company’s former provider of data processing services in the second quarter of 2002.  The increase in loan fees was due to the increase in loan originations at both the Bank and Mortgage Company.  The reasons for the increase in net security gains are generally the same as for the quarter ended September 30, 2002.

TOTAL OTHER EXPENSES

Total other expenses for the third quarter of 2002 were $64.2 million compared to $36.1 million for the third quarter of 2001. During the third quarter of 2002, the Company determined that the settlement of certain stock option exercises triggered the recognition of compensation expense for certain options under the stock option plan. For the three months ended September 30, 2002 and 2001, this accounting treatment resulted in non-cash credits to compensation expense of $13.6 million and $7.3 million, respectively.  Exclusive of these credits, total other expenses for the third quarter of 2002 were $77.8 million compared to $43.4 million for the third quarter of 2001. The increase of $34.4 million was primarily due to an $8.3 million increase in personnel expense, a $20.9 million increase in commission expense, a $1.8 million increase in professional fees and a $3.8 million increase in other expenses. The increase in personnel expense was due to a $5.4 million increase in personnel costs at the Mortgage Company, primarily due to increased loan origination volume, which results in additional brokered commissions income paid, and expansion, and an $872,029 increase in salary expense at the Bank due to expansion and normal merit pay increases. The increase in professional fees was primarily due to the use of contract employees at the Mortgage Company to handle the increased volumes. The increase in other expense was due to the increased loan origination volume and expansion at the Mortgage Company.

Total other expenses for the first nine months of 2002 were $204.2 million compared to $117.8 million for the first nine months of 2001. Exclusive of the $6.2 million expense in 2002 and the $6.0 million expense in 2001 related to stock options, and reflected in compensation expense, total other expenses were $198.0 million in 2002 and $111.8 million in 2001. The increase of $86.2 million was due to a $20.7 million increase in personnel expense, a $47.9 million increase in commission expense, a $2.0 million increase in occupancy expense, a $1.8 million increase in advertising expense, a $6.0 million increase in professional fees and an $11.5 million increase in other expense. These increases were partially offset by a $3.8 million decrease in amortization expense for goodwill due to a change in accounting for goodwill, as discussed previously. The increase in personnel costs was due to a $14.9 million increase in personnel costs at the Mortgage Company due to increased volumes and expansion and a $2.9 million increase in the ESOP expense due to the previously discussed change in accounting and the increased value of the Company’s common stock. The increase in commission expense was due to the increased loan origination volume at the Mortgage Company. The increase in occupancy expense was due to expansion at the Mortgage Company and the opening of four new branch locations by the Bank. The increase in advertising and marketing expense was due to the increased activity in this area resulting from expansion at both the Bank and the Mortgage Company. The increase in professional fees and other expenses was primarily due to the increased loan origination volumes and expansion at the Mortgage Company.

PROVISION FOR INCOME TAXES

The provision for income taxes for the third quarter of 2002 was $28.2 million resulting in an effective tax rate of 41.1% compared to a provision of $15.6 million in the third quarter of 2001 resulting in an effective tax rate of 40.8%. The provision for the nine months ended September 30, 2002 was $49.0 million compared to $27.4 million for the first nine months of 2001. The effective tax rates for the nine-month periods ending September 30, 2002 and 2001 were 41.1% and 38.0%, respectively. The primary reason for the increase in the provision for income taxes for both the three month and nine month periods ended September 30, 2002 compared to the same time frame in the prior year was the increase in the effective tax rate and the increase in net income before the provision for income taxes. The increase in the effective tax rate was primarily due to a change in the Company’s mix of business including the volumes of loan originations in states with higher corporate tax rates and the level of income as compared to the permanent tax differences.

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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, amortization, prepayments and maturities of outstanding loans and mortgage-backed securities, maturities of investment securities and other short-term investments and funds provided from operations. While scheduled payments from the amortization of loans and mortgage-backed securities and maturing investment 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 which provide liquidity to meet lending requirements.

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. 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-backed and mortgage-related securities and investment securities. At September 30, 2002, the total approved loan commitments outstanding amounted to $1.5 billion and the Mortgage Company had forward commitments of $1.4 billion to sell loans to third party investors. At the same date, the unadvanced portion of construction loans totaled $35.2 million. Certificates of deposit scheduled to mature in one year or less at September 30, 2002 totaled $752.0 million. Investment securities scheduled to mature in one year or less at September 30, 2002 totaled $1.0 million and amortization from investments and loans is projected at $1.5 billion over the next 12 months. Based on historical experience, the Bank’s current pricing strategy and the Bank’s strong core deposit base, management believes that a significant portion of maturing deposits will remain with the Bank. The Bank anticipates that it will continue to have sufficient funds, together with loan sales and security sales, to meet its current commitments. In the event the funds required exceed the funds generated by the Bank, additional sources of funds such as reverse repurchase agreements, FHLB advances, overnight lines of credit and brokered Certificates of Deposit are available to the Bank.

