NORTH FORK BANCORPORATION INC, 10-K, 1996-03-26

NORTH FORK BANCORPORATION INC
10-K, 1996-03-26
STATE COMMERCIAL BANKS

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<PAGE> 1

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 1995

Commission File Number 1-10458

NORTH FORK BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 36-3154608
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

275 BROAD HOLLOW ROAD, MELVILLE, NEW YORK 11747
(Address of principal executive offices) (Zip Code)

(Registrant's telephone number, including area code) (516) 844-1004

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
Common Stock par New York Stock Exchange
value $2.50

Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)

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. (X) Yes ( ) No

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ( )

As of March 15, 1996, there were 24,704,893 shares of the Registrant's
common stock outstanding. The aggregate market value of the Registrant's common
stock (based on the average stock price on March 15, 1996) held by
non-affiliates was approximately $580,565,000.

<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated herein by reference in the
following parts of this Annual Report:

North Fork Bancorporation, Inc. 1995 Annual Report to Shareholders --
Parts I, II and IV.

North Fork Bancorporation, Inc. 1996 Definitive Proxy Statement --
Part III
<PAGE> 3
PART I

ITEM 1 BUSINESS

General Development of Business

North Fork Bancorporation, Inc. (the "Registrant") with its executive
headquarters located in Melville, New York, is a bank holding company organized
under the laws of the State of Delaware in 1980 and registered under the Bank
Holding Company Act of 1956, as amended. The Registrant's primary subsidiary,
North Fork Bank, operates forty-nine retail banking facilities throughout
Suffolk, Nassau, Queens, Westchester and Rockland Counties, New York.

During 1995, North Fork Bank entered into definitive merger agreements
to acquire the domestic commercial banking business of Extebank with
approximately $387 million in assets and $348 million in deposits for $47
million in cash. Extebank operated seven retail banking facilities in Suffolk
County and one in Manhattan, New York. Additionally, North Fork Bank entered
into an Asset Purchase and Sale Agreement with First Nationwide Bank to acquire
their ten Long Island branches with approximately $600 million in deposits at a
deposit premium of 6.35% (see "Note 2 -- Mergers and Acquisitions" (pages 24-25)
of the Registrant's 1995 Annual Report for a more detailed discussion). Both of
these in-market acquisitions closed during the first quarter of 1996.

On July 3, 1995, the Bank consummated its purchase of Great Neck
Bancorp, the parent company of Bank of Great Neck, a Long Island based
commercial bank ("Great Neck"). Great Neck with net assets of $91 million,
including $49.4 million in net loans and $90.3 million in deposits, was merged
into North Fork Bank.

On November 30, 1994, Metro Bancshares Inc. ("Metro"), the parent
company of Bayside Federal Savings Bank ("Bayside") was merged with and into
the Registrant. Simultaneously, Bayside (with approximately $1.0 billion in
assets, $.9 billion in deposits and $83.5 million in stockholders equity,
operating through thirteen branch locations in Queens, Nassau and Suffolk
Counties, New York) was merged with and into the Bank. The merger was accounted
for as a pooling-of-interests, and accordingly, the Registrant's consolidated
financial statements include the consolidated results of Metro.

North Fork Bank is the result of the October 1, 1992 merger of the
Registrant's banking subsidiaries, The North Fork Bank & Trust Company ("Bank &
Trust") and Southold Savings Bank ("Southold"). Bank & Trust was merged into
Southold; Southold then converted its charter from that of a state savings bank
to a state commercial bank and changed its name to North Fork Bank.

Prior to 1988, the Registrant's principal asset was Bank & Trust and
its business consisted primarily of the ownership and operation of Bank &
Trust. On August 1, 1988, the Registrant completed the acquisition of Southold,
a New York State chartered savings bank. Southold expanded its branch network
through the June 28, 1991 acquisition of Eastchester Financial Corporation,
("Eastchester"). Eastchester's primary asset was Eastchester Savings Bank, a
$500.8 million savings bank which operated through seven branch locations in
Westchester and Rockland Counties, New York. Immediately upon consummation of
the acquisition. Eastchester was dissolved and its operations consolidated into
those of Southold.

Additionally, the Registrant and the Bank have nine active non-bank
subsidiaries, none of which accounted for a significant portion of the
Registrant's consolidated assets, nor contributed significantly to the
Registrant's consolidated results of operations, at and for the year ended
December 31, 1995.

<PAGE> 4
DESCRIPTION OF BUSINESS

The Registrant, through its bank subsidiary, provides a variety of
banking and financial services to middle market and small business
organizations, local governmental units, and retail customers in the
metropolitan New York area. The Bank's major competitors across the entire line
of its products and services are local branches of large money-center banks
headquartered in New York City and other banks headquartered in New York State.
Additionally, the Bank competes with other independent commercial banks in its
marketplace for loans and deposits; with local savings and loan associations and
savings banks for deposits and mortgage loans; with credit unions for deposits
and consumer loans; with insurance companies and money market funds for
deposits; and with local consumer finance organizations and the financing
affiliates of consumer goods manufacturers for consumer loans, especially
automobile manufacturers. In setting rate structures for the Bank's loan and
deposit products, management refers to a wide variety of financial information
and indices, including the rates charged or paid by the major money-center
banks, both locally and in the commercial centers, and the rates fixed
periodically by smaller, local competitors.

The Registrant and the Bank, in their normal course of business, are
subject to various regulatory statutes and guidelines. Additional information
is set forth under the caption "Capital" (pages 13-14) in Management's
Discussion and Analysis of the Registrant's 1995 Annual Report to Shareholders
included as Exhibit 13 herewith and incorporated herein by reference.

As of December 31, 1995, the Registrant and its consolidated
subsidiaries had approximately 814 full-time equivalent employees.

ITEM 2 PROPERTIES

During 1995, the Registrant entered into a long-term lease for a
portion of a four-story office building located at 275 Broad Hollow Road,
Melville, New York. At December 31, 1995, the Registrant occupied 48,125 square
feet which represents approximately 42% of the building's rentable space. This
additional space was necessitated by the Registrant's recent acquisitions which
expanded its presence in the metropolitan New York area, specifically, Queens
and Nassau Counties. This facility now serves as the Registrant's
administrative headquarters, and includes its lending, retail banking, trust
and investment management services divisions and its recently relocated
Melville branch.

The Registrant maintains its operations center and mortgage origination
and administration offices in a 28,300 square foot facility owned by the bank,
located at 9025 Main Road, Mattituck, New York.

The Bank owns twenty-six (26) buildings and occupies thirty-four (34)
other facilities under various lease arrangements expiring at various times
through 2014 (see "Note 14 - Other Commitments and Contingent Liabilities(b)
Lease Commitments" (page 39)) of the Registrant's 1995 Annual Report to
Shareholders included as Exhibit 13 herewith and incorporated herein by
reference). All but six of these buildings and facilities are utilized by the
Bank to provide banking and related financial services either as bank branches
or as limited banking facilities (principally stand-alone ATM locations). Of
the six not used for retail banking, two are owned facilities used by the data
processing, loan servicing and operations departments of the Bank. The
remaining space is leased to either accommodate additional office space or has
been vacated and subleased as a result of relocating certain departments to 275
Broad Hollow Road, Melville. The premises occupied or leased by the Registrant
and its subsidiaries are considered to be well located and suitably equipped
to serve as banking and related financial services facilities.

<PAGE> 5
ITEM 3 LEGAL PROCEEDINGS

Information required by this item is set forth under the caption "Note
14 -- Other Commitments and Contingent Liabilities -- (c) Other Matters" (page
39), in the Registrant's 1995 Annual Report to Shareholders included herein as
Exhibit 13 and incorporated herein by reference.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to security holders for vote during the
fourth quarter of 1995.

ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT

The name, age, position and business experience during the past five
years of each of the executive officers of the Registrant as of December 31,
1995, are presented in the following table. The officers are elected annually
by the Board of Directors.

Name Age Positions Held in Most Recent 5 Years
- - ---- --- -------------------------------------
<S> <C> <C>

John Adam Kanas 49 Chairman, President and Chief Executive Officer of the
Registrant and the Bank, throughout the past 5 years.

John Bohlsen 53 Vice Chairman of the Registrant (since 10/92) and of the Bank
(since 12/89). Mr. Bohlsen has been President of The Helm
Development Corp., a real estate company, throughout the past 5
years.

Daniel M. Healy 53 Executive Vice President and Chief Financial Officer of the
Registrant (since 3/92). Before that, Mr. Healy was a partner
with the accounting firm of KPMG Peat Marwick LLP.

</TABLE>

PART II

ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

The Registrant's common stock is traded on the New York Stock Exchange
under the symbol NFB. As of March 15, 1996, there were approximately 5,551
shareholders of record of the Registrant's common stock.

During 1995, the Registrant declared dividends of $.125 per share for
the first and second quarters, respectively, and $.15 per share for the third
and fourth quarter, respectively. During 1994, the Registrant declared
dividends of $.075 per share for the first and second quarters, respectively,
and $.10 per share for the third and fourth quarters, respectively (dividends
declared are exclusive of dividends declared by Metro prior to merger).

For additional information regarding dividends and restrictions thereon,
and market price information, refer to the "Selected Financial Data" (page 1),
the "Liquidity" section of Management's Discussion and Analysis (pages 9-10),
the "Selected Statistical Data" (page 16), "Note 8 - Long Term Borrowings"
(page 29), and "Note 13 - Regulatory Matters" (page 37) of the Registrant's
1995 Annual Report to Shareholders included herewith as Exhibit 13 and
incorporated herein by reference.

<PAGE> 6
ITEM 6 SELECTED FINANCIAL DATA

The information required by this item is set forth in "Selected
Financial Data" (page 1) of the Registrant's 1995 Annual Report to Shareholders
included herewith as Exhibit 13 and incorporated herein by reference.

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The information required by this item is set forth in Management's
Discussion and Analysis, (pages 3-15) of the Registrant's 1995 Annual Report
to Shareholders included herewith as Exhibit 13 and incorporated herein by
reference.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following information is set forth in the Registrant's 1995 Annual
Report to Shareholders included herewith as Exhibit 13 and incorporated herein
by reference:

Unaudited Consolidated Quarterly Financial Information (page 16); the
Consolidated Financial Statements (pages 17-21); the Notes to the Consolidated
Financial Statements (pages 22-41); the Independent Auditors' Report (page 42);
and the Report of Management (page 43).

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

There were no changes in or disagreements with accountants on
accounting and financial disclosure as defined by Item 304 of Regulation S-K.

PART III

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is set forth under the caption
"Election of Directors and Information with Respect to Directors and Officers"
(pages 2-6) in the Registrant's Definitive Proxy Statement for its Annual
Meeting of Stockholders to be held April 23, 1996, which is incorporated herein
by reference, and in Part I of this report under the caption "Executive
Officers of the Registrant".

ITEM 11 EXECUTIVE COMPENSATION

The information required by this item is set forth under the captions
"Compensation of Directors" (pages 6 - 7), "Executive Compensation" (pages
8-19), and "Retirement Plans" (pages 19-20) in the Registrant's Definitive
Proxy Statement for its Annual Meeting of Stockholder's to be held April 23,
1996, which is incorporated herein by reference.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is set forth under the caption
"Certain Beneficial Ownership" and "Nominees for Director and Directors
Continuing in Office" (pages 2-6) in the Registrant's Definitive Proxy
Statement for its Annual Meeting of Stockholder's to be held April 23, 1996,
which is incorporated herein by reference.

<PAGE> 7
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is set forth under the caption
"Transactions with Directors, Executive Officers and Associated Persons" (page
20) in the Registrant's Definitive Proxy Statement for its Annual Meeting of
Stockholders to be held April 23, 1996, which is incorporated herein by
reference.

PART IV

ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The consolidated financial statements, including notes thereto, and
financial schedules of the Registrant, required in response to this item is set
forth in response to Part II, Item 8 of this Annual Report are incorporated
herein by reference in the Registrant's 1995 Annual Report to Shareholders filed
herewith as Exhibit 13.

1. Financial Statements Page #
Consolidated Statements of Income 17
Consolidated Balance Sheets 18
Consolidated Statements of Cash Flows 19-20
Consolidated Statements of Changes 21
in Stockholders' Equity
Notes to Consolidated Financial Statements 22-41
Report of Independent Public Accountants 42

2. Financial Statement Schedules

Schedules to the consolidated financial statements required by Article 9
of Regulation S-X and all other schedules to the consolidated financial
statements of the Registrant have been omitted because they are either not
required, are not applicable or are included in the consolidated financial
statements or notes thereto, which is incorporated herein by reference.

3. Exhibits

The exhibits listed on the Exhibit Index page of this Annual Report are
incorporated by reference or filed herewith as required by Item 601 of
Regulation S-K (each management contract or compensatory plan or
arrangement listed therein is identified).

(b) Current Reports on Form 8-K

The Registrant has not filed any reports on Form 8-K during the last
quarter of the year ended December 31, 1995.
<PAGE> 8
Pursuant to the requirements of Section 13 or 15(d) of this Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

NORTH FORK BANCORPORATION, INC.

BY: /s/ John A. Kanas
-------------------------------------
JOHN A. KANAS
President and Chief Executive Officer

Dated: March 26, 1996

<PAGE> 9
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.

Signature Title Date

/s/ John A. Kanas Director, President, March 26, 1996
- - ------------------------- Chief Executive Officer,
John A. Kanas and Chairman of the Board
(Principal Executive Officer)

/s/ Daniel M. Healy Executive Vice President and March 26, 1996
- - ------------------------- Chief Financial Officer
Daniel M. Healy (Principal Accounting Officer)

/s/ John Bohlsen Director March 26, 1996
- - ------------------------- Vice Chairman of the Board
John Bohlsen

/s/ Malcolm J. Delaney Director March 26, 1996
- - -------------------------
Malcolm J. Delaney

/s/ Allan C. Dickerson Director March 26, 1996
- - -------------------------
Allan C. Dickerson

/s/ Lloyd A. Gerard Director March 26, 1996
- - -------------------------
Lloyd A. Gerard

/s/ James F. Reeve Director March 26, 1996
- - -------------------------
James F. Reeve

/s/ James H. Rich, Jr. Director March 26, 1996
- - -------------------------
James H. Rich, Jr.

/s/ George H. Rowsom Director March 26, 1996
- - -------------------------
George H. Rowsom

/s/ Raymond W. Terry, Jr. Director March 26, 1996
- - -------------------------
Raymond W. Terry, Jr.

/s/ Dr. Kurt R. Schmeller Director March 26, 1996
- - -------------------------
Dr. Kurt R. Schmeller

<PAGE> 10
EXHIBIT INDEX

Exhibit
Number Description Method of Filing
------- ----------- ----------------
<S> <C> <C>
2.1 Stock Purchase Agreement Filed herewith.
dated as of September 19, 1995,
among North Fork Bank and
Banco Exterior de Espana, S.A.

2.2 Asset Purchase and Sale Agree- Filed herewith.
ment dated as of September 28,
1995, among North Fork Bank
and First Nationwide Bank.

3.1 Articles of Incorporation Previously filed on Form S-3 dated 8/16/91 as
of North Fork Bancorporation, Inc. Exhibit 4(b) (Registration No. 33-42294) and
incorporated herein by reference.

3.2 By-Laws of North Fork Bancorpor- Previously filed on Form 10K for the year
ation, as amended, effective ended December 31, 1993 dated 3/9/94,
7/28/92. as Exhibit 3(b) and incorporated herein
by reference.

4.1 Rights Agreement dated Incorporated by reference to Form 8-A
2/28/89, between North Fork Registration Statement dated 3/21/89.
Bancorporation, Inc. and
North Fork Bank, as rights agent.

10.1 North Fork Bancorporation, Inc. Previously filed with post-effective
Dividend Reinvestment and Stock Amendment #1 to the Registrant's
Purchase Plan, as amended. registration statement on Form S-3
dated 5/16/95 (Registration No.
33-54222) and incorporated herein
by reference.

10.2(a) North Fork Bancorporation, Inc. Previously filed on Form S-8 dated 12/1/82
1982 Incentive Stock Option Plan. (Registration No. 2-80676) and incorporated
herein by reference.

10.3(a) North Fork Bancorporation, Inc. Previously filed on Form S-8 dated 8/29/85
1985 Incentive Stock Option Plan. (Registration No. 2-99984) and incorporated
herein by reference.

10.4(a) North Fork Bancorporation, Inc. Previously filed on Form S-8 dated 6/12/87
1987 Long Term Incentive Plan. (Registration No. 33-14903) and incorporated
herein by reference.

10.5(a) North Fork Bancorporation, Inc. Previously filed on Form S-8 dated 4/17/90
1989 Executive Management (Registration No. 33-34372) and incorporated
Compensation Plan. herein by reference.
</TABLE>

<PAGE> 11

EXHIBIT INDEX (continued)

EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- - ------- ----------- ----------------
<S> <C> <C>
10.6(a) North Fork Bancorporation, Inc. Previously filed as Exhibit 4 to the Registrant's
401(k) Retirement Savings Plan, registration statement on Form S-8 dated
as amended. 2/2/96 (Registration No. 333-00675) and
incorporated herein by reference.

10.7(a) North Fork Bancorporation, Inc. Previously filed on Form S-8 dated 5/4/94
1994 Key Employee Stock Plan. (Registration No. 33-53467) and incorporated
herein by reference.

10.8(a) North Fork Bancorporation, Inc. Previously filed on Form S-8 dated 12/5/94
The Secondary Stock Option Plan, (Registration No. 33-56743) and incorporated
the Secondary Incentive Stock herein by reference.
Option Plan, the Secondary 1993
Stock Option Plan, and the
Secondary 1993 Incentive Stock
Option Plan resulting from the
merger with Metro Bancshares Inc.

10.9(a) North Fork Bancorporation, Inc. Previously filed on Form 10-K for the year
Performance Plan. ended December 31, 1994 dated 3/28/95,
as Exhibit 10.9 and incorporated herein by
reference.

10.10(a) Form of Change-in-Control Previously filed as Exhibit 10.2
Agreement, as entered into to Quarterly Report on Form 10-Q
between North Fork Bancorporation, for the quarter ended March 31,
Inc. and each of John A. Kanas, 1995, and incorporated herein by
John Bohlsen and Daniel M. reference.
Healy, each dated
December 20, 1994.

10.11(a) Letter Agreement dated Filed herewith.
September 14, 1995 between
North Fork Bank and Mindy
Butler, regarding the
cessation of Ms. Butler's
employment.

11 Statement re: Computation of Filed herewith
earnings per share.

13 All portions of the Registrant's Filed herewith
1995 Annual Report to
Shareholders that are incorporated
herein by reference.

21 Subsidiaries of Registrant. Filed herewith

</TABLE>

<PAGE> 12

EXHIBIT INDEX (continued)

EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- - ------- ----------- ----------------
<S> <C> <C>
22 Registrant's Definitive Proxy Previously filed on 3/20/96 Pursuant to
Statement for its Annual Meeting Section 14(a) of the Securities Exchange
of Stockholders. Act of 1934 and incorporated herein by
reference.

23 Accountants' Consent. Filed herewith.

27 Financial Data Schedule. Only included in electronic filing

</TABLE>

(a) Management Contract or Compensatory Plan arrangement.

<PAGE> 1
EXHIBIT 2.1

STOCK PURCHASE AGREEMENT

STOCK PURCHASE AGREEMENT, dated as of September 19, 1995, by and among
North Fork Bank, a New York-chartered stock commercial bank ("NFB"), Banco
Exterior de Espana, S.A., a banking corporation organized under the laws of the
Kingdom of Spain (the "Company"), and Extebank, a New York-chartered stock
commercial bank and a wholly-owned subsidiary of the Company (the "Company
Bank").

WHEREAS, the Company Bank is engaged in both domestic and international
banking operations;

WHEREAS, NFB seeks to purchase all of the capital stock of the Company
Bank (the "Stock Purchase"), and thereby acquire the domestic banking business
of the Company Bank and its Subsidiaries (as hereinafter defined) as such
business is described in the draft "Management's Discussion and Analysis of
Financial Condition and Results of Operations" (hereinafter referred to as the
"Domestic Business");

WHEREAS, prior to the Stock Purchase, the Company Bank will transfer to
the Company the International Business (as hereinafter defined);

WHEREAS, NFB (which is sometimes hereinafter referred to as the
"Surviving Bank") and the Company Bank will enter into a Subsidiary Agreement
and Plan of Merger (which shall be a plan of complete liquidation of the Company
Bank for purposes of Sections 332(a) and 337(a) of the Internal Revenue Code of
1986, as amended (the "Code")) substantially in the form of Exhibit A hereto
(the "Bank Merger Agreement") providing for the merger (the "Merger") of the
Company Bank with and into NFB immediately following the Closing; and
<PAGE> 2
WHEREAS, the parties desire to make certain representations, warranties
and agreements in connection with the Stock Purchase and also to prescribe
certain conditions to the consummation of such transaction.

NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:

ARTICLE I

THE PURCHASE AND SALE OF SHARES

1.1. Transfer of Shares by the Company. Subject to the terms and
conditions of this Agreement, at the Closing (as defined below), the Company
agrees to sell 619,597 shares (the "Shares") of the Company Bank's common stock,
par value $5.00 per share (the "Common Stock"), and deliver the certificates
evidencing the Shares to NFB, free and clear of all Encumbrances (as defined
below).

1.2. Purchase of Shares by the Bank; Purchase Price. Subject to the
terms and conditions of this Agreement, NFB agrees to acquire the Shares from
the Company and to pay U.S. $47 million (the "Purchase Price") to the Company;
provided, that if the Closing Date occurs after January 16, 1996, and if, prior
to such date, the covenant contained in Section 5.17 shall have been breached by
NFB, the Purchase Price shall be an amount equal to the product obtained by
multiplying (i) $47,000,000, (ii) the quotient obtained by dividing (a) the
number of days elapsed between January 17, 1996 and the Closing Date by (b) 360
and (iii) the Federal Funds Rate as published in the "Money Rates" section of
the Wall Street Journal as of January 17, 1996.
<PAGE> 3
1.3. Closing; Payment of Purchase Price. (a) The sale and purchase of
the Shares (the "Closing") hereunder shall be deemed to occur at the close of
business on the Closing Date (as defined below). Subject to the terms and
conditions of this Agreement, the parties hereto shall use their best efforts to
cause the Closing Date to be January 2, 1996 or on a business day as soon as
reasonably practicable thereafter (the "Closing Date"). The Closing shall take
place at 9:00 a.m., local time, on the Closing Date at the offices of NFB's
counsel.

(b) On the Closing Date, the following actions shall be taken:

(i) NFB shall pay the Purchase Price to the Company by wire
transfer of immediately available funds to such account or accounts as the
Company shall designate in writing at least two business days prior to the
Closing Date;

(ii) NFB shall pay up to $1,350,000 of the fees and expenses of
the firms listed on Section 2.7 of the Disclosure Schedule;

(iii) the Company shall deliver certificates for the Shares, duly
endorsed in blank or with stock powers duly endorsed in blank, together
with such other documents as NFB may reasonably request to evidence the
transfer to NFB of good and valid title in and to all of the Shares, free
and clear of any and all Encumbrances (as defined below);

(iv) immediately following the Closing, the Company Bank shall
merge into NFB pursuant to the terms of the Bank Merger Agreement; and

(v) each party shall take such other actions, and shall execute
and deliver such other instruments or documents, as shall be required under
the terms of this Agreement and the Bank Merger Agreement.

ARTICLE II
<PAGE> 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to NFB as follows:

2.1. Corporate Organization. (a) The Company is a corporation duly
organized and validly existing under the laws of the Kingdom of Spain.

(b) The Company Bank is a commercial bank duly organized, validly
existing and in good standing under the laws of the State of New York. The
deposit accounts of the Company Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC") through the Bank Insurance Fund to the
fullest extent permitted by the Federal Deposit Insurance Act, and all premiums
and assessments required to be paid in connection therewith have been paid by
the Company Bank. The Company Bank has the corporate power and authority to own
or lease all of its properties and assets and to carry on its business as it is
now being conducted and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or the location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where the failure to be
so licensed or qualified would not have a Material Adverse Effect (as
hereinafter defined). Each Subsidiary of the Company Bank has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted, and is duly licensed or
qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have a
Material Adverse Effect. The articles of organization and by-laws of the Company
Bank, copies of which are attached to Section 2.1 of the Disclosure Schedule
which is being delivered to NFB
<PAGE> 5
concurrently herewith (the "Disclosure Schedule"), are true, complete and
correct copies of such documents as in effect as of the date of this Agreement.
As used in this Agreement, the term "Material Adverse Effect" means a material
adverse effect on the business, properties, assets, liabilities, results of
operations or financial condition of the Company Bank and its Subsidiaries taken
as a whole; provided, however, that for purposes of determining whether any
event or condition has had a Material Adverse Effect, the Company Bank and its
Subsidiaries shall be considered without regard to the International Business.
As used in this Agreement, the word "Subsidiary" when used with respect to any
party means any corporation, partnership or other organization, whether
incorporated or unincorporated, which is consolidated with such party for
financial reporting purposes.

(c) The minute books of the Company Bank and each of its
Subsidiaries contain true, complete and accurate records in all material
respects of all meetings and other corporate actions held or taken since
December 31, 1992 of their respective stockholders and Boards of Directors
(including committees of their respective Boards of Directors).

2.2. Capitalization. (a) The Company owns, beneficially and of record,
all of the Shares, free and clear of all liens, claims, charges, encumbrances
and security interests (collectively, "Encumbrances") whatsoever, and the Shares
are duly authorized and validly issued and are fully paid, nonassessable (except
to the extent required by Sections 114 and 632 of the New York Banking Law) and
free of preemptive rights, with no personal liability attaching to the ownership
thereof (except as aforesaid). The authorized capital stock of the Company Bank
consists of 619,597 shares of Common Stock all of which shares are issued and
outstanding and no shares are held in the Company Bank's treasury. Other than
the Shares, there are no shares of
<PAGE> 6
capital stock of the Company Bank issued or outstanding. There are no shares of
Common Stock reserved for issuance. Except for this Agreement, there are no
outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase or issuance of any shares of Common
Stock or any other equity security of the Company Bank or any securities
representing the right to purchase or otherwise receive any shares of Common
Stock or any other equity security of the Company Bank.

(b) Section 2.2(b) of the Disclosure Schedule sets forth a true,
complete and correct list of all of the Subsidiaries of the Company Bank. The
Company Bank owns, directly or indirectly, all of the issued and outstanding
shares of the capital stock of each of such Subsidiaries, free and clear of all
Encumbrances, and all of such shares are duly authorized and validly issued and
are fully paid, nonassessable and free of preemptive rights with no personal
liability attaching to the ownership thereof. No Subsidiary of the Company Bank
has or is bound by any outstanding subscriptions, options, warrants, calls,
commitments or agreements of any character calling for the purchase or issuance
of any shares of capital stock or any other equity security of such Subsidiary
or any securities representing the right to purchase or otherwise receive any
shares of capital stock or any other equity security of such Subsidiary. Except
for the Subsidiaries of the Company Bank, there are no Affiliates of the Company
Bank engaged in the Domestic Business in the Region (as hereinafter defined)
other than intercompany transactions between the Company and such Affiliates. As
used in this Agreement, the term "Affiliate" shall have the meaning given such
term in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as in effect on the date of this Agreement.
<PAGE> 7
2.3. Authority; No Violation. (a) The Company has full corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary corporate action on the part of the
Company, and no other corporate proceedings on the part of the Company are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Company and (assuming the due authorization, execution and
delivery by NFB) constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement may be limited by laws affecting insured depository institutions,
general principles of equity whether applied in a court of law or a court of
equity and by bankruptcy, insolvency and similar laws affecting creditors'
rights and remedies generally (including laws affecting the rights and remedies
of creditors of insured depository institutions).

(b) The Company Bank has full corporate power and authority to
execute and deliver this Agreement and the Bank Merger Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Bank Merger Agreement, and the consummation
of the transactions contemplated hereby and thereby, have been duly and validly
approved by the Board of Directors of the Company Bank and by the Company as the
sole stockholder of the Company Bank, and no other corporate proceedings on the
part of the Company Bank are necessary to approve this Agreement and the Bank
Merger Agreement and to consummate the transactions contemplated hereby and
thereby. This Agreement has been duly and validly executed and delivered by the
Company Bank and (assuming
<PAGE> 8
the due authorization, execution and delivery by NFB) constitutes a valid and
binding agreement of the Company Bank, enforceable against the Company Bank in
accordance with its terms, except as enforcement may be limited by laws
affecting insured depository institutions, general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally (including laws
affecting the rights and remedies of creditors of insured depository
institutions). The Bank Merger Agreement, upon execution and delivery by the
Company Bank, will be duly and validly executed and delivered by the Company
Bank and will (assuming due authorization, execution and delivery by NFB)
constitute a valid and binding agreement of the Company Bank, enforceable
against the Company Bank in accordance with its terms, except as enforcement may
be limited by laws affecting insured depository institutions, general principles
of equity whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar laws affecting creditors' rights and remedies
generally (including laws affecting the rights and remedies of creditors of
insured depository institutions).

(c) Except as set forth in Section 2.3(c) of the Disclosure
Schedule, neither the execution and delivery of this Agreement by the Company or
by the Company Bank nor the execution and delivery of the Bank Merger Agreement
by the Company Bank nor the consummation by the Company or the Company Bank, as
the case may be, of the transactions contemplated hereby or thereby, nor
compliance by the Company or the Company Bank, as the case may be, with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
Estatutos of the Company or the articles of organization or by-laws of the
Company Bank or any of its Subsidiaries, or (ii) assuming that the consents and
approvals referred to in Section 2.4
<PAGE> 9
hereof are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to the
Company, the Company Bank or any Subsidiaries of the Company Bank, or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of the Company, the
Company Bank or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which the Company, the
Company Bank or any of its Subsidiaries is a party, or by which they or any of
their respective properties or assets may be bound or affected, except for such
violations, conflicts, breaches or defaults which, either individually or in the
aggregate, would not have a Material Adverse Effect.

2.4. Consents and Approvals. Except for (a) the filing of applications
and notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the Bank Holding Company Act of 1956,
as amended (the "BHC Act"), the FDIC under the Bank Merger Act, as amended (the
"Bank Merger Act"), the New York State Banking Department (the "Banking
Department") under the New York Banking Law, and the approval of, and expiration
of waiting periods relating to, such applications and notices, as the case may
be, and (b) such additional filings, authorizations, consents or approvals as
may be set forth in Section 2.4 of the Disclosure Schedule, no consents or
approvals of or filings or registrations with any
<PAGE> 10
court, administrative agency or commission or other governmental authority or
instrumentality, whether foreign, federal, state or local (each a "Governmental
Entity") or with any third party are necessary in connection with (1) the
execution and delivery by the Company and the Company Bank of this Agreement,
(2) the consummation by the Company and the Company Bank of the transactions
contemplated hereby, (3) the execution and delivery by the Company Bank of the
Bank Merger Agreement and (4) the consummation by the Company Bank of the Merger
and the transactions contemplated by the Bank Merger Agreement except, in each
case, for consents, approvals, filings or registrations the failure to obtain or
make, either individually or in the aggregate, would not have a Material Adverse
Effect.

2.5. Reports. The Company Bank and each of its Subsidiaries have filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
December 31, 1992 with or pursuant to the requirements of (i) the Federal
Reserve Board, (ii) the FDIC, (iii) the Banking Department, (iv) any foreign
Governmental Entity and (v) any other self-regulatory organization, and have
paid all fees and assessments due and payable in connection therewith. Except
for examinations conducted by a Governmental Entity in the regular course of the
business of the Company Bank and its Subsidiaries, and except as set forth in
Section 2.5 of the Disclosure Schedule, no Governmental Entity has initiated any
proceeding or, to the knowledge of the Company Bank, investigation into the
business or operations of the Company Bank or any of its Subsidiaries since
December 31, 1992. There is no unresolved material violation or material
criticism asserted or made by any Governmental Entity contained in any report or
statement relating to any examination of the Company Bank or any of its
Subsidiaries.
<PAGE> 11
2.6. Financial Statements. (a) The Company has delivered to NFB copies
of (i) the audited consolidated balance sheets of the Company Bank and its
Subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of income, shareholders' equity and cash flows for the years then
ended, in each case accompanied by the audit report of Arthur Andersen LLP,
independent public accountants with respect to the Company Bank ("Arthur
Andersen") and (ii) the audited consolidated balance sheet of the Company Bank
and its Subsidiaries as of June 30, 1995 (the "June 30 Balance Sheet") and the
related audited consolidated statement of income for the six-month period then
ended (the "June 30 Income Statement"), accompanied by the audit report of
Arthur Andersen. The December 31, 1994 consolidated balance sheet of the Company
Bank and the June 30 Balance Sheet (including in each case the related notes,
where applicable) fairly present the consolidated financial position of the
Company Bank and its Subsidiaries as of the dates thereof, and the other
financial statements referred to in this Section 2.6 (including the related
notes, where applicable) fairly present (subject, in the case of unaudited
statements, to recurring audit adjustments normal in nature and not material in
amount), the results of the consolidated operations and consolidated financial
position of the Company Bank and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth; each of such statements
(including the related notes, where applicable) comply in all material respects
with applicable accounting requirements; and each of such statements (including
the related notes, where applicable) has been prepared in accordance with GAAP
consistently applied during the periods involved. The books and records of the
Company Bank and its Subsidiaries have been, and are being, maintained in all
material respects in
<PAGE> 12
accordance with generally accepted accounting principles ("GAAP") and any other
applicable legal and accounting requirements and reflect only actual
transactions.

(b) The column entitled "Domestic" on the June 30 Balance Sheet
fairly presents the pro forma consolidated financial position of the Domestic
Business as of the date thereof. The column entitled "Domestic" on the June 30
Income Statement fairly presents the pro forma results of the consolidated
operations of the Domestic Business for the fiscal period therein set forth.

2.7. Broker's Fees. Neither the Company nor the Company Bank nor any of
the Subsidiaries of the Company Bank nor any of their respective officers or
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement, except that the Company has engaged
the firms listed on Section 2.7 of the Disclosure Schedule in accordance with
the terms of letter agreements, true, complete and correct copies of which are
attached to Section 2.7 of the Disclosure Schedule.

2.8. Absence of Certain Changes or Events. Except as may be set forth
in Section 2.8 of the Disclosure Schedule or as expressly permitted by this
Agreement, since June 30, 1995: (a) neither the Company Bank nor any of its
Subsidiaries has: (i) issued or sold any equity securities; (ii) mortgaged,
pledged or subjected to any Encumbrance or lease any of its material assets,
tangible or intangible, or permitted or suffered any such asset to be subjected
to any Encumbrance or lease, except in the ordinary course of business; (iii)
acquired or disposed of any material assets or properties, or entered into any
contract for any such acquisition or disposition, except acquisitions and
dispositions effected in the ordinary course of business; (iv) solely with
<PAGE> 13
respect to the Company Bank, declared, paid, or set apart any sum or property
for any dividend or other distribution or paid or transferred any funds or
property to its shareholders or, directly or indirectly, redeemed or otherwise
acquired any of its capital stock; (v) other than in the ordinary course of
business, increased the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any executive officer, employee, or director
from the amount in effect as of December 31, 1994, granted any severance or
termination pay, entered into any contract to make or grant any severance or
termination pay, or paid any bonus; (vi) forgiven or canceled any material
indebtedness or contractual obligation; (vii) suffered any material strike, work
stoppage, slow-down, or other labor disturbance; (viii) entered into any lease
of real or personal property, except for any lease involving payment of amounts
not in excess of $25,000 per annum; or (ix) entered into any other material
transaction other than in the ordinary course of business; and (b) no event
other than changes in general conditions (including laws and regulations)
applicable to the banking industry, or in general economic conditions, has
occurred which has caused a Material Adverse Effect.

2.9. Legal Proceedings. (a) Except as set forth in Section 2.9 of the
Disclosure Schedule, neither the Company Bank nor any of its Subsidiaries is a
party to any, and there are no pending or, to the Company Bank's knowledge,
threatened, legal, administrative, arbitral or other proceedings, claims,
actions or governmental or regulatory investigations of any nature
(collectively, "Proceedings") against the Company Bank or any of its
Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement as to which there is a reasonable probability of
an adverse determination and which, if adversely determined, would, individually
or in the aggregate, have a Material Adverse Effect.
<PAGE> 14

(b) Except as set forth in Section 2.9(b) of the Disclosure
Schedule, there is no injunction, order, judgment, decree, or regulatory
restriction imposed upon the Company Bank or any of its Subsidiaries or any of
their respective assets which has had a Material Adverse Effect.

(c) Section 2.9 of the Disclosure Schedule sets forth all
Proceedings pending as of the date hereof against the Company Bank or any of its
Subsidiaries, indicating for each such Proceeding a brief description of the
nature of the claim, the remedy sought, the identity of the parties, the forum
in which the claim has been brought and the procedural posture of the
Proceeding.