CAPITAL

At September 30, 2002, the Bank had regulatory capital that was well in excess of all regulatory requirements set by the OTS. The current requirements and the Bank’s actual levels are detailed below (000’s omitted) (unaudited):

	Required Capital				Actual Capital				Excess Capital
	Amount		Percent		Amount		Percent		Amount		Percent
Tangible capital	$	101,272	1.50	%	$	439,720	6.51	%	$	338,448	5.01	%
Core Capital	$	270,141	4.00	%	$	441,753	6.54	%	$	171,612	2.54	%
Risk-based capital	$	292,000	8.00	%	$	462,230	12.66	%	$	170,230	4.66	%

SEGMENT REPORTING

The Company manages its operations in a manner to focus on two strategic goals: fulfilling its role as a community banking institution for both individuals and businesses and as a national provider of single-family residential mortgage loan products. Accordingly, the Company aligns its various business objectives in support of these goals and manages the Company through two segments: Community Banking and Mortgage Banking.

Community Banking.  The Company’s Community Banking segment provides traditional banking services to commercial and retail customers through the Bank. The services include deposit accounts and related services, residential and commercial real estate lending, consumer lending, commercial lending, loan servicing, trust services, life insurance products and investment products. Products and services offered by this business segment are delivered through a multi-channel distribution network, including on-line banking. The Community Banking segment is the primary warehouse lender for the Mortgage Banking segment and purchases certain loans from the Mortgage Banking segment to be held in its portfolio.

27

During the first nine months of 2002, the Community Banking segment opened four branches in the State of New Jersey, in furtherance of its goal to expand its branch network and increase deposits.

Mortgage Banking.  The Company’s Mortgage Banking segment activities, which are conducted through the Mortgage Company, primarily include the origination of residential real estate loans either for sale into the secondary market, or to a lesser extent, for retention in the Bank’s portfolio. The loans are originated throughout a network in 42 states. Loans not retained for the Bank’s portfolio are sold to investors, including certain government-sponsored agencies. Applications for loans are accepted through various sources by the Mortgage Banking segment as indicated below.

The Mortgage Banking segment’s net income for the quarter was $17.4 million resulting in net income of $29.6 million for the first nine months of 2002. Included in the quarter and year-to-date net income is the previously discussed cumulative effect due to a change in accounting principle to comply with implementation guidance in Issue C13 of FASB 133 of $4.7 million after taxes and an increase in the value of locked loan commitments in the third quarter of $8.2 million, net of taxes. The level of earnings at the Mortgage Company is dependent on loan originations, which were $2.2 billion in the third quarter of 2002 and loan sales, which were $1.8 billion for the third quarter of 2002. For the first nine months of 2002, loan originations were $5.0 billion and loans sold were $4.8 billion.

The primary source of income for the Mortgage Company is gains generated by the sale of loans on a servicing released basis. All loans are sold servicing released by the Mortgage Company and therefore, the Mortgage Company has no loan servicing assets. The Mortgage Company recognizes gains on sales when the loan is sold with the net gain for the period being determined by the volume of loans sold and the net realized margin on those loans.

The Mortgage Company’s net realized margin on mortgage loans is comprised of the gross profit margin recognized in originating and subsequently selling mortgage loans. The net realized margin has two components, the inherent margin expected at the time the loan is locked in, or “origination income”, and the secondary market gain. Origination income is the gross difference between the market value of a loan based upon a standard execution and the cost basis of the loan as of the date of lock-in. The secondary marketing gains/losses portion of the gain on sale is essentially the extent to which the execution of the sale of the loan is either greater or less than the expected or inherent origination income. Secondary market gains/losses primarily occur as a result of changes in the interest rate environment, hedging activities and changes in the method of execution of settlements of the sales of the loans from what was anticipated at the time of lock-in. During the third quarter of 2002, the Mortgage Company experienced a widening of both the inherent origination income margins and the secondary marketing margin, resulting in an increase of 18 basis points in average gross margin to 2.72% over the second quarter of 2002 in spite of a greater volume of agency business, traditionally a lower margin business line.  Comparing the third quarter of 2002 to the third quarter of 2001, the average gross margins decreased by 44 basis points. However, it should be noted that the third quarter of 2001 included post-September 11 market fluctuations resulting in larger than normal secondary market gains. The Mortgage Company’s goal is to increase Alt-A loan (loans not eligible for Agency or Government programs that have a minimum specified credit score and/or that satisfy other criteria and/or reduced income or asset documentation) production since this product produces higher margins.