2.10. Taxes. Except as set forth in Schedule 2.10 of the Disclosure
Schedule and except as, individually or in the aggregate, would not have a
Material Adverse Effect: (a) all returns, declarations, reports, estimates,
information returns and statements required to be filed under federal, state,
local or any foreign tax laws by or on behalf of the Company Bank or any of its
Subsidiaries or any affiliated, combined or unitary group of which the Company
Bank or any of its Subsidiaries is or was a member ("Returns") have been timely
filed and were true, complete and correct;

(b) the Company Bank and each of its Subsidiaries has paid or has
had paid on its behalf, within the time and in the manner prescribed by law, all
Taxes for which it is liable including, without limitation, withholding Taxes as
described in Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws and all withholding from employee wages or other remuneration, or
has established reserves with respect thereto pursuant to Section 2.10(c) of the
Disclosure Schedule;
<PAGE> 15
(c) the reserves for Taxes (except for deferred Taxes) reflected
on the books and records of the Company Bank and its Subsidiaries are sufficient
for the payment of all unpaid Taxes (whether or not currently disputed) which
are incurred or may be incurred with respect to the period reflected by such
books and records and for all years and periods ended prior thereto;

(d) reserved;

(e) the statute of limitations for the assessment of federal
income Taxes with respect to the Company Bank and each of its Subsidiaries has
expired for all periods through 1990;

(f) neither the Company Bank nor any of its Subsidiaries has
requested any extension of time within which to file any Return, which Return
has not since been filed;

(g) there are no outstanding waivers of any statute of limitations
with respect to any taxable year or period or any Return of the Company Bank or
any of its Subsidiaries;

(h) no federal, state, local or foreign audits or other
administrative proceedings or court proceedings are presently pending against
the Company Bank or any of its Subsidiaries;

(i) no power of attorney has been granted by the Company Bank or
any of its Subsidiaries with respect to any matter relating to Taxes which is
currently in force;

(j) there are no liens for Taxes upon any property or assets of
the Company Bank or any of its Subsidiaries, except for liens for Taxes not yet
due;
<PAGE> 16
(k) neither the Company Bank nor any of its Subsidiaries (A) is a
party to any agreement providing for the allocation or sharing of Taxes or (B)
is required to include in income any adjustment pursuant to Section 481(a) of
the Code, and none of the Company, the Company Bank or any of its Subsidiaries
has knowledge that the Internal Revenue Service has proposed any such adjustment
or change in accounting method;

(l) neither the Company Bank nor any of its Subsidiaries is a
party to any agreement, contract or arrangement that could result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code;

(m) neither the Company Bank nor any of its Subsidiaries has
participated in or cooperated with an international boycott within the meaning
of Section 999 of the Code;

(n) neither the Company Bank nor any of its Subsidiaries has filed
a consent pursuant to section 341(f) of the Code or agreed to have section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
such term is defined in Section 341(f)(4) of the Code);

(o) no property of the Company or any of its Subsidiaries is
property that the Company Bank or any of its Subsidiaries is or will be required
to treat as being owned by another person pursuant to the provisions of Section
168(f)(8) of the Internal Revenue Code of 1954, as amended, as in effect prior
to the enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of Section 168 of the Code;

(p) neither the Company Bank nor any of its Subsidiaries computes
its bad debt reserves in accordance with Section 593 of the Code;
<PAGE> 17
(q) neither the Company Bank nor any of its Subsidiaries is a
"loss corporation" within the meaning of Section 382(k)(1) of the Code;

(r) the Company Bank is not and, during the applicable period
specified in Section 897(c)(1)(ii) of the Code, has not been a United States
real property holding company (as defined in Section 897(c)(2) of the Code); and

(s) neither the Company Bank nor any of its Subsidiaries is
subject to the provisions of Section 1503(d) of the Code.

For purposes of this Agreement, "Taxes" shall mean all taxes, charges, fees,
levies or other assessments, including, without limitation, all net income,
gross income, gross receipts, sales, use, ad valorem, goods and services,
capital, transfer, franchise, profits, license, withholding, payroll,
employment, employer health, excise, estimated, severance, stamp, occupation,
property or other taxes, customs duties, fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties, additions to tax
or additional amounts imposed by any taxing authority (domestic or foreign).

2.11. Employees. (a) Other than as set forth in Section 2.11(a) of the
Disclosure Schedule, there are no employee benefit plans, arrangements or
agreements ("Plans") that are maintained or contributed to or required to be
contributed to by the Company Bank, any of its Subsidiaries or by any trade or
business, whether or not incorporated (an "ERISA Affiliate"), all of which
together with the Company Bank would be deemed a "single employer" within the
meaning of Section 4001 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), for the benefit of any employee or former employee of the
Company Bank or any of its Subsidiaries.
<PAGE> 18
(b) Except as set forth in Section 2.11(b) of the Disclosure
Schedule, (i) each of the Plans has been operated and administered in all
material respects in accordance with its terms and applicable law, including but
not limited to ERISA and the Code, (ii) each of the Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified,
(iii) with respect to each Plan which is an "employee benefit plan" as defined
in Section 3(3) of ERISA and which is subject to Title IV of ERISA, the present
value of accrued benefits under such Plan, based upon the actuarial assumptions
used for funding purposes in the most recent actuarial report prepared by such
Plan's actuary with respect to such Plan, did not, as of its latest valuation
date, exceed the then current value of the assets of such Plan allocable to such
accrued benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of the Company Bank, any of its Subsidiaries or any ERISA
Affiliate beyond their retirement or other termination of service, other than
(w) coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in Section
3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities on the
books of the Company Bank, any of its Subsidiaries or the ERISA Affiliates or
(z) benefits the full cost of which is borne by the current or former employee
(or his beneficiary), (v) no plan which is an "employee benefit plan" as defined
in Section 3(3) of ERISA and which is subject to Title IV of ERISA has been
terminated or completely or partially withdrawn from so as to result, directly
or indirectly, in any liability under Title IV of ERISA of the Company Bank or
any of its Subsidiaries that has not been satisfied in full, (vi) no Plan is a
"multiemployer pension plan," as such term is defined in Section 3(37) of ERISA,
(vii) all contributions or other amounts payable by the Company Bank, any of its
<PAGE> 19
Subsidiaries or any ERISA Affiliates with respect to each Plan in respect of
current or prior plan years have been paid or accrued in accordance with GAAP
and Section 412 of the Code, (viii) neither the Company Bank, any of its
Subsidiaries nor any ERISA Affiliate has engaged in a transaction in connection
with which the Company Bank or any of its Subsidiaries could be subject to
either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a
tax imposed pursuant to Section 4975 or 4976 of the Code and (ix) there are no
material pending, or, to the knowledge of the Company Bank, threatened or
anticipated claims (other than routine claims for benefits) by, on behalf of or
against any of the Plans or any trusts related thereto and (x) the consummation
of the transactions contemplated by this Agreement will not accelerate the time
of payment or vesting or increase the amount of compensation due any such
employee or officer.

(c) Except as set forth in Section 2.11(c) of the Disclosure
Schedule, the Company Bank has no obligations under any stock option or stock
performance-based plans of the Company Bank or any of its Subsidiaries.

2.12. Compliance with Applicable Law. The Company Bank and each of its
Subsidiaries hold all licenses, franchises, permits and authorizations (each, a
"License") necessary for the lawful conduct of their respective businesses under
and pursuant to all, and have complied with and are not in default in any
respect under any, applicable laws, statutes, orders, rules, regulations,
policies and/or guidelines of any Governmental Entity relating to the Company
Bank or any of its Subsidiaries, except where the failure to hold such License
or such noncompliance or default would not, individually or in the aggregate,
have a Material Adverse Effect, and neither
<PAGE> 20
the Company Bank nor any of its Subsidiaries knows of, or has received notice
of, any material violations of any such laws, statutes, orders, rules,
regulations, policies and/or guidelines.

2.13. Contracts. (a) Except as set forth in Section 2.13(a) of the
Disclosure Schedule, neither the Company Bank nor any of its Subsidiaries is a
party to or bound by any contract, arrangement, plan, commitment or
understanding (whether written or oral) (i) with respect to the employment of
any directors, officers, employees or consultants, (ii) which, upon the
consummation of the transactions contemplated by this Agreement, will (either
alone or upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from NFB, the
Company, the Company Bank, or any of their respective Subsidiaries to any
officer or employee thereof, (iii) which is an agreement involving the payment
of more than $40,000 per annum, (iv) which materially restricts the conduct of
any line of business by the Company Bank or its Subsidiaries or (v) is a
collective bargaining agreement. Each contract, arrangement, plan, commitment or
understanding of the type described in this Section 2.13(a), whether or not set
forth in Section 2.13(a) of the Disclosure Schedule, is referred to herein as a
"Covered Contract". The Company Bank has previously delivered to the Bank true
and correct copies of each Covered Contract.

(b) Except as set forth in Section 2.13(b) of the Disclosure
Schedule, (i) each Covered Contract is valid and binding and in full force and
effect, (ii) the Company Bank and each of its Subsidiaries have in all material
respects performed all obligations required to be performed by it under each
Covered Contract, except where such noncompliance, individually or in the
aggregate, would not have a Material Adverse Effect, (iii) no event or condition
exists which constitutes or, after notice or lapse of time or both, would
constitute, a material default on
<PAGE> 21
the part of the Company Bank or any of its Subsidiaries under any such Covered
Contract, except where such default, individually or in the aggregate, would not
have a Material Adverse Effect and (iv) no other party to such Covered Contract
is, to the knowledge of the Company Bank, in default in any material respect
thereunder.

2.14. Agreements with Regulatory Agencies. Except as set forth in
Section 2.14 of the Disclosure Schedule, neither the Company Bank nor any of its
Subsidiaries is subject to any cease-and-desist or other written order or
written directive issued by, or is a party to any written agreement, consent
agreement or memorandum of understanding with, or is a recipient of any
extraordinary supervisory letter from, or has adopted any board resolutions at
the request of (each, whether or not set forth on Section 2.14 of the Disclosure
Schedule, a "Regulatory Agreement"), any state, federal or foreign bank
regulatory authority that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has the Company Bank or any of its Subsidiaries been advised
by any state, federal or foreign bank regulatory authority that it is
considering issuing or requesting any Regulatory Agreement.

2.15. Investment Securities. Section 2.15 of the Disclosure Schedule
sets forth (i) the book and estimated market value as of August 31, 1995 of the
investment securities, mortgage-backed securities and securities held for sale
of the Company Bank and its Subsidiaries and (ii) an investment securities
report as of such date which includes security descriptions, CUSIP numbers, pool
face values, book values and coupon rates. Except for the above-described
securities that are Transferred Assets, none of such securities are denominated
in currencies other
<PAGE> 22
than U.S. dollars, except for such securities which do not have a market value
that exceeds U.S. $1,000,000.

2.16. Undisclosed Liabilities. Except (a) as set forth in the
Disclosure Schedule, (b) for those liabilities that are fully reflected or
reserved against on the June 30 Balance Sheet, (c) for liabilities incurred in
the ordinary course of business consistent with past practice since June 30,
1995 and (d) for liabilities which are being assumed by the Company pursuant to
Section 5.10, neither the Company Bank nor any of its Subsidiaries has incurred
any liability of any nature whatsoever (whether absolute, accrued, contingent or
otherwise and whether due or to become due), except for liabilities that are not
material to the Company Bank and its Subsidiaries taken as a whole, without
regard to the International Business.

2.17. Reserved.

2.18. Environmental Matters. Except as set forth in Section 2.18 of the
Disclosure Schedule:

(a) Each of the Company Bank and its Subsidiaries are, and have
been, in compliance with all applicable federal, state and local laws including
common law, regulations and ordinances and with all applicable decrees, orders
and contractual obligations relating to pollution, the discharge of, or exposure
to, materials in the environment or workplace ("Environmental Laws"), except for
violations which, either individually or in the aggregate, would not and cannot
reasonably be expected to have a Material Adverse Effect;

(b) There is no suit, claim, action or proceeding pending or, to
the knowledge of the Company Bank, threatened, before any Governmental Entity or
other forum in which the Company Bank or any of its Subsidiaries has been or,
with respect to threatened
<PAGE> 23
proceedings, may be, named as a defendant (x) for alleged noncompliance
(including by any predecessor) with any Environmental Laws (other than with
respect to any Loan Property or Participation Facility), or (y) relating to the
release, threatened release or exposure to any material described in any of the
Environmental Laws (other than with respect to any Loan Property) whether or not
occurring at or on a site owned, leased or operated by the Company Bank or any
of its Subsidiaries, except where such noncompliance or release would not have,
either individually or in the aggregate, in a Material Adverse Effect;

(c) To the knowledge of the Company Bank, during the period of
the Company Bank's or any of its Subsidiaries' ownership or operation of any of
their respective current properties, there has been no release of materials in,
on, under or affecting any such Property (other than any Loan Property, or
Participation Facility), except where such release has not had and cannot
reasonably be expected to result in, either individually or in the aggregate, a
Material Adverse Effect. To the knowledge of the Company Bank, prior to the
period of the Company Bank's or any of its Subsidiaries' ownership or operation
of any of their respective current properties, there was no release or
threatened release of materials in, on, under or affecting any such properties
(other than any Loan Property or Participation Facility), except where such
release has not had and cannot be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect; and

For purposes of this Section 2.18 (x) "Loan Property" means any
property in which the Company Bank or any of its Subsidiaries holds a security
interest, and, where required, by the context, said term means the owner or
operator of such property and (y) "Participation Facility" means any facility in
which the Company Bank or any of its Subsidiaries participates in
<PAGE> 24
the Management and, where required by the context, said term means the owner or
operator of such property.

2.19. Derivative Transactions, Letters of Credit and Loan Commitments.
Except as set forth in Section 2.19 of the Disclosure Schedule and except for
Transferred Assets and Transferred Liabilities (as such terms are hereinafter
defined) and in the case of clauses (b) and (c) below with respect to such items
which in the aggregate are not material in amount, neither the Company Bank nor
any of its Subsidiaries (a) is a party to transactions in or involving forwards,
futures, options on futures, options, swaps, caps, collars, floors, swaptions,
structured notes or other derivative instruments, whether relating to
currencies, interest rates, securities or commodities, (b) has entered into or
is subject to any commercial letters of credit, standby letters of credit or
similar obligations, or (c) has entered into or is subject to any Loan
Commitments, however denominated, to extend credit, except such Loan Commitments
in U.S. dollars relating to the Domestic Business which are not and should not
be classified as "Special Mention", "Substandard", "Doubtful" or "Loss", or
words of similar import. The financial position of the Company Bank and its
Subsidiaries on a consolidated basis under or with respect to each such
disclosed instrument has in all material respects been reflected in the books
and records of the Company Bank and its Subsidiaries in accordance with GAAP
consistently applied.

2.20. Loan Portfolio. Except as set forth in Section 2.20 of the
Disclosure Schedule and other than with respect to the Transferred Assets, as of
the date of this Agreement, neither the Company Bank nor any of its Subsidiaries
is a party to any written or oral (i) non-U.S. dollar denominated Loans (as
hereinafter defined) with or to any obligor except for such Loans which do not,
in the aggregate, exceed U.S. $1,000,000 at any time or (ii) Loan with any
director
<PAGE> 25
or executive officer of the Company Bank or any of its Subsidiaries, or to the
best knowledge of the Company Bank, any person, corporation or enterprise
controlling, controlled by or under common control with any of the foregoing
other than residential mortgage loans and consumer credit in accordance with
applicable bank regulatory laws.

2.21. Title to Assets. Except as set forth in Section 2.21 of the
Disclosure Schedule and except for Permitted Liens and except as would not,
individually or in the aggregate, have a Material Adverse Effect, to the
knowledge of the Company Bank, there are no Liens on the real property of the
Company Bank or any of its Subsidiaries (the "Fee Properties" and the "Leased
Properties" and, collectively, the "Real Property") and each of the Company Bank
and its Subsidiaries has (a) good and valid title to the Fee Properties and (b)
a valid leasehold interest in the Leased Properties. None of the Company Bank,
any Subsidiary of the Company Bank or, to the knowledge of the Company Bank, any
other party is in default (and there does not exist any event which with notice
or lapse of time or both would constitute a default) under any of the leases
relating to the Real Property, except for such defaults thereunder which, in the
aggregate, would not have a Material Adverse Effect. To the knowledge of the
Company Bank, all such leases referred to in the second preceding sentence are
valid and binding and in full force and effect. As used in this Agreement,
"Permitted Liens" shall mean liens for current Taxes not yet due or being
contested in good faith and for which appropriate reserves under GAAP have been
established, Liens imposed by law and incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers,
materialmen and the like, Liens in respect of pledges or deposits under workers'
compensation laws or similar legislation,
<PAGE> 26
and minor defects in title, none of which, individually or in the aggregate,
materially interferes with the use or value of the property subject thereto.

2.22. Scheduled Assets. Except as set forth in Section 2.22 of the
Disclosure Schedule and except for Loans and the Transferred Assets described in
Section 5.10 (a)(i) and 5.10(a)(iii), Schedule A hereto (the "Asset Schedule")
sets forth a true, correct and complete list as of the date hereof of all
Problem Assets. As used herein, the term "Problem Assets" shall mean (a) all
Loans or other assets of the Company Bank or any of its Subsidiaries that are
classified (by an examiner of a Governmental Entity or by an internal examiner)
as "Special Mention," "Substandard," "Doubtful," "Loss," or otherwise adversely
criticized with words of similar import or as "In-Substance Foreclosure"
(including an indication of whether such asset is on accrual or non-accrual
status), (b) Loans or other assets of the Company Bank or any of its
Subsidiaries that are classified as non-performing or non-accrual, and (c)
Loans, under the terms of which the obligor is over 90 days delinquent in
payment of principal or interest or in default of any other provision. The
assets reflected on the Asset Schedule are hereinafter referred to as the
"Scheduled Assets."

2.23. Approvals. As of the date of this Agree- ment, neither the
Company nor the Company Bank knows of any reason why all of the Requisite
Regulatory Approvals (as hereinafter defined) shall not be obtained.

2.24. Loans. Except as described on Section 2.24 of the Disclosure
Schedule and for the Transferred Assets and except where the failure of any of
the following to be true, would not, individually or in the aggregate, have a
Material Adverse Effect, with respect to each Loan or
<PAGE> 27
Loan Commitment (as such terms are hereinafter defined) of the Company Bank and
its Subsidiaries, to the Company's knowledge:

(a)(i) Each Loan Document (as hereinafter defined) constitutes a
valid, legal and binding obligation of the obligor thereunder, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium, laws governing fraudulent conveyance or equitable subordination and
other similar laws of general applicability relating to or affecting creditors'
rights generally and to general principles of equity, (ii) each Loan Document
contains customary and enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization (including
realization by judicial foreclosure) of the benefits intended to be provided by
the security interest or lien, if any, created and granted by such Loan
Document, subject to bankruptcy, insolvency, reorganization, moratorium, laws
governing fraudulent conveyance or equitable subordination and other similar
laws of general applicability relating to or affecting creditors' rights
generally and to general principles of equity, and (iii) all Liens (as
hereinafter defined) in any collateral described in each Loan Commitment and
Loan Document as security for each Loan and Loan Commitment constitute valid and
perfected Liens in such collateral (assuming the relevant person obligated on or
in respect to such Loan or Loan Commitment, including any guarantor,
hypothecator or other provider of security (each, a "Debtor") has rights in the
collateral as to permit attachment), subject to (x) bankruptcy, insolvency,
reorganization, moratorium, laws governing fraudulent conveyance or equitable
subordination and other similar laws of general applicability relating to or
affecting creditors' rights generally and to general principles of equity and
(y) federal and state laws relating to fraudulent conveyances and preferences;
<PAGE> 28
(b) All Loans, Loan Commitments and related Loan Documents were
issued, made and maintained in accordance with applicable law; under existing
law, there is no valid claim against the Company Bank with respect to, or valid
defense to the enforcement of, such Loan or Loan Commitment and neither the
Company Bank nor any of its Affiliates has taken or failed to take any action
that would, and the transactions contemplated hereby do not, entitle any Debtor
or other party to assert successfully any claim or defense against the Company
Bank (including without limitation any right not to repay any such obligation or
any part thereof);

(c) None of the rights or remedies under the Loan Documents in
favor of the Company Bank have been amended, modified, waived, supplemented,
subordinated or otherwise altered by the Company Bank other than in good faith
and in the ordinary course of business and all writings and other documents
relating to any such amendment, modification, waiver, supplement, subordination
or other alteration of any Loan or Loan Commitment are included among the Loan
Documents; and

(d) Each file of Loan Documents pertaining to each Loan includes
all documents relating to each such Loan that are necessary to enforce such
Loan.

As used in this Agreement, the term "Liens" shall mean any mortgage,
lien, pledge, charge, assignment for security purposes, security interest, or
encumbrance of any kind, including any related unconditional sale agreement or
capital lease or other title retention agreement.
<PAGE> 29
ARTICLE III

REPRESENTATIONS AND WARRANTIES
OF NFB

NFB hereby represents and warrants to the Company as follows:

3.1. Corporate Organization. NFB is a commercial bank duly organized,
validly existing and in good standing under the laws of the State of New York.
The deposit accounts of NFB are insured by the FDIC through the Bank Insurance
Fund to the fullest extent permitted by law, and all premiums and assessments
required in connection therewith have been paid by NFB. Each of NFB's
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation.

3.2. Authority; No Violation. (a) NFB has full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of NFB and no other corporate
proceedings on the part of NFB are necessary to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by NFB and (assuming the due authorization, execution and delivery by
the Company and the Company Bank) constitutes a valid and binding agreement of
NFB, enforceable against NFB in accordance with its terms, except as enforcement
may be limited by laws affecting insured depository institutions, general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar laws affecting creditors' rights and
remedies generally (including laws affecting the rights and remedies of
creditors of insured depository institutions).
<PAGE> 30
(b) NFB has full corporate power and authority to execute and
deliver the Bank Merger Agreement and to consummate the transactions
contemplated thereby. The execution and delivery of the Bank Merger Agreement
and the consummation of the transactions contemplated thereby have been duly and
validly approved by the Board of Directors of NFB and by North Fork
Bancorporation, Inc. as the sole stockholder of NFB, and no other corporate
proceedings on the part of NFB are necessary to consummate the transactions
contemplated thereby. The Bank Merger Agreement, upon execution and delivery by
NFB, will be duly and validly executed and delivered by NFB and will (assuming
the due authorization, execution and delivery by the Company Bank) constitute a
valid and binding agreement of NFB, enforceable against NFB in accordance with
its terms, except as enforcement may be limited by laws affecting insured
depository institutions, general principles of equity whether applied in a court
of law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally (including laws affecting the
rights and remedies of creditors of insured depository institutions).

(c) Neither the execution and delivery of this Agreement or the
Bank Merger Agreement by NFB, nor the consummation by NFB of the transactions
contemplated hereby or thereby, nor compliance by NFB with any of the terms or
provisions hereof or thereof, will (i) violate any provision of the Certificate
of Incorporation or By-Laws of NFB or any of its Affiliates or (ii) assuming
that the consents and approvals referred to in Section 3.3 are duly obtained,
(x) violate any statute, code, ordinance, rule, regulation, judgment, order,
writ, decree or injunction applicable to NFB or any of its Affiliates or any of
their respective properties or assets, or (y) violate, conflict with, result in
a breach of any provision of or the loss of any benefit
<PAGE> 31
under, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of or a right
of termination or cancellation under, accelerate the performance required by, or
result in the creation of any lien, pledge, security interest, charge or other
encumbrance upon any of the respective properties or assets of NFB or any of its
Affiliates under, any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which NFB or any of its Affiliates is a party, or by
which they or any of their respective properties or assets may be bound or
affected, except for such violations, conflicts, breaches or defaults which
either individually or in the aggregate would not prevent or materially delay
NFB from performing its obligations hereunder.

3.3. Consents and Approvals. Except for the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act, the
FDIC under the Bank Merger Act and the Banking Department under the New York
Banking Law, and the approval of, or expiration of waiting periods relating to,
such applications and notices, as the case may be, no consents or approvals of
or filings or registrations with any Governmental Entity or with any third party
are necessary in connection with the execution and delivery by NFB of this
Agreement and the Bank Merger Agreement and the consummation by NFB of the
transactions contemplated hereby and thereby except, in each case, for consents,
approvals, filings or registrations the failure to obtain or make, either
individually or in the aggregate, would not prevent or materially delay NFB from
performing its obligations hereunder.

3.4. Approvals. As of the date of this Agreement, NFB does not know of
any reason why all of the Requisite Regulatory Approvals shall not be obtained.
<PAGE> 32
3.5. Financing. NFB has current assets or other financial arrangements
such that at the Closing, NFB will have funds sufficient to enable it to carry
out its obligations under this Agreement.

ARTICLE IV

COVENANTS RELATING TO CONDUCT OF BUSINESS

4.1. Covenants of the Company and the Company Bank. During the period
from the date of this Agreement and continuing until the Closing, except as
expressly contemplated or permitted by this Agreement or with the prior written
consent of NFB, the Company shall cause the Company Bank to carry on its
business in the ordinary course consistent with past practice. The Company shall
cause the Company Bank to use its best efforts to (x) preserve its business
organization and that of its Subsidiaries intact and (y) keep available to
itself and the Company Bank the present services of the employees of the Company
Bank and its Subsidiaries. Without limiting the generality of the foregoing, and
except as set forth in Section 4.1 of the Disclosure Schedule or as otherwise
contemplated by this Agreement or consented to in writing by NFB, the Company
shall not permit the Company Bank or any of its Subsidiaries to:

(a) other than as necessary to effectuate the provisions of this
Agreement, declare or pay any dividends on, or make other distributions in
respect of, any of its capital stock;

(b) Reserved.

(c) issue, deliver or sell, or authorize or propose the issuance,
delivery or sale of, any shares of its capital stock or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares, or enter into any agreement with respect to any of the
foregoing;
<PAGE> 33
(d) amend its Articles of Organization, By-laws or other similar
governing documents;

(e) enter into any new line of business;

(f) acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire any assets, which would be material, individually or in the
aggregate, to the Domestic Business, other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructuring in the
ordinary course of business consistent with past practices;

(g) Reserved.

(h) change its methods of accounting in effect at June 30, 1995,
except as required by changes in GAAP or regulatory accounting principles as
concurred to by the Company Bank's independent auditors;

(i) (i) except as required by applicable law or to maintain
qualification pursuant to the Code, adopt, amend, renew or terminate any Plan or
any agreement, arrangement, plan or policy between the Company Bank or any
Subsidiary of the Company Bank and one or more of its current or former
directors, officers or employees or (ii) except for normal increases in the
ordinary course of business consistent with past practice or except as required
by applicable law, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any plan or
agreement as in effect as of the date hereof;
<PAGE> 34
(j) except as set forth in Section 4.1 of the Disclosure Schedule
or as expressly contemplated by this Agreement, sell, lease, encumber, assign or
otherwise dispose of, or agree to sell, lease, encumber, assign or otherwise
dispose of, any of its assets, properties or other rights or agreements, other
than pursuant to existing contracts or commitments that are not, individually or
in the aggregate, material to the Domestic Business or activities in the
ordinary course of business consistent with past practice (including disposal of
real property acquired by the Company Bank or any of its Subsidiaries in
satisfaction of a debt previously contracted in a manner consistent with past
practice);

(k) other than in the ordinary course of business consistent with
past practice, incur or assume any liabilities or incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as an accommodation
become responsible for the obligations of any other individual, corporation or
other entity;

(l) file any application to relocate or terminate the operations
of any banking office of it or any of its Subsidiaries;

(m) commit any act or omission which constitutes a material
breach or default by the Company Bank or any of its Subsidiaries under any
material agreement or license to which the Company Bank or any of its
Subsidiaries is a party or by which any of them or their respective properties
is bound;

(n) make any equity investment or commitment to make such an
investment in real estate or in any real estate development project, other than
in connection with foreclosures, settlements in lieu of foreclosure or troubled
loan or debt restructuring in the ordinary course of business consistent with
past banking practices;
<PAGE> 35
(o) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any material contract, agreement
or lease for goods, services or office space to which the Company Bank or any of
its Subsidiaries is a party or by which the Company Bank or any of its
Subsidiaries or their respective properties are bound;

(p) take any action which would cause the termination or
cancellation by the FDIC of insurance in respect of the Company Bank's deposits;
or

(q) agree to do any of the foregoing.

ARTICLE V

ADDITIONAL AGREEMENTS

5.1. Regulatory Matters. (a) The parties hereto shall cooperate with
each other and use their best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Governmental Entities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement and the Bank Merger Agreement. The parties hereto agree that they will
consult with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Entities
necessary or advisable to consummate the transactions contemplated by this
Agreement and the Bank Merger Agreement and each party will keep the other
apprised of the status of matters relating to completion of the transactions
contemplated herein.

(b) The parties hereto shall, upon request, furnish each other
with all information concerning themselves, their Subsidiaries, directors,
officers and stockholders and such other matters as may be reasonably necessary
or advisable in connection with any filing,
<PAGE> 36
notice or application made by or on behalf of the parties hereto or any of their
respective Subsidiaries to any Governmental Entity in connection with the Stock
Purchase and the Merger and the other transactions contemplated by this
Agreement and the Bank Merger Agreement.

(c) The parties hereto shall promptly furnish each other with
copies of written communications received by any of them or any of their
respective Subsidiaries, Affiliates or Associates (as such term is defined in
Rule 12b-2 under the Exchange Act as in effect on the date of this Agreement)
from, or delivered by any of the foregoing to, any Governmental Entity in
respect of the transactions contemplated hereby and by the Bank Merger
Agreement.

5.2. Access to Information. (a) Upon reasonable notice and subject to
applicable laws relating to the exchange of information, the Company shall cause
the Company Bank and each of its Subsidiaries to afford to the officers,
employees, accountants, counsel and other representatives of NFB, access, during
normal business hours during the period prior to the Closing, to all its
properties, books, contracts, commitments, records, officers, employees,
accountants, counsel and other representatives and, during such period, the
Company shall cause the Company Bank and its Subsidiaries to make available to
NFB (i) a copy of each report, schedule and other document filed or received by
it during such period pursuant to the requirements of Federal or state laws
(other than reports or documents which the Company Bank is not permitted to
disclose under applicable law) and (ii) all other information concerning its
business, properties and personnel as NFB may reasonably request. Neither the
Company Bank nor any of its Subsidiaries shall be required to provide access to
or to disclose information where such access or disclosure would violate or
prejudice the rights of the Company Bank's customers, jeopardize any
attorney-client privilege or contravene any law, rule, regulation, order,
judgment,
<PAGE> 37
decree, fiduciary duty or binding agreement entered into prior to the
date of this Agreement. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of the
preceding sentence apply. NFB will hold all such information in confidence to
the extent required by, and in accordance with, the provisions of the
confidentiality agreement, dated September 15, 1995, between NFB and the Company
(the "Confidentiality Agreement").

(b) Any information furnished by NFB to the Company or the
Company Bank and their representatives pursuant hereto shall be treated as the
sole property of NFB and, if the Stock Purchase shall not occur, the Company and
the Company Bank and their representatives shall return to NFB all of such
written information and all documents, notes, summaries or other materials
containing, reflecting or referring to, or derived from, such information. The
Company and the Company Bank shall, and shall use their respective best efforts
to cause their representatives to, keep confidential all such information, and
shall not directly or indirectly use such information for any competitive or
other commercial purpose. The obligation to keep such information confidential
shall continue for five years from the date the proposed Stock Purchase is
abandoned and shall not apply to (i) any information which (x) was already in
the Company's or the Company Bank's possession prior to the disclosure thereof
by NFB; (y) was then generally known to the public; or (z) was disclosed to the
Company or the Company Bank by a third party not bound by an obligation of
confidentiality that was known or that reasonably should have been known to the
Company or the Company Bank or (ii) disclosures made as required by law. It is
further agreed that, if in the absence of a protective order or the receipt of a
waiver hereunder the Company or the Company Bank is nonetheless, in the opinion
of
<PAGE> 38
its counsel, compelled to disclose information concerning NFB to any tribunal or
governmental body or agency or else stand liable for contempt or suffer other
censure or penalty, the Company or the Company Bank, as the case may be, may
disclose such information to such tribunal or governmental body or agency
without liability hereunder.

(c) No investigation by NFB shall affect the representations,
warranties, covenants or agreements of the Company or the Company Bank set forth
herein, including, without limitation, the indemnification obligations contained
in Article VIII hereof.

5.3. Legal Conditions to Stock Purchase and the Merger. Each of NFB,
the Company and the Company Bank shall, and shall cause its Subsidiaries to, use
their best efforts (a) to take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal requirements which may be
imposed on such party or its Subsidiaries with respect to the Stock Purchase or
the Merger and, subject to the conditions set forth in Article VI hereof, to
consummate the transactions contemplated by this Agreement and the Bank Merger
Agreement and (b) to obtain (and to cooperate with the other party to obtain)
any consent, authorization, order or approval of, or any exemption by, any
Governmental Entity and any other third party which is required to be obtained
by the Company or NFB or any of their respective Subsidiaries in connection with
the Stock Purchase and the Merger and the other transactions contemplated by
this Agreement.

5.4. Employee Benefit Plans. The employees of the Company Bank
associated with the Domestic Business (the "Company Bank Employees") shall be
entitled to participate in NFB's employee benefit plans in which similarly
situated employees of NFB participate, to the same extent as comparable
employees of NFB. As of the Closing, NFB shall permit the Company
<PAGE> 39
Bank Employees to participate in NFB's group hospitalization, medical, life and
disability insurance plans (the "NFB Welfare Plans") on the same terms and
conditions as applicable to comparable employees of NFB. NFB shall cause to be
waived any preexisting condition restrictions otherwise applicable under any NFB
Welfare Plan to a Company Bank Employee or his or her covered dependents (but
only to the extent waived immediately prior to the Closing Date under any
similar plan of the Company Bank with respect to such employee or dependent) and
give effect, in determining any deductible and maximum out-of-pocket
limitations, to claims incurred, amounts paid by and amounts reimbursed to
Company Bank Employees with respect to similar plans maintained for their
benefit immediately prior to the Closing Date. As of the Closing, NFB shall
permit the Company Bank Employees to participate in NFB's defined benefit
pension plan, thrift plan, severance, and similar plans on the same terms and
conditions as employees of NFB and its Subsidiaries, giving effect (solely for
purposes of NFB's defined benefit pension plan and thrift plan) to years of
service with the Company Bank and its Subsidiaries (to the extent the Company
Bank gave effect) as if such service were with NFB, for purposes of eligibility
to participate and vesting, but not for benefit accrual purposes. With respect
to the Company Bank Savings Plan and Pension Plan, the parties hereto shall
cooperate in effecting a transfer of assets and liabilities under such plan that
will result in the Company retaining liability for the benefits of Transferred
Employees and former employees of the Company Bank and its Subsidiaries and NFB
and the Company Bank retaining liability for the benefits of Company Bank
Employees.

5.5. Subsequent Interim Financial Statements. As soon as reasonably
available, but in no event more than 30 days after the end of each fiscal
quarter ending after the date of this
<PAGE> 40
Agreement, upon the request of NFB, the Company Bank will deliver to NFB its
unaudited consolidated balance sheets and related statements of income,
shareholders' equity and cash flows for the fiscal quarter then ended, in each
case prepared on the same basis as the June 30 Balance Sheet and the June 30
Income Statement and separately reflecting the International Business and the
Domestic Business.

5.6. Additional Agreements. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, or the Bank Merger Agreement, or to vest the Surviving Bank with full
title to all properties, assets, rights, approvals, immunities and franchises of
any of the parties to the Stock Purchase or the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by NFB.

5.7. Advice of Changes. From time to time prior to the Closing (and on
the date prior to the Closing Date), the Company will promptly (or, in the case
of the matters described below that are not material, within a reasonable time
following the discovery of such matter) supplement or amend the Disclosure
Schedule delivered in connection with the execution of this Agreement to reflect
any matter which, if existing, occurring or known at the date of this Agreement,
would have been required to be set forth or described in such Disclosure
Schedule or which is necessary to correct any information in such Disclosure
Schedule which has been rendered inaccurate thereby. No supplement or amendment
to such Disclosure Schedule shall have any effect for the purpose of determining
the accuracy of the Company's representation and warranties, the satisfaction of
any of the conditions set forth in Article VI hereof, the compliance
<PAGE> 41
by the Company with its covenants and agreements contained herein or the
obligation of the Company to indemnify NFB pursuant to Article VIII hereof.

5.8. Current Information. During the period from the date of this
Agreement to the Closing, the Company Bank will cause one or more of its
designated representatives to confer on a regular and frequent basis (not less
than monthly) with representatives of NFB and to report (i) the general status
of the ongoing operations of the Company Bank and its Subsidiaries and (ii) the
status of, and the action proposed to be taken with respect to, those Loans held
by the Company or any Subsidiary of the Company which are non-performing assets
and which are not reflected on the Asset Schedule. The Company Bank will
promptly notify NFB of any material change in the normal course of business or
in the operation of the properties of the Company Bank or any of its
Subsidiaries and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or the threat of significant litigation involving the Company Bank or any of its
Subsidiaries, and will keep NFB fully informed of such events.

5.9. Execution and Authorization of Bank Merger Agreement; Consummation
of the Merger. NFB and the Company Bank shall execute and deliver the Bank
Merger Agreement. The parties hereto shall take all necessary action to effect
the Merger immediately following the Closing.

5.10. Transfer of the International Business. (a) At or prior to the
Closing, the Company shall cause the Company Bank to transfer, assign, convey
and deliver to the Company, and the Company shall acquire from the Company Bank,
all of the business and operations of the Company Bank conducted as part of the
"International Operations" of the Company Bank as
<PAGE> 42
described in the draft "Management's Discussion and Analysis of Financial
Condition and Results of Operations" attached to Section 5.10 of the Disclosure
Schedule (such business and operations being referred to herein as the
"International Business"), and all right, title and interest of the Company Bank
as of the Closing Date in and to the assets, rights, properties, claims and
contracts in respect of the International Business as of the close of business
on the Closing Date, including without limitation the Transferred Assets
(provided that for purposes of determining compliance with this covenant for
purposes of satisfaction of the condition to closing set forth on Section 6.2(b)
(and not for any other purpose, including without limitation under clause (c) of
Section 8.1), such compliance shall be determined solely with reference to the
Transferred Assets).

As used herein, the term "Transferred Assets" shall mean:

(i) assets of the Company Bank which are reflected on the June
30 Balance Sheet under the column entitled "International" (collectively,
"Balance Sheet Assets") except to the extent that any such assets have
previously been disposed of by the Company Bank;

(ii) the Scheduled Assets, except to the extent that any such
assets have previously been disposed of by the Company Bank;

(iii) any assets of the Company Bank acquired or generated
subsequent to June 30, 1995 which, based on the criteria used by the
Company Bank and Arthur Andersen (the "AA Criteria") in establishing the
June 30 Balance Sheet (which criteria are described in the notes to the
June 30 Balance Sheet (it being understood that such criteria may not
necessarily specifically articulate a basis for allocating each and every
asset and liability to either the International Business or the Domestic
Business)), would have been
<PAGE> 43
reflected on the June 30 Balance Sheet under the column entitled
"International" if such assets had been acquired or generated as of June
30, 1995 (collectively, the "After-Acquired Assets"), except to the extent
that any such assets have previously been disposed of by the Company Bank;

(iv) earned and unpaid interest with respect to any Loan which
constitutes a Balance Sheet Asset, a Scheduled Asset or an After-Acquired
Asset;

(v) Assumed Contracts and Other Obligations (as hereinafter
defined);

(vi) books and records related to the In- ternational Business;

(vii) all accounts as to which the Company Bank or any of its
Subsidiaries acts as a fiduciary, including but not limited to accounts for
which any of such entities serves as a trustee, agent, custodian, personnel
representative, guardian, conservator, or investment advisor (collectively,
the "Fiduciary Business"); and

(viii) such additional liquid securities or cash as may be
necessary to prevent the Company Bank from having shareholders' equity at
the Closing Date in excess of the amount referred to in Section 5.15 of
this Agreement.

As used herein, the term "Assumed Contracts and Other Obligations"
means those Contracts (as hereinafter defined) and all other obligations or
liabilities of the Company Bank or any of its Subsidiaries relating to or
arising from the International Business, except in each case those expiring or
terminating between the date hereof and the Closing Date. As used herein, the
term "Contracts" means any arrangement, note, bond, commitment, franchise,
guarantee, indemnity, instrument, license or other agreement, understanding or
obligation, whether written or
<PAGE> 44
oral, and all rights, interests and obligations arising thereunder or in
connection therewith, in each case relating to or arising from the International
Business.

Notwithstanding anything to the contrary contained in this Agreement,
the Transferred Assets shall not include the following assets, which assets
shall remain as assets of the Company Bank following the Closing:

(i) all of the branch offices of the Company Bank, which branch
offices are listed in Section 5.10 of the Disclosure Schedule;

(ii) the Company Bank's charter documents, non-transferable
licenses, permits, charters, corporate seals, minute books, stock books and
other corporate records having to do with the corporate organization and
capitalization of the Company Bank, and all records relating to Taxes;
provided, however, that the Transferred Assets shall include copies of all
records relating to those Taxes constituting Transferred Liabilities
reasonably requested by the Company and, if the Company is requested by any
Governmental Entity or required in connection with any suit, action or
proceeding to produce originals of such records, NFB shall provide such
originals to the Company for such purpose;

(iii) the Company Bank's personnel records pertaining to any
employees of the Company Bank, personnel references and security or
background investigation materials which were prepared or obtained at the
time of hiring with respect to employees of the Company Bank and any other
books and records which the Company Bank is required by law to retain,
provided that the Transferred Assets shall include copies of any portion of
such retained books and records that relate to the employees of the
International Business reasonably requested by the Company and, if the
Company is
<PAGE> 45
requested by any Governmental Entity or required in connection with any
suit, action or proceeding to produce originals of such records, NFB shall
provide such originals to the Company for such purpose.

(b) At or prior to the Closing, the Company shall assume, agree
to pay, perform and discharge when due all liabilities and obligations relating
to in any manner or arising out of the International Business, whether primary
or secondary, direct or indirect, absolute or contingent, contractual, tortious
or otherwise, including without limitation the Transferred Liabilities (provided
that for purposes of determining compliance with this covenant for purposes of
satisfaction of the condition to closing set forth on Section 6.2(b) (and not
for any other purpose, including without limitation under clause (c) of Section
8.1), such compliance shall be determined solely with reference to the
Transferred Liabilities). As used herein, the term "Transferred Liabilities"
shall mean:

(i) liabilities of the Company Bank which are reflected on the
June 30 Balance Sheet under the column entitled "International"
(collectively, "Balance Sheet Liabilities") except to the extent that any
such liabilities have previously been satisfied or discharged by the
Company Bank;

(ii) any liabilities of the Company Bank acquired, generated or
incurred subsequent to June 30, 1995 which, based on the AA Criteria, would
have been reflected on the June 30 Balance Sheet under the column entitled
"International" if such liabilities had been acquired, generated or
incurred as of June 30, 1995 (collectively, the "After-Acquired
Liabilities") except to the extent that any such liabilities have
previously been satisfied or discharged by the Company Bank;
<PAGE> 46
(iii) obligations under Loans and Loan Commitments (as
hereinafter defined) included as part of the International Business and
obligations under Loan Documents (as hereinafter defined) relating to such
Loans and Loan Commitments;

(iv) obligations under Assumed Contracts and Other Obligations;

(v) liabilities that may arise in connection with any
litigation or other claim that has been or may be brought against the
Company Bank or any of its subsidiaries or any of their respective
directors or NFB as the successor to the Company Bank in connection with or
arising out of the International Business, the Fiduciary Business (as
hereinafter defined) or in respect of NFB's indemnification obligations
with respect thereto, including without limitation those claims against the
Company Bank described in Section 5.10 of the Disclosure Schedule;

(vi) obligations arising under participation arrangements sold
to third parties with respect to Loans and Loan Commitments included in the
Transferred Assets;

(vii) all Employment Liabilities (as hereinafter defined)
relating to the transfer of employment contemplated by Section 5.10(c); and

(viii) all obligations and liabilities relating to, or arising out
of, the Fiduciary Business.

As used herein, the term "Loan" shall mean all:

(i) loans, advances or other extensions of credit, including
interests in loan participations and assignments, customer liabilities on
letters of credit, bankers acceptances and participations in letters of
credit (including in all cases loans made to pay
<PAGE> 47
interest accruing on loans, whether or not due or payable (sometimes
referred to as capitalized interest)); and

(ii) all amendments, modifications, renewals, extensions,
refinancings and refundings of or for any of the foregoing.

As used herein, the term "Loan Commitments" shall mean the collective
reference to each commitment or obligation to extend credit to any person
(including pursuant to a letter of credit or banker's acceptance) or to
participate therein, whether or not such commitment, obligation or participation
has been accepted or utilized by such person.

As used herein, the term "Loan Documents" shall mean the agreements,
instruments, certificates, or other documents at any time evidencing or
otherwise relating to, governing, or executed in connection with, or as security
for, a Loan or Loan Commitment, including without limitation, notes, bond, loan
agreements, letter of credit applications, letters of credit, lease financing
contracts, bankers' acceptances, drafts, guarantees, deeds of trust, mortgages,
assignments, security agreements, pledges, subordination or priority agreement,
lien priority agreements, undertakings, security instruments, financing
statements, certificates, documents, legal opinions, participation and
assignment agreements and inter-creditor agreements, and all amendments,
modifications, renewals, extensions, rearrangements, and substitutions with
respect to any of the foregoing.

(c) Prior to the Closing, the Company shall cause those employees of
the Company Bank listed on Section 5.10(c) of the Disclosure Schedule (the
"Transferred Employees") to be transferred to the employ of the Company and, at
the time of such transfer, such employees shall cease to be employees of the
Company Bank.
<PAGE> 48
5.11. Reserved.

5.12. Intercompany Accounts Settlement. Prior to the Closing, (a) the
Company Bank and its Subsidiaries shall pay and discharge all amounts of
intercompany indebtedness owed by the Company Bank or any of its Subsidiaries to
the Company or any Affiliate of the Company (other than the Company Bank and its
Subsidiaries) and (b) the Company shall pay and discharge (or cause to be paid
and discharged) all amounts of intercompany indebtedness owed by the Company or
any Affiliate (other than the Company Bank and its Subsidiaries) to the Company
Bank or any of its Subsidiaries.

5.13. Termination of Intercompany Agreements. Other than as expressly
contemplated by this Agreement, the Company shall, and will cause each of its
Affiliates (other than the Company Bank and its Subsidiaries) to terminate,
effective at or prior to Closing, in accordance with their terms, any and all
agreements then in effect as between the Company, any Affiliate of the Company
(other than the Company Bank or any of its Subsidiaries) or any predecessor
thereof, on the one hand, and the Company Bank or any of its Subsidiaries, on
the other hand and, at such time, all rights under any such agreement shall
terminate and all liabilities under any such agreement shall be paid and
discharged in accordance with the provisions of Section 5.13. Notwithstanding
the foregoing, the parties shall enter into mutually satisfactory arrangements
with respect to assets on the books of the Company that are currently being
serviced by the Company Bank.

5.14. Covenants Not to Compete and Solicit. From and after the Closing
Date and continuing until the eighteen-month anniversary thereof, the Company
shall not, and shall not permit any of its Subsidiaries to: (a) directly or
indirectly acquire or establish any office in the
<PAGE> 49
boroughs of Queens or Brooklyn or the counties of Nassau or Suffolk (together,
the "Region") which is engaged in the business of accepting deposits or
originating loans or (b) solicit loans or other products or services of the type
currently made or offered by the Domestic Business to any persons who reside (in
the case of individuals) or conduct the substantial part of their business in
the Region.

5.15. Shareholders' Equity. (a) No later than December 15, 1995, the
Company shall deliver to NFB a pro forma consolidated balance sheet of the
Company Bank as of November 30, 1995, giving effect to the transfer of the
International Business as contemplated by Section 5.10 hereof and prepared on
the basis and with the adjustments set forth in this Section 5.15 (the "November
30 Balance Sheet"). From and after the delivery of the November 30 Balance
Sheet, the parties hereto shall monitor the assets and the liabilities of the
Company Bank on a regular and frequent basis and shall cooperate and act in good
faith to jointly prepare a consolidated balance sheet of the Company Bank as of
the close of business on the business day immediately preceding the Closing Date
(the "Closing Balance Sheet"). The Closing Balance Sheet shall be prepared in
accordance with GAAP applied on a consistent basis with the preparation of the
June 30 Balance Sheet, subject to the adjustments referred to in this Section
5.15.

(b) The Company and the Company Bank shall take all actions
necessary to cause the shareholders' equity of the Company Bank as reflected on
the Closing Balance Sheet to be $30 million after taking into account (i) the
transfer of the International Business (together with the Transferred Assets and
Transferred Liabilities) as contemplated by Section 5.10 hereof, (ii) the
application of Financial Accounting Standards No. 115 ("FAS 115"), (iii) the
establishment
<PAGE> 50
of the amounts referred to in paragraph (c) of this Section 5.15, and (iv) the
exclusion referred to in clause (z) of paragraph (d) of this Section 5.15.

(c) The Company shall establish as liabilities on the Closing
Balance Sheet (whether or not in accordance with GAAP) amounts equal to (i)
except as otherwise provided below, all Employment Liabilities with respect to
the employment or termination of employment of employees or former employees
(including, without limitation, the Transferred Employees (as hereinafter
defined)) of the Company Bank or any of its Subsidiaries incurred, or arising
out of, events occurring (or, in the case of medical benefits, claims incurred)
on or prior to the Closing Date (collectively, "Pre-Closing Employee
Liabilities"), to the extent not theretofore discharged; (ii) all liabilities
and obligations for Taxes of the Company Bank and its Subsidiaries arising in or
attributable to any Pre-Closing Period (as hereinafter defined), including,
without limitation, any liabilities for Taxes arising out of, attributable to,
or incurred in connection with or with respect to, any of the transactions
contemplated by this Agreement, and any ad valorem, withholding, real or
personal or intangible property, sales or other Taxes which are not due or
assessed until after the Closing Date but which are attributable to any
Pre-Closing Period (collectively, "Pre-Closing Tax Liabilities") in each case to
the extent not theretofore discharged; (iii) all fees, costs and expenses
incurred or payable by the Company Bank in connection with the transactions
contemplated by this Agreement, except as set forth in Section 1.3(b)(ii), to
the extent not theretofore discharged (the "Transactional Costs"), (iv) all
attorney and accounting fees, costs and expenses incurred or payable by the
Company Bank or any of its Subsidiaries for the period on or prior to the
Closing Date, whether or not incurred or payable in the ordinary course of
business and including without limitation any such fees and expenses incurred in
connection with any
<PAGE> 51
potential securities offering by the Company Bank or any current or proposed
Affiliate thereof, to the extent not theretofore discharged (the "Professional
Fees") and (vi) all current costs and expenses incurred in connection with the
operation of the Company Bank for the period on or prior to the Closing Date
(the "Current Expenses"). As used herein, the term "Employment Liabilities"
shall mean any liabilities, obligations, losses, claims, demands, suits,
actions, damages, costs, expenses or commitments related to compensation,
retirement benefits, severance or other welfare benefits ("Costs"), whether
arising under a plan, agreement, arrangement, policy, understanding or
applicable federal, state or local law, other than Costs in respect of the
contract identified in Section 2.8(v) of the Disclosure Schedule.

(d) The parties hereto acknowledge that certain of the
Transferred Assets may not be transferable from the Company Bank to the Company
as a matter of law, contract or otherwise (any such asset being referred to
herein as a "paragraph (d) asset"). The parties hereto agree that in the case of
(i) paragraph (d) assets and (ii) tax assets (other than the deferred tax asset
relating to the Domestic Business), (x) NFB shall hold all such assets for the
benefit of the Company, (y) any cash or other property received by NFB in
respect of any such assets shall be delivered by NFB to the Company within five
business days after receipt thereof by NFB, and (z) none of such assets shall be
reflected on the Closing Balance Sheet.

(e) Neither compliance by NFB with this Section 5.15 nor the
consummation by NFB of the Stock Purchase in reliance on the Closing Balance
Sheet shall affect the representations, warranties, covenants or agreements of
the Company or the Company Bank set forth herein, including, without limitation,
the covenants of the Company contained in this Section 5.15 and the
indemnification obligations contained in Article VIII hereof.
<PAGE> 52
(f) Within five business after the Closing Date, the parties
shall complete the preparation of a balance sheet as of the close of business on
the Closing Date (the "Final Balance Sheet"). The Final Balance Sheet shall be
prepared on the same basis as the Closing Balance Sheet and shall reflect all of
the adjustments referred to in this Section 5.15. In the event the amount
reflected as shareholders' equity on the Final Balance Sheet is less than $30
million, then on the next business day after the completion of the Final Balance
Sheet the Company shall pay to NFB in immediately available funds the amount by
which $30 million exceeds the amount of shareholders' equity on the Final
Balance Sheet. In the event the amount reflected as shareholders' equity on the
Final Balance Sheet is more than $30 million, then on the next business day
after the completion of the Final Balance Sheet NFB shall pay to the Company in
immediately available funds the amount by which the amount of shareholders'
equity on the Final Balance Sheet exceeds $30 million. Any payments made
pursuant to the preceding two sentences shall be with interest from but not
including the Closing Date to and including the date of payment at the rate set
forth in Section 1.2 hereof. If for any reason the parties are unable to agree
on all aspects of the Final Balance Sheet within such five business day period,
then the parties shall jointly select an independent accounting firm to resolve
any disputes between the parties. The determination of such firm shall be
binding upon the parties and any amount determined to be due from one party to
the other shall be paid in immediately available funds (together with interest
from and after the Closing Date at the rate set forth in Section 1.2 hereof) on
the business day immediately following the date of such determination. The party
who is required to make a payment pursuant to the preceding sentence shall pay
all of the fees and expenses of such accounting firm.
<PAGE> 53
5.16. FIRTPA Compliance. The Company shall deliver at the Closing to
NFB a certification that the stock of the Company Bank does not constitute a
U.S. real property interest in a form which complies with the requirements of
Section 1445 of the Code and the regulations promulgated thereunder.

5.17. Certain Actions. Except as disclosed in writing prior to the date
hereof by NFB or its legal counsel, NFB will not take any action that would
jeopardize or materially delay the receipt of the Requisite Regulatory
Approvals.

5.18 Fiduciary Business. NFB shall indemnify the directors of the
Company Bank against and hold each of them harmless from any and all claims in
respect of, relating to, or arising out of, the Fiduciary Business.
<PAGE> 54
ARTICLE VI

CONDITIONS PRECEDENT

6.1. Conditions to Each Party's Obligation To Effect the Stock
Purchase. The respective obligation of each party to effect the Stock Purchase
shall be subject to the satisfaction at or prior to the Closing of the follow-
ing conditions:

(a) Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby and by the Bank Merger Agreement (including the
Stock Purchase and the Merger) shall have been obtained and shall remain in full
force and effect (all such approvals being referred to herein as the "Requisite
Regulatory Approvals") and all statutory waiting periods in respect thereof
shall have expired.

(b) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Stock Purchase, the Merger or any of the other transactions
contemplated by this Agreement or the Bank Merger Agreement shall be in effect.
No statute, rule, regulation, order, injunction or decree shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits, restricts or makes illegal consummation of the Stock Purchase or the
Merger.

6.2. Conditions to Obligations of NFB. The obligation of NFB to effect
the Stock Purchase is also subject to the satisfaction or waiver by NFB at or
prior to the Closing of the following conditions:
<PAGE> 55
(a) Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (other than the
representation contained in Section 2.9(c)) shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date. NFB shall have
received a certificate signed on behalf of the Company by the Managing Director
of the Company to the foregoing effect.

(b) Performance of Obligations of the Company and the Company
Bank. Each of the Company and the Company Bank shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and NFB shall have received a
certificate signed on behalf of the Company by the Managing Director of the
Company to such effect.

(c) No Pending Governmental Actions. No proceeding initiated by
any Governmental Entity seeking an Injunction shall be pending.

(d) Legal Opinion. NFB shall have received the opinion of Davis
Polk & Wardwell, counsel to the Company, dated the Closing Date, covering the
matters set forth on Exhibit 6.2(d)(a) and Spanish counsel to the Company, who
may be an employee of the Company, covering the matters set forth on Exhibit
6.2(d)(b). As to any matter in such opinion which involves matters of fact or
matters relating to laws other than Federal or New York law, such counsel may
rely upon the certificates of officers of the Company and the Company Bank and
of public officials and opinions of local counsel, reasonably acceptable to NFB,
provided a copy of such reliance opinion shall be attached as an exhibit to the
opinion of such counsel.
<PAGE> 56
(e) Shareholders' Equity. The shareholders' equity of the
Company Bank, as reflected on the books and records of the Company Bank, in
accordance with GAAP, taking into account the application of FAS 115, as of the
Closing Date and subsequent to the transfer of the International Business
(together with the Transferred Assets and Transferred Liabilities) as
contemplated by Section 5.10 hereof and the establishment of the amounts
referred to in Section 5.15 hereof, shall not be less than $30,000,000.

(f) Loan Loss Reserve. The loan loss reserve of the Company Bank,
as reflected on the books and records of the Company Bank, as of the Closing
Date and subsequent to the transfer of the International Business as
contemplated by Section 5.10 hereof, shall not be less than $6,006,900 minus the
amount equal to one-half of the carrying value of the loan set forth in the
Asset Schedule.

6.3. Conditions to Obligations of the Company and the Company Bank. The
obligation of each of the Company and the Company Bank to effect the Stock
Purchase is also subject to the satisfaction or waiver by the Company or the
Company Bank at or prior to the Closing of the following conditions:

(a) Representations and Warranties. The representations and
warranties of NFB set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of an earlier date) as of the
Closing Date as though made on and as of the Closing Date; provided, however,
that for purposes of determining the satisfaction of the foregoing condition,
such representations and warranties shall be deemed to be true and correct in
all material respects unless the failure or failures of such representations and
warranties to be so true and correct,
<PAGE> 57
individually or in the aggregate, will prevent the consummation of the
transactions contemplated hereby.

(b) Performance of Obligations of NFB. NFB shall have performed in
all material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing Date.

(c) No Pending Governmental Actions. No proceeding initiated by
any Governmental Entity seeking an Injunction shall be pending.

(d) Legal Opinion. The Company shall have received the opinion of
Skadden, Arps, Slate, Meagher & Flom, counsel to NFB, dated the Closing Date,
covering the matters set forth on Exhibit 6.3(d). As to any matter in such
opinion which involves matters of fact or matters relating to laws other than
Federal or New York law, such counsel may rely upon the certificates of officers
of NFB and of public officials and opinions of local counsel, reasonably
acceptable to the Company and the Company Bank, provided a copy of such reliance
opinions shall be attached as an exhibit to the opinion of such counsel.

ARTICLE VII

TERMINATION AND AMENDMENT

7.1. Termination. This Agreement may be terminated at any time prior
to the Closing:

(a) by mutual consent in writing of the Company and NFB;

(b) by either NFB or the Company upon written notice to the other
party (i) 60 days after the date on which any request or application for a
Requisite Regulatory Approval shall have been denied or withdrawn at the request
or recommendation of the Governmental
<PAGE> 58
Entity which must grant such Requisite Regulatory Approval, unless within the
60-day period following such denial or withdrawal a petition for rehearing or an
amended application has been filed with the applicable Governmental Entity,
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 7.1(b)(i) if such denial or request or
recommendation for withdrawal or failure to file and request for rehearing or an
amended application shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe the covenants and agreements of
such party set forth herein or (ii) if any Governmental Entity of competent
jurisdiction shall have issued a final nonappealable order enjoining or
otherwise prohibiting the consummation of any of the transactions contemplated
by this Agreement;

(c) by either NFB or the Company if the Closing shall not have
occurred on or before April 30, 1996, unless the failure of the Closing to occur
or the Requisite Regulatory Approvals to have been obtained by such respective
dates shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants and agreements of such party set
forth herein;

(d) by either NFB or the Company (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there shall have been a material breach
of any of the representations or warranties set forth in this Agreement on the
part of the other party, which breach is not cured within thirty days following
written notice to the party committing such breach, or which breach, by its
nature, cannot be cured prior to the Closing; provided, however, that neither
party shall have the right to terminate this Agreement pursuant to this Section
7.1(d) unless the breach of
<PAGE> 59
representation or warranty, together with all other such breaches, would entitle
the party receiving such representation not to consummate the transactions
contemplated hereby under Section 6.2(a) (in the case of a breach of
representation or warranty by the Company) or Section 6.3(a) (in the case of a
breach of representation or warranty by NFB); provided, further, however, that
no party may terminate this Agreement under this subsection (d) prior to
December 31, 1995;

(e) by either NFB or the Company (provided that the terminating
party is not then in material breach of any representation, warranty, covenant
or other agreement contained herein) if there have been a material breach of any
of the covenants or agreements set forth in this Agreement on the part of the
other party, which breach shall not have been cured within thirty days following
receipt by the breaching party of written notice of such breach from the other
party hereto; provided, however, that no party may terminate this Agreement
under this subsection (e) prior to December 31, 1995.

7.2. Effect of Termination; Expenses. (a) In the event of termination
of this Agreement by either NFB or the Company as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect except that (i) the
last sentence of Section 5.2(a), and Sections 5.2(b), 7.2 and 10.1, shall
survive any termination of this Agreement, and (ii) notwithstanding anything to
the contrary contained in this Agreement, no party shall be relieved or released
from any liabilities or damages arising out of its willful breach of any
provision of this Agreement.

(b) In the event (i) this Agreement is terminated by the Company
or the Stock Purchase is otherwise abandoned, (ii) NFB shall have breached the
covenant contained in Section 5.17 and (iii) at the time of such termination or
abandonment, NFB would not be entitled
<PAGE> 60
not to consummate the Agreement pursuant to Section 6.2(a) or Section 6.2(b) if
the Closing Date were otherwise scheduled to occur on such date of termination
or abandonment, then, without limiting any of the Company's or the Company
Bank's remedies available under law, NFB shall pay the Company $1,500,000.

7.3. Amendment. Subject to compliance with applicable law, this
Agreement may be amended by the parties hereto by a duly authorized instrument
in writing signed on behalf of each of the parties hereto.

7.4. Extension; Waiver. At any time prior to the Closing, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.

ARTICLE VIII

INDEMNIFICATION

8.1. Obligations of the Company. From and after the Closing Date, the
Company shall indemnify, defend and hold harmless NFB and its directors,
officers and Affiliates from and against any and all claims, losses,
liabilities, costs, penalties, fines and expenses (including attorney's,
accountant's, consultant's and expert's fees and expenses), damages, obligations
to third
<PAGE> 61
parties, expenditures, proceedings, judgments, awards or demands ("Losses")
which any of them may suffer, incur or sustain arising out of, attributable to,
or resulting from: (a) any inaccuracy in or breach of any of the representations
or warranties of the Company made in or pursuant to this Agreement (it being
agreed that solely for purposes of establishing whether any matter is
indemnifiable pursuant to this clause (a), the accuracy of the representations
and warranties made by the Company shall be determined without giving effect to
the qualifications to such representations and warranties concerning
"materiality," the Company's or the Company Bank's "knowledge," and "Material
Adverse Effect," and all such representations and warranties shall be tested as
if such qualifications were not included therein); (b) any breach or
nonperformance of any of the covenants or agreements made by the Company in or
pursuant to this Agreement; (c) the International Business, including without
limitation the Transferred Assets or the Transferred Liabilities (whether
arising before, on or after the Closing Date), (d) any litigation not set forth
on Schedule 2.9 (whether arising prior to, on or after the Closing Date) which
arises out of any act or omission of the Company Bank or any of its Affiliates
on or prior to the Closing Date and (e) the reconciliation of the Company Bank's
accounts with ACS.

8.2. Adjustments. Notwithstanding any other provisions of this
Agreement:

(a) The Company shall, and hereby does, indemnify NFB and its
Affiliates against and hold each of them harmless from any and all Pre-Closing
Tax Liabilities to the extent not discharged on or before the Closing Date;
provided, however, that the Company shall not be required to indemnify NFB with
respect to Pre-Closing Tax Liabilities unless and until the aggregate
Pre-Closing Tax Liabilities exceed the amounts reflected in respect of
Pre-Closing Tax Liabilities (other than deferred Tax liabilities in respect of
the Domestic Business on the Final
<PAGE> 62
Balance Sheet). Upon the occurrence of such event, the Company shall pay to NFB
the amount of such excess, and, thereafter, the Company shall indemnify NFB with
respect to all Pre-Closing Tax Liabilities. If, following the expiration of the
statute of limitations, including extensions thereof, with respect to all
Pre-Closing Periods and the payment of all Pre-Closing Tax Liabilities, the
amounts reflected in respect of Pre-Closing Tax Liabilities (other than deferred
Tax Liabilities) exceed the Pre-Closing Tax Liabilities, NFB shall pay to the
Company the amount of such excess.

(b) The Company shall, and hereby does, indemnify NFB and its
Affiliates against and hold each of them harmless from any and all Pre-Closing
Employee Liabilities to the extent not discharged on or before the Closing Date;
provided, however, that the Company shall not be required to indemnify NFB with
respect to Pre-Closing Employee Liabilities unless and until the aggregate
Pre-Closing Employee Liabilities exceed the amounts reflected in respect of
Pre-Closing Employee Liabilities on the Final Balance Sheet. Upon the occurrence
of such event, the Company shall pay to NFB the amount of such excess, and,
thereafter, the Company shall indemnify NFB with respect to all Pre-Closing
Employee Liabilities. If, following the payment of all Pre-Closing Employee
Liabilities, the amounts reflected in respect of Pre-Closing Employee
Liabilities exceed the Pre-Closing Employee Liabilities, NFB shall pay to the
Company the amount of such excess.

(c) Any amounts paid pursuant to Sections 8.2(a) and 8.2(b) shall
be with interest for the number of days from the Closing Date (in the event of
payments by NFB) or the date such payment was made (in the case of payments by
the Company) to the date of payment at, in all cases, the Federal Funds Rate as
published in the "Money Rates" section of The Wall Street Journal as of the
Closing Date.
<PAGE> 63
(d) Any amounts paid pursuant to Sections 8.2(a) and 8.2(b) shall
be treated as adjustments to the Purchase Price for tax purposes.

(e) Each of the amounts reflected as liabilities on the Closing
Balance Sheet with respect to Transactional Costs, Professional Fees and Current
Expenses shall be reduced by the amount of any payment duly made by NFB or any
of its Affiliates in respect of such liability following the Closing Date. To
the extent that the amount of any such liability is reduced, as a result of
payments made by NFB, below zero (a "Deficiency"), the Company shall pay to NFB
the absolute value of the amount of such Deficiency with interest on such amount
for the number of days from the date the Deficiency arose to the date of payment
of the Deficiency by the Company at the Federal Funds Rate as published in the
"Money Rates" section of The Wall Street Journal as of the Closing Date.

(f) If, after all of the liabilities with respect to each of the
Transactional Costs, Professional Fees and Current Expenses have been paid by
NFB or any of its Affiliates, the amount reflected as a liability with respect
to each of the Transactional Costs, Professional Fees and Current Expenses is
greater than zero, NFB shall pay the Company the amount of such excess with
interest on such amount for the number of days from the Closing Date to the date
of such payment at the Federal Funds Rate as published in the "Money Rates"
section of The Wall Street Journal as of the Closing Date.

8.3. Procedure. (a) Any party entitled to be indemnified under this
Agreement (an "Indemnified Party") seeking indemnification for any Loss or
potential Loss arising from a claim asserted by a third party against the
Indemnified Party (a "Third Party Claim") shall give written notice to the
Company (the "Indemnifying Party"). Written notice to the Indemnifying
<PAGE> 64
Party of the existence of a Third Party Claim shall be given by the Indemnified
Party within 30 days after its receipt of a written assertion of liability from
the third party; provided, however, that the Indemnified Party shall not be
foreclosed from seeking indemnification pursuant to this Article VIII by any
failure to provide timely notice of the existence of a Third Party Claim to the
Indemnifying Party except and only to the extent that the Indemnifying Party
actually incurs an out-of-pocket expense or otherwise has been damaged or
prejudiced as a result of such delay. In the event that the Company receives
notice from a third party of a claim or potential claim against an Indemnified
Party for Taxes, the Company shall give written notice to such Indemnified Party
of such claim and such parties shall otherwise comply with the procedures
contained herein.

(b) Except as otherwise provided herein, the Indemnifying Party
may elect to compromise or defend, at such Indemnifying Party's own expense and
by such Indemnifying Party's own counsel (which counsel shall be reasonably
satisfactory to the Indemnified Party), any Third Party Claim. If the
Indemnifying Party elects to compromise or defend such Third Party Claim, it
shall, within 30 days after receiving notice of the Third Party Claim, notify
the Indemnified Party of its intent to do so, and the Indemnified Party shall
cooperate, at the expense of the Indemnifying Party, in the compromise of, or
defense against, such Third Party Claim. If the Indemnifying Party elects not to
compromise or defend against the Third Party Claim, or fails to notify the
Indemnified Party of its election to do so as herein provided, or otherwise
abandons the defense of such Third Party Claim, (i) the Indemnified Party may
pay (without prejudice of any of its rights as against the Indemnifying Party),
compromise or defend such Third Party Claim and (ii) the costs and expenses of
the Indemnified Party incurred in connection therewith shall be indemnifiable by
the Indemnifying Party pursuant to the terms of this Agreement.
<PAGE> 65
Notwithstanding anything to the contrary contained herein, in connection with
any Third Party Claim (i) for Taxes or (ii) in which the Indemnified Party shall
reasonably conclude, based upon the advice of its counsel, that (x) there is a
conflict of interest between the Indemnifying Party and the Indemnified Party in
the conduct of the defense of such Third Party Claim or (y) there are specific
defenses available to the Indemnified Party which are different from or
additional to those available to the Indemnifying Party and which could be
materially adverse to the Indemnifying Party, then the Indemnified Party shall
have the right to assume and direct the defense and compromise of such Third
Party Claim. In such an event, the Indemnifying Party shall pay the fees and
disbursements of counsel to each of the Indemnifying Party and the Indemnified
Party. Notwithstanding the foregoing, neither the Indemnifying Party nor the
Indemnified Party may settle or compromise any claim (unless the sole relief
payable to a third party in respect of such Third Party Claim is monetary
damages that are paid in full by the party settling or compromising such claim)
over the objection of the other, provided, however, that consent to settlement
or compromise shall not be unreasonably withheld. In any event, except as
otherwise provided herein, the Indemnified Party and the Indemnifying Party may
each participate, at its own expense, in the defense of such Third Party Claim.
If the Indemnifying Party chooses to defend any claim, the Indemnified Party
shall make available to the Indemnifying Party any personnel or any books,
records or other documents within its control that are reasonably necessary or
appropriate for such defense, subject to the receipt of appropriate
confidentiality agreements. Notwithstanding anything to the contrary contained
in this paragraph (b), in the event prompt action is required with respect to
the defense of a Third Party Claim, the Indemnified Party shall, subject to the
terms and conditions of this Article VIII, have the right to assume the defense
of such Third Party
<PAGE> 66
Claim; provided, however, that in the event that the Indemnifying Party
subsequently elects to assume the defense of such Third Party Claim, then the
provisions set forth in this paragraph (b) shall be applicable and the
Indemnifying Party shall, subject to the terms and conditions of this Article
VIII, reimburse the Indemnified Party for any costs and expenses incurred by the
Indemnified Party prior to the date the Indemnifying Party assumes control of
such Third Party Claim. Notwithstanding anything to the contrary contained in
this Agreement, the Indemnifying Party shall not settle any Third Party Claim
with respect to Taxes without the consent of the Indemnified Party, which
consent shall not be unreasonably withheld.

(c) Notwithstanding the foregoing, if an offer of settlement or
compromise is made by a third party claimant, and the Indemnifying Party
notifies the Indemnified Party in writing of the Indemnifying Party's
willingness to accept the settlement offer and pay the amount called for by such
offer, and the Indemnified Party declines to accept such offer, the Indemnified
Party may continue to contest such claim, free of any participation by the
Indemnifying Party, and the amount of any ultimate liability with respect to
such Indemnifiable Claim that the Indemnifying Party has an obligation to pay
hereunder shall be limited to the lesser of (A) the amount of the settlement
offer that the Indemnified Party declined to accept plus the costs and expenses
of the Indemnified Party prior to the date the Indemnifying Party notifies the
Indemnified Party of the Indemnifying Party's willingness to settle or
compromise such Third Party Claim and (B) the aggregate Losses of the
Indemnified Party with respect to such claim.

(d) Any claim on account of a Loss which does not involve a Third
Party Claim shall be asserted by written notice given by the party claiming
indemnity to the Company. The Company shall have a period for 30 days within
which to respond thereto. If the
<PAGE> 67
Company does not respond within such 30-day period, the Company shall be deemed
to have accepted responsibility to make payment, subject to the provisions
hereof, and shall have no further right to contest the validity of such claim.
If the Company does respond within such 30-day period and rejects such claim in
whole or in part, the party claiming indemnity shall be free to pursue such
remedies as may be available to such party by applicable law.

Notwithstanding anything to the contrary contained in this Agreement,
no claim shall be made against the Company for indemnification under clauses
(a), (b) and (d) of Section 8.1 with respect to any Loss unless the aggregate of
all such Losses described in such clauses (a), (b) and (d) of Section 8.1 shall
exceed $1,000,000 (the "Basket"), and the Company shall only be required to pay
or be liable for any such Losses arising under such clauses in Section 8.1 to
the extent that their aggregate amount exceeds the Basket, and then only with
respect to Losses incurred in excess of such amount, provided, however, that the
Basket contained in this Section 8.3(d) shall not apply to, and
dollar-for-dollar recovery shall be available with respect to, Losses suffered,
incurred or sustained which arise out of, result from or are attributable to
breaches of the representations contained in Sections 2.2 and 2.10 hereof and
breaches of the covenants contained in Sections 5.10, 5.15 and Article IX
hereof.

The Indemnifying Party shall not be liable for any breach of
representation or warranty hereunder if the Loss therefrom, in any individual
case, amounts to $15,000 or less; however, such Losses shall be included in
calculating the $1 million threshold established in the immediately preceding
sentence, provided, however, that in the case of any Loss exceeding $15,000,
subject to the Basket, the entire Loss, and not solely the portion of such Loss
in excess of $15,000, shall be indemnifiable by the Indemnifying Party and
provided further, however, that
<PAGE> 68
where a number of Losses are each individually less than $15,000, but the
aggregate of such Losses exceeds $15,000, and all such Losses are based upon,
arise from or are attributable to the same or a series of closely related
matters, then subject to the Basket, such Losses shall be indemnifiable by the
Indemnifying Party pursuant to Section 8.1(a). No indemnification shall be
available for any Loss incurred by NFB in respect of the matter listed as item
No. 3 in Section 2.9 of the Disclosure Schedule, although if NFB incurs such a
Loss at a time when all other Losses in the aggregate are less than the Basket,
then the Loss attributable to such item may be applied to the Basket.