Certain of the Mortgage Company’s expenses are variable based on the volume of loan applications and originations. The primary expense associated with loan originations is commission expense paid to brokers and retail loan officers to originate a loan. Declines in volume resulting in reduced fee income will be partially offset by a decline in commission expense and reduction in back-office staff, primarily shipping, and the number of contract employees. The Mortgage Company, in an effort to partially protect itself in the event of declines in volumes resulting from interest rate movements, has developed contingency plans designed to reduce expenses to coincide with reductions in loan origination volumes.

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The Mortgage Company originates loans through various sources.  The following table summarizes application volumes by source.

	Quarter Ended September 30,(unaudited)				Year To Date September 30, (unaudited)
Source	2002Volume		2001Volume		2002Volume		2001Volume
Consumer Direct	$	625,838	$	181,444	$	1,225,678	$	330,988
Retail	1,171,369		765,426		2,760,559		2,115,398
Wholesale	3,358,972		770,011		6,224,009		1,841,204
Bulk Purchase	45,749		—		72,475		—
Total	$	5,201,928	$	1,716,881	$	10,282,721	$	4,287,590

With the exception of loans originated for the Bank’s portfolio, all loans originated by the Mortgage Company are originated for sale into the secondary market and the Mortgage Company assumes limited repurchase risk. In connection with the sale of loans to mortgage loan investors, the Mortgage Company makes standard secondary market representations and warranties in the normal course of business to facilitate the sale as is common in the mortgage banking industry. These representations and warranties relate to, among other things, the Mortgage Company’s compliance with laws, regulations, investor and industry standards and the accuracy of information supplied by borrowers and verified by the Mortgage Company.

The Mortgage Company also represents and warrants that the borrowers will make payments as agreed for a specified period of time after transfer of ownership of the loans to the investors. The time period ranges from 0 to 90 days after the loan transfer. In the event of payment default within the warranty period, the investor may require the Mortgage Company to repurchase the loan or the Mortgage Company may mutually agree to extend the warranty period. In certain cases where repurchase is required, an alternative settlement may be reached whereby the investor reprices the loan to market based on its then impaired status, and accepts a cash payment of the difference between the price originally paid by the investor and the repriced market value as full satisfaction of the Mortgage Company’s warranty for that loan. The Mortgage Company repriced loans totaling $2.9 million in the third quarter of 2002 and $5.2 million for the nine-month period ended September 30, 2002, resulting in a reduction of gain on loan sales of $1.3 million and $2.5 million for the quarter and nine-month period ended September 30, 2002.

The segment operating revenue and operating earnings in the table below incorporate certain intersegment transactions that the Company views as appropriate for purposes of reflecting the contribution of certain segments, which are eliminated in preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles.

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Segment Reporting Table

For The Three and Nine Months Ended September 30, 2002 And 2001

	Quarter Ended September 30, 2002 (unaudited and restated)
	Mortgage Banking		Community Banking			Elimination of Intersegment Banking(1)			Total
	(000’s omitted)
Interest income	$	22,800	$	93,433		$	(15,598)		$	100,635
Interest expense	17,026		46,938			(15,598		)	48,366
Net Interest income	5,774		46,495			—			52,269
Provision for loan losses	3,119		230			—			3,349
Other income (loss):
Service and fee income	—		5,865			—			5,865
Net gains on loan sales	55,781		792			(1,280		)	55,293
Unrealized gain on derivative transactions	14,033		—			—			14,033
Loan fees	7,153		99			—			7,252
Securities transactions	—		1,512			—			1,512
Total other income	76,967		8,268			(1,280		)	83,955
Other expenses	57,937		6,232			—			64,169
Income before provision for income taxes	21,685		48,301			(1,280		)	68,706
Provision for income taxes	9,000		19,704			(474		)	28,230
Income before cumulative effect of accounting change	12,685		28,597			(806		)	40,476
Cumulative effect of change in accounting principle, net of tax	4,731		—			—			4,731
Net income	$	17,416	$	28,597		$	(806	)	$	45,207
Total assets at September 30, 2002	$	1,749,845	$	6,567,162		$	(1,435,739	)	$	6,881,868
	Quarter Ended September 30, 2001 (unaudited and restated)
	Mortgage Banking		Community Banking			Elimination of Intersegment Items (1)			Total
	(000’s omitted)
Interest income	$	16,327	$	89,861		$	(12,211	)	$	93,977
Interest expense	11,028		53,256			(12,211		)	52,073
Net Interest income	5,299		36,605			—			41,904
Provision for loan losses	1,166		1,434			—			2,600
Other income (loss):
Service and fee income	—		4,793			—			4,793
Net gains (losses) on loan sales	26,948		(621		)	(476		)	25,851
Loan fees	4,012		299			—			4,311
Securities transactions	—		61			—			61
Total other income	30,960		4,532			(476		)	35,016
Other expenses	23,634		12,514			—			36,148
Income before provision for income taxes	11,459		27,189			(476		)	38,172
Provision for income taxes	4,751		10,983			(176		)	15,558
Net income	$	6,708	$	16,206		$	(300	)	$	22,614
Total assets at September 30, 2001	$	1,109,880	$	5,689,277		$	(1,098,113	)	$	5,701,044