(e) No action or claim pursuant to Section 8.1(a) hereof resulting
from breaches of the representations and warranties of the Company or any claim
for indemnity in respect thereof shall be brought or made unless, prior to the
expiration of the survival period for the applicable representation or warranty
as set forth below, the action or claim shall have been the subject of a good
faith written notice from the Indemnified Party to the Indemnifying Party which
notice specifies in reasonable detail the nature of the claim (it being
understood that such written notice may be delivered prior to the incurrence or
suffering of a Loss by an Indemnified Party if facts are described in sufficient
detail in such notice as to warrant the delivery of a good faith notice in which
case the party giving such notice shall be entitled to indemnification in
accordance with the provisions hereof notwithstanding that such Loss may occur
after the expiration of the applicable survival period). The representations and
warranties of the Company contained in this Agreement or in any certificate or
instrument delivered pursuant to this Agreement shall survive the Closing and
shall expire on the eighteen-month anniversary of the Closing Date, provided,
however, that the representations and warranties contained in (i) Section
<PAGE> 69
2.2 shall survive the Closing indefinitely and (ii) Section 2.10 shall survive
until 30 days after the expiration of the applicable statute of limitations
periods (taking into account extensions thereof). The covenants of any party
contained herein (including, without limitation, those relating to
indemnification) shall survive the Closing indefinitely other than the covenants
contained in Sections 4.1, 5.1, 5.2 (except as provided otherwise therein), 5.3,
5.5, 5.7, 5.8, and 5.9, which shall expire on the eighteen-month anniversary of
the Closing Date.

ARTICLE IX

CERTAIN TAX MATTERS

9.1. Tax Returns. (a) Except as otherwise provided in Section 9.3, NFB
shall file or cause to be prepared for filing, all Returns of or which include
the Company Bank or any of its Subsidiaries (including any amendments thereto)
with respect to any taxable period ending on or prior to the Closing Date or
treated as ending on the Closing Date pursuant to Section 9.1(b) (a "Pre-Closing
Period") with respect to which the due date for filing is after the Closing
Date; provided, however, that 30 days before the date on which such Returns are
required to be filed, NFB shall provide to the Company copies of such Returns;
and, before NFB executes and files such Returns or pays any Taxes shown to be
due thereon, the Company shall have the right to object reasonably to anything
contained in such Returns that is reported in a manner which is inconsistent
with the manner reported in such Returns for the immediately preceding taxable
period.

(b) If, for any federal, state, local or foreign tax purpose, a
taxable period of the Company Bank or any of its Subsidiaries does not terminate
on the Closing Date, the parties hereto will, to the extent permitted by
applicable law, elect with the relevant taxing
<PAGE> 70
authority to treat such taxable period for all purposes as a short taxable
period ending as of the close of the Closing Date. In any case where applicable
law does not permit such an election to be made, then for purposes of this
Agreement, the parties shall treat such taxable period as ending on the Closing
Date. In such a case, Taxes for the entire taxable period shall be allocated to
the period ending on or prior to the Closing Date using an
interim-closing-of-the-books method assuming that such taxable period ended at
the close of the Closing Date, except that (i) exemptions, allowances or
deductions that are calculated on an annual basis (such as the deduction for
depreciation) shall be apportioned on a perdiem basis, (ii) real property Taxes
shall be allocated in accordance with the principles of Section 164(d) of the
Code, (iii) any and all Taxes arising out of, attributable to or incurred in
connection with or with respect to the International Business and the
transactions contemplated by Section 5.10 shall be allocated to the period prior
to the Closing Date. For purposes of this Agreement, any taxable period ending
or treated by the parties as ending on the Closing Date shall constitute a
Pre-Closing Period.

(c) To the extent that the Company is subject to an obligation for
indemnification with respect to such Returns, the Company shall have the right
to object reasonably to anything contained in such Returns that is reported in a
manner which is inconsistent with the manner reported in such Returns for the
immediately preceding taxable period.

9.2. Refunds. The Company shall be entitled to any refunds of Taxes
attributable to any Pre-Closing Period. NFB shall be entitled to any refund
attributable to any period after the Closing date.

9.3. Conveyance Taxes. The Company and NFB shall each pay one-half of
the liability for all sales, transfer, stamp, real property transfer or real
property gains and similar Taxes
<PAGE> 71
(collectively "Conveyance Taxes") attributable to, arising out of, or incurred
in connection with or with respect to the transactions effected pursuant to this
Agreement. The Company agrees to file all required Returns and reports due in
connection with the Conveyance Taxes and assumed under this Section 9.2. To the
extent the Company and NFB are required to file any joint Returns or reports,
the Company will submit to NFB for its review and comment, ten days in advance
of the due date for such filing, copies of all such Returns or reports it
intends to file and will in good faith consider all comments made by the Bank.

9.4. Post-Closing Taxes. Notwithstanding anything herein to the
contrary, the Company shall have no liability under this Agreement in respect of
Taxes of the Company Bank or any of its Subsidiaries attributable to any action
(including, without limitation, the Merger), of NFB, the Company Bank or any of
its Subsidiaries that occurs after the Closing.

ARTICLE X

GENERAL PROVISIONS

10.1. Expenses. Except as provided in Sections 1.3(b)(ii) and 5.15(f)
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense.

10.2. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):

(a) if to NFB, to:
<PAGE> 72
North Fork Bank
9025 Route 25
Mattituck, New York 11952
Attn: Daniel M. Healy, Chief Financial
Officer and Executive Vice President

with a copy to:

Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: William S. Rubenstein, Esq.

and

(b) if to the Company or the Company Bank, to:

Banco Exterior de Espana, S.A.
645 Fifth Avenue
New York, New York 10022
Attn: Marco Antonio Garcia

with a copy to:

Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: Randal Quarles, Esq.

10.3. Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. The phrases "the date of this Agreement", "the date hereof" and
<PAGE> 73
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to September 19, 1995.

10.4. Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.

10.5. Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement and the Bank Merger Agreement.

10.6. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without regard to any
applicable conflicts of law.

10.7. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court, federal or
state, within the State of New York, this being in addition to any other remedy
to which they are entitled at law or in equity.

10.8. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any
<PAGE> 74
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable.

10.9. Publicity. Except as otherwise required by law or the rules of
the NYSE, so long as this Agreement is in effect, neither NFB nor the Company
shall, or shall permit any of its Subsidiaries to, issue or cause the
publication of any press release or other public announcement with respect to,
or otherwise make any public statement concerning, the transactions contemplated
by this Agreement without the consent of the other party, which consent shall
not be unreasonably withheld.

10.10. Assignment; No Third Party Beneficiaries. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns. This
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.

10.11. Consent to Jurisdiction; Service of Process. The parties hereto
hereby exclusively and irrevocably submit to the jurisdiction of the state
courts
<PAGE> 75
of New York and federal courts located in New York over any action suit or
proceeding arising out of or relating to this Agreement and any of the
agreements entered into in connection herewith and the Company, the Company Bank
and NFB hereby irrevocably agree that all claims in respect of any such suit,
action or proceeding shall be heard and determined in such courts. The parties
hereby irrevocably waive, to the fullest extent permitted by applicable law, any
objection which they may now or hereafter have to the laying of venue of any
such suit, action or proceeding brought in such court or any defense of
inconvenient forum for the maintenance of such suit, action or proceeding. Each
of the parties hereto agrees that a judgment in any such action, suit or pro-
ceeding may be enforced in other jurisdictions by suit on the judgment or in any
manner provided by law.

Each of the parties hereto hereby consents to process being served by
any party to this Agreement in any suit, action or proceeding of the nature
specified in subsection (a) above by the mailing of a copy thereof in accordance
with the provisions of Section 10.2 of this Agreement.
<PAGE> 76
IN WITNESS WHEREOF, the Bank, the Company and the Company Bank
have caused this Agreement to be executed by their respective officers thereunto
duly authorized as of the date first above written.

BANCO EXTERIOR DE ESPANA, S.A.

By:/s/ Marco A. Garcia
---------------------------------
Name: Marco Antonio Garcia
Title: Director General

EXTEBANK

By:/s/ Marco A. Garcia
---------------------------------
Name: Marco Antonio Garcia
Title: Chairman

NORTH FORK BANK

By:/s/ John A. Kanas
---------------------------------
Name: John A. Kanas
Title: Chairman, Chief Executive
Officer & President

<PAGE> 1
EXHIBIT 2.2

ASSET PURCHASE AND SALE AGREEMENT

THIS ASSET PURCHASE AND SALE AGREEMENT (the "Agreement") is made
as of September 28, 1995, by and between FIRST NATIONWIDE BANK, A FEDERAL
SAVINGS BANK (the "Seller") and NORTH FORK BANK (the "Purchaser").

R E C I T A L S

WHEREAS, Seller desires to sell and Purchaser desires to acquire
and operate the branch offices described in Exhibit A, which is attached hereto
and incorporated by this reference (the "Branch Offices") and the business
conducted at the Branch Offices;

WHEREAS, Seller desires to assign to Purchaser and Purchaser
desires to assume from Seller certain liabilities relating to the Branch Offices
and the business conducted at the Branch Offices, including certain obligations
and liabilities relating to the deposits of the Branch Offices and certain other
obligations of Seller;

NOW, THEREFORE, in consideration of the foregoing recitals and
the following terms, covenants, and conditions, the parties agree as follows:

ARTICLE I
DEFINITIONS

1.1 "ACH Accounts" is defined in the definition of "Deposits".

1.2 "ACH Items" is defined in the definition of "Deposits".

1.3 "Additional Contract" is defined in Section 5.13.

1.4 "Affiliates" is defined in Section 12.1.

1.5 "Assumed Liabilities" is defined in Section 2.4.

1.6 "Assets" is defined in Section 2.1.

1.7 "ATM" is defined in Section 2.1(a).

1.8 "Book Value Schedule" is defined in Section 2.6(a).

1.9 "Branch Account" is defined in Section 5.8.

1.10 "Branch Account Report" is defined in Section 5.8.

1.11 "Business Day" means any day (other than a Saturday or Sunday)
on which banking institutions shall generally be open for the
transaction of business in the State of New York.

<PAGE> 2

1.12 "Business Retirement Plan", "BRP", "Keogh Account" or "Keogh"
means an account created by a trust for the benefit of employees (some or all of
whom are owner-employees) that complies with the provisions of Section 401 of
the Code.

1.13 "Cash" is defined in Section 2.1(a).

1.14 "Closing" is defined in Section 8.1(b).

1.15 "Closing Date" is defined in Section 8.1(a).

1.16 Space Reserved.

1.17 "Code" is defined in Section 2.9.

1.18 "Collection Accounts" is defined in the definition of
"Deposits".

1.19 "Comparable Position" is defined in Section 6.1(b).

1.20 "Confidential Information" is defined in Section 5.2.

1.21 "Contracts" is defined in Section 2.1(f).

1.22 "Covenant Not To Compete" is defined in Section 5.10.

1.23 The term "Deposits" shall mean all deposits (as defined in
Section 31(l) of the Federal Deposit Insurance Act ("FDIA") as amended, 12
U.S.C. Section 1813(l)), including without limitation the aggregate balances of
all savings accounts (including certificates of deposit) domiciled at each
Branch Office as of the close of business on the Closing Date, including
accounts accessible by negotiable orders of withdrawal ("NOW") or other demand
instruments; all deposit accounts maintained by a customer for the stated
purpose of the accumulation of funds to be drawn upon at retirement ("Retirement
Accounts"); all deposit accounts domiciled at each Branch Office through which
Seller accepts payments or deposits for credit or deposit to another account
domiciled at such Branch Office (the "Collection Accounts"); all deposit
accounts subject to arrangements between the owner of the account and a third
party which directly makes automated clearing house debits and credits,
including, but not limited to, social security payments, Federal recurring
payments, and other payments debited and/or credited on a regularly scheduled
basis to or from such accounts (such payments being hereinafter referred to as
the "ACH Items" and such accounts being hereinafter referred to as the "ACH
Accounts"); and all other accounts and deposits, together with interest, if any,
that is accrued but unposted as of the close of business on the Closing Date
provided that notwithstanding anything to the contrary contained in this
Agreement, Seller shall not assign, and Purchaser shall not assume, any Deposits
subject to or involved in any form of litigation, any Deposits as to which
assets

<PAGE> 3

of Seller have been pledged as security for amounts in excess of the FDIC
insured limits, or any "Escheatable Deposits."

1.24 "Deposit Obligations" is defined in Section 2.3.

1.25 "Deposit Premium" is defined in Section 2.6(b).

1.26 "Designated Employees" is defined in Section 6.1(g).

1.27 "Disagreement" is defined in Section 2.7(b).

1.28 "Employees" means all persons employed by Seller at any Branch
Office and those employees of FNIC set forth on Schedule 3.15(e) excluding (i)
any person who indicates that he or she is not interested in seeking employment
with Purchaser and (ii) any person who is on leave or disability and does not
return to work within 6 months after the initial date of leave or disability.

1.29 "Encumbrances" is defined in Section 3.5.

1.30 "Environmental Laws" means all applicable federal, state and
local laws and regulations and rules relating to pollution, discharge or release
of Hazardous Substances into the environment or workplace.

1.31 Intentionally Deleted.

1.32 "Escheatable Deposits" means Deposits held as of the close of
business on the Closing Date at any Branch Office which, in the absence of any
claim by the depositor thereof, will become subject to escheat, in the calendar
year in which the Closing occurs, to the State of New York pursuant to
applicable escheat and unclaimed property laws.

1.33 "Estimation Date" is defined in Section 2.6(a).

1.34 "Estimated Cash" is defined in Section 2.6(a).

1.35 "Estimated Deposits" is defined in Section 2.6(a).

1.36 "Estimated Loan Payment" is defined in Section 2.6(a).

1.37 "Estimated Pro-Rata Adjustment" is defined in Section
2.6(a).

1.38 "Estimated Transfer Amount" is defined in Section 2.6(b).

1.39 "Excluded Assets" is defined in Section 2.2(a).

1.40 "Excluded Liabilities" is defined in Section 2.2(b).

1.41 "Fee Properties" is defined in Section 2.1(c).

<PAGE> 4

1.42 "FDIA" is defined in the definition of "Deposits".

1.43 "FDIC" means Federal Deposit Insurance Corporation.

1.44 "Final Settlement Date" is defined in Section 2.8.

1.45 "Final Transfer Amount" is defined in Section 2.8.

1.46 "FIRPTA Affidavit" is defined in Section 7.1(d).

1.47 "GAAP" is defined in Section 3.11(a).

1.48 "Government Entity" is defined in Section 3.3(a).

1.49 "Hazardous Substances" means the definition of pollutants,
contaminants and hazardous substances set forth in the Federal Comprehensive
Environmental Response Compensation and Liability Act and similar New York state
law.

1.50 "Indemnitee" is defined in Section 12.3(a).

1.51 "Indemnifying Party" is defined in Section 12.3(a).

1.52 "Interest Period" is defined in Section 2.8.

1.53 "IRA" means individual retirement account.

1.54 "IRS" means Internal Revenue Service.

1.55 "Keogh Account" or "Keogh" has the same meaning as
"Business Retirement Plan" or "BRP".

1.56 "Leased Properties" is defined in Section 2.1(c).

1.57 "Leasehold Improvements" is defined in Section 2.1(g).

1.58 "Leases" is defined in Section 2.1(c).

1.59 Space Reserved.

1.60 "Loans" is defined in Section 2.1(b). As used in this Agreement,
the term "Loans" shall also include (i) any and all liens and other security or
other interests in various items of property and assets of the borrowers
("Borrower" or "Borrowers") and other obligors ("Obligor" or "Obligors") under
the Loans held as collateral for the indebtedness covered by the Loans (the
"Collateral") as provided for in any mortgages, deeds of trust, security
agreements or other agreements, documents, or instruments granting liens or
other encumbrances which may have been executed by the various Borrowers and
Obligors in favor of the Seller and relating to the Loans ("Security
Instruments") and (ii) promissory notes, guarantees, subordination agreements
and similar agreements,

<PAGE> 5

documents or instruments relating to the Loans and executed by Borrowers or
Obligors.

1.61 "Losses" is defined in Section 12.1.

1.62 "Material Adverse Effect" means a material adverse effect on the
Assets or on the business or operations conducted by Seller at the Branch
Offices.

1.63 "material part" is defined in Section 2.11(d).

1.64 "Material Violation" means a violation which, individually or in
the aggregate with all other such violations, would have a Material Adverse
Effect or constitute or give rise to a default under, result in the termination
of or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any lien, pledge, security interest,
charge or other encumbrance upon any of the Assets or any of the assets of
Seller relating to the Branch Offices under any material Seller Agreement.

1.65 "Names" is defined in Section 5.12.

1.66 "NOW" is defined in the definition of "Deposits".

1.67 "Notice of Disagreement" is defined in Section 2.7(b).

1.68 "Other Liabilities" is defined in Section 2.4.

1.69 "Permits" is defined in Section 3.4(c).

1.70 "Personal Property" is defined in Section 2.1(d).

1.71 "Post-Closing Schedule" is defined in Section 2.7(a).

1.72 "properties" is defined in Section 3.9.

1.73 "Pro-Rata Adjustment" is defined in Section 2.5.

1.74 "Purchaser" means North Fork Bank.

1.75 "Purchaser Agreement" is defined in Section 4.2(b).

1.76 "Purchaser's Account" is defined in Section 2.6(b).

1.77 "Purchaser's Indemnified Parties" is defined in Section
12.1.

1.78 "Real Properties" is defined in Section 3.14.

1.79 "Records" means all records and original documents in
Seller's possession which pertain to and are utilized by Seller to

<PAGE> 6

administer, reflect, monitor, evidence or record information respecting the
business or conduct of any of the Branch Offices and all such records and
original documents respecting (i) the Contracts, (ii) the Assets, (iii) the
Deposits, (iv) the Leases and (v) the Employees (except confidential employee
records for which consents to release such records to Purchaser shall not have
been obtained from the relevant employee), including all such records maintained
on electronic or magnetic media in the electronic data base system of Seller or
to comply with any applicable federal or state law or governmental regulation to
which the Deposits are subject, including but not limited to Federal Reserve
Board Regulation E (12 C.F.R. Section 205), Federal Reserve Board Regulation CC
(12 C.F.R. Section 229) and the escheat and unclaimed property laws of the State
of New York.

1.80 "Requisite Regulatory Approvals" is defined in Section 9.1.

1.81 "Retirement Accounts" is defined in the definition of
"Deposits".

1.82 "Returned Items" is defined in Exhibit B.

1.83 "Review Period" is defined in Section 2.7(b).

1.84 "Safe Deposit Box Assets" is defined in Section 2.1(h).

1.85 "Seller" means First Nationwide Bank, A Federal Savings
Bank.

1.86 "Seller Agreement" is defined in Section 3.2(b)(iii).

1.87 "Seller's Account" is defined in Section 2.8.

1.88 "Seller's Indemnified Parties" is defined in Section 12.2.

1.89 "SAIF" means Savings Association Insurance Fund.

1.90 "Taxes" means all taxes, charges, fees, levies or other like
assessments, including, without limitation, income, gross receipts, excise, real
and personal and intangible property, sales, use, transfer, transfer gain,
withholding, license, payroll, recording, ad valorem and franchise taxes imposed
by the United States, or any state, local or foreign government or subdivision
or agency thereof; and such term shall include any interest, penalties or
additions to tax attributable to such assessments.

1.91 "Tax Return" shall mean any report, return or other information
required to be supplied to a taxing authority in connection with Taxes.

1.92 "Taxpayer Information" is defined in Exhibit B.

<PAGE> 7

1.93 "Termination Date" is defined in Section 13.1(b).

1.94 "TIN" means taxpayer identification number.

1.95 "Third Party" is defined in Section 12.3(a).

1.96 "Third Party Claim" is defined in Section 12.3(a).

1.97 "Transfer Taxes" is defined in Section 7.1(b).

ARTICLE II
TRANSFER OF ASSETS AND ASSUMPTION OF LIABILITIES

2.1 Purchase and Sale of Assets.

On the Closing Date, subject to the terms and conditions set
forth in this Agreement, Seller shall sell, transfer, assign, convey and deliver
to Purchaser, and Purchaser shall purchase and acquire from Seller, all of
Seller's right, title and interest in and to the following assets (collectively,
the "Assets") relating to the Branch Offices as of the close of business on the
Closing Date:

(a) Cash on Hand. All petty cash, vault cash, teller cash,
automated teller machine ("ATM") cash and any other cash at or held for the
account of the Branch Offices (the "Cash").

(b) Loans. All savings account loans secured by an interest in
Deposits and loans made by the Branch Offices in connection with automatic loan
reserves (i.e., overdraft protection), together with all interest thereon that
shall accrue but not be received by Seller on or prior to the Closing Date (the
"Loans"). At least ten Business Days prior to the Closing Date, Seller shall
provide Purchaser with Schedule 2.1(b) which sets forth all Loans as of the most
recent practicable date.

(c) Real Property. (i) All real property described on Schedule
2.1(c)(i) including the buildings, improvements and structures thereon and the
appurtenances belonging thereto (the "Fee Properties") and (ii) all leasehold
interests in real property identified on Schedule 2.1(c)(ii) (the "Leased
Properties") and all of Seller's rights with respect to the occupancy of the
Leased Properties (the "Leases").

(d) Personal Property. The personal property set forth on
Schedule 2.1(d)-1, which is located at the Branch Offices on the Closing Date
and owned by Seller (including without limitation furniture, fixtures and
equipment) but excluding the property set forth on Schedule 2.1(d)-2 ("Personal
Property").

(e) Records. All segregated Records, provided that if the

<PAGE> 8

Purchaser reasonably determines that unsegregated Records are necessary to
administer a Branch Office Seller shall use reasonable efforts to make available
to Purchaser the Records or portions thereof that are necessary to administer
the Branch Office.

(f) Contracts. The contract rights, licenses, permits, approvals,
authorizations and franchises set forth on Schedule 2.1(f), together with any
additional contract rights added to such Schedule pursuant to Section 5.13
hereof (the "Contracts").

(g) Leasehold Improvements. All leasehold improvements
(to the extent not otherwise included as Personal Property)
located at the Branch Offices on the Closing Date (the "Leasehold
Improvements").

(h) Safe Deposit Box Assets. All assets related to the safe
deposit box business located at the Branch Offices as of the close of business
on the Closing Date (the "Safe Deposit Box Assets").

(i) Intangibles. The Covenant Not to Compete and the core deposit
intangibles associated with the assumption of Deposits pursuant to Section 2.3
hereto.

2.2 Excluded Assets and Liabilities.

(a) It is understood and agreed that Purchaser is not acquiring
from Seller, and Seller shall retain ownership of all right, title and interest
in and to, any property or asset which is not being transferred pursuant to
Section 2.1 hereof (including but not limited to (i) the existing or any
currently anticipated future name of Seller or derivation thereof and (ii) any
logos, service marks, trademarks, advertising material, slogans, or similar
items used on or prior to the Closing Date by Seller in connection with its
business) and the assets and liabilities set forth on Schedule 2.2
(collectively, the "Excluded Assets").

(b) Except as expressly set forth in this Agreement, Purchaser
shall not assume or be liable for any of the debts, obligations or liabilities
of Seller of any kind or nature whatsoever (whether or not accrued or fixed,
absolute or contingent, known or unknown), and Seller shall remain and be solely
and exclusively liable with regard to such debts, liabilities and obligations
(collectively, the "Excluded Liabilities").

2.3 Assignment and Assumption of Deposits.

<PAGE> 9

liable for all Deposits domiciled at the Branch Offices (the "Deposit
Obligations"). At least ten Business Days prior to the Closing Date, Seller
shall provide Purchaser with Schedule 2.3 which sets forth a list of all the
Deposits as of the most recent practicable date.

2.4 Assignment and Assumption of Other Liabilities.
----------------------------------------------

Subject to the terms and conditions set forth in this Agreement,
on the Closing Date, Seller shall assign to Purchaser, and Purchaser shall (a)
accept and assume from Seller and (b) pay, perform and discharge all obligations
with respect to and be solely liable for, the liabilities and obligations that
arise under the Leases and the Contracts, which liabilities and obligations
become due and payable after the Closing Date (the "Other Liabilities"). The
Deposit Obligations and the Other Liabilities shall collectively be referred to
as the "Assumed Liabilities".

2.5 Adjustment for Income, Expenses, Pre-Payments and Fees.
------------------------------------------------------

(a) All items of income, operating expenses, pre-payments and
fees relating to the Assets and Assumed Liabilities, whether accrued or prepaid
on or prior to the Closing Date (including without limitation, wages, salaries,
rents, equipment charges, safe deposit fees, utility payments, personal property
taxes, non delinquent real property taxes and assessments relating to the Branch
Offices or the Fee Properties, any fees paid or payable to Seller with respect
to the Loans or the IRA and Keogh Accounts, and any FDIC/SAIF fees, premiums or
assessments), shall be pro-rated between the parties as of the close of business
on the Closing Date. Seller shall be responsible for (or entitled to receive, as
the case may be) all such items which are allocable to the period on or prior to
the Closing Date, and Purchaser shall be responsible for (or entitled to
receive, as the case may be) all such items which are allocable to the period
subsequent to the Closing Date. Notwithstanding the foregoing, any special or
extraordinary FDIC/SAIF fees, premiums or assessments relating to the Deposits
levied after the execution of this Agreement shall be paid by Purchaser; and
payment of such fees, premiums or assessments will be made as part of the
Estimated Transfer Amount under Section 2.6 (if levied prior to the Closing),
the Final Transfer Amount under Section 2.8 (if levied after the Closing but
prior to the Final Settlement) or within 10 Business Days of presentment for
payment (if levied after the Final Settlement is made). The aggregate net amount
of such proration adjustments shall be referred to herein as the "Pro-Rata
Adjustment". The Pro-Rata Adjustment shall be included as part of the
calculation of the Estimated Transfer Amount and the Final Transfer Amount as
provided for in this Agreement.

(b) The Pro-Rata Adjustment shall include the dollar amount of
all security deposits which Seller has paid to lessors

<PAGE> 10

under the Leases, as indicated in the estoppel certificates or assignments to be
signed by such lessors.

(c) To the extent that any of the items of income, fees or
expenses described in paragraph (a) of this section are not discovered prior to
the preparation of the Post-Closing Schedule, the parties shall cooperate with
one another so that Purchaser or Seller, as the case may be, pays any such fee
or expense, or receives any such income, depending upon whether such fee,
expense or income relates to the period before, on or after the Closing Date.

(d) All prorations made pursuant to this section shall be based
upon the ratio of the number of days on or prior to the Closing Date related to
such item compared to the total number of days related to such item.

2.6 Estimated Transfer Payment.

(a) Five (5) Business Days prior to the Closing, Seller shall
deliver to Purchaser a schedule estimating the following, in each case as of the
close of business on the last day of the month preceding the month in which the
Closing Date shall occur (the "Estimation Date"): (i) the aggregate balance of
the Deposits (the "Estimated Deposits"), (ii) the aggregate book value, net of
specific loan loss reserves, of the Loans, plus (to the extent not reflected in
such book value) all interest thereon that shall accrue but not be received by
Seller on or prior to the Estimation Date (such book value, as so adjusted, the
"Estimated Loan Payment"), (iii) the aggregate amount of the Cash (the
"Estimated Cash") and (iv) the Pro-Rata Adjustment (the "Estimated Pro-Rata
Adjustment"). At the Closing, Seller shall deliver to Purchaser a true and
complete schedule (the "Book Value Schedule") setting forth the aggregate book
value, net of accumulated depreciation, as of the Closing Date, of the Personal
Property located at the Branch Offices, the Leasehold Improvements and the Fee
Properties.

(b) In connection with the sale by Seller to Purchaser of the
Assets and the assumption by Purchaser of the Deposits as provided for herein,
at the Closing, Seller shall transfer to Purchaser in immediately available
funds, by wire transfer to an account designated in writing by Purchaser to
Seller at least two days prior to the Closing Date ("Purchaser's Account"), an
amount (the "Estimated Transfer Amount") equal to the Estimated Deposits minus
the sum of (i) the amount set forth on Schedule 2.6 (b)(i) (the "Deposit
Premium"), (ii) the Estimated Loan Payment, (iii) the Estimated Cash, (iv) the
aggregate book value (net of accumulated depreciation) as of the Closing Date of
the Personal Property located at the Branch Offices, the Leasehold Improvements
and the Fee Properties and (v) the Estimated Pro-Rata Adjustment.

<PAGE> 11

respect to the amount payable by Seller pursuant to Section 2.6(b) of this
Agreement, within 15 Business Days of the date of this Agreement Seller shall
deliver to Purchaser Schedule 2.6(c) calculating the amount that would have been
payable by Seller pursuant to such Section 2.6(b) if the Closing Date were
August 31, 1995.

2.7 Post-Closing Schedule.

(a) Within ten (10) Business Days after the Closing Date, Seller
shall deliver to Purchaser a schedule (the "Post-Closing Schedule") setting
forth the actual amount of (i) the aggregate balance of the Deposits as of the
close of business on the Closing Date, (ii) the aggregate book value, net of
specific loan loss reserves, as of the Closing Date of the Loans, plus (to the
extent not reflected in such book value) all interest thereon that shall accrue
but not be received by Seller on or prior to the Closing Date, (iii) the
aggregate amount of the Cash as of the close of business on the Closing Date,
(iv) the Deposit Premium and (v) the Pro-Rata Adjustment. Purchaser shall
cooperate with Seller in the preparation of the Post-Closing Schedule. Purchaser
shall provide Seller and its independent accountants with reasonable access to
the books, records, facilities and personnel of the Branch Offices in a manner
which does not unduly disrupt or interfere with the operation of the Branch
Offices so that Seller and its independent accountants may prepare the
Post-Closing Schedule.

(b) Within thirty (30) calendar days after delivery of the
Post-Closing Schedule to Purchaser (the "Review Period"), Purchaser may dispute
all or any portion of the Post-Closing Schedule by giving written notice (a
"Notice of Disagreement") to Seller setting forth in reasonable detail the basis
for such dispute (hereinafter called a "Disagreement"). The failure by Purchaser
to deliver a Notice of Disagreement during the Review Period shall constitute an
irrevocable acceptance by Purchaser of the Post-Closing Schedule in the form
delivered by Seller. If Purchaser delivers a Notice of Disagreement during the
Review Period, the parties shall promptly commence good faith negotiations with
a view to resolving such Disagreement. If Seller shall not dispute all or any
portion of the Notice of Disagreement by giving written notice to Purchaser
setting forth in reasonable detail the basis for such dispute within 10 Business
Days following the delivery of the Notice of Disagreement, Seller shall be
deemed to have irrevocably accepted the Post-Closing Schedule as modified by the
Notice of Disagreement.

(c) If Seller disputes all or any portion of the Notice of
Disagreement within the 10 Business Days following the delivery of the Notice of
Disagreement and the parties are not able to resolve any Disagreement within 30
calendar days after the delivery by Seller of its dispute of the Notice of
Disagreement, such Disagreement shall be referred to a nationally recognized

<PAGE> 12

accounting firm for determination of the disputed amounts in accordance with
this Agreement. If Purchaser and Seller do not promptly agree on the selection
of a nationally recognized accounting firm, their respective independent public
accountants shall immediately select such accounting firm. The determination of
such firm shall be final and binding upon the parties and the amount so
determined shall be used to complete the final Post-Closing Schedule. Such firm
shall render its determination as soon as practicable after referral of the
Disagreement. The fees and expenses of such firm shall be paid one-half by
Purchaser and one-half by Seller. The parties shall cooperate with each other
and such firm with respect to the resolution of any Disagreement, such
cooperation to include reasonable access to books, records, facilities and
personnel.

2.8 Final Settlement.

On the Business Day immediately following the day on which the
Post-Closing Schedule is finally determined pursuant to the terms of Section 2.7
of this Agreement (the "Final Settlement Date"), the Estimated Transfer Amount
shall be recalculated using the amounts reflected in the final Post-Closing
Schedule (the "Final Transfer Amount"). If the Final Transfer Amount exceeds the
Estimated Transfer Amount, Seller shall pay the difference to Purchaser by wire
transfer in immediately available funds to Purchaser's Account. If the Estimated
Transfer Amount exceeds the Final Transfer Amount, Purchaser shall refund the
difference to Seller by wire transfer in immediately available funds to an
account designated in writing by Seller ("Seller's Account"). Any payment
pursuant to this section shall include interest on such amount for the number of
days from (but not including) the Closing Date to, but excluding, the Final
Settlement Date (the "Interest Period") calculated at the Federal Funds Rate as
published in the "Money Rates" section of The Wall Street Journal as of the
Closing Date.

2.9 Allocation of Purchase Price.

The consideration paid by Purchaser to Seller pursuant to this
Agreement shall be allocated among the Assets, including any intangible assets,
as set forth on Schedule 2.9. The allocation of the purchase price will be
bargained and negotiated for, and each party agrees to report the transactions
contemplated hereby for federal income tax and all other tax purposes
(including, without limitation, for purposes of Section 1060 of the Internal
Revenue Code of 1986, as amended (the "Code")) in a manner consistent with the
allocation set forth on Schedule 2.9 determined pursuant to this Section 2.9 and
in accordance with all applicable rules and regulations, and to take no position
inconsistent with such allocation in any administrative or judicial examination
or other proceeding or otherwise. Each of Purchaser and Seller shall timely file
the appropriate forms in accordance with the requirements of

<PAGE> 13

Section 1060 of the Code and this section.

2.10 Limited Warranty; Nonrecourse; Conveyance

(a) EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS AGREEMENT,
THE CONVEYANCE OF ALL ASSETS, INCLUDING PERSONAL PROPERTY INTERESTS, PURCHASED
BY PURCHASER UNDER THIS AGREEMENT AND UNDER ANY CONVEYANCING DOCUMENT EXECUTED
IN CONNECTION HEREWITH SHALL BE MADE, AS NECESSARY, BY SELLER'S SPECIAL WARRANTY
DEED WITH COVENANTS AGAINST GRANTOR'S ACTS, ASSIGNMENT OR BILL OF SALE, IN "AS
IS" AND "WHERE IS" CONDITION, WITHOUT RECOURSE AND, WITHOUT ANY WARRANTIES
WHATSOEVER WITH RESPECT TO SUCH ACQUIRED ASSETS, EXPRESS OR IMPLIED, WITH
RESPECT TO TITLE, ENVIRONMENTAL CONDITION, ENFORCEABILITY, COLLECTABILITY,
DOCUMENTATION OR FREEDOM FROM LIENS OR ENCUMBRANCES (IN WHOLE OR IN PART),
CONDITION OF PROPERTY OR ANY OTHER MATTER.

(b) On and after the Closing Date, Seller shall execute and
deliver to Purchaser such further instruments and documents of conveyance (in
form and substance satisfactory to Seller and Purchaser) as shall be reasonably
necessary to vest in Purchaser the full legal or equitable title of Seller in
and to the Assets.

(c) On and after the Closing Date, Purchaser shall execute,
acknowledge and deliver all such acknowledgements and other instruments as shall
be reasonably necessary to effectively relieve and discharge Seller from any of
the Assumed Liabilities.

2.11 Risk of Loss; Repairs.

(a) If, on or before the Closing Date, any of the Leased
Properties or Fee Properties is damaged in material part by fire or other cause,
Seller shall promptly notify Purchaser thereof in writing. In such event,
Purchaser may elect to:

(i) In the case of the Fee Property or Leased
Property, allow as a reduction in the consideration payable by
Purchaser to Seller an amount equal to the estimated cost of
restoration (to the extent of the damaged property interest owned
by Seller) as determined by an independent construction
contracting firm satisfactory to both Seller and Purchaser; or

(ii) (A) In the case of the Fee Property, assign at
Closing to Purchaser, without recourse to Seller, the insurance
proceeds for the casualty and the right to collect same, without
any reduction in the consideration payable by Purchaser to Seller
or (B) in the case of a Leased Property, assign at Closing to
Purchaser, without recourse to Seller, the insurance proceeds for
the casualty and the right to collect same (but only to the
extent that Seller, pursuant to the terms of the applicable
lease, is

<PAGE> 14

entitled to such insurance proceeds payable in connection with
such fire or other cause), without any reduction in the
consideration payable by Purchaser to Seller

(b) If, on or before the Closing Date, any condemnation or
eminent domain proceedings are initiated which could result in the taking of any
part of any Fee Property or Leased Property, Seller shall promptly notify
Purchaser of the initiation of any such proceedings. Upon receipt of such
notice, if a material part of the premises is to be taken, Purchaser may elect
to:

(i) (A) In the case of the Fee Property, consummate
the purchase of the Fee Property and receive a reduction in the
consideration payable by Purchaser to Seller in an amount equal
to the book value of the Fee Property at such time giving effect
to such taking, in which case Seller shall receive and retain any
award made in connection with such condemnation or eminent domain
proceedings or (B) in the case of a Leased Property, consummate
the purchase of the real property leasehold interest in such
Leased Property and receive a reduction in the consideration
payable by Purchaser to Seller in an amount equal to the current
book value of the real property leasehold interest in such Leased
Property giving effect to such taking, in which case Seller shall
receive any award made in connection with such condemnation or
eminent domain proceedings which is payable to Seller pursuant to
the applicable lease; or

(ii) (A) In the case of the Fee Property,
consummate the purchase of the Fee Property without any reduction
in the consideration payable by Purchaser to Seller, in which
event Seller shall assign to Purchaser, without recourse to
Seller, all of Seller's right, title and interest in and to any
award made in connection with such condemnation or eminent domain
proceedings or (B) in the case of a Leased Property, consummate
the purchase of the real property leasehold interest in such
Leased Property, without any reduction in the consideration
payable by Purchaser to Seller, in which event Seller shall
assign to Purchaser, without recourse to Seller, all of Seller's
right, title and interest in and to any award made in connection
with such condemnation or eminent domain proceedings as provided
in the applicable lease.

(c) Purchaser shall have ten (10) Business Days from the date of
receipt of Seller's written notice within which to make such election, and a
failure to make an election shall be deemed an election to consummate this
transaction pursuant to subsection 2.11(a)(i) or 2.11(b)(i) above, as
applicable.

(d) A "material part" shall be deemed to mean (i) any

<PAGE> 15

taking or damage which would leave remaining a balance of such Fee Property or
Leased Property which, due either to the area so taken or damaged or the
location of the part so taken or damaged in relation to the part not so taken or
damaged, would not permit it to be used effectively for its intended purpose
and, under economic conditions, zoning laws or building regulations then
existing or prevailing, would not readily accommodate a new or reconstructed
building or buildings of a type not materially different from the building or
buildings existing on the date of such taking or damage or (ii) any damage or
taking that would require Purchaser to incur costs or expenses exceeding fifty
thousand dollars ($50,000) to repair the branch or to compensate for such
taking.

(e) If any Fee Property or Leased Property requires any capital
improvements between the date of this Agreement and the Closing Date, Seller
shall give Purchaser notice of the proposed improvements and the cost thereof.
If Purchaser does not object to such proposal within five (5) Business Days,
Seller shall have the right to make such capital improvements and the
consideration payable by Purchaser to Seller shall be increased by the cost of
such capital improvements (only to the extent that the cost of such improvements
have not been reflected in the book value of the Asset so improved).

ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Purchaser as follows:

3.1 Corporate Organization and Powers.

(a) Seller is a federally chartered savings bank, duly organized,
validly existing and in good standing under the laws of the United States of
America.

(b) Seller has the corporate power and authority to own, lease or
operate the Assets and to carry on the business of the Branch Offices as
presently conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its properties makes such qualification necessary, except where the
failure to be so qualified would not, individually or in the aggregate with all
other such failures, have a Material Adverse Effect.

(c) Seller's deposits are, subject to applicable monetary limits
established by law, insured by the SAIF of the FDIC, and all premiums and
assessments required in connection therewith have been paid when due by Seller.

3.2 Corporate Authority; No Violation.

<PAGE> 16

(a) Seller has the corporate power and authority to execute and
deliver this Agreement and any documents, agreements or instruments to be
executed by Seller pursuant to this Agreement, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and any documents, agreements or instruments to be executed by Seller
pursuant to this Agreement, and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of Seller, and no further corporate authorization
on the part of Seller is necessary to approve this Agreement or to consummate
the transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller. Assuming the due authorization, execution and delivery of
this Agreement and of other documents, agreements and Instruments to be
delivered by Seller to Purchaser pursuant to this Agreement by Purchaser, and
except as enforcement may be limited by general principles of equity, whether
applied in a court of law or a court of equity, and by bankruptcy, insolvency
and similar laws affecting creditors' rights and remedies generally, (i) this
Agreement constitutes a legal, valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms and (ii) the other
documents, agreements and instruments to be delivered by Seller to Purchaser
pursuant to this Agreement, when executed and delivered, will be duly executed
and delivered by Seller and will constitute legal, valid and binding obligations
of Seller.

(b) The execution and delivery by Seller of this
Agreement or any document, agreement or instrument to be executed by Seller
pursuant to this Agreement, the consummation by Seller of the transactions
contemplated hereby or thereby, and compliance by Seller with the terms or
provisions hereof or thereof, shall not result:

(i) in a violation of any provision of the Charter
or Bylaws of Seller,

(ii) in a Material Violation of any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Seller or any of its properties or
assets (including, without limitation, the Assets), or

(iii) in a Material Violation of any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement, or
other instrument or obligation to which Seller is a party or by
which Seller or any of the Assets may be bound or affected (a
"Seller Agreement").

3.3 Consents and Approvals.

(a) Except as set forth on Schedule 3.3, Seller is not required
to obtain any consent, approval, order, authorization, registration, declaration
from, or to make any filing with, any

<PAGE> 17

court, administrative agency or commission, or governmental authority or
instrumentality, domestic or foreign (each a "Governmental Entity") or any other
third party in connection with (a) Seller's execution and delivery of this
Agreement or any document, agreement or instrument to be executed pursuant to
this Agreement or (b) the consummation by Seller of the transactions
contemplated hereby or thereby (including without limitation the transfer of the
Assets to Purchaser).

(b) As of the date of this Agreement, Seller knows of no reason,
specifically relating to its business or operations, why all of the Requisite
Regulatory Approvals shall not be obtained.

3.4 Compliance With Law.

(a) Except as set forth on Schedule 3.4, with respect to the
Assets and the business of the Seller related to the Branch Offices, Seller is
in compliance in all material respects with the provisions of all applicable
federal, state and local statutes, regulations and ordinances.

(b) Except as set forth on Schedule 3.4, and except for regularly
scheduled examinations, audits and full and limited scope reviews conducted by
Governmental Entities under applicable laws relating to federal savings banks
and their holding companies, no investigation or review by any Governmental
Entity concerning any possible conflicts or violations by Seller is pending or
threatened to the knowledge of Seller.

(c) Seller has all licenses, franchises, permits, certificates of
public convenience, orders and other authorizations ("Permits") of all federal,
state and local governments and governmental authorities necessary for the
lawful conduct of the business being conducted at each of the Branch Offices,
all such Permits are valid and in good standing, and all such Permits are not
subject to any suspension, modification or revocation or proceedings related
thereto except where the failure to have such Permits, or the invalidity
thereof, would not, individually or in the aggregate, have a Material Adverse
Effect.

3.5 Title to Assets.

As of the Closing Date, Seller or one of its subsidiaries will
have, and will deliver to Purchaser at the Closing, good, valid, and marketable
title and with respect to the Fee Properties and will assign a valid leasehold
interest in, all of the Leased Properties, free and clear of all mortgages,
claims, pledges, charges, liens, encumbrances, easements, limitations,
restrictions, commitments and security interests (collectively, the
"Encumbrances") except for Encumbrances:

(a) securing any Assumed Liability;

<PAGE> 18

(b) listed on Schedule 3.5 or disclosed in any title
reports, opinions or insurance binders listed on Schedule 3.5;

(c) incurred in connection with the acquisition of property and
securing the purchase price therefor, in either case only if such liability
relating thereto is an Assumed Liability;

(d) for Taxes or assessments, special or otherwise, either
payable in installments or not due and payable or being contested in good faith
and subject to escrow, reserves, or other appropriate protection for Purchaser;

(e) easements, rights of way, restrictions, covenants of record,
claims and covenants not shown of record, and other similar charges and
encumbrances which, if the rights granted under such instruments were exercised,
would not individually, or in the aggregate, impair or interfere with the
present and continued use operation, value or marketability of the affected
property;

(f) rights of parties in possession, matters which would be shown
on an accurate survey, and any other defect or exception to title, which in any
case does not materially impair the present and continued use, operation, value
or marketability of the Asset to which it relates; and

(g) with respect to each Fee Property, any other title exceptions
affecting the Fee Property which do not impair or interfere with the present and
continued use, operation, value or marketability of the Fee Property. Seller
shall cooperate with Purchaser to remove those encumbrances on the Fee Property
which the title company may agree to delete as exceptions to the title thereto,
but the title company's failure to delete any such encumbrance shall not
constitute a breach of this representation.

3.6 Contracts and Leases.

(a) Seller is not a party to or bound by any agreements or
arrangements for the purchase or sale of any of the Assets, or for the grant of
any preferential right to purchase any of the Assets, other than in the ordinary
course of business.

(b) Schedule 3.6(b) sets forth each Contract for
transactions:

(i) with an aggregate value of five thousand
dollars ($5,000) or more during the past three (3) months or
twenty-five thousand dollars ($25,000) or more during the past 12
months;

(ii) with a remaining term of more than one (1)
year, or

<PAGE> 19

(iii) that has or may have a material effect on the
Assets or on the business or operations conducted by Seller at
the Branch Offices.

Each of the foregoing contracts, whether or not set forth on
Schedule 3.6(b), is referred to herein as a Contract.

(i) will constitute the legal, valid and binding
obligation of Seller, and to the knowledge of Seller, each
of the other parties thereto,

(ii) will be enforceable in accordance with its
terms, and

(iii) will not be subject to any material defaults
or existing acts, events or conditions which, with notice or
lapse of time, or both, will result in a material default under
any of such Contracts or Leases.

Seller has made available to Purchaser true and correct copies of
each Contract set forth on Schedule 2.1(f), and all attachments, amendments and
addenda thereto, excluding those Contacts added pursuant to Section 5.13.

(d) Seller has delivered to Purchaser true, complete and correct
copies of the Leases, together with all amendments, modifications, and other
changes. The Leases are also listed on Schedule 2.1(c)(ii).

(e) All sums due and owing by Seller pursuant to the Leases,
through the Closing Date, have been or will be paid prior to the Closing Date.

(f) Except as set forth on Schedule 3.6(f), Seller has not
subleased any of its interests in any Leased Property.

(g) Seller has not received any notice of (i) non-compliance with
any restriction encumbering any Leased Property, or (ii) any zoning violations
adversely affecting the value or use of any Leased Property.

3.7 Assignment of Assumed Liabilities.

As of the Closing Date, each of the Assumed Liabilities will be
properly assigned to Purchaser, and to the best of Seller's knowledge, there are
no material defaults under any of such Assumed Liabilities.

<PAGE> 20

3.8 Litigation.

Schedule 3.8 sets forth each action, suit, proceeding, inquiry or
investigation, at law or in equity, before any court, arbitrator, mediator or
any governmental body, agency or official, pending, or, to Seller's knowledge,
threatened, against Seller relating to any of the Assets, Assumed Liabilities,
or the business or operation of the Branch Offices.

Except as set forth on Schedule 3.8, there is no action, suit,
proceeding, at law or in equity, before any court or arbitrator or any
governmental body, agency or official, pending, or, to Seller's knowledge,
threatened against Seller, wherein an unfavorable decision, ruling or finding
would adversely affect (a) the validity or enforceability of this Agreement or
any document necessary to consummate the transactions contemplated herein, (b)
the consummation of the transactions contemplated hereby, (c) any approval,
consent or permission required to be obtained by Seller hereunder, (d) the
ability of Seller to perform its obligations under this Agreement, (e) the use,
development, operation or maintenance of the Fee Properties or the Leased
Properties as branch banking facilities or (f) the business, assets, liabilities
or operations of any of the Branch Offices. Except as set forth on Schedule 3.8,
no attachments, execution proceedings, assignments for the benefit of creditors,
insolvency, bankruptcy, reorganization or other proceedings relating to the
Assets or the Branch Offices are pending, or, to Seller's knowledge, threatened.

3.9 Environmental.

Seller represents and warrants concerning the Fee Properties, the
Leased Properties and all other property contained therein which shall be
transferred pursuant hereto (for purposes of this Section 3.9, "properties")
that, except as set forth on Schedule 3.9 and breaches of this representation
that, individually or in the aggregate, would not have a Material Adverse Effect
on the Assets or the Assumed Liabilities:

(a) Except as otherwise provided herein or as disclosed in any
environmental studies, reports, investigations or other documents (all of which
are listed on Schedule 3.9), such properties are and have been in substantial
compliance with all Environmental Laws,

(b) there has been no storage, disposal, arrangement for
disposal, presence or release of Hazardous Substances, from, in, upon or below
any such properties,

(c) Seller has not engaged in any activity that involves or
involved the generation, use, manufacture, treatment, transportation, storage in
tanks or otherwise, or disposal of Hazardous Substances on or from any property,
and has no actual

<PAGE> 21

knowledge that any other person has engaged in any such activity,

(d) Seller has not received any written communication from any
person or entity that alleges a violation of Environmental Laws concerning, or
that Seller may be responsible for any Loss (as defined in this Agreement) under
Environmental Laws with respect to, any of the properties,

(e) Seller has not received any written notice of any claim,
action, demand, or investigation from any person or entity alleging or
describing potential Loss under Environmental Laws arising out of or based on or
resulting from (a) the presence, release or threatened release of any Hazardous
Substance from, in, upon or below any of the properties or (b) the violation or
alleged violation of any Environmental Laws concerning any of the properties,
and

(f) Seller is not aware of any past or present actions,
conditions or occurrences which could reasonably be expected to form the basis
of any Loss to Seller under Environmental Laws concerning, relating to or
incidental to the ownership or operation of any of the properties.

(g) Seller has made available to Purchaser copies of all
environmental studies, reports, investigations and other documents relating to
the properties of which Seller has possession.

3.10 Finders or Brokers.

Except as disclosed on Schedule 3.10, Seller has not paid or
agreed to pay any fee or commission to any agent, broker, finder or other person
for or on account of services rendered as a broker or finder in connection with
this Agreement or the transactions covered and contemplated hereby.

3.11 Financial Information.

(a) The books of account of the Branch Offices fairly and
accurately reflect the respective Assets and Assumed Liabilities of the Branch
Offices, in accordance with generally accepted accounting principles ("GAAP") or
regulatory accounting principles, whichever is applicable.

(b) The books of account of the Branch Offices (i) are maintained
by Seller substantially in accordance with applicable legal and accounting
requirements and (ii) reflect only actual transactions.

(c) The Book Value Schedule shall accurately reflect the book
value of the Assets referred to therein as of its date, recorded at their
historical cost and depreciated in accordance

<PAGE> 22

with Seller's historical accounting policies, all in accordance with GAAP.

(d) The Post-Closing Schedule, to the extent it relates to Loans,
shall accurately reflect the book value of the Loans referred to therein as of
the Closing Date in accordance with generally accepted accounting practices.

(e) Schedule 2.6(c) will be accurate, when delivered in
accordance with the provisions of this Agreement, in all material respects.

3.12 Taxes.

To the best of Seller's knowledge,

(a) All Taxes which are due or payable by Seller relating to the
Assets (except those Taxes which are Purchaser's responsibility under a
different covenant of this Agreement) have been paid in full or properly accrued
and adequately provided for by reserves shown in the books and records of
Seller, or will be so paid or accrued and provided for in the books and records
of the Seller.

(b) All Tax Returns required to be filed with respect to the
Assets have been filed with the appropriate federal, state or local taxing
authority and each such Tax Return is true, complete and correct in all material
respects.

(c) All Taxes shown to be due on such Tax Returns, and all Taxes
arising from or attributable to the Assets required to be withheld by or with
respect to the Seller have been paid or, if applicable, withheld and paid to the
appropriate taxing authority, other than those Taxes the failure of which to be
paid would not result in a lien on the Assets or become a liability of
Purchaser.

(d) No notice of deficiency or assessment of Taxes has been
received from any taxing authority with respect to the Assets.

(e) There are no ongoing audits or examinations of any of the Tax
Returns relating to or attributable to the Assets, other than with respect to
Taxes that would not result in a lien on the Assets or become a liability of
Purchaser.

(f) No consents or waivers to extend the statutory period of
limitations applicable to the assessment of any Taxes with respect to the Assets
has been granted, other than with respect to Taxes that would not result in a
lien on the Assets or become a liability of Purchaser.

<PAGE> 23

3.13 Loans.

Except as set forth on Schedule 3.13, (a) each evidence of
indebtedness representing a Loan has been duly and validly executed and
delivered by the Borrower(s) and other Obligors(s) thereunder, (b) each Loan
constitutes a genuine, valid and legally binding obligation of such Borrower(s)
and other Obligor(s), enforceable against such Borrower(s) and other Obligor(s)
in accordance with its terms, except as enforceability may be limited by general
principles of equity, whether applied in a court of law or a court of equity,
and bankruptcy, insolvency and similar laws affecting creditors rights and
remedies generally and (c) Seller has duly performed in all material respects
all of its obligations thereunder. There are no material claims, counterclaims,
set-off rights or other rights with respect to any Loan which could impair the
collectability of such Loan or the foreclosure on the Collateral related
thereto. Schedule 3.13 contains a true, complete and correct list of all Loans
made in connection with overdraft protection which (x) are more than 30 days
past due or (y) have been classified or criticized by any federal or state
regulator of Seller or by Seller.

3.14 State of the Property.

(a) Schedule 3.14 contains a list, that is complete and accurate
in all material respects, which sets forth as of a recent date identified on
said schedule (i) the address of each Fee Property and Leased Property and (ii)
the Leases with respect to the Leased Properties and all material amendments
thereto;

(b) The improvements and building systems are in good operating
condition and repair, subject to ordinary wear and tear and routine maintenance
needs; and

(c) The present use, operation and physical condition of the Fee
Properties and the Leased Properties are in material compliance with all
applicable laws.

3.15 Employees.

(a) There are no claims (statutory or otherwise), demands,
proceedings or other actions pending or, to Seller's actual knowledge,
threatened against Seller by (a) any of its present or former employees at the
Branch Offices or (b) any person who sought to become employed by Seller at the
Branch Offices.

(b) None of the Employees is a member of any labor union
or is otherwise subject to collective bargaining.

(c) For purposes of Section 2.4 hereof, the term "Contracts" does
not include any employment, severance, termination or similar agreement.

<PAGE> 24

(d) Seller's 401(k) plan is a qualified plan for purposes
of Section 401(a) of the Code.

(e) Schedule 3.15(e) sets forth a true and complete list of all
Employees as of the date set forth therein.

3.16 Deposit Insurance.

The Deposits are insured by SAIF up to the maximum extent
permitted by law, and Seller has filed and will file all reports and paid all
fees, premiums and assessments required under the Federal Deposit Insurance Act,
as amended.

3.17 Currency Transaction Reports.

Seller has filed all Currency Transaction Reports with respect to
all transactions required to be reported under the Bank Secrecy Act and
regulations adopted pursuant thereto.

3.18 Insurance.

(a) With respect to the Assets and the operations of the Branch
Offices, Seller currently maintains insurance (the "Insurance") as set forth on
Schedule 3.18. All premiums due on the Insurance have been paid by Seller.
Seller has not received, and has no knowledge of, any notice or request from any
insurance company or board of fire underwriters requesting the performance of
any work or alteration with respect to the Assets. Seller has received no notice
from any insurance company, nor is Seller aware, of any defects or inadequacies
in the Assets which, if not corrected, would result in the termination or
limitation of the Insurance or any increase in the cost of the Insurance.

(b) The Insurance is sufficient to replace (less any deductible
amount) the Branch Offices or any of the Assets which are damaged, destroyed or
lost prior to the Closing Date.

(c) The Insurance will be "occurrence" insurance, meaning that
Seller or such lessors, as the case may be, will have the enforceable right to
submit and pursue claims and receive proceeds under such insurance after the
Closing Date with respect to events occurring prior to the Closing Date

(d) Seller's rights under the Insurance can be assigned to
Purchaser without the consent of any person.

3.19 Condemnation; Special Assessments.

Except as set forth on Schedule 3.19 hereto, there are no
pending, or to the best of Seller's knowledge, contemplated,

<PAGE> 25

condemnation or similar proceedings or special assessments which would affect
any Fee Property or Leased Property or any part thereof in any way whatsoever.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Seller as follows:

4.1. Corporate Organization and Powers.

(a) Purchaser is a New York chartered stock commercial bank, duly
organized, validly existing and in good standing under the laws of the State of
New York.

(b) Purchaser has the corporate power and authority to own, lease
or operate its properties and to carry on its business as presently conducted
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its
properties makes such qualification necessary, except where the failure to be so
qualified would not, individually or in the aggregate with all other such
failures, have a material adverse effect on Purchaser's ability to consummate
the transactions contemplated hereby and perform its obligations hereunder.

(c) Purchaser's deposits are, subject to applicable monetary
limits established by law, insured by the SAIF and the Bank Insurance Fund of
the FDIC, and all premiums and assessments required in connection therewith have
been paid when due by Purchaser.

4.2 Corporate Authority; No Violation.

(a) Purchaser has the corporate power and authority to execute
and deliver this Agreement and any documents, agreements or instruments to be
executed by Purchaser pursuant to this Agreement, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and any documents, agreements or instruments to be executed by
Purchaser pursuant to this Agreement, and the consummation of the transactions
con templated hereby and thereby, have been duly authorized by all necessary
corporate action on the part of Purchaser, and no further corporate
authorization on the part of Purchaser is necessary to approve this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Purchaser. Assuming the due authorization, execution
and delivery of this Agreement and of the other documents, agreements and
instruments to be delivered by Purchaser to Seller pursuant to this Agreement by
Seller, and except as enforcement may be limited by general principles of
equity, whether applied in a

<PAGE> 26

court of law or a court of equity, and by bankruptcy, insolvency and similar
laws affecting creditors' rights and remedies generally, (i) this Agreement
constitutes a legal, valid and binding obligation of Purchaser, enforceable
against Purchaser in accordance with its terms and (ii) the other documents,
agreements and instruments to be delivered by Purchaser to Seller pursuant to
this Agreement, when executed and delivered, will be duly executed and delivered
by Purchaser and will constitute legal, valid and binding obligations of
Purchaser.

(b) The execution and delivery by Purchaser of this Agreement or
any document, agreement or instrument to be executed by Purchaser pursuant to
this Agreement, the consummation by Purchaser of the transactions contemplated
hereby or thereby, and compliance by Purchaser with the terms or provisions
hereof or thereof, shall not result:

(i) in a violation of any provision of the
Charter or Bylaws of Purchaser,

(ii) in a violation of any statute, code,
ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Purchaser or any of its properties or
assets (including, without limitation, the Assets), except for
those violations which would not have, individually or in the
aggregate, a material adverse effect on Purchaser's ability to
consummate the transactions contemplated hereby and performance
obligation hereunder, or

(iii) in a violation of any note, bond, mortgage,
indenture, deed of trust, license, lease, agreement, or other
instrument or obligation to which Purchaser is a party or by
which Purchaser or any of the Assets may be bound or affected (a
"Purchaser Agreement"), except for those violations which would
not have, individually or in the aggregate, a material adverse
effect on Purchaser's ability to consummate the transactions
contemplated hereby and performance obligation hereunder.

4.3 Consents and Approvals.

(a) Except for the filing of applications and notices, as
applicable, with the FDIC, Office of Thrift Supervision ("OTS") and the New York
Banking Department, and the approval of, or the expiration of waiting periods
relating to such applications and notices, as the case may be, Purchaser is not
required to obtain any consent, approval, order, authorization, registration,
declaration from, or to make any filing with, any Governmental Entity or any
other third party in connection with (a) Purchaser's execution and delivery of
this Agreement or any document, agreement or instrument to be executed pursuant
to this Agreement or (b) the

<PAGE> 27

consummation by Purchaser of the transactions contemplated hereby or thereby.

(b) As of the date of this Agreement, Purchaser knows of no
reason, specifically relating to its business or operations, why all of the
Requisite Regulatory Approvals shall not be obtained.

4.4 Litigation.

There is no action, suit, proceeding, at law or in equity, before
any court or arbitrator, or any governmental body, agency or official pending,
or, to Seller's knowledge, threatened against Seller, wherein an unfavorable
decision, ruling or finding would adversely affect (a) the validity or
enforceability of this Agreement or any document necessary to consummate the
transactions contemplated herein, (b) the consummation of the transactions
contemplated hereby, (c) any approval, consent or permission required to be
obtained by Purchaser hereunder, (d) the ability of Purchaser to perform its
obligations under this Agreement or, (e) the business, assets, liabilities or
operations of any of the Branch Offices.

4.5 Finders or Brokers.

Purchaser has not paid or agreed to pay any fee or commission to
any agent, broker, finder or other person for or on account of services rendered
as a broker or finder in connection with this Agreement or the transactions
covered and contemplated hereby.

4.6 Estimates, Projections and Other Predictions.

It is understood that any cost estimates, projections or other
predictions contained or referred to in any Exhibit or Schedule hereto or which
otherwise have been provided to Purchaser are not and shall not be deemed to be
representations or warranties of Seller. Purchaser acknowledges that there are
uncertainties inherent in attempting to make such estimates, projections and
other predictions, that Purchaser is familiar with such uncertainties, that
Purchaser is taking full responsibility for making its own evaluation of the
adequacy and accuracy of all estimates, projections and other predictions so
furnished to it, and that Purchaser shall have no claim against anyone with
respect thereto.

ARTICLE V
COVENANTS OF THE PARTIES

5.1 Business Obligations.

Except as set forth on Schedule 5.1, as otherwise provided

<PAGE> 28

in this Agreement, or as required by applicable law, between the date of this
Agreement and the Closing Date:

Seller shall:

(a) conduct the business of the Branch Offices and
the operations of Seller relating thereto in the ordinary course
of business, consistent with Seller's past practice and
applicable law, and consistent with prudent banking practice,

(b) maintain its books and records in accordance
with GAAP, and

(c) use its reasonable efforts to preserve, for
itself and Purchaser, its present business organization and the
goodwill of its customers and others with whom business
relationships exist.

(d) Except as may be required (x) to obtain the
Requisite Regulatory Approvals, (y) otherwise by a Governmental
Entity, or (z) to accomplish the transactions contemplated
hereby, with respect to the Branch Offices, the Deposits and the
Loans, Seller shall not, without the prior written consent of
Purchaser:

(i) Cause any Branch Office to engage
or participate in any material transaction or incur
or sustain any material obligation except in the
ordinary course of business;

(ii) Change its interest rate or fee
pricing policies, or materially alter the mix of
rate, terms and account types, in each case, as in
effect as of date of this Agreement, with respect
to Deposits at the Branch Offices other than in the
ordinary course of business and consistent with the
markets in which the Branch Offices operate and
promptly disclosed to Purchaser;

(iii) Cause the Branch Offices to
transfer to or receive from Seller's or any third
party's other operations or branches which are not
Branch Offices any (x) Loans or (y) Personal
Property, other than in the ordinary course of
business;

(vi) Cause the Branch Offices to
transfer to or receive from Seller's or any third
party's other operations or branches any Deposits,
except upon the unsolicited request of a depositor
in the ordinary course of business, or if such
deposit is pledged as security for a loan which is
not a

<PAGE> 29

Loan;

(v) Transfer, assign, encumber, or
otherwise dispose of or enter into any contract,
agreement, or understanding to transfer, assign,
encumber, or otherwise dispose of the Assets except
in the ordinary course of business or as
contemplated by this Agreement;

(vi) Increase the salary,
remuneration, or compensation of persons employed
at the Branch Offices other than normal increases
in accordance with Seller's customary policies as
in existence on the date hereof, or pay any
uncommitted bonus to any such employee other than
regular bonuses granted based on historical
practice of Seller;

(vii) Amend, terminate or modify any
of the terms of any Lease or Contract, or waive any
of the provisions thereof except in the ordinary
course of business;

(viii) Amend or modify the terms of
any Loan in any manner materially adverse to Seller
or Purchaser;

(ix) Open, close or relocate any
Branch Office, or transfer any employee to or from
a Branch Office (other than to or from another
Branch Office);

(x) Agree to do any of the foregoing.

5.2 Access.

(a) Between the date of this Agreement and the Closing Date,
Seller shall provide Purchaser and its authorized representatives access, upon
reasonable notice and during normal business hours, to copies of Seller's
confidential, proprietary and non-public information ("Confidential
Information") except the Confidential Information that Seller is by law not
permitted to disclose, including without limitation Seller's books, records,
contracts, documents, Loan files, and other information of or relating to the
Branch Offices.

(b) Purchaser's investigations shall be conducted in a manner
which does not unreasonably interfere with Seller's normal operations,
customers, and employee relations. Seller shall, and shall cause its employees
to, cooperate with and assist Purchaser to perform said investigations. No
investigation conducted by the Purchaser pursuant to this Agreement shall affect
any of Seller's representations, warranties, covenants or agreements made in
this

<PAGE> 30

Agreement.

(c) All of Seller's Confidential Information shall be treated as
and remain the sole property of Seller. If the transactions contemplated by this
Agreement do not occur, Purchaser and its representatives shall return to
Seller, or destroy, all of Seller's Confidential Information, and all documents,
notes, summaries and other materials that contain, refer to, or are derived from
such Confidential Information; Purchaser shall certify to the return or
destruction of such Confidential Information.

(d) Purchaser shall keep confidential and not disclose any of
Seller's Confidential Information. Purchaser shall not directly or indirectly
use Seller's Confidential Information for any purpose other than the
consummation of this Agreement.

(e) Purchaser's obligations to keep confidential and to not
disclose Seller's Confidential Information shall continue for five years from
the date of the transactions contemplated by this Agreement are consummated or
abandoned and shall not apply to any information which was (i) in Purchaser's
possession prior to its disclosure by Seller or (ii) generally known to the
public, or (iii) rightfully disclosed to Purchaser by a third party not bound by
an obligation of confidentiality. It is further agreed that, if in the absence
of a protective order or the receipt of a waiver hereunder Purchaser is
nonetheless, in the opinion of its counsel, compelled to disclose information
concerning Seller to any tribunal or Governmental Entity or else stand liable
for contempt or suffer other censure or penalty, Purchaser may disclose such
information to such tribunal or governmental body or agency without liability
hereunder.

(f) Upon receipt of all of the Requisite Regulatory Approvals
other than the expiration of any statutory waiting period relating thereto, and
upon notice to Seller of a proposed Closing Date, Purchaser may communicate
with, and deliver information, brochures, bulletins, press releases, and other
communications to, depositors, Loan borrowers and other customers of the Branch
Offices concerning (i) the transactions contemplated by this Agreement and (ii)
the business and operations of Purchaser. The communications described
hereinabove must be made with Seller's prior written consent (which consent
shall not be unreasonably withheld) and shall be made at Purchaser's sole cost
and expense. Seller, if so requested by Purchaser, shall on behalf and at the
sole cost and expense of Purchaser, furnish such information and communications
to depositors, Loan borrowers, and other customers of the Branch Offices in a
commercially reasonable manner.

(g) Except as may be required in connection with the obtaining of
the Requisite Regulatory Approvals or as required by applicable law, Purchaser
shall not disclose to any person, including to employees of the Branch Offices,
the possible closing

<PAGE> 31

of any of the Branch Offices prior to the Closing Date.

5.3 Legal and Regulatory Matters.

With respect to the making of filings to any Governmental Entity
or third party:

(a) Seller and Purchaser shall cooperate with each other and use
their best efforts to promptly prepare and file all necessary documentation; to
effect all applications, notices, petitions and filings; and to promptly obtain
all permits, consents, approvals, waivers and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement.

(b) Within 30 days after the execution of this Agreement, Seller
and Purchaser shall each file with the appropriate Governmental Entities all the
applications for the Requisite Regulatory Approvals, consents, permits and
authorizations which such party is required to obtain in connection with the
consummation of the transactions contemplated by this Agreement.

(c) Subject to the applicable laws relating to the exchange of
information, Seller and Purchaser shall consult with each other and exchange
information in order to obtain all the permits, consents, approvals and
authorizations that are necessary or advisable to consummate the transactions
contemplated by this Agreement from all third parties and Governmental Entities.

(d) Seller and Purchaser will keep the other party apprised of
the status of all applications and filings.

(e) Except for any confidential portions thereof, the party
responsible for making a filing shall promptly (i) provide a copy of the filing,
and any supplement, amendment or item of additional information in connection
with the filing, to the other party and (ii) deliver to the other party a copy
of each material notice, order, opinion and other item of correspondence
received by it from any Governmental Entity in respect of any such filing whose
consent or approval is required for consummation of the transactions
contemplated by this Agreement.

(f) Purchaser and Seller shall promptly advise each other of any
communication received from a Governmental Entity which causes such party to
believe that there is a reasonable likelihood that a Requisite Regulatory
Approval will not be obtained or that the receipt of such approval will be
materially delayed.

5.4 Payment of Liabilities.

From and after the Closing Date, Purchaser shall pay all properly
drawn checks, drafts and non-negotiable withdrawal orders

<PAGE> 32

timely presented to it (including without limitation those presented by mail,
over the counter, or through clearings) by depositors whose deposits or accounts
on which such items are drawn are Deposits. Payment of said items shall be made
without regard to whether the items are drawn on the check or draft forms
provided by Seller or by Purchaser. Further, Purchaser shall, in all other
respects, discharge, in the usual course of the banking business, the duties and
obligations of Seller with respect to the balances due and owing to the
depositors whose accounts are assumed by Purchaser. The obligations set forth in
this section shall be in addition to the Purchaser's obligations under Sections
2.3 and 2.4.

5.5 Interest Reporting.

From January 1 of the current calendar year through the Closing
Date, Seller shall report all interest credited to, interest withheld from, and
early withdrawal penalties charged to the Deposits. After the Closing Date and
through the end of the calendar year in which the Closing occurs, Purchaser
shall report all interest credited to, interest withheld from, and early
withdrawal penalties charged to the Deposits. Said reports shall be made to the
holders of the Deposits and to the applicable federal and state regulatory
agencies.

5.6 Transfer Fees.

(a) Except as set forth in Section 2.5, Seller and Purchaser
shall equally bear all fees incurred in connection with the obtaining of third
party consents for transfer of the Assets from Seller to Purchaser and the
assumption by Purchaser of the liabilities of Seller specified herein.

(b) Notwithstanding the foregoing, if any lessor requires an
increase in the amounts payable under any of the Leases as a condition to its
consent to the assumption of such Lease by Purchaser, Purchaser shall be solely
responsible for the payment of all such increases after the Closing. Seller
shall not negotiate or agree to any such increase without the consent of
Purchaser, which consent shall not be unreasonably withheld.

5.7 Reports.

(a) Subsequent to the Closing Date, Purchaser shall make all the
reports that are required to be made in the ordinary course of business to any
Governmental Entity or otherwise with respect to the Branch Offices, including
without limitation, federal, state and local income tax reporting of Retirement
Accounts, 1099 information returns and other required tax forms, and cash
transaction reports. Notwithstanding the foregoing, Purchaser's obligations with
respect to said reports shall only apply to the extent that any such reports
relate to matters occurring after the Closing Date.

<PAGE> 33

(b) Seller shall have the obligation to make all such reports
with respect to matters occurring on or prior to the Closing Date.

(c) All reports shall be made to the holders of accounts and to
the applicable federal, state and local regulatory agencies.

5.8 Branch Account Report.

As soon as practicable after the date of this Agreement, Seller
shall furnish Purchaser with a report of the Deposits as of the date of such
report (the "Branch Account Report") in form reasonably acceptable to Purchaser.
To the extent such information is maintained by Seller on its computer systems,
the Branch Account Report shall enumerate for each account constituting a
Deposit ("Branch Account"): (a) the address and taxpayer identification number
of the owner of the Branch Account, (b) the type of account, (c) the date the
Branch Account was opened, (d) the current interest rate paid on the Branch
Account, if any, (e) the balance of the Branch Account, and (f) the term and
maturity of any Branch Account that is a certificate of deposit or similar time
deposit. By 11:00 A.M. on the Tuesday preceding the Closing, Seller should
provide Purchaser with a Branch Account Report for the Friday preceding the
Closing.

5.9 General Notices to Depositors and Safe Deposit Box Owners.
---------------------------------------------------------

(a) Within five (5) business days following the receipt of all
Requisite Regulatory Approvals, Seller shall provide Purchaser with an
intermediate customer list of the accounts that are to be assumed by Purchaser
pursuant to this Agreement. The customer list shall contain information that is
accurate as of the month-end prior to the giving of the notice referred to in
Section 5.9(b) of this Agreement.

(b) Within five (5) Business Days following the receipt of all of
the Requisite Regulatory Approvals (other than the expiration of all statutory
waiting periods relating thereto), Seller shall notify the holders of the
Deposits that are to be assumed under this Agreement that, subject to
satisfaction of the conditions to closing contained herein, Purchaser will
assume the liability for the Deposits. Such notifications shall include notice
that Purchaser shall not continue services to depositors provided by Seller but
not routinely offered by Purchaser, as specified by Purchaser prior to the
giving of such notification. The notifications shall be based on the list
referred to in Section 5.9(a) of this Agreement and a listing maintained at the
Branch Offices of the new accounts opened since the date of such list. Seller
shall provide Purchaser with the documentation of such lists up to the date of
Seller's mailing. Prior to the Closing, Purchaser shall send notifications to
the appropriate holders setting out the details of its administration of the
assumed

<PAGE> 34

accounts. Each party shall obtain approval of its notification letter(s) from
the other party, and said approval shall not be unreasonably withheld. Each
party shall bear the cost of its own mailing.

(c) Within five (5) Business Days following the receipt of all of
the Requisite Regulatory Approvals (other than the expiration of all statutory
waiting periods relating thereto), Seller shall provide a notice to the owners
of each of the safe deposit boxes at the Branch Offices stating that Seller
shall assign to Purchaser the safe deposit agreements between Seller and each of
such parties on the Closing Date. The notice shall be made by a letter that is
mutually acceptable to Purchaser and Seller. Seller and Purchaser shall
cooperate with one another in order to transfer the Safe Deposit Box Assets from
Seller to Purchaser. As soon as practicable after the date of this Agreement,
Seller shall deliver copies of all safe deposit box lease forms currently used
in connection with the Safe Deposit Box business of the Seller.

(d) At least thirty (30) days before the Closing Date, Seller
shall prominently and continuously display a sign in each Branch Office stating
that the Branch Office will be closed on the Saturday following the Closing Date
and will not reopen until the following Monday (unless such Monday is a bank
holiday, in which case the sign will indicate that the Branch Office will reopen
the following Tuesday). The contents and form of the sign shall be subject to
Purchaser's prior approval, which shall not be unreasonably withheld. At a
mutually agreeable time on the Closing Date, Seller shall provide Purchaser and
their agents access to each Branch Office in order for Purchaser to take such
steps as are necessary to enable Purchaser to reopen such Branch Office on the
date described above as a functioning branch office of Purchaser.

5.10 Covenant Not to Compete.

(a) For a period of two (2) years following the Closing Date,
Seller shall not, and shall not allow any of its Affiliates to, directly or
indirectly solicit any deposit business of the Branch Offices, or establish or
maintain a branch office or other physical facility for the purpose of accepting
deposits within the Borough of Queens or the counties of Nassau or Suffolk (the
"Region").

(b) For two years following the Closing Date, Seller shall not,
and shall not allow any of its Affiliates to, (i) directly contact any customer
of the Branch Offices as of the Closing Date for the purpose of soliciting any
deposit or (ii) conduct general solicitations specifically targeted to such
customers.

(c) For two years following the Closing Date, Seller shall not,
and shall not allow any of its Affiliates to, solicit loans to any of the
Deposit customers of the Branch Offices, unless

<PAGE> 35

such customer is currently a secured real estate borrower.

(d) Notwithstanding the foregoing, Seller and its Affiliates may
(i) acquire any thrift or depositary institution, or the assets and/or
liabilities thereof, which conducts business in the Region (provided the
deposits of such thrift's or depository institution's retail branches located in
the Region do not exceed twenty-five percent of the total deposits of the thrift
or depository institution being acquired), (ii) conduct general solicitations
and mailings that are not specifically targeted to such customers (including
without limitation solicitations related to the mortgage banking and loan
origination business), and (iii) conduct solicitations and mailings to people
who are depositors at another branch of Seller that is not covered by this
Agreement (regardless of whether they are also customers of a Branch Office).

(e) The obligations of Seller created by this Section 5.10 are
referred to herein as the "Covenant Not To Compete".

5.11 Insurance.

Following execution of this Agreement until the Closing Date,
Seller shall maintain in full force and effect all of the Insurance listed in
Schedule 3.18.

5.12 Use of Names, Trademarks and Service Marks.
------------------------------------------

(a) Except for the trademarks set forth in Schedule 5.12, no
interest in or right to use any logo, name, trademark or service mark presently
or previously used by Seller is being conveyed pursuant to this Agreement.

(b) Purchaser agrees that from and after the Closing Date neither
it nor any of its affiliates (including the Branch Offices) will use the name
"First Nationwide Bank", "First Nationwide", or any similar name indicating
affiliation after the Closing with Seller or any of its affiliates, in
connection with any business or activity engaged in by Purchaser or any of its
affiliates, except that (x) for a period of three months after the Closing,
Purchaser may, with the prior consent of Seller (which consent shall not be
unreasonably withheld), refer to the Branch Offices and Assets in correspondence
with existing customers of Seller as "formerly known as First Nationwide Bank, A
Federal Savings Bank" or a similar designation and (y) Purchaser or its
Affiliates or advisers may make "tombstone" advertisements announcing
consummation of the transactions contemplated hereby.

(c) Promptly after the Closing Date, Purchaser shall commence the
removal of the trade names, names, service marks, logos, insignia, slogans,
emblems, symbols, designs, and other identifying characteristics ("Names"),
except the Names set forth on Schedule 5.12, from all premises, equipment,
signs, interior

<PAGE> 36

decor items, fixtures and furnishings, and from all printed materials and
related business literature associated with the Branch Offices and the Personal
Property acquired. The costs associated with such removal shall be at the sole
expense of the Purchaser and shall be completed not later than 30 days after the
Closing Date.

5.13 Additional Contracts.

(a) From the date of this Agreement until and through the Closing
Date, the parties shall take the following actions for any contract or group of
related contracts which are related to the operations of the Branch Offices or
the other operations that are the subject of this Agreement, and which are (i)
not related to the ordinary course of business of the Branch Offices or (ii)
expected to result in payments of more than $50,000 in any year or $25,000 in
the case of contracts which are not cancelable on 60 days or less notice without
cost or penalty (an "Additional Contract").

(b) Prior to entering into an Additional Contract, Seller shall
provide written notice to Purchaser of its intention to enter into the
Additional Contract and shall afford Purchaser reasonable access to the
documents relating thereto.

(c) By 12:00 p.m. of the tenth Business Date following notice by
Seller, Purchaser shall state to Seller its decision as to whether or not to
accept such Additional Contract. The failure by Purchaser to respond prior to
12:00 p.m. on such tenth Business Day shall be deemed an acceptance of such
Additional Contract.

(d) Any Additional Contracts accepted or deemed accepted by
Purchaser under this section, and any contract entered into by Seller subsequent
to the date hereof for which Seller is not required to notify Purchaser pursuant
to the terms of this section, shall be added to Schedule 2.1(a)(vi) and become
part of the Contracts to be assumed by Purchaser.

5.14 Updating Schedules.

On the Closing Date, Seller shall deliver to Purchaser updated
versions of all Schedules hereto with the latest information available to Seller
as of two (2) Business Days prior to the Closing Date. Within five (5) calendar
days after the Closing Date, Seller shall deliver to Purchaser final versions of
all Schedules covering all transactions through the close of business on the
Closing Date. No updating of schedules pursuant to this Section shall affect any
of Seller's representations, warranties, covenants or agreements in this
Agreement.

<PAGE> 37

5.15 General Conversion Matters.

Seller and Purchaser agree to terms, covenants and conditions
related to the conversion of the Branch Offices set forth in Exhibit B.

5.16 Intentionally Deleted.

5.17 Assistance Clause.

At the request of Purchaser, Seller shall execute and deliver
such instruments and take such action as may be reasonably necessary in order to
carry out the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, on and after the Closing Date, Seller shall use
reasonable efforts to assist Purchaser in the orderly transfer of the Assets and
Deposits.

5.18 Other Information.

From the date of this Agreement until the Closing Date, within 15
days following the end of each calendar month, Seller shall use reasonable
efforts to deliver to Purchaser those reports set forth on Schedule 5.18, or, in
the event such information is not reasonably available, such information as
shall be mutually agreed upon by Seller and Purchaser for each of the Branch
Offices.

5.19 Title to Assets.

At least three (3) business days prior to the Closing, Seller
shall deliver (i) for recordation on the Closing Date, executed and acknowledged
special warranty deeds with covenants against grantor's acts, and (ii)
assignments in form acceptable to Seller and Purchaser, by which Seller will
convey to Purchaser all of its right, title and interest, respectively, to each
of the Fee Properties and the Leased Properties.

ARTICLE VI
EMPLOYEE MATTERS

6.1 Employee Matters.

(a) As of the Closing Date, except for those Employees set forth
on Schedule 6.1, Purchaser shall offer to employ all of the Employees. Seller
shall pay, discharge and be responsible for (i) all salary, wages and claims
arising out of or relating to the employment of the Employees on or before the
Closing Date and (ii) any employee benefits (including, but not limited to,
accrued vacation, annual or long-term incentive program, 401(k) plan,
non-qualified deferred compensation plan and group health coverage continuation
pursuant to the Code) arising under Seller's employee

<PAGE> 38

benefit plans and employee programs on or prior to the close of business on the
Closing Date, including benefits with respect to claims incurred on or prior to
the close of business on the Closing Date but reported after the Closing Date.
After the Closing Date, Purchaser shall pay, discharge and be responsible for
all salary, wages, claims and benefits arising out of or relating to the
employment of the Employees by Purchaser after the Closing Date.

(b) Except as otherwise provided herein, for a period of twelve
(12) months following the Closing Date (or for such shorter period as Purchaser
shall employ an Employee), Purchaser shall pay each Employee a base salary and
benefits that is generally equivalent to but not less than, on an aggregate
dollar value basis, ninety-five (95) percent of the dollar value of the base
salary and reasonably quantifiable benefits (excluding retention plans) received
by such Employee from Seller immediately prior to the Closing Date (a
"Comparable Position"). In addition, Purchaser shall cause all Employees as of
the Closing Date to be eligible to participate, as of the next "entry date"
under any such plan that so limits the commencement of participation therein,
(i) in any holiday, sick leave, vacation pay, leave of absence or similar policy
of Purchaser in which similarly situated employees of Purchaser are generally
eligible to participate without duplication of benefits and (ii) in the
"employee welfare benefit plans" and "employee pension plans" (as defined in
Section 3 (1) and Section 3 (2) of ERISA, respectively) of Purchaser in which
similarly situated employees of Purchaser are generally eligible to participate.
Notwithstanding the foregoing, all Employees and their dependents shall be
covered immediately after the Closing (and shall not be excluded from coverage
on account of any pre-existing condition or actively-at-work requirement) under
any such plan that is a group health plan of Purchaser subject to Part 6 of
Title I of ERISA and under basic company-provided life or disability coverage.
For purposes of any seniority or length of service requirements, waiting
periods, vesting periods or differential benefits based on length of service in
any such plan or policy of Purchaser for which an Employee may be eligible after
the Closing, Purchaser shall ensure that service by such Employee with Seller
shall be deemed to have been service with Purchaser for all purposes under any
such plan or policy to the extent such service is credited by Seller under its
similar plans; provided that Purchaser shall not be required to treat an
Employee's service with Seller as service with Purchaser for purposes of
determining benefit accrual under any defined benefit plan maintained by
Purchaser.

(c) With respect to any Employee who declines employment with
Purchaser and who was not offered a Comparable Position with Purchaser or who is
terminated by Purchaser other than for "cause" within twelve (12) months
following the Closing Date, Purchaser shall provide to such Employee the
compensation and other benefits described on Schedule 6.1 hereof, provided,
however,

<PAGE> 39

that with respect to the Employees set forth on Schedule 6.1, Seller shall
promptly reimburse Purchaser for all costs incurred by Purchaser pursuant to
this section. In the event a right to reimbursement arises hereunder, Purchaser
shall promptly submit to Seller a claim for reimbursement setting forth the
Employee involved, the effective date of termination of employment of such
Employee, and the aggregate amount of the costs incurred by Purchaser for which
the Purchaser seeks reimbursement. Within five (5) calendar days of Seller's
receipt of such claim, Seller shall remit to Purchaser, in immediately available
funds, the amount of such claim.

(d) Except with the prior written consent of Purchaser, Seller
shall not for a period of one (1) year after the Closing Date solicit any
Employee to again become an employee of Seller or any of its affiliates. Seller
shall inform Purchaser of any Employee who resigns prior to the Closing Date,
within five (5) days of such resignation.

(e) If the transactions contemplated by this Agreement are not
consummated for any reason, Purchaser shall not solicit for hire any Employee
for a period of one (1) year from the date hereof.

(f) For each Employee, Seller shall use its reasonable efforts to
deliver to Purchaser copies of Seller's general employee benefit information,
staff lists that include title and hire date, all records relating to
withholding and payment of income and unemployment taxes (federal, state and
local) and FICA taxes (including, without limitation, Forms W-4, Forms I-9,
Employee's Withholding Allowance Certificate) with respect to wages paid by
Seller during the 1995 calendar year, and other employee records (including,
without limitation, performance reviews, pre-employment investigation and
background checks). Seller shall provide Purchaser with such information no
later than 30 days after the execution of this Agreement.

(g) Prior to the Closing Date, Purchaser shall interview all
Employees set forth on Schedule 6.1 who are interested in seeking employment
with Purchaser and deliver to Seller a confidential list setting forth those
Employees to which Purchaser intends to offer employment on the Closing Date
(the "Designated Employees") and the position to be offered to each Employee.
Notwithstanding anything herein to the contrary, Purchaser shall have no
obligation to offer employment to any of such Employees. Notwithstanding the
exception contained in this section, Purchaser's obligations with respect to
Employees contained in this section shall apply to each of the Designated
Employees who accepts employment with Purchaser as if such Designated Employees
were not set forth on Schedule 6.1.

(h) As soon as practicable following the Closing Date,

<PAGE> 40

Purchaser and Seller shall cooperate to transfer from Seller's 401(k) plan, as
applicable to Purchaser's 401(k) plan, the assets and liabilities in Seller's
401(k) plan attributable to the Employees.

(i) Seller shall promptly reimburse Purchaser for all costs
incurred by Purchaser with respect to any person on leave or disability on the
Closing Date who does not return to work within the six-month period after the
initial date of leave or disability.

6.2 Notice of Closing.

Except as necessary in order to obtain the Requisite Regulatory
Approvals or as required by law, prior to the Closing Date Purchaser shall not
give any notice or notification of the closing of any of the Branch Offices, or
that any Employees are not to be offered employment by Purchaser, or be
responsible for any such notice or notification or the communication of any such
information to any person.

ARTICLE VII
CERTAIN TAX MATTERS

7.1 Certain Tax Matters.

(a) Except as otherwise provided in this section hereof (relating
to Transfer Taxes), Seller shall be responsible for the payment of all Taxes
relating to the Assets for all taxable periods that end prior to the close of
business on the Closing Date. Responsibility for Taxes relating to the Assets
for all taxable periods which include (but do not end on) the Closing Date shall
be allocated between Purchaser and Seller in accordance with the method of
Section 164(d) of the Code, as amended. The party which has the primary
obligation to do so under applicable law shall file any Tax Return that is
required to be filed in respect of Taxes described in this section, and that
party shall pay the Taxes shown on such Tax Return and notify the other party in
writing of the other party's share of Taxes for which it is responsible, if any,
of the Taxes shown on such Tax Return and how such Taxes and share were
calculated, which the other party shall reimburse by wire transfer of
immediately available funds no later than ten days after receipt of such notice.

(b) Purchaser and Seller shall each pay one-half of all transfer,
recording, sales, use (including all bulk sales taxes) and other similar taxes
and fees (collectively, the "Transfer Taxes") arising out of or in connection
with the transactions effected pursuant to this Agreement. The party which has
the primary obligation to do so under applicable law shall file any Tax Return
that is required to be filed in respect of Taxes described

<PAGE> 41

in this section, and that party shall pay the Taxes shown on such Tax Return and
notify the other party in writing of the other party's share of Taxes for which
it is responsible, if any, of the Taxes shown on such Tax Return and how such
Taxes and share were calculated, which the other party shall reimburse by wire
transfer of immediately available funds no later than ten days after receipt of
such notice.

(c) Seller and the Purchaser shall provide each other
with such assistance as reasonably may be requested by either of them in
connection with (i) the preparation of any Tax Return, or (ii) any audit or
other examination by any taxing authority, or any judicial or administrative
proceedings relating to liability for Taxes. The party requesting assistance
hereunder shall reimburse the other party for reasonable out-of-pocket expenses
incurred in providing such assistance, provided, however, that no independent
contractors, such as accountants or attorneys, shall be consulted without the
written consent of the party requesting assistance, which consent shall not be
unreasonably withheld.

(d) Seller shall deliver to the Purchaser at the
Closing a true, correct and complete affidavit which meets the requirements of
Treasury Regulation Section 1.1445-2(b)(2) and which attests to Seller's
non-foreign status (the "FIRPTA Affidavit"). If Purchaser receives the FIRPTA
Affidavit at the Closing, Purchaser shall not withhold any of the consideration
paid to Seller under this agreement pursuant to Section 1445 of the Code (and
regulations thereunder).

ARTICLE VIII
OBLIGATIONS OF PARTIES ON THE CLOSING DATE

8.1 Closing Date/Closing.

(a) Except as otherwise hereinafter provided, the closing date
(the "Closing Date") shall be the second Friday upon which all conditions set
forth in this Agreement are satisfied or waived or such other date as may be
mutually agreeable to the parties hereto; provided, however, that unless
otherwise mutually agreed by the parties, the Closing Date shall not be prior to
January 1, 1996.

(b) The delivery of the instruments of assignment and transfer to
be delivered by Seller and payment by Seller of the amount set forth under this
Agreement, delivery of the instruments of assumption to be delivered by
Purchaser, and the other transactions herein contemplated to take place
concurrently with such deliveries, assumptions, and payments (the "Closing"),
shall take place on the Closing Date, at 1:00 P.M. Eastern Time, at the offices
of Seller, 135 Main Street, San Francisco, California (or at such other time and
place as are agreed to by the parties), and

<PAGE> 42

all such deliveries, assumptions, and payments shall be effective as of the
close of business on the Closing Date.

(c) At the Closing, any funds to be paid on the Closing Date
shall be paid by wire transfer of immediately available funds on the Closing
Date as early as possible and, in any event, before 3:00 p.m. Eastern Standard
Time on the Closing Date, and, no effect shall be given to any assignment or
assumption by Seller or Purchaser contained in this Agreement until Seller's
wire transfer of funds is actually received on the Closing Date.

(d) Any deliveries, assignments, or transfers required under this
Agreement, other than the foregoing, shall be made at the time and date
specified in this Agreement (and where no time is specified, on or before the
close of business on the date specified) and in the manner and place specified
in this Agreement (or, where not specified, in the manner and place as may be
reasonably requested in writing by the party that is to receive such delivery,
assignment or transfer).

(e) The payment of the Final Transfer Amount, to the extent based
on any of the items to be reflected on the Post-Closing Schedule, shall be
determined as of the close of business on the Closing Date.

8.2 Obligations of Seller on the Closing Date.
-----------------------------------------

On the Closing Date, Seller shall:

(a) deliver to Purchaser the Records referred to in
Section 2.1(e), to the extent that any such Records are not located
at the Branch Offices; and

(b) execute, acknowledge and deliver to Purchaser (i) a
Bill of Sale substantially similar in form and substance to Exhibit C attached
hereto and made a part hereof, (ii) with respect to the Fee Properties, special
warranty deeds with covenants against grantor's acts and (iii) all such
endorsements, assignments, bills of sale, and other instruments of conveyance,
assignment and transfer as shall be reasonably necessary or advisable to
consummate the sale and transfer to Purchaser of the assets to be sold
hereunder.

8.3 Obligations of Purchaser on the Closing Date. On the Closing Date, Purchaser
shall execute, acknowledge and deliver to Seller an Instrument of Assumption of
Assumed Liabilities substantially similar in form and substance to Exhibit D
attached hereto and made a part hereof, and all such other instruments as shall
be reasonably necessary or advisable to consummate the sale and transfer of
assets to Purchaser and the assumption of Assumed Liabilities by Purchaser.

<PAGE> 43

ARTICLE IX
CONDITIONS TO EACH PARTY'S OBLIGATIONS

The obligations of the parties under this Agreement are to the
satisfaction, on or before the Closing Date, of the following conditions:

9.1 Approval of Governmental Authorities.

All regulatory approvals required to consummate the transactions
contemplated hereby shall have been obtained and remain in full force and
effect, and all applicable statutory waiting periods relating thereto shall have
expired (all such approvals and the expiration of all such waiting periods being
referred to herein as the "Requisite Regulatory Approvals").

9.2 No Injunctions or Restraints.

There shall be no order, injunction or decree issued by a court
or agency of competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the transactions contemplated by
this Agreement in effect.

9.3 Illegality.

There shall be no statute, rule, regulation, order, injunction or
decree enacted, entered, promulgated or enforced by any Governmental Entity
which prohibits, restricts or makes illegal consummation of the transactions
contemplated by this Agreement.

ARTICLE X
CONDITIONS TO PURCHASER'S OBLIGATIONS

The obligations of Purchaser under this Agreement are subject to
the satisfaction or waiver, on or before the Closing Date, of the following
conditions:

10.1 Representations and Warranties True; Obligations Performed.
----------------------------------------------------------

(a) The representations and warranties made by Seller in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such representations and warranties speak as of an earlier date)
as of the Closing Date at and as though such representations and warranties were
made as of the Closing Date. The condition contained in this Section 10.1(a)
shall be deemed to have been satisfied even if such representations or
warranties are not true and correct unless the failure of any of the
representations or warranties to be so true and correct, individually or in the
aggregate, would have a Material Adverse Effect, and, nothing contained in this
section 10.1(a) shall be deemed to preclude, or otherwise limit, the right of
Purchaser to

<PAGE> 44

be indemnified for any breach of a representation or warranty by Seller in
accordance with the provisions of Article XII hereof.

(b) Seller shall have performed and complied in all material
respects with all obligations, covenants and agreements required by this
Agreement to be performed or complied with by it on or prior to the Closing
Date.

(c) Seller shall have delivered to Purchaser a certificate of an
executive officer of Seller, dated the Closing Date, certifying to the
fulfillment of the foregoing conditions.

10.2 Opinion of Counsel.

Purchaser shall have received an opinion of counsel for Seller,
dated the Closing Date, with respect to the matters set forth on Exhibit E
attached hereto.

10.3 No Pending Governmental Actions.

There shall be no pending proceeding, initiated by any
Governmental Entity, seeking an Injunction.

10.4 Consents.

All of the consents contemplated by Schedule 3.3 (other than
those contemplated by Section 9.1) shall have been obtained by Seller, except
for such third party consents the failure of which to obtain would not have a
Material Adverse Effect.

10.5 No Material Adverse Change.

Nothing shall have occurred or failed to occur subsequent to June
30, 1995, which shall have caused or shall reasonably be expected to cause a
material adverse change in the assets, liabilities, business, financial
condition or results of operations of the Branch Offices taken as a whole.

ARTICLE XI
CONDITIONS TO SELLER'S OBLIGATIONS

The obligations of Seller under this Agreement to be performed at
the Closing shall be subject to the satisfaction or waiver, on or before the
Closing Date, of the following conditions:

11.1 Representations and Warranties True; Obligations Performed.
------------------------------------ ---------------------

(a) The representations and warranties made by Purchaser in this
Agreement shall be true and correct as of the date of this Agreement and (except
to the extent such representations and

<PAGE> 45

warranties speak as of an earlier date) as of the Closing Date as though such
representations and warranties were made at and as of such date. Notwithstanding
the foregoing, the conditions contained in this Section 11.1(a) shall be deemed
to have been satisfied even if such representations or warranties are not true
and correct unless the failure of any of the representations or warranties to be
so true and correct, individually or in the aggregate, would have a material
adverse effect on Purchaser's ability to consummate the transactions
contemplated herein, and, nothing contained in this section 11.1(a) shall be
deemed to preclude, or otherwise limit, the right of Seller to be indemnified
for any breach of a representation or warranty by Purchaser in accordance with
the provisions of Article XII hereof).

(b) Purchaser shall have performed and complied in all material
respects with all obligations and agreements required by this Agreement to be
performed or complied with by it prior to or at the Closing Date.

(c) Purchaser shall have delivered to Seller a certificate of an
executive officer of Purchaser, dated the Closing Date, certifying to the
fulfillment of the foregoing conditions.

11.2 Opinion of Counsel.

Seller shall have received an opinion of counsel for Purchaser,
dated the Closing Date, with respect to the matters set forth on Exhibit F
attached hereto.

11.3 No Governmental Actions.

There shall be no pending proceeding, initiated by any
Governmental Entity, seeking an Injunction.

11.4 Consents.

All of the consents contemplated by Section 4.3 (other than those
contemplated by Section 9.1) shall have been obtained by Purchaser, except for
such third party consents the failure of which to obtain would not have a
material adverse effect on Purchaser's ability to consummate the transactions
contemplated herein.

ARTICLE XII
INDEMNIFICATION

12.1 Seller to Indemnify.

Seller agrees to indemnify, hold harmless and defend Purchaser,
and Purchaser's directors, officers, subsidiaries, successors and assigns, and
"Affiliates", as such term is defined

<PAGE> 46

in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
(collectively, the "Purchaser's Indemnified Parties"), on an after tax basis,
from and against any and all claims, losses, liabilities, costs and expenses,
including legal fees and expenses, damages, expenditures, proceedings,
judgments, awards, demands and obligations to third parties ("Losses") of any
kind whatsoever which may at any time be incurred by, imposed upon, or asserted
or awarded against Purchaser's Indemnified Parties that (it being agreed that
solely for purposes of establishing whether any matter is indemnifiable pursuant
to this clause (a), the accuracy of the representations and warranties made by
Seller in this Agreement shall be determined without giving effect to any
qualifications concerning knowledge contained in the representations and
warranties set forth in Section 3.9, and any qualifications concerning Material
Adverse Effect contained in the representations set forth in Section 3.9, and
such representations and warranties shall be tested as if such qualifications
were not included therein);

(a) arise out of or result from the breach or inaccuracy of any
representation or warranty made by Seller in this Agreement (which shall include
the Exhibits and Schedules attached hereto) or any certificate delivered to
Purchaser hereunder,

(b) arise out of or result from any breach or failure to
comply with any covenant made by Seller in this Agreement,

(c) arise out of or result from or are based upon (i) any
Excluded Asset and any asset other than the Assets or (ii) any Excluded
Liability,

(d) is a claim, liability, obligation or penalty related to the
Deposits transferred pursuant to this Agreement arising out of or relating to
Seller's preparation or submission (or failure to prepare or submit) of the
information, returns or reports required by applicable laws with respect to
periods prior to the Closing Date, except, to the extent that such claim,
liability or obligation is caused by Purchaser's negligence,

(e) is a claim, liability, obligation, Tax, contract or
commitment arising out of or relating to any of the Assets, the Branch Offices,
or Seller or its business or operations, except to the extent specifically
assumed by Purchaser hereunder,

(f) is a claim or liability asserted by any former employee of
Seller relating to any condition which existed in the Branch Offices during the
time that Seller operated such Branch Offices and Seller employed such employee,
or

(g) is a claim or liability arising out of Seller's failure to
properly record accrued interest on the Deposits prior to the Closing Date.

<PAGE> 47

12.2 Purchaser to Indemnify.

Purchaser agrees to indemnify, hold harmless and defend Seller,
and Seller's directors, officers, subsidiaries, successors and assigns, and
Affiliates (collectively, the "Seller's Indemnified Parties"), on an after tax
basis, from and against any and all Losses of any kind whatsoever which may at
any time be incurred by, imposed upon, or asserted or awarded against the
Seller's Indemnified Parties that:

(a) arise out of or result from the breach or inaccuracy of any
representation or warranty made by Purchaser in this Agreement (which shall
include the Exhibits and Schedules attached hereto) or any certificate delivered
to Seller hereunder,

(b) arise out of or result from any breach or failure to
comply with any covenant made by Purchaser in this Agreement,

(c) is sustained or incurred by the Seller's Indemnified Parties
by reason of any failure of the Purchaser to pay, perform or otherwise discharge
the Assumed Liabilities,

(d) is based upon any action taken or omitted to be taken by
Purchaser subsequent to the Closing Date or (except to the extent specifically
otherwise provided herein) results from or arises in connection with any
transaction or event occurring subsequent to the Closing Date unless such Loss
arises out of or results from the failure of Seller to deliver on the Closing
Date to the Purchaser all applicable Records relating to such Loss which are
requested in writing on or prior to the Closing Date, or

(e) is for any exit or entrance fees payable to the FDIC as a
result of the consummation of the transactions contemplated hereby.

12.3 Procedure for Indemnification.

(a) If a party entitled to be indemnified under this Agreement
(an "Indemnitee") receives notice of the assertion by an unaffiliated third
party (a "Third Party") of any claim or potential liability or of the
commencement by any such person of any action or proceeding (a "Third Party
Claim") with respect to which another party hereto (an "Indemnifying Party") is
obligated to provide indemnification, the Indemnitee shall give the Indemnifying
Party prompt notice thereof after becoming aware of such Third Party Claim. Such
notice shall describe the Third Party Claim in reasonable detail and shall
indicate the amount (estimated if necessary) of the Loss that has been or may be
sustained by the Indemnitee. Such notice shall be a condition precedent to any
liability of the Indemnifying Party for any Third Party Claim under the
provisions for indemnification contained in this Agreement; provided, however,
that the failure of the Indemnitee to give

<PAGE> 48

prompt notice to the Indemnifying Party of such Third Party Claim shall
adversely affect the Indemnitee's rights to indemnification hereunder solely to
the extent that such failure prejudices the Indemnifying Party in the defense of
such Third Party Claim.

(b) The Indemnifying Party may elect to compromise or defend, at
such Indemnifying Party's own expense and by such Indemnifying Party's own
counsel, any Third Party Claim. If the Indemnifying Party elects to compromise
or defend such Third Party Claim, it shall, within 30 days after receiving
notice of the Third Party Claim, notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in
the compromise of, or defense against, such Third Party Claim. If the
Indemnifying Party elects not to compromise or defend against the Third Party
Claim, or fails to notify the Indemnitee of its election as herein provided, or
otherwise abandons the defense of such Third Party Claim, (i) the Indemnitee may
pay (without prejudice of any of its rights as against the Indemnifying Party),
compromise or defend such Third Party Claim and (ii) the costs and expenses of
the Indemnitee incurred in connection therewith shall be indemnifiable by the
Indemnifying Party pursuant to the terms of this Agreement.

(c) In addition, in connection with any Third Party Claim in
which the Indemnitee shall reasonably conclude, based upon an opinion of its
counsel, that (i) there is a conflict of interest between the Indemnifying Party
and the Indemnitee in the conduct of the defense of such Third Party Claim or
(ii) there are specific defenses available to the Indemnitee which are different
from or additional to those available to the Indemnifying Party and which could
be materially adverse to the Indemnifying Party, then the Indemnitee shall have
the right to retain separate counsel in connection with such Third Party Claim.
In such an event, the Indemnifying Party shall pay the reasonable fees and
disbursements of counsel to each of the Indemnifying Party and the Indemnitee.

(d) Notwithstanding the foregoing, neither the Indemnifying Party
nor the Indemnitee may settle or compromise any claim (unless the sole relief
payable to a Third Party in respect of such Third Party Claim is monetary
damages that are paid in full by the party settling or compromising such claim)
over the objection of the other, provided, however, that consent to settlement
or compromise shall not be unreasonably withheld.

(e) In any event, except as otherwise provided herein, the
Indemnitee and the Indemnifying Party may each participate, at its own expense,
in the defense of such Third Party Claim.

(f) If the Indemnifying Party chooses to defend any claim, the
Indemnitee shall make available to the Indemnifying Party any personnel or any
books, records or other documents within its control that are reasonably
necessary or appropriate for such

<PAGE> 49

defense, subject to the receipt of appropriate confidentiality agreements.

(g) Notwithstanding anything to the contrary stated hereinabove
in this section, in the event prompt action is required with respect to the
defense of a Third Party Claim, the Indemnitee shall, subject to the terms and
conditions of this Article, have the right to assume the defense of such Third
Party Claim; provided, however, that in the event that the Indemnifying Party
subsequently elects to assume the defense of such Third Party Claim, then the
provisions set forth hereinabove shall be applicable and the Indemnifying Party
shall, subject to the terms and conditions of this Article, reimburse the
Indemnitee for any costs and expenses incurred by the Indemnitee prior to the
date the Indemnifying Party assumes control of such Third Party Claim.

(h) Notwithstanding the foregoing, if an offer of settlement or
compromise is received by or communicated to the Indemnifying Party with respect
to a Third Party Claim and the Indemnifying Party notifies the Indemnitee in
writing of the Indemnifying Party's willingness to settle or compromise such
Third Party Claim on the basis set forth in such notice and the Indemnitee
declines to accept such settlement or compromise, the Indemnitee may continue to
contest such Third Party Claim, free of any participation by the Indemnifying
Party, at the Indemnitee's sole expense. The obligation of the Indemnifying
Party to the Indemnitee with respect to such Third Party Claim shall be equal to
the lesser of (i) the amount of the offer of settlement or compromise which the
Indemnitee declined to accept plus the costs and expenses of the Indemnitee
prior to the date the Indemnifying Party notifies the Indemnitee of the
Indemnifying Party's willingness to settle or compromise such Third Party Claim
or (ii) the amount the Indemnitee is obligated to pay as a result of the
Indemnitee's continuing to contest such Third Party Claim including costs and
expenses with respect thereto; and the Indemnifying Party shall be entitled to
recover (by set-off or otherwise) from the Indemnitee any additional expenses
incurred by the Indemnifying Party as a result of the Indemnitee's decision to
continue to contest such Third Party Claim.

(i) Any claim on account of a Loss which does not involve a Third
Party Claim shall be asserted by a written notice given by the party claiming
indemnity to the party from which indemnity is claimed. The recipient of such
notice shall have a period of 30 days within which to respond thereto. If such
recipient does not respond within such 30-day period, such recipient shall be
deemed to have accepted responsibility to make payment, subject to the
provisions hereof, and shall have no further right to contest the validity of
such claim. If the recipient does respond within such 30-day period and rejects
such claim in whole or in part, the party claiming indemnity shall be free to
pursue such remedies as may be available to such party by

<PAGE> 50

applicable law.

(j) If the amount of any Loss shall, at any time subsequent to
payment of indemnification pursuant to this Agreement, be reduced by receipt of
insurance proceeds by the Indemnitee in respect of such Loss, the amount of such
reduction less any expenses incurred in connection therewith shall promptly be
repaid by the Indemnitee to the Indemnifying Party.

(k) Notwithstanding anything to the contrary contained in this
Agreement, no claim shall be made against Seller for indemnification under
Section 12.1(a) with respect to any Loss which any of Purchaser's Indemnified
Parties may suffer, incur or sustain unless the aggregate of all such Losses
described in Section l2.l(a) shall exceed $750,000, and Seller shall only be
required to pay or be liable for any such Losses described in Section l2.l(a) to
the extent that their aggregate amount exceeds $750,000, and then only with
respect to Losses incurred in excess of such amount, provided, however, that the
$750,000 limitation contained in this Section 12.3(k) shall not apply to, and
Purchaser's Indemnified Parties shall be entitled to dollar-for-dollar recovery
with respect to, Losses suffered, incurred or sustained which arise out of,
result from or are attributable to breaches of the representations contained in
Sections 3.5 and 3.12 hereof.

12.4 Production of Witnesses.

Following the Closing, each party shall use its best efforts to
make available to the other party, upon written request, its employees and
agents as witnesses to the extent that any such person may be reasonably
required in connection with any legal, administrative or other proceedings in
which the requesting party may from time to time be involved.

12.5 Survival.

No rights to indemnification with respect to breaches of the
representations and warranties of the parties contained in this Agreement shall
be asserted by any party unless notice thereof is given on or before the date
such representation or warranty no longer survives as provided in this Section
l2.5 (it being understood that such written notice may be delivered prior to the
incurrence or suffering of a Loss by an Indemnitee if the facts or occurrence
giving rise to such Loss occurred prior to the second anniversary described
above and the anticipated Loss is described with reasonable certainty in such
notice, in which case the party giving such notice shall be entitled to
indemnification in accordance with the provisions hereof notwithstanding that
such Loss may occur after the expiration of the applicable survival period). The
representations and warranties of Seller, on the one hand, and of Purchaser, on
the other hand, contained in this

<PAGE> 51

Agreement or in any certificate or instrument delivered pursuant to this
Agreement shall survive the Closing Date and shall expire on the second
anniversary of the Closing Date.

ARTICLE XIII
TERMINATION

13.1 Methods of Termination.

This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing:

(a) by mutual written consent of Seller and Purchaser;

(b) by either Seller or Purchaser, upon written notice
to the other, if the transactions contemplated by this Agreement are not
consummated on or before March 31, 1996 (the "Termination Date"), unless the
failure of such occurrence is due to the failure of the party seeking to
terminate this Agreement to perform or to observe the agreements set forth
herein at or before the Closing;

(c) by either Seller or Purchaser, upon written notice
to the other, if there is a material breach of an obligation of the other party
hereunder and such breach is not remedied within 30 days after receipt by such
breaching party of notice in writing from the non-breaching party, specifying
the nature of such breach and requesting that it be remedied;

(d) by either Seller or Purchaser, upon written notice
to the other, if any court or governmental authority of competent jurisdiction
issues a final unappealable order prohibiting consummation of any material
transaction contemplated hereby; or

(e) by either Seller or Purchaser, upon written notice
to the other, following the expiration of thirty (30) days after any
Governmental Entity shall have denied or refused to grant the approvals or
consents required to be obtained pursuant to this Agreement, unless within said
thirty (30) day period Purchaser and Seller agree to submit or resubmit an
application to, or appeal the decision of, the regulatory authority which denied
or refused to grant approval thereof.

13.2 Effect of Termination.

In the event of the termination and abandonment of this Agreement
pursuant to Section 13.1 hereof, this Agreement shall become void and have no
effect, without any liability on the part of any party to this Agreement or its
Affiliates, directors, officers or stockholders, other than the provisions of
this Section

<PAGE> 52

13.2, Section 14.4 and the confidentiality provisions of Section 5.2(e).
Notwithstanding the foregoing sentence, a termination of this Agreement shall
not defeat or impair the right of any party to pursue such relief as may
otherwise be available to it on account of any willful breach of this Agreement
or any of the representations, warranties, covenants or agreements contained in
this Agreement.

ARTICLE XIV
GENERAL PROVISIONS

14.1 Entire Agreement; Modification; Waiver.

This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire agreement of the parties pertaining to the subject matter
contained herein and this Agreement supersedes all prior or contemporaneous
agreements, representations and understandings of the parties. No supplement,
modification or amendment to, or waiver of this Agreement shall be binding
unless executed in writing by Seller and Purchaser. No waiver of any provision
of this Agreement shall be deemed or shall constitute a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver.

14.2 Counterparts.

This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

14.3 Headings.

The headings of the Sections, Articles, Exhibits and Schedules of
this Agreement are inserted for convenience only and shall not constitute a part
of this Agreement.

14.4 Payment of Expenses.

Except as otherwise provided in this Agreement, whether or not
the transactions contemplated hereby are consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs and expenses.

14.5 Governing Law.

This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to the principles
of conflict of laws thereof.

<PAGE> 53

14.6 Addresses of Notice, Etc.

All notices, requests, demands and other communications provided
for under this Agreement and under the related documents shall be in writing
(including telegraphic communication) and mailed (by registered or certified
mail, return receipt requested, or by Federal Express or other similar express
overnight delivery service), or telegraphed, or delivered to the applicable
party at the addresses indicated below.

If to Purchaser:

North Fork Bank
275 Broad Hollow Road
Melville, New York 11747
Attn: Daniel M. Healy, Executive Vice President and
Chief Financial Officer

With a copy to:

Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attn: William S. Rubenstein, Esq.

If to Seller:

First Nationwide Bank, A Federal Savings Bank
135 Main Street, 20th Floor
San Francisco, California 94105
Attention: Carl Webb, President

With a copy to:

First Nationwide Bank, A Federal Savings Bank
200 Crescent Ct., Ste. 1350
Dallas, TX 75201
Attention: Christie S. Flanagan, General Counsel

or, to each party, at such other address that party designates in a written
notice to the other party in accordance with this section. All such notices,
requests, demands or other communications shall be deemed delivered (i) if sent
by messenger, upon personal delivery to the party to whom the notice is
directed, (ii) if sent by telecopier, upon electronic or telephonic confirmation
of receipt from the receiving telecopier machine, (iii) if sent by reputable
overnight courier, one (1) day after delivery to such courier, or (iv) if sent
by mail, three (3) days following deposit in the United States mail, postage
prepaid, certified mail, return receipt requested.

<PAGE> 54

14.7 Publicity.

Except as may be required by law or by the rules or regulations
of any Governmental Entity or securities exchange prior to the Closing Date,
neither party shall, directly or indirectly, make or cause to be made any public
announcement or disclosure, or issue any notice, relating to any of the
transactions contemplated by this Agreement, without the prior written consent
of the other party, which consent shall not be unreasonably withheld. Both
parties will limit the distribution of information relative to this transaction
to those persons who must be aware of the Agreement for the performance of their
duties.

14.8 Severability.

If any paragraph, section, sentence, clause, phrase, word or
covenant contained in this Agreement shall become illegal, null or void, or
against public policy, for any reason, or shall be held by any court of
competent jurisdiction to be illegal, null or void, or against public policy,
the remaining paragraphs, sections, sentences, clauses, phrases, words and
covenants contained in this Agreement shall not be affected.

14.9 Enforcement of the Agreement.

The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.

14.10 Binding Nature; Assignment.

This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their permitted successors and assigns. Neither party
shall assign or otherwise transfer any rights or obligations under this
Agreement without the express written consent of the other party; provided,
however, that either party may assign its rights or obligations under this
Agreement to any Affiliate of such party; provided, further, that no such
assignment shall relieve the assigning party of its obligations hereunder.

<PAGE> 55

14.11 No Third Party Rights.

This Agreement is not intended, nor shall it be construed, to
create any express or implied third party beneficiary rights in any person,
including present or former employees of Seller, the Employees, or any
beneficiaries or dependents thereof.

IN WITNESS WHEREOF, the parties have executed this Agreement as
of _________________, 1995.

SELLER:

FIRST NATIONWIDE BANK,
A FEDERAL SAVINGS BANK

By: /s/ Sam Webb
---------------------------------
Name: Sam Webb
---------------------------------
Title:
---------------------------------

PURCHASER:
NORTH FORK BANK

By: /s/ Daniel M. Healy
---------------------------------
Name: Daniel M. Healy
---------------------------------
Title: EVP & CFO
---------------------------------

<PAGE> 1
NORTH EXHIBIT 10.11(a)
FORK
BANK

September 14, 1995

Ms. Mindy Butler
32 Cottontail Road
Melville, New York 11747

Re: Termination of the Employment with
North Fork Bank (the "Bank")
----------------------------------

Dear Ms. Butler:

This letter confirms the mutually agreed arrangement concerning the
termination of your employment with the Bank. Effective August 25, 1995, the
"Termination Date", the Bank has accepted your resignation from employment. In
connection with and in consideration of this termination and the release
described below, the Bank will pay to you and make available to you the sums
and benefits in the manner described below. These sums and benefits are in
excess of what the Bank is required to provide to you and are in complete
satisfaction of all amounts which are or may be due pursuant to the Bank's
letter of March 31, 1994 regarding your employment, or any other agreement or
on any other basis. This letter shall not be construed as an admission of
wrongdoing by you or by the Bank or any of its officers, directors, or
employees. This letter is written without prejudice and shall not be effective
until the provisions of paragraph 12 below are met.

1. SEVERANCE PAYMENT: You have received a severance payment in the
sum of $8,653.85 less required withholding and deductions and will receive
further severance payments of $367,788.63 and $75,000.00, each less required
withholding and deductions, within 5 days after the occurrence of the Last
Revocation Day (as defined below) without this agreement being revoked.

2. USE OF AUTOMOBILE: You will return to the Bank the leased vehicle
now in your possession promptly after the Last Revocation Day.

3. STOCK OPTIONS: You currently hold the following non-qualified
stock options with regard to the stock of North Fork Bancorporation, Inc. which
are fully vested. You must exercise these options at your own cost and expense,
(and pay all taxes incident to the exercise) by the expiration date indicated
or they will lapse.

<PAGE> 2
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICE EXPIRATION DATE
- - ---------------- -------------- ---------------
<S> <C> <C>
20,000 $14.125 August 25, 1996
</TABLE>

You have exercised your options with respect to 10,000 shares of North
Fork Bancorporation, Inc. stock at 14.19.

4. RESTRICTED STOCK: The grant of 5,000 restricted shares of North
Fork Bancorporation, Inc. has not vested in whole or in part, and is forfeited
effective on the Termination Date.

5. LONG TERM DISABILITY: You will be entitled to convert your
coverage under the Bank's Long Term Disability Plan to coverage under a Group
Long Term Disability Conversion Policy under the terms and subject to the
limitations of the Conversion Policy, provided you meet all requirements of
eligibility for conversion and timely submit all required documentation. If you
so convert, the Bank will pay premiums through December 31, 1995. You will be
responsible for premiums thereafter. One of the conditions of eligibility is
application within thirty-one (31) days of the Termination Date. Coverage is not
available if you are or become insured for Long Term Disability insurance under
another insurance plan within thirty-one (31) days after the Termination Date.

6. HEALTH AND MEDICAL BENEFITS: Since you did not participate in
the Bank's health and medical benefit plan, you are not entitled to COBRA
coverage. However, since you participated in the Flexible Spending Account
Program, you are entitled to extend this participation through COBRA. You must
elect to do so.

7. RETIREMENT PLANS: Your participation in the Bank's 401(K) Plan
ended upon the Termination Date. Your contributions to the 401(K) program are
available to you in accordance with law. However, the Bank's contributory
portion of your 401(K) is forfeited since it was not vested. You have not and
will not pursuant to this letter vest in the Bank's cash balance retirement
plan and all amounts therein are forfeited.

8. BANK EQUIPMENT: You shall immediately return all Bank property
in your possession or entrusted to you, including but not limited to fax machine
and cellular telephone.

9. RELEASE: a. In consideration of the provisions of this letter
you release the Bank, North Fork Bancorporation, Inc., and all of their
subsidiaries and affiliates, "Companies", and all of the Companies' officers,
directors and employees, all of the foregoing, collectively "Releasees", from
all claims and demands you may have arising out of your employment and
termination of employment. This release includes, but is not limited to, claims
arising under the Federal Age Discrimination in Employment Act, the Federal
Equal Opportunity Employment Act and the New York State Human Rights Law and
any other federal, state or local law which prohibits employment
<PAGE> 3

discrimination. This release bars you from bringing any complaint or action
against Releasees for employment discrimination or wrongful termination of
employment, including, but not limited to, age, sex, and/or religious
discrimination. This release does not release any claims which arise after this
letter becomes effective, such as your right to enforce this Agreement with
respect to any matter which has not been released. If you bring an action with
respect to such matters and you are the prevailing party, you shall be entitled
to attorney's fees and all other expenses incurred. You agree not to commence
any action against Releasees with respect to any matter covered by this
release. If you bring such an action, and the Releasees are the prevailing
party, you must pay the Releasees' attorneys fees and all other expenses.

b. You represent to us that in your employment with the Bank you
conducted business on the Companies' behalf in conformity with applicable law
and regulation. In reliance upon this representation and as further
consideration, the Companies release you from all claims and demands they may
have against you based upon facts existing as of the Termination Date, whether
or not known except for breach of the foregoing representation. If any action
is brought contrary to this release and you prevail, you shall be entitled to
the costs and attorney's fees you incur.

10. CONFIDENTIALITY: You agree to keep the existence and substance of
this letter completely confidential and not disclose same to any person or
entity, except in response to Court Order or to your spouse, accountant or
attorney. You further agree to keep confidential and not to disclose to any
person or entity, at any time, any information concerning the Companies, their
operations, their financial affairs, their customers or business relationships,
except in response to Court Order and upon not less than ten (10) days written
notice of intention to comply with such Court Order. All work produced by you
during the course of your employment is the sole property of the Bank and shall
not be used, reproduced or disclosed to others.

11. EFFECTIVE DATE: The provisions of this letter shall not become
effective until seven (7) days after you have signed and returned a copy of
this letter, "Last Revocation Day". You may revoke your agreement to the
provisions of this letter within such seven (7) day period by delivery of a
written notice of revocation no later than the close of business on the Last
Revocation Day. If you revoke this letter, it shall not become effective or
enforceable. If you do not revoke this letter, it shall be effective and
enforceable the day after the Last Revocation Day.

12. REVIEW AND ADVICE OF COUNSEL: You are given a period of
twenty-one (21) days in which to review and consider this letter before signing
it. You are encouraged to consult an attorney before signing this letter.

<PAGE> 4
13. MISCELLANEOUS: This letter contains the entire understanding
between you and the Bank with regard to your termination of employment and
supersedes the letter agreement between you and the Bank dated March 31, 1994
and any other agreements between you and the Bank and the Companies with regard
to your employment and termination. The provisions of this letter may not be
waived, modified or terminated orally. In any action arising out of or
concerning this letter, both you and the Bank waive trial by jury. This letter
shall be governed by Federal Law and the internal laws of the State of New York
without regard to conflicts of laws rules. This letter shall be binding and
inure to the benefit of yourself, your heirs, and assigns and the companies and
their successors and assigns.

If the foregoing correctly reflects our agreement and is satisfactory,
kindly sign, date and return the enclosed copy of this letter where indicated.

Very truly yours,

/s/ John Adam Kanas
-------------------------------------
John Adam Kanas

JAK/dmc/is
Enclosure

I have read the foregoing letter, understand it and voluntarily countersign it.
I accept and agree to be bound by the terms of this letter. I understand that
the letter contains a release.

/s/ Mindy Butler September 22, 1995
- - ------------------------------------ -------------------------------------
Mindy Butler Date

<PAGE> 1
EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE

(dollars in thousands, except per share amounts)

<S> <C>
Net Income.................................. $ 52,235

Weighted Average Equivalent

Shares Outstanding:

Average Outstanding Shares.............. 24,410,976

Common Stock Equivalents(1)............. 142,611

Weighted Average Equivalent Shares...... 24,553,587

Earnings Per Share.......................... $ 2.13
</TABLE>

- - -------------
(1) Represents options.

<PAGE> 1
EXHIBIT 13

North Fork Bancorporation, Inc. and Subsidiaries
SELECTED FINANCIAL DATA

SELECTED FINANCIAL DATA FOR EACH OF THE YEARS IN THE FIVE YEAR PERIOD ENDED
DECEMBER 31, 1995 ARE SET FORTH BELOW. THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO AS OF DECEMBER 31, 1995 AND 1994 AND FOR EACH OF
THE YEARS IN THE THREE YEAR PERIOD ENDED DECEMBER 31, 1995 ARE INCLUDED
ELSEWHERE HEREIN. ALL PRIOR YEARS' FINANCIAL INFORMATION HAS BEEN CONFORMED TO
CURRENT YEAR PRESENTATION.

<TABLE>
<CAPTION>
(in thousands, except ratios and per share amounts) 1995 1994 1993 (1) 1992 (1) 1991 (1) (2)
------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest Income (tax equivalent basis) (3) . . . . . $228,368 $205,595 $193,119 $212,337 $228,028
Interest Expense . . . . . . . . . . . . . . . . . . 85,162 71,227 73,169 105,714 136,464
------------------------------------------------------------------------
Net Interest Income (tax equivalent basis) (3) . 143,206 134,368 119,950 106,623 91,564
Less: Tax Equivalent Basis Adjustment . . . . . . . . 1,970 1,862 1,489 1,557 2,173
------------------------------------------------------------------------
Net Interest Income . . . . . . . . . . . . . . . 141,236 132,506 118,461 105,066 89,391
Provision for Loan Losses . . . . . . . . . . . . . . 9,000 3,275 10,300 23,775 66,625
Non-Interest Income . . . . . . . . . . . . . . . . 20,942 19,020 18,938 16,860 13,399
Net Securities Gains/(Losses) . . . . . . . . . . . . 6,379 (9,211) 1,457 9,547 9,052
Non-Interest Expense . . . . . . . . . . . . . . . . 68,588 74,453 71,962 72,104 62,663
Other Real Estate Expense . . . . . . . . . . . . . . 255 3,651 13,971 16,358 10,663
Merger & Related Restructure Charges . . . . . . . . -- 14,338 -- 1,200 --
------------------------------------------------------------------------
Income/(Loss) Before Income Taxes . . . . . . . . 90,714 46,598 42,623 18,036 (28,109)
Provision/(Benefit) for Income Taxes . . . . . . . . 38,479 16,926 16,976 8,609 (164)
------------------------------------------------------------------------
Net Income/(Loss) . . . . . . . . . . . . . . . . . $52,235 $29,672 $25,647 $9,427 ($27,945)
========================================================================

AVERAGE BALANCE SHEET DATA:

Securities . . . . . . . . . . . . . . . . . . . . . $857,302 $968,908 $869,792 $544,966 $450,831
Loans, net of unearned income & fees . . . . . . . . 1,893,654 1,773,088 1,735,122 1,906,438 1,884,440
Total Assets . . . . . . . . . . . . . . . . . . . . 2,928,773 2,933,943 2,820,491 2,782,480 2,542,179
Total Deposits . . . . . . . . . . . . . . . . . . . 2,464,776 2,363,965 2,363,652 2,467,494 2,172,622
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase . . . . . . . . . . . . . 102,893 244,688 176,519 57,568 73,881
Other Borrowings . . . . . . . . . . . . . . . . . . 10,000 25,537 13,696 15,190 32,916
Senior Notes Payable . . . . . . . . . . . . . . . . 25,000 23,507 22,863 40,000 40,000
Stockholders' Equity . . . . . . . . . . . . . . . . 283,024 244,759 210,345 169,155 191,749

BALANCE SHEET DATA AT DECEMBER 31:
Securities $1,156,628 $773,297 $971,867 $658,127 $440,990
Loans, net of unearned income & fees . . . . . . . . 1,966,440 1,814,037 1,740,778 1,807,119 1,987,560
Total Assets . . . . . . . . . . . . . . . . . . . . 3,303,311 2,717,776 2,884,375 2,691,011 2,854,876
Total Deposits . . . . . . . . . . . . . . . . . . . 2,535,460 2,342,887 2,348,545 2,387,368 2,503,661
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase . . . . . . . . . . . . . 391,369 20,000 255,643 28,200 366
Other Borrowings . . . . . . . . . . . . . . . . . . 10,000 50,000 13,000 13,000 27,000
Senior Notes Payable . . . . . . . . . . . . . . . . 25,000 25,000 20,000 40,000 40,000
Stockholders' Equity . . . . . . . . . . . . . . . . 309,845 254,923 226,310 183,147 166,475

PER SHARE:
Net Income/(Loss) . . . . . . . . . . . . . . . . . . $2.13 $1.25 $1.10 $0.48 ($1.51)
Cash Dividends (4) . . . . . . . . . . . . . . . . . 0.55 0.35 - - 0.34
Book Value at December 31 . . . . . . . . . . . . . . 12.47 11.06 10.08 9.08 8.71
Market Price at December 31 . . . . . . . . . . . . . 25.25 13.75 12.88 8.13 4.75

SELECTED RATIOS:
Return on Average Total Assets . . . . . . . . . . . 1.78% 1.01% 0.91% 0.34% -1.10%
Return on Average Stockholders' Equity . . . . . . . 18.46% 12.12% 12.19% 5.57% -14.57%
Core Efficiency Ratio (5) . . . . . . . . . . . . . . 41.78% 47.97% 51.81% 58.39% 59.70%
Net Interest Margin . . . . . . . . . . . . . . . . 5.18% 4.81% 4.48% 4.03% 3.90%
Average Stockholders' Equity to Average Assets . . . 9.66% 8.34% 7.46% 6.08% 7.54%
Tier I Capital Ratio . . . . . . . . . . . . . . . . 15.50% 14.94% 12.06% 9.28% 7.34%
Risk Adjusted Capital Ratio . . . . . . . . . . . . 16.77% 16.22% 13.34% 10.65% 8.84%
Leverage Ratio . . . . . . . . . . . . . . . . . . . 8.86% 8.40% 6.88% 5.83% 4.85%
Allowance for Loan Losses/Non-Performing Loans . . . 154.05% 118.89% 96.04% 53.64% 44.23%
Non-Performing Assets to Total Assets . . . . . . . . 1.13% 1.73% 2.43% 5.19% 5.76%

AVERAGE EQUIVALENT SHARES OUTSTANDING . . . . . . . . 24,554 23,763 23,242 19,689 18,490
NUMBER OF BRANCH OFFICES OF THE COMPANY . . . . . . . 49 47 35 35 41
</TABLE>

(1) On November 30, 1994, Metro Bancshares Inc. ("Metro") was merged with and
into the Company. The merger has been accounted for as a
pooling-of-interests and, accordingly, all prior periods include the
consolidated results of Metro.
(2) The results of operations for the Company include the results of
operations for Eastchester Savings Bank from July 1, 1991.

<PAGE> 2

(3) Interest income on a tax equivalent basis includes the additional amount
of interest income that would have been earned if the Company's investment
in state and municipal obligations and tax-exempt loans had been made in
investment securities and loans subject to New York State and City, and
Federal income taxes yielding the same after tax income.
(4) Cash dividends do not reflect dividends declared by Metro prior to the
merger.
(5) The core efficiency ratio is defined as the ratio of non-interest
expenses, net of other real estate expenses and other non-recurring
charges, to net interest income on a taxable equivalent basis and other
non-interest income net of net securities gains/(losses).

<PAGE> 3

MANAGEMENT'S DISCUSSION AND ANALYSIS
This section presents management's discussion and analysis of the
consolidated results of operations and financial condition of North Fork
Bancorporation, Inc. (the "Company"), a $3.3 billion commercial bank holding
company. The Company's primary subsidiary, North Fork Bank (the "Bank"),
operates retail banking facilities throughout Suffolk, Nassau, Queens,
Westchester and Rockland Counties, New York. On November 30, 1994, Metro
Bancshares Inc. ("Metro"), the parent company of Bayside Federal Savings Bank
("Bayside"), was merged with and into the Company. The merger was accounted
for as a pooling-of-interests. Accordingly, the financial results for all
prior periods reported in the accompanying management discussion and analysis
include the results of Metro. On July 3, 1995, Great Neck Bancorp, the parent
company of the Bank of Great Neck ("Great Neck"), was acquired in a purchase
transaction. This acquisition is not significant to the operating results.
The discussion and analysis that follows should be read in conjunction
with the consolidated financial statements and supplementary data contained
elsewhere in this 1995 Annual Report to Shareholders.

OVERVIEW
In 1995, the Company achieved record earnings of $52.2 million or $2.13
per share and demonstrated significant improvement in several key operating
performance measurements. This was accomplished by successfully following the
Company's operating plan, including efficiently integrating two business
acquisitions, carefully monitoring operating costs, remaining cautious and
prudent in underwriting and avoiding any significant interest rate risk in
asset/liability management. Return on average stockholders' equity and
average total assets was 18.46% and 1.78%, respectively, which ranks among the
industry's highest performers. Shareholders' returns in 1995 were increased
through the rise in the market value of the Company's stock and greater cash
dividends.
The success of the Metro and Great Neck mergers demonstrates management's
ability to reduce operating costs post merger. Specificaly, the core
efficiency ratio declined to 41.8% for 1995 compared to 48% in 1994. Also,
management increased demand deposits balances, an important funding source, in
the Bayside thrift conversion. Total demand deposits were $451.8 million at
December 31, 1995, representing a 36.4% increase over 1994. The multi-family
mortgage line of business, which was acquired with Bayside, also prospered.
At December 31, 1995, total multi-family mortgage loans were $662.3 million and
constituted 33.4% of the Company's loan portfolio as yields improved and asset
quality remained strong. Overall asset quality improved further as the
level of non-performing assets declined 20.4% to $37.4 million at December 31,
1995, as compared with $47.0 million at December 31, 1994. Management
continued to maintain its allowance for loan losses at conservative levels,
and, as a result, the reserve to non-performing loans increased to 154.1% at
December 31, 1995, as compared to 118.9% at December 31, 1994.
During 1995 the Company entered into definitive merger agreements to
acquire the domestic commercial banking business of Extebank with approximately
$410 million in assets and $375 million in deposits for $47.0 million in cash
and the ten Long Island branches of First Nationwide Bank with approximately
$600 million in deposits at a deposit premium of 6.35% (See Note 2 of the
Consolidated Financial Statements). Both of these in-market acquisitions are
scheduled to close during the first quarter of 1996 and will provide
approximately 100 thousand new customers and 18 new retail locations. In
1995, the Company opened two de novo branches in Nassau County and continues to
evaluate new opportunities to serve its customers.

NET INTEREST INCOME
Net interest income, which represents the difference between interest
earned on interest earning assets and interest incurred on interest bearing
liabilities, is the Company's primary source of earnings. Net interest income
is affected by the level and composition of assets, liabilities and equity, as
well as changes in market interest rates.
Net interest income increased $8.7 million to $141.2 million in 1995, as
compared to $132.5 million in 1994. The components of this increase include a
$22.6 million increase in interest income partially offset by a $13.9 million
increase in interest expense. The net interest margin, on a taxable equivalent
basis, improved to 5.18% in 1995 as compared to 4.81% in 1994.
Interest income improved to $226.4 million in 1995 from $203.7 million in
1994. This improvement, despite a modest decline in average interest earning
assets to $2.77 billion from $2.79 billion, resulted from a change in the mix
of interest earning assets to higher yielding loans from lower yielding
investment securities and the impact of higher market interest rates. The
increase in average net loans to $1.89 billion in 1995 as compared to $1.77
billion in 1994, resulted from continued growth in multi-family mortgages and
consumer loans and leases, and the addition of $49.4 million in loans acquired
in the Great Neck acquisition. This increase was partially offset by a decline
in residential mortgage loans. The results of these changes are evident in the
improvement in yield on interest earning assets to 8.26% from 7.36%.
Interest expense increased to $85.2 million in 1995, reflecting a 3.86%
cost of funds, as compared with $71.2 million or 3.02% in 1994. The $13.9
million increase is attributable to the impact of higher short-term market
interest rates on the Company's overall cost of funds and the change in the
relative composition of the Company's

<PAGE> 4

funding sources. Interest bearing deposits remained stable, however, in
response to market interest rates, customers shifted balances from lower
yielding savings accounts to higher yielding time deposits. In early 1995,
certain N.O.W. accounts were converted into non-interest bearing deposit
accounts, which the Company was able to successfully retain.
The Company continued to benefit from its ability to grow demand deposits
as average balances increased $97.8 million or 32.7% to $396.8 million for 1995
as compared to $299.0 million for 1994. Demand deposits comprised 17.8% of
total deposits at December 31, 1995 as compared to 14.1% at December 31, 1994.
This increase reflects continuing success in converting former thrift branches
into full-service commercial bank outlets and greater market penetration. The
growth in demand deposits and internally generated capital allowed the Company
to minimize its reliance on short-term borrowings as a funding source for its
core assets.
The following table sets forth a summary analysis of the relative impact
on net interest income of changes in the average volume of interest earning
assets and interest bearing liabilities and changes in average rates on such
assets and liabilities. Because of the numerous simultaneous volume and rate
changes during the periods analyzed, it is not possible to precisely allocate
changes to volume or rate. For presentation purposes, changes which are not
solely due to volume changes or rate changes have been allocated to these
categories based on the respective percentage changes in average volume and
average rates as they compare to each other. In addition, average interest
earning assets include non-accrual loans.

<TABLE>
<CAPTION>
Years Ended December 31, 1995 vs. 1994 1994 vs. 1993
-----------------------------------------------------------------------------
(in thousands) CHANGE IN Change in Net
AVERAGE AVERAGE NET INTEREST Average Average Interest
VOLUME RATE INCOME Volume Rate Income
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME FROM EARNING ASSETS:
Interest Earning Deposits . . . . . . . . . . . $31 $29 $60 $10 $9 $19
Taxable Securities . . . . . . . . . . . . . . (4,387) 1,433 (2,954) 1,598 1,191 2,789
Non-Taxable Municipals . . . . . . . . . . . . (115) 415 300 1,744 (131) 1,613
Mortgage-Backed Securities . . . . . . . . . . (2,090) 4,663 2,573 2,259 909 3,168
Loans, including non-accrual loans . . . . . . 10,380 13,586 23,966 2,948 1,956 4,904
Federal Funds Sold and Securities
Purchased Under Agreements to Resell . . . . (1,891) 719 (1,172) (725) 708 (17)
-----------------------------------------------------------------------------
Total Interest Income . . . . . . . . . . . 1,928 20,845 22,773 7,834 4,642 12,476
-----------------------------------------------------------------------------

INTEREST EXPENSE ON LIABILITIES:
Total Savings and Time Deposits . . . . . . . . 4,924 14,333 19,257 (1,777) (4,315) (6,092)
Short-Term Borrowings . . . . . . . . . . . . . (8,271) 3,013 (5,258) 3,383 1,672 5,055
Long-Term Borrowings . . . . . . . . . . . . . 130 (194) (64) (305) (600) (905)
-----------------------------------------------------------------------------
Total Interest Expense . . . . . . . . . . . (3,217) 17,152 13,935 1,301 (3,243) (1,942)
-----------------------------------------------------------------------------
Net Change in Net Interest Income . . . . . . . $5,145 $3,693 $8,838 $6,533 $7,885 $14,418
=============================================================================
</TABLE>

(1) The above table is presented on a taxable equivalent basis.
(2) Prior period amounts have been restated to reflect the adoption of SFAS
114.

<PAGE> 5

The following table presents an analysis of net interest income by each major
category of interest earning assets and interest bearing liabilities for the
years ended December 31,

<TABLE>
<CAPTION>
1995 1994 (2)
--------------------------------------------------------------------------
AVERAGE AVERAGE Average Average
(dollars in thousands) BALANCE INTEREST RATE Balance Interest Rate
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Deposits . . . . . . . . . . . . $1,385 $93 6.71% $811 $33 4.07%
Taxable Securities . . . . . . . . . . . . . . . 124,601 7,610 6.11% 199,264 10,564 5.30%
Non-Taxable Municipals . . . . . . . . . . . . . 53,725 3,778 7.03% 55,509 3,478 6.27%
Mortgage-Backed Securities . . . . . . . . . . . 678,976 43,604 6.42% 714,135 41,031 5.75%
Loans, net of unearned income & fees . . . . . . 1,893,654 172,484 9.11% 1,773,088 148,518 8.38%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell . . . . . . 13,535 799 5.90% 50,961 1,971 3.87%
--------------------- -----------------------
Total Interest Earning Assets . . . . . . . . . 2,765,876 228,368 8.26% 2,793,768 205,595 7.36%
===================== =======================

Allowance for Loan Losses . . . . . . . . . . . . (52,008) (54,720)
Cash and Due from Banks . . . . . . . . . . . . . 87,242 80,616
Other Non-Interest Earning Assets (3) . . . . . . 127,663 114,279
---------- ----------
Total Assets . . . . . . . . . . . . . . . . . . $2,928,773 $2,933,943
---------- ----------

INTEREST BEARING LIABILITIES:
Savings, N.O.W. & Money Market Deposits . . . . . $1,167,929 $27,789 2.38% $1,386,052 $30,968 2.23%
Time Deposits . . . . . . . . . . . . . . . . . . 900,084 48,507 5.39% 678,919 26,071 3.84%
--------------------- -----------------------
Total Savings and Time Deposits . . . . . . . . 2,068,013 76,296 3.69% 2,064,971 57,039 2.76%
Short-Term Borrowings . . . . . . . . . . . . . . 102,893 5,963 5.80% 260,225 11,221 4.31%
Long-Term Borrowings . . . . . . . . . . . . . . 35,000 2,903 8.29% 33,507 2,967 8.85%
--------------------- -----------------------
Total Interest Bearing Liabilities . . . . . . . 2,205,906 85,162 3.86% 2,358,703 71,227 3.02%
--------------------- -----------------------
Rate Spread . . . . . . . . . . . . . . . . . . . 4.40% 4.34%
Non-Interest Bearing Deposits . . . . . . . . . . 396,763 298,994
Other Non-Interest Bearing Liabilities . . . . . 43,080 31,487
---------- ----------
Total Liabilities . . . . . . . . . . . . . . . 2,645,749 2,689,184
Stockholders' Equity . . . . . . . . . . . . . . 283,024 244,759
---------- ----------
Total Liabilities and Stockholders' Equity . . . $2,928,773 $2,933,943
========== ==========
Net Interest Income and Net Interest Margin (1) . 143,206 5.18% 134,368 4.81%
Less: Tax Equivalent Basis Adjustment . . . . . . (1,970) (1,862)
--------- ---------
Net Interest Income . . . . . . . . . . . . $141,236 $132,506
========= =========
</TABLE>

<PAGE> 6

<TABLE>
<CAPTION>
1993 (2)
------------------------------------
Average Average
(dollars in thousands) Balance Interest Rate
------------------------------------
<S> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Deposits . . . . . . . . . . . . . . . . . . . . $528 $14 2.65%
Taxable Securities . . . . . . . . . . . . . . . . . . . . . . . 167,439 7,775 4.64%
Non-Taxable Municipals . . . . . . . . . . . . . . . . . . . . . 27,793 1,865 6.71%
Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . 674,560 37,863 5.61%
Loans, net of unearned income & fees . . . . . . . . . . . . . . 1,735,122 143,614 8.28%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell . . . . . . . . . . . . . . 73,734 1,988 2.70%
-----------------------
Total Interest Earning Assets . . . . . . . . . . . . . . . . . 2,679,176 193,119 7.21%
-----------------------

Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . (65,816)
Cash and Due from Banks . . . . . . . . . . . . . . . . . . . . . 73,731
Other Non-Interest Earning Assets . . . . . . . . . . . . . . . . 133,400
-----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $2,820,491
===========

INTEREST BEARING LIABILITIES:
Savings, N.O.W. & Money Market Deposits . . . . . . . . . . . . . $1,408,306 $34,960 2.48%
Time Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 710,574 28,171 3.96%
-----------------------
Total Savings and Time Deposits . . . . . . . . . . . . . . . . 2,118,880 63,131 2.98%
Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . 176,519 6,166 3.49%
Long-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . 36,559 3,872 10.59%
-----------------------
Total Interest Bearing Liabilities . . . . . . . . . . . . . . . 2,331,958 73,169 3.14%
-----------------------
Rate Spread . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.07%
Non-Interest Bearing Deposits . . . . . . . . . . . . . . . . . . 244,772
Other Non-Interest Bearing Liabilities . . . . . . . . . . . . . 33,416
-----------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . 2,610,146
Stockholders' Equity 210,345
-----------
Total Liabilities and Stockholders' Equity . . . . . . . . . . . $2,820,491
===========
Net Interest Income and Net Interest Margin . . . . . . . . . . . 119,950 4.48%
Less: Tax Equivalent Basis Adjustment . . . . . . . . . . . . . . (1,489)
---------
Net Interest Income . . . . . . . . . . . . . . . . . . . . $118,461
=========
</TABLE>

(1) Interest income on a tax equivalent basis includes the additional amount
of interest and dividend income that would have been earned if the
Company's investment in state and municipal obligations, non-taxable loans
and equity securities had been made in securities and loans subject to New
York State and Federal income taxes yielding the same after tax income.
The tax equivalent amount for $1.00 of non-taxable investment income,
non-taxable loan income, dividends and interest income from U.S.
Obligations (included in Taxable Securities) was $1.57, $1.57, $1.43 and
$1.03 in 1995; $1.54, $1.58, $1.43 and $1.03 in 1994; and $1.54, $1.58,
$1.43 and $1.03 in 1993.
(2) Prior period amounts have been restated to reflect the adoption of SFAS
114.
(3) Unrealized gains/(losses) on available-for-sale securities are recorded in
other non-interest earning assets.

ASSET/LIABILITY MANAGEMENT
The Company's primary earnings source is its net interest margin, which is
affected by changes in the level of interest rates, the relationship between
rates, the impact of interest rate fluctuations on asset prepayments and the
level and composition of deposits, and the credit quality of the portfolio.
Management's asset/liability objectives are to maintain a strong, stable net
interest margin, to utilize its capital effectively without taking undue risks
and to maintain adequate liquidity.
The Company's risk assessment program includes a coordinated approach to
the management of liquidity, capital and interest rate risk. This risk
assessment process is governed by policies and limits established by senior
management which are reviewed and approved by the Asset/Liability Committee of
the Board of Directors ("ALCO"). ALCO, comprised of members of senior
management and the Board, meets periodically to evaluate the impact of changes
in market interest rates on assets and liabilities, net interest margin,
capital and liquidity, and to evaluate the strategic plan.
The balance sheet structure is primarily short-term with most assets and
liabilities repricing or maturing in less than five years. Management monitors
the sensitivity of net interest income by utilizing a dynamic simulation model
complemented by traditional gap analysis. This model measures net interest
income sensitivity and volatility to interest rate changes. This model
involves a degree of estimation based on certain assumptions that management
believes to be reasonable. Factors considered include actual maturities,
estimated cash flows, repricing characteristics, deposit growth/retention and,
primarily, the relative sensitivity of assets and liabilities to changes in
market interest rates. Utilizing this process, management can project the
impact of changes in interest rates on net interest income. This relative
sensitivity is important to consider since the core deposit base is not subject
to the same degree of interest rate sensitivity as assets. The core deposit
costs are internally controlled and generally exhibit less sensitivity to
changes in interest rates than the adjustable rate assets whose yields are
based

<PAGE> 7

on external indices and change in concert with market interest rates.
Management has established certain limits for potential volatility of net
interest income, assuming certain levels of change in market interest rates
with the objective of maintaining a stable level of net interest income under
various probable rate scenarios.
The traditional gap analysis is prepared based on the maturity and
repricing characteristics of interest earning assets and liabilities for
selected time periods. The mismatch between repricings or maturities within a
time period is commonly referred to as the "gap" for that period. A positive
gap (asset sensitive), where interest-rate sensitive assets exceed
interest-rate sensitive liabilities, generally will result in net interest
margin increasing in a rising rate environment and decreasing in a falling rate
environment. A negative gap (liability sensitive) will generally have the
opposite results on the net interest margin. However, the traditional gap
analysis does not assess the relative sensitivity of assets and liabilities to
changes in interest rates. Management utilizes the gap analysis to complement
income simulation modeling, primarily focusing on the longer term structure of
the balance sheet.
The asset/liability process has enabled the Company to achieve its net
interest income targets despite the turbulence in market interest rates over
the past three years.
During the fourth quarter of 1995, management initiated a pre-investment
program in anticipation of the pending acquisitions. At year end, management
had invested approximately $380 million of the anticipated transaction proceeds
by purchasing mortgage-backed securities with a weighted average life of 3.5
years. These purchases have been funded through short-term borrowings at a
positive spread of approximately 100 basis points. These short-term borrowings
will be replaced with the low cost core deposits obtained in the acquisitions.
Over time, it is expected that the composition of interest earning assets will
shift from investment securities to higher yielding loans.
Management's strategy for its securities portfolios is to maintain a
short-weighted average life to minimize its exposure to future rises in
interest rates and to provide cash flows that may be reinvested at current
market interest rates. The weighted average lives of the held-to-maturity and
available-for-sale securities portfolios at December 31, 1995 were 3.8 years.
Deposit liabilities fund 81.2% of interest earning assets at December 31, 1995.
The pending acquisitions are anticipated to result in the percentage of
interest earning assets funded by deposit liabilities to rise significantly.
The following table reflects the repricing of the balance sheet, or "gap"
position at December 31, 1995:

<TABLE>
<CAPTION>
(dollars in thousands) 0-90 91-180 181-365 1-5 Over 5
INTEREST EARNING ASSETS: Days Days Days Years Years Total
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Deposits . . . . . . . . . . . . . $1,347 - - - - $1,347
Securities (1) . . . . . . . . . . . . . . . . . . 113,938 82,953 126,860 453,443 375,681 1,152,875
Loans, net of unearned income & fees (2) (3) . . . 441,822 148,129 355,642 866,307 123,034 1,934,934
-------------------------------------------------------------------------
Total Interest Earning Assets . . . . . . . . $557,107 $231,082 $482,502 $1,319,750 $498,715 $3,089,156
-------------------------------------------------------------------------

INTEREST BEARING LIABILITIES:
Savings, N.O.W. and Money Market Deposits (4) . . . $104,233 $104,233 $208,467 $736,806 - $1,153,739
Time Deposits . . . . . . . . . . . . . . . . . . . 345,121 181,389 178,703 224,706 - 929,919
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase . . . . . 391,369 - - - - 391,369
Other Borrowed Funds . . . . . . . . . . . . . . . - - - 35,000 - 35,000
-------------------------------------------------------------------------
Total Interest Bearing Liabilities . . . . . $840,723 $285,622 $387,170 $996,512 - $2,510,027
-------------------------------------------------------------------------
Gap . . . . . . . . . . . . . . . . . . . . . . . . ($283,616) ($54,540) $95,332 $323,238 $498,715
-----------------------------------------------------------
Cumulative Difference Between Interest Earning
Assets and Interest Bearing Liabilities . . . ($283,616) ($338,156) ($242,824) $80,414 $579,129
===========================================================

Cumulative Difference as a Percentage of
Total Assets . . . . . . . . . . . . . . . . . (8.59%) (10.24%) (7.35%) 2.43% 17.53%
===========================================================
</TABLE>

Notes: (1) Based upon (a) contractual maturity, (b) repricing date, if
applicable, and (c) projected repayments of principal based upon
experience. Amounts exclude the unrealized gain on securities
available-for-sale.
(2) Based upon (a) contractual maturity, (b) repricing date, if
applicable, and (c) management's estimate of prepayments of
principal.
(3) Excludes non-accrual loans totaling $31.5 million.
(4) Savings, N.O.W. and Money Market Deposits are allocated to
specific time bands in accordance with the proposed rule of
Section 305 of the Federal Deposit Insurance Corporation
Improvement Act.

<PAGE> 8

The tables that follow depict the amortized cost, contractual maturities
and approximate weighted average yields (on a tax equivalent basis) of the
held-to-maturity and available-for-sale securities portfolios at December 31,
1995, respectively:

HELD-TO-MATURITY

<TABLE>
<CAPTION>
State &
(dollars in thousands) Municipal
Maturity Obligations Yield Total Yield
- - ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Within 1 Year . . . . . . . . . . . . . . $21,709 6.61% $21,709 6.61%

After 1 But Within 5 Years . . . . . . . 20,220 7.28% 20,220 7.28%

After 5 But Within 10 Years . . . . . . . 18,796 7.29% 18,796 7.29%
. . . . . . . . . . . . . . . . . . . . .
-----------------------------------------
Subtotal . . . . . . . . . . . . . . 60,725 7.04% 60,725 7.04%
Mortgage-Backed Securities . . . . . . . - -- 281,418 6.40%
-----------------------------------------
Total Securities . . . . . . . . . . $60,725 7.04% $342,143 6.51%
=========================================
</TABLE>

<TABLE>
<CAPTION>
AVAILABLE -FOR-SALE (1) U.S.
U.S. Government
(dollars in thousands) Treasury Agencies'
Maturity Securities Yield Obligations Yield Total Yield
- - -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Within 1 Year . . . . . . . . . . . . . . $9,995 6.18% $9,612 6.56% $19,607 6.37%
After 1 But Within 5 Years . . . . . . . 9,994 5.99% 34 8.05% 10,028 6.00%
After 5 But Within 10 Years . . . . . . . -- -- 49,050 5.65% 49,050 5.65%
-----------------------------------------------------------------------
Subtotal . . . . . . . . . . . . . . 19,989 6.09% 58,696 5.80% 78,685 5.87%
Equity Securities . . . . . . - -- -- -- 24,907 --
SBA Securities . . . . . . . . . . . . . -- -- -- -- 29,500 7.09%
Mortgage-Backed Securities . . . . . . . - -- -- -- 677,640 6.76%
-----------------------------------------------------------------------
Total Securities . . . . . . . . . . $19,989 -- $58,696 5.80% $810,732 6.42%
=======================================================================
</TABLE>

(1) Amounts exclude unrealized gains/(losses) reflected as a seperate
component of stockholders' equity, net of taxes.

The following table presents the composition of the carrying value of the
securities portfolio in each of the last three years at December 31,

<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
---------------------------------------------
<S> <C> <C> <C>
Mortgage-Backed Securities . . . . . . . . . . . . . . . $961,404 $581,674 $762,692
State & Municipal Obligations . . . . . . . . . . . . . . 60,725 64,672 46,265
U.S. Government Agencies' Obligations . . . . . . . . . . 58,552 54,793 55,988
SBA Securities . . . . . . . . . . . . . . . . . . . . . 29,968 -- --
Equity Securities . . . . . . . . . . . . . . . . . . . . 25,836 25,990 9,679
U.S. Treasury Securities . . . . . . . . . . . . . . . . 20,143 46,168 97,243
---------------------------------------------
$1,156,628 $773,297 $971,867
=============================================
</TABLE>

<PAGE> 9

The following are approximate contractual maturities and sensitivities to
changes in interest rates of certain loans, exclusive of non-commercial real
estate mortgages, consumer loans and leases and non-accrual loans as of
December 31, 1995:

<TABLE>
<CAPTION>
Maturity
----------------------------------------------------------------
Due After
One But
Due Within Within Five Due After
(in thousands) One Year Years Five Years Total
----------------------------------------------------------------
<S> <C> <C> <C> <C>
TYPES OF LOANS:
Mortgage Loans-Multi-family . . . . . . . $110,999 $489,779 $61,551 $662,329
Mortgage Loans-Commercial . . . . . . . . 173,322 134,483 47,851 355,656
Commercial & Industrial . . . . . . . . . 185,367 40,157 12,954 238,478
Construction and Land Loans . . . . . . . 39,610 2,266 - 41,876
----------------------------------------------------------------
Total . . . . . . . . . . . . . . . $509,298 $666,685 $122,356 $1,298,339
================================================================
RATE PROVISIONS:
Amounts with Fixed Interest Rates . . . . $49,118 $131,817 $96,401 $277,336
Amounts with Adjustable Interest Rates . 460,180 534,868 25,955 1,021,003
----------------------------------------------------------------
Total . . . . . . . . . . . . . . . $509,298 $666,685 $122,356 $1,298,339
================================================================
</TABLE>

The following table shows the classification of the average daily deposits for
each of the periods indicated:

<TABLE>
<CAPTION>
For the year ended December 31, 1995 1994 1993
-----------------------------------------------
(in thousands)
<S> <C> <C> <C>
Demand Deposits . . . . . . . . . . . . . . . . . . . . . $396,763 $298,994 $244,772
Savings Deposits . . . . . . . . . . . . . . . . . . . . 842,516 1,003,934 1,030,444
N.O.W. & Money Market Deposits . . . . . . . . . . . . . 325,413 382,118 377,862
Time Deposits . . . . . . . . . . . . . . . . . . . . . . 900,084 678,919 710,574
-----------------------------------------------
Total Deposits . . . . . . . . . . . . . . . . . . . . $2,464,776 $2,363,965 $2,363,652
===============================================
</TABLE>

At December 31, 1995, the remaining maturities of certificates of
deposit in amounts of $100,000 or greater were as follows:

<TABLE>
<CAPTION>
1995
-------------
(in thousands)
<S> <C>
3 months and less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $112,115
3 to 6 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,028
6 to 12 months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,555
One to five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,285
Greater than five years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
-------------
$176,110
=============
</TABLE>

LIQUIDITY
The objective of liquidity management is to ensure the availability of
sufficient resources to meet all financial commitments and to capitalize on
opportunities for business expansion. Liquidity management addresses the
ability to meet deposit withdrawals either on demand or by contractual
maturity, to repay other borrowings as they mature and to make new loans and
investments as opportunities arise.
The Company's sources of liquidity include dividends from its subsidiaries,
borrowings, and funds available through the capital markets. Dividends from
the Bank are limited by New York State Banking Department regulations to the
current year's earnings plus the prior two years' retained net profits.
Pursuant to this regulation, the Bank had $74.6 million of retained earnings
available for dividends to the Company as of January 1, 1996.

<PAGE> 10

The Bank has numerous sources of liquidity including loan and security
principal repayments and maturities, lines of credit with other financial
institutions, the ability to borrow under repurchase agreements utilizing its
unpledged securities portfolio, the sale of securities from its
available-for-sale portfolio, the securitization of loans within the portfolio,
whole loan sales and growth in its core deposit base.
In addition, the Bank has the ability, as a member of the Federal Home Loan
Bank system, to borrow $322 million on a secured basis, utilizing mortgage
related loans and securities as collateral, for a term ranging from one day to
ten years at both fixed and variable rates. As of December 31, 1995, the Bank
had $10 million in such advances with an original maturity of greater than one
year.
The Company's liquidity positions are monitored daily to ensure the
maintenance of an optimum level and efficient use of available funds.
Management believes that the Company and Bank have sufficient liquidity to meet
their operating requirements.

LOAN PORTFOLIO
The loan portfolio is concentrated primarily in loans secured by real
estate in metropolitan New York. Loans outstanding totaled $2.0 billion at
December 31, 1995, an increase of $153.6 million or 8.4% from the 1994 year end
levels of $1.83 billion, of which $49.4 million was acquired in the Great Neck
acquisition. Great Neck's loan portfolio was comprised primarily of commercial
loans and commercial mortgages. Aggregate loan growth during 1995 consisted
of a 26.4% increase in multi-family mortgage loans to $662.3 million, a 54.6%
increase in consumer loans and leases to $111.5 million, a 7.9% increase in
commercial mortgage loans to $367.2 million and a modest increase in commercial
and industrial loans. This growth was partially offset by a 7.6% decline in
residential mortgage loans to $552.7 million at December 31, 1995.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114 "Accounting by Creditors for Impairment of a Loan"
("SFAS 114"), as amended by Statement of Financial Accounting Standards No.
118, "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosures" ("SFAS 118") (collectively referred to as "the Statement"). The
Statement requires that impairment of larger balance, non-homogeneous loans be
measured by comparing the net carrying value (or amount) of the loan to the
present value of the expected future cash flows discounted at the loan's
effective rate, the secondary market value of the loan, or the fair value of
the collateral for collateral-dependent loans. A valuation allowance is
established if necessary within the overall allowance for credit losses.
Smaller balance, homogeneous loans, such as residential mortgages and consumer
loans and leases, are collectively evaluated for impairment. Adoption of the
Statement had no impact on the level of the overall allowance for loan losses,
and does not affect the Company's policies regarding charge-offs, recoveries
and interest income recognition.
In accordance with the Statement, $8.2 million, $14.9 million, $53.3
million, and $58.4 million of loans previously reported as in-substance
foreclosures at December 31, 1994, 1993, 1992 and 1991, respectively, have been
reclassified from Other Real Estate to Loans in the accompanying disclosures.
The adoption of the Statement did not affect the level of non-performing assets
as loans previously classified as in-substance foreclosures, and contained
within the other real estate caption, have been classified as non-accrual
loans. All financial ratios contained within this annual report affected by
this reclassification have been restated for comparability purposes.

The following table represents the components of the loan portfolio at
December 31,

<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994 1993 1992 1991
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans-Multi-family . . $662,329 33.4% $524,167 28.6% $382,836 21.7% $344,370 18.8% $295,012 14.6%
Mortgage Loans-Residential . . 552,681 27.8% 598,711 32.7% 651,721 37.0% 685,293 37.4% 833,960 41.2%
Mortgage Loans-Commercial . . . 367,158 18.5% 340,157 18.6% 343,750 19.5% 337,258 18.4% 343,458 17.0%
Commercial & Industrial . . . . 245,956 12.4% 241,544 13.2% 257,151 14.6% 288,114 15.7% 319,421 15.8%
Consumer Loans and Leases . . . 111,475 5.6% 72,098 3.9% 61,647 3.5% 73,702 4.0% 98,182 4.9%
Construction and Land Loans . . 45,429 2.3% 54,789 3.0% 64,031 3.7% 103,712 5.7% 131,005 6.5%
-----------------------------------------------------------------------------------------------------
Total . . . . . . . . . . . . $1,985,028 100.0% $1,831,466 100.0% $1,761,136 100.0% $1,832,449 100.0% $2,021,038 100.0%
=====================================================================================================
</TABLE>

ASSET QUALITY
At December 31, 1995, non-performing assets, which includes loans past
due 90 days and still accruing interest, non-accrual loans and other real
estate, declined $9.6 million or 20.3% to $37.4 million, in comparison to $47.0
million at December 31, 1994. Non-performing loans consisted of $12.0 million
in commercial mortgages, $9.0 million in residential mortgages, $7.8 million in
commercial loans, $3.6 million in construction and land loans, and $.2 million
in consumer loans and leases.
The decline in non-performing assets consisted principally of a $4.7
million decline in construction and land loans, a $1.8 million decline in
multi-family mortgages, a $1.8 million decline in residential mortgages.

<PAGE> 11

The components of non-performing assets and restructured, accruing
loans are detailed below.

<TABLE>
<CAPTION>
December 31, 1995 1994 1993 1992 1991
------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Loans Ninety Days Past Due and Still Accruing . . $1,088 $1,597 $2,265 $6,048 $7,027
Non-Accrual Loans . . . . . . . . . . . . . . . . . 31,506 40,516 56,624 123,682 137,029
------------------------------------------------------------------
Non-Performing Loans . . . . . . . . . . . . . . 32,594 42,113 58,889 129,730 144,056
Other Real Estate . . . . . . . . . . . . . . . . . 4,805 4,861 11,326 9,850 20,339
------------------------------------------------------------------
Non-Performing Assets . . . . . . . . . . . . . . $37,399 $46,974 $70,215 $139,580 $164,395
==================================================================
Restructured, Accruing Loans . . . . . . . . . . . $31,875 $37,044 $43,456 $50,639 $28,132
==================================================================
</TABLE>

Loans are classified as restructured loans when management has granted, for
economic or legal reasons related to the borrower's financial difficulties,
concessions to the customer that would not otherwise be considered. Generally,
this occurs when the cash flow of the borrower is insufficient to service the
loan under its original terms. At December 31, 1995, the portfolio of
restructured, accruing loans is comprised primarily of loans which have
demonstrated performance in accordance with the terms of their restructure
agreements for at least two years, and are currently yielding 6.95%.
Management determines what it deems to be the appropriate level of the
allowance for loan losses on an ongoing basis by reviewing individual loans, as
well as the composition of and trends in the loan portfolio. Management
considers, among other things, concentrations within segments of the loan
portfolio, delinquency trends, as well as recent charge-off experience and
third party evidentiary matter (such as appraisals) when assessing the degree
of credit risk in the portfolio. Various appraisals and estimates of current
value influence the estimation of the required allowance at any point in time.
During 1995, the provision for loan losses was $9.0 million as compared to $3.3
million in 1994. Net charge-offs in 1995 aggregated $9.3 million, or .49% of
average net loans, as compared with $10.3 million or .57% of average net loans
during 1994. The allowance for loan losses at year end 1995 was $50.2 million,
or 154.1% of non-performing loans and 2.55% of net loans. This compares to an
allowance for loan losses of $50.1 million, or 118.9% of non-performing loans,
and 2.76% of net loans at December 31, 1994. Although the trend of improved
asset quality continued in 1995, management prudently assessed the loan
portfolio considering its growth and the level of charge-offs during the year
and increased the provision for loan losses. While management uses available
information in estimating possible loan losses, future additions to the
allowance may be necessary based on future changes in economic conditions. In
addition, various regulatory agencies, as an integral part of their examination
process, periodically review the allowance for loan losses. Such agencies may
require the Company to recognize additions to the allowance based on their
judgment of information available to them at the time of their examinations.
Based on current economic conditions, management considers the allowance at
December 31, 1995, adequate to cover the possible credit losses inherent in the
loan portfolio.

<PAGE> 12

Transactions in the Allowance for Loan Losses are summarized as follows for
the years ended December 31,

<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994 1993 1992 1991
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOANS (NET OF UNEARNED INCOME & FEES):
Average Balance . . . . . . . . . . . . . . $1,893,654 $1,773,088 $1,735,122 $1,906,438 $1,884,440
End of Year . . . . . . . . . . . . . . . . 1,966,440 1,814,037 1,740,778 1,807,119 1,987,560
================================================================

ANALYSIS OF ALLOWANCE FOR LOAN LOSSES:
Balance at Beginning of Year . . . . . . . $50,069 $56,556 $69,583 $63,722 $34,051

LOANS CHARGED-OFF:
Mortgage Loans-Multi-family . . . . . . . $ 3,236 $ 747 $ 5,305 $ 1,221 $ 550
Mortgage Loans-Residential . . . . . . . . 1,815 1,590 2,713 178 475
Mortgage Loans-Commercial . . . . . . . . 3,578 2,989 2,335 2,717 15,776
Commercial & Industrial . . . . . . . . . 2,870 7,724 14,362 13,029 19,151
Consumer Loans and Leases . . . . . . . . 396 727 1,216 2,207 3,217
Construction and Land Loans . . . . . . . 1,098 680 1,074 1,174 15,837
----------------------------------------------------------------
Total charge-offs . . . . . . . . . . . $12,993 $14,457 $27,005 $20,526 $55,006

RECOVERIES OF LOANS CHARGED-OFF:
Mortgage Loans-Multi-family . . . . . . . $ 100 $ 50 $ -- $ -- $ --
Mortgage Loans-Residential . . . . . . . . 127 157 50 125 --
Mortgage Loans-Commercial . . . . . . . . 1,587 611 452 156 --
Commercial & Industrial . . . . . . . . . 1,344 2,573 2,557 1,097 212
Consumer Loans and Leases . . . . . . . . 390 333 508 557 304
Construction and Land Loans . . . . . . . 94 607 111 677 226
----------------------------------------------------------------
Total Recoveries . . . . . . . . . . . $3,642 $ 4,331 $ 3,678 $ 2,612 $ 742

NET LOANS CHARGED-OFF $9,351 $10,126 $23,327 $17,914 $54,264
Provision for Loan Losses . . . . . . . . . . 9,000 3,275 10,300 23,775 66,625
Additional Allowance Acquired in Acquisition 492 -- -- -- 17,310
Metro Activity for the Three Months . . . . .
Ended December 31, 1993 . . . . . . . . . . -- 364 -- -- --
----------------------------------------------------------------
Balance at End of Year . . . . . . . . . . . $50,210 $50,069 $56,556 $69,583 $63,722
================================================================

Ratio of Net Charge-Offs to Average Loans . . 0.49% 0.57% 1.34% 0.94% 2.88%
================================================================

Ratio of Allowance for Loan Losses
to Non-performing Loans . . . . . . . . . 154.05% 118.89% 96.04% 53.64% 44.23%
================================================================
</TABLE>

Management considers the adequacy of the allowance for loan losses in its
entirety, however , to comply with regulatory reporting requirements,
management has allocated the allowance for loan losses as shown in the table
below into components by loan type at each year end. Management does not
intend to imply that actual future charge-offs will necessarily follow the
allocations described below.

<TABLE>
<CAPTION>
PERCENTAGE Percentage Percentage Percentage Percentage
OF LOANS of Loans of Loans of Loans of Loans
(dollars in thousands) 1995 TO TOTAL 1994 to Total 1993 to Total 1992 to Total 1991 to Total
AMOUNT LOANS Amount Loans Amount Loans Amount Loans Amount Loans
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans-Multi-family $15,767 33.4% $16,811 28.6% $5,781 21.7% $6,968 18.8% $5,290 14.6%
Mortgage Loans-Residential 1,876 27.8% 1,840 32.7% 5,668 37.0% 5,114 37.4% 4,972 41.2%
Mortgage Loans-Commercial . 12,419 18.5% 12,711 18.6% 20,542 19.5% 16,997 18.4% 15,178 17.0%
Commercial & Industrial . . 9,521 12.4% 9,716 13.2% 18,120 14.6% 25,030 15.7% 25,538 15.8%
Consumer Loans and Leases . 1,857 5.6% 1,443 3.9% 901 3.5% 817 4.0% 1,337 4.9%
Construction and Land Loans 1,461 2.3% 1,825 3.0% 4,669 3.7% 7,158 5.7% 11,407 6.5%
Unallocated . . . . . . . . 7,309 -- 5,723 -- 875 -- 7,499 -- -- --
-------------------------------------------------------------------------------------------------------
Total . . . . . . . . . . $50,210 100.0% $50,069 100.0% $56,556 100.0% $69,583 100.0% $63,722 100.0%
=======================================================================================================
</TABLE>

<PAGE> 13

NON-INTEREST INCOME
Non-interest income, exclusive of net securities gains, was $20.9 million
in 1995, compared with $19.0 million in 1994. Net securities gains in 1995
were $6.4 million, as compared with net securities losses of $9.2 million in
1994.
Net securities gains recognized during 1995 were principally due to the
Company selling its equity investments in certain financial institutions and
the recognition of a $.9 million recovery on the settlement of a certain
collateralized mortgage obligation that had been written down during 1994.
Other operating income increased $1.9 million, or 48.3%, to $5.7 million
during 1995 when compared to $3.8 million during 1994. This increase is
primarily attributable to $730 thousand in distribution gains recognized on a
long standing minority interest in a venture capital fund and a $950 thousand
increase in fees and commissions earned by the Company's broker/dealer
subsidiary (Compass Investment Services Corp).
Income from mortgage banking activities increased 10.2% during 1995 to $2.6
million as compared to $2.4 million for 1994. This modest increase is
attributable to the positive impact lower market interest rates had on the sale
of loans into the secondary market, offset by a decrease in the level of
servicing revenue.

NON-INTEREST EXPENSE
Non-interest expense in 1995 was $68.8 million, compared with $92.4
million in 1994. Included in the results for 1994 was a $14.3 million merger
and restructure related charge incurred in connection with the Metro
acquisition. Non-interest expense during 1995 declined $9.3 million or 11.9%
when compared to 1994 results, exclusive of the aforementioned restructure
charge. This reduction is attributable to a $3.4 million decrease in other
real estate expenses, a $1.8 million reduction in FDIC insurance premiums
(during 1995, approximately 38% of the Company's deposits were insured under
the Savings Association Insurance Fund ("SAIF"), a $2.3 million decline in
compensation and employee benefits, and a $1.8 million decline in general and
administrative expenses. The post-merger integration of Metro's operations and
the achievement of other efficiencies associated with the combination of
certain product lines contributed to certain of the aforementioned reductions.
The Company's core efficiency ratio, which represents the ratio of non-interest
expenses, net of other real estate costs and other non-recurring charges, to
net interest income on a tax equivalent basis and non-interest income net of
securities gains and losses, improved to 41.78% in 1995 from 47.97% and 51.81%
in 1994 and 1993, respectively.

INCOME TAXES
The effective tax rate on income before income taxes was 42.4% for 1995 as
compared to 36.3% and 39.8% for 1994 and 1993, respectively. The effective tax
rate in 1994 reflects a reduction in the deferred tax asset valuation allowance
partially offset by the recapture of Bayside's tax bad debt reserve. The
effective tax rate during 1993 was also positively impacted by a reduction in
the deferred tax asset valuation allowance.

CAPITAL
The Federal Reserve Board has formal capital guidelines which bank holding
companies are required to meet. The risk based capital guidelines are designed
to make regulatory capital requirements more sensitive to differences in risk
profiles among banks and bank holding companies, to account for off-balance
sheet exposure and to minimize disincentives for holding liquid assets. Under
these guidelines, assets and off-balance sheet items are assigned to broad risk
categories, each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk weighted assets and off-balance
sheet items. The guidelines currently require all bank holding companies to
maintain a minimum ratio of total risk based capital to total risk weighted
assets of 8.00%, including a minimum ratio of Tier I capital to risk weighted
assets of 4.00%.
The following table sets forth the Company's regulatory capital at December
31, 1995, under the rules applicable at such date. At such date, the Company
was in compliance with all applicable Regulatory requirements.

<TABLE>
<CAPTION>
(dollars in thousands)
Amount Ratio
--------------------------------
<S> <C> <C>
Tier 1 Capital . . . . . . . . . . . . . . . . $281,063 15.50%
Regulatory Requirement . . . . . . . . . . . . 72,521 4.00%
--------------------------------
Excess . . . . . . . . . . . . . . . . . . . . $208,542 11.50%
================================
Total Risk Adjusted Capital . . . . . . . . . . $304,066 16.77%
Regulatory Requirement . . . . . . . . . . . . 145,042 8.00%
--------------------------------
Excess . . . . . . . . . . . . . . . . . . . . $159,024 8.77%
================================
Risk Weighted Assets . . . . . . . . . . . . . $1,813,029
================
</TABLE>

<PAGE> 14

The Company's leverage ratio at December 31, 1995 was 8.86%. The Tier I,
total risk based and leverage capital ratios of the Bank were 16.00%, 17.26%,
and 9.14%, respectively, at December 31, 1995.
The Federal Deposit Insurance Corporation Improvement Act ("FDICIA") became
effective December 19, 1991. FDICIA substantially revised the depository
institution regulatory and funding provisions of the Federal Deposit Insurance
Act and makes revisions to several other banking statutes. Among other things,
FDICIA requires the federal banking regulators to take prompt corrective action
on depository institutions that do not meet minimum capital requirements.
FDICIA established five capital categories (well capitalized, adequately
capitalized, undercapitalized, significantly undercapitalized and critically
undercapitalized). Under the regulations, a "well capitalized" institution has
a minimum total risk based capital to total risk weighted assets ratio of at
least 10%, a minimum Tier I capital to total risk weighted assets ratio of 6%,
a minimum leverage ratio of at least 5% and is not subject to any written
order, agreement or directive. As of December 31, 1995, the Company and the
Bank were considered well capitalized.

COMPARISON BETWEEN 1994 AND 1993

OVERVIEW
The November 1994 acquisition of Metro increased total assets to $2.7
billion from $1.8 billion. Similarly, stockholders' equity rose to $255
million with the issuance of 8.4 million shares of common stock in connection
with the transaction and the combined earnings results for 1994.
Net income in 1994 was $29.7 million or $1.25 per share, as compared with
$25.6 million or $1.10 in 1993. The 1994 results were impacted by a $14.3
million merger and related restructure charges that were incurred in connection
with the Metro acquisition. Net securities losses of $9.2 million resulted
from the repositioning of the available-for-sale portfolio in light of the
current and anticipated interest rate environment and the write-down of a
certain investment security for an other than temporary impairment in value.
Earnings were favorably impacted by the further strengthening of the net
interest margin to 4.81% in 1994 as compared with 4.48% in 1993. The growth in
net interest margin increased net interest income to $132.5 million in 1994
from $118.5 million in 1993.
The decline in the level of non-performing assets further contributed to
improved earnings as the provision for loan losses was reduced to $3.3 million
in 1994, from $10.3 million in 1993. The level of other real estate expenses
(primarily maintenance and liquidation costs) declined to $3.7 million in 1994
from $14.0 million in 1993.

NET INTEREST INCOME
Net interest income increased $14.0 million to $132.5 million in 1994, as
compared to $118.5 million in 1993. The components of this increase include a
$12.1 million increase in interest income and a $1.9 million decline in
interest expense.
Interest income aggregated $203.7 million in 1994, a $12.1 million increase
from $191.6 million in 1993. This increase is attributable to a $114.6
million growth in average interest earning assets to $2.79 billion in 1994,
from $2.68 billion in 1993, increases in the prime rate of interest during
1994, and the impact of higher market interest rates on the securities
portfolio.
Interest expense declined to $71.2 million in 1994, reflecting a 3.02% cost
of funds, as compared with $73.1 million, or 3.14% in 1993. The $1.9 million
decline was achieved despite the rising interest rate environment that
prevailed during 1994. Higher costs of funds associated with short-term
borrowings were offset by interest reductions on the core deposit base.
Short-term borrowings incurred in connection with the balance sheet leverage
strategy were liquidated at year end 1994.

PROVISION FOR LOAN LOSSES
Net charge-offs declined to $10.1 million in 1994, or .57% of average net
loans as compared with $23.3 million, or 1.34% of average net loans for 1993.
The ratio of the allowance for loan losses to non-performing loans was 118.9%
at December 31, 1994, as compared with 96.0% at December 31, 1993.

NON-INTEREST INCOME
Non-interest income, exclusive of securities transactions, was $19.0
million in 1994, compared with $18.9 million in 1993. Net securities losses in
1994 were $9.2 million as compared with net securities gains of $1.5 million in
1993. Net securities losses during 1994 resulted primarily from management's
decision to reduce its securities holdings and short-term borrowings. Net
securities losses also reflect a $3.2 million write-down on an

<PAGE> 15

impaired collateralized mortgage obligation previously received by Metro as
partial satisfaction in a troubled debt loan restructuring.
Through growth in its demand deposit base, increases in service fees, and
the introduction of new products and services, the Company increased its fees
and service charges on deposit accounts $1.7 million, or 18.6%, during 1994.
Trust and investment management fees increased 8.1% to $1.8 million for
1994. These increases were offset by a $1.7 million or 41.8% decline in income
from mortgage banking operations, due to higher mortgage interest rates and a
corresponding decrease in the level of refinancing activity.

NON-INTEREST EXPENSE
Non-interest expense for 1994 included a $14.3 million charge incurred in
connection with the merger with Metro. This charge included $3.0 million in
direct merger expenses (primarily legal and professional fees), a $5.9 million
in severance related costs, and $5.4 million in system and facility costs
(primarily for the elimination of duplicate facilities, the write-off of
certain property and equipment, the cancellation of certain contractual
obligations and other expenses associated with the merger).
Excluding this charge, non-interest expense declined $7.8 million, or 9.1%,
to $78.1 million in 1994 when compared to $85.9 million in 1993. The decline
is primarily the result of a $10.3 million decrease in other real estate
expenses and a $1.3 million decrease in occupancy and equipment expense. These
improvements were partially offset by a $3.8 million increase in compensation
and employee benefits primarily attributable to expenses incurred in connection
with Metro's former Stock Appreciation Rights Plan. The Company's core
efficiency ratio was 47.97% in 1994 and 51.81% in 1993.

<PAGE> 16

SELECTED STATISTICAL DATA

Quarterly Financial Information
(unaudited)

<TABLE>
<CAPTION>
1995 1994
-------------------------------------------------------------------------------
1ST 2ND 3RD 4TH 1st 2nd 3rd 4th
(in thousands, except per share amounts) QTR QTR QTR QTR Qtr Qtr Qtr Qtr
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income . . . . . . . . . . . . . . $52,005 $55,067 $57,312 $62,014 $48,291 $51,125 $52,302 $52,015
Interest Expense . . . . . . . . . . . . . 18,153 20,512 21,681 24,816 17,246 17,941 18,266 17,774
-------------------------------------------------------------------------------
Net Interest Income . . . . . . . . . . . 33,852 34,555 35,631 37,198 31,045 33,184 34,036 34,241
Provision /(Benefit) for Loan Losses . . . 2,000 2,000 2,000 3,000 1,700 1,200 (375) 750
-------------------------------------------------------------------------------
Net Interest Income after Provision
for Loan Losses . . . . . . . . . . . . 31,852 32,555 33,631 34,198 29,345 31,984 34,411 33,491
Non-Interest Income/(Loss) . . . . . . . . 5,153 5,303 8,267 8,598 4,892 4,579 2,841 (2,503)
Non-Interest Expense . . . . . . . . . . . 17,236 16,801 15,846 18,960 19,784 20,697 20,044 31,917
-------------------------------------------------------------------------------
Income/(Loss) Before Income Taxes . . . . 19,769 21,057 26,052 23,836 14,453 15,866 17,208 (929)
Provision/(Benefit) for Income Taxes . . . 8,268 8,827 11,100 10,284 5,682 6,376 6,772 (1,904)
-------------------------------------------------------------------------------
Net Income . . . . . . . . . . . . . . . . $11,501 $12,230 $14,952 $13,552 $8,771 $9,490 $10,436 $975
===============================================================================
Per Share:
Net Income . . . . . . . . . . . . . . . $0.48 $0.50 $0.60 $0.54 $0.37 $0.40 $0.44 $0.04
Common Stock Price Range
High . . . . . . . . . . . . . . . . . $16.50 $18.38 $20.75 $25.25 $15.13 $15.88 $16.63 $16.00
Low . . . . . . . . . . . . . . . . . . $13.63 $16.00 $17.75 $20.75 $12.75 $13.25 $13.50 $13.50
</TABLE>

On November 30, 1994, Metro Bancshares Inc. ("Metro") was merged with and into
the Company. The merger has been accounted for as a pooling-of-interests and,
accordingly, prior period amounts include the consolidated results of Metro.

<PAGE> 17

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
For the Years Ended December 31,
(in thousands, except per share amounts)
1995 1994 1993
-------------------------------------
<S> <C> <C> <C>
INTEREST INCOME
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $172,088 $148,050 $142,907
Mortgage-Backed Securities . . . . . . . . . . . . . . . . . . . . . 43,604 41,031 37,863
U.S. Treasury & Government Agency Securities . . . . . . . . . . . . 5,845 9,108 6,801
State & Municipal Obligations . . . . . . . . . . . . . . . . . . . 2,488 2,300 1,271
Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,481 1,240 786
Federal Funds Sold & Securities Purchased
Under Agreements to Resell . . . . . . . . . . . . . . . . . . 799 1,971 1,988
Interest Earning Deposits . . . . . . . . . . . . . . . . . . . . . . 93 33 14
-------------------------------------
Total Interest Income . . . . . . . . . . . . . . . . . . . . . . . . 226,398 203,733 191,630
-------------------------------------

INTEREST EXPENSE
Savings, N.O.W & Money Market Deposits . . . . . . . . . . . . . . . 27,789 30,968 34,960
Other Time Deposits . . . . . . . . . . . . . . . . . . . . . . . . . 40,179 23,532 26,305
Certificates of Deposit, $100,000 and Over . . . . . . . . . . . . . 8,328 2,539 1,866
Short-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . 5,963 11,221 6,166
Long-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . 2,903 2,967 3,872
-------------------------------------
Total Interest Expense . . . . . . . . . . . . . . . . . . . . . . 85,162 71,227 73,169
-------------------------------------
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . 141,236 132,506 118,461
Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . . . 9,000 3,275 10,300
-------------------------------------
Net Interest Income after
Provision for Loan Losses . . . . . . . . . . . . . . . . . . 132,236 129,231 108,161
-------------------------------------

NON-INTEREST INCOME

Fees & Service Charges on Deposit Accounts . . . . . . . . . . . . . 10,840 11,013 9,287
Mortgage Banking Operations . . . . . . . . . . . . . . . . . . . . . 2,599 2,358 4,051
Trust & Investment Management Fees . . . . . . . . . . . . . . . . . 1,794 1,800 1,665
Other Operating Income . . . . . . . . . . . . . . . . . . . . . . . 5,709 3,849 3,935
Net Securities Gains/(Losses) . . . . . . . . . . . . . . . . . . . . 6,379 (9,211) 1,457
-------------------------------------
Total Non-Interest Income . . . . . . . . . . . . . . . . . . . 27,321 9,809 20,395
-------------------------------------

NON-INTEREST EXPENSE
Compensation & Employee Benefits . . . . . . . . . . . . . . . . . . 34,633 36,934 33,145
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,774 6,764 6,970
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,684 5,314 6,455
FDIC Insurance Premiums . . . . . . . . . . . . . . . . . . . . . . . 3,683 5,476 5,736
Amortization of Excess of Cost Over
Fair Value of Net Assets Acquired . . . . . . . . . . . . . . . . 1,667 1,470 1,595
Other Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . 255 3,651 13,971
Merger & Related Restructure Charges . . . . . . . . . . . . . . . . - 14,338 -
Other Operating Expense . . . . . . . . . . . . . . . . . . . . . . . 17,147 18,495 18,061
-------------------------------------
Total Non-Interest Expense . . . . . . . . . . . . . . . . . . . 68,843 92,442 85,933
-------------------------------------
Income Before Income Taxes . . . . . . . . . . . . . . . . . . . . . 90,714 46,598 42,623
Provision for Income Taxes . . . . . . . . . . . . . . . . . . . . . 38,479 16,926 16,976
-------------------------------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,235 $29,672 $25,647
=====================================

EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . $2.13 $1.25 $1.10
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 18

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
At December 31,
(in thousands, except per share amounts) 1995 1994
-------------------------------
<S> <C> <C>
ASSETS
Cash & Due from Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $106,476 $67,168
Interest Earning Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,347 748
Securities:
Available-for-Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 814,485 141,805
Held-to-Maturity (Fair value $341,925 in 1995; $593,110 in 1994) . . . . . . . . . . . 342,143 631,492
-------------------------------
Total Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,156,628 773,297
-------------------------------
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,985,028 1,831,466
Less: Unearned Income & Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,588 17,429
Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,210 50,069
-------------------------------
Net Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,916,230 1,763,968
-------------------------------
Premises & Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,169 39,168
Accrued