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	Nine Months Ended September 30, 2002 (unaudited and restated)
	Mortgage Banking		Community Banking		Elimination of Intersegment Items (1)			Total
	(000’s omitted)
Interest income	$	68,074	$	270,194	$	(43,456	)	$	294,812
Interest expense	46,397		138,844		(43,456		)	141,785
Net Interest income	21,677		131,350		—			153,027
Provision for loan losses	7,709		2,130		—			9,839
Other income (loss):
Service and fee income	—		19,445		—			19,445
Net gains (losses) on loan sales	136,075		347		(8,945		)	127,477
Unrealized gain on derivative transactions	13,013		—		—			13,013
Loan fees	18,466		629		—			19,095
Securities transactions	—		2,111		—			2,111
Total other income	167,554		22,532		(8,945		)	181,141
Other expenses	138,961		65,270		—			204,231
Income before provision for income taxes	42,561		86,482		(8,945		)	120,098
Provision for income taxes	17,663		34,660		(3,310		)	49,013
Income before cumulative effect of accounting change	24,898		51,822		(5,635		)	71,085
Cumulative effect of change in accounting principle, net of tax	4,731		—		—			4,731
Net income	$	29,629	$	51,822	$	(5,635	)	$	75,816

	Nine Months Ended September 30, 2001 (unaudited and restated)
	Mortgage Banking		Community Banking			Elimination of Intersegment Items (1)			Total
	(000’s omitted)
Interest income	$	39,961	$	263,210		$	(25,812	)	$	277,359
Interest expense	25,812		161,036			(25,812		)	161,036
Net Interest income	14,149		102,174			—			116,323
Provision for loan losses	1,501		2,299			—			3,800
Other income:
Service and fee income	—		14,384			—			14,384
Net gains (losses) on loan sales	54,474		(1,555		)	(667		)	52,252
Loan fees	9,833		672			—			10,505
Securities transactions	—		64			—			64
Total other income	64,307		13,565			(667		)	77,205
Other expenses	56,090		61,662			—			117,752
Income before provision for income taxes	20,865		51,778			(667		)	71,976
Provision for income taxes	8,659		18,972			(247		)	27,384
Net income	$	12,206	$	32,806		$	(420	)	$	44,592

(1)The intersegment eliminations consist of interest income on the Community Banking segment’s results and interest expense on the Mortgage Banking segment’s results due to the Community Banking segment providing a $1.3 billion warehouse line of credit to the Mortgage Banking segment. The intersegment elimination also includes $1.3 million and $475,858 in premiums paid by the Community Banking segment to the Mortgage Banking segment for the purchase of loans during the third quarter of 2002 and 2001, respectively. The premiums paid for the purchase of loans by the Community Banking segment from the Mortgage Banking segment for the first nine months of 2002 and 2001 were $8.9 million and $666,669, respectively.

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Part II                    Other Information

Item 6                     Exhibits and Reports on Form 8-K

a.   Exhibits

99.1         Section 1350 Certification of the Chief Executive Officer

99.2         Section 1350 Certification of the Chief Financial Officer

b.   Reports on Form 8-K

On July 15, 2002, Staten Island Bancorp filed a current report on form 8-K that included the press release regarding the $7.4 million writedown of two asset backed securities due to permanent impairment of these securities.

On July 22, 2002, Staten Island Bancorp filed current report on Form 8-K that included the press release announcing the intention of the Company to repurchase up to 3,040,000 shares of the Company’s Common stock.

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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.

	STATEN ISLAND BANCORP, INC.
Date:  May 15, 2003	By:	/s/ Harry P. Doherty
		Harry P. Doherty, Chairman of the
		Board and Chief Executive Officer
Date:  May 15, 2003	By:	/s/ Edward Klingele
		Edward Klingele, Sr. Vice President
		and Chief Financial Officer

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CERTIFICATIONS

I, HARRY P. DOHERTY, the Chief Executive Officer of Staten Island Bancorp, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q/A of Staten Island Bancorp, Inc.;

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

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

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

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

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

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

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

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

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

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  May 15, 2003	By:	/s/ Harry P. Doherty
		Harry P. Doherty,
		Chief Executive Officer

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I, EDWARD KLINGELE, the Chief Financial Officer of Staten Island Bancorp Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q/A of Staten Island Bancorp, Inc.;

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

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

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

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

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

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

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

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

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

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:  May 15, 2003	By:	/s/ Edward Klingele
		Edward Klingele
		Chief Financial Officer

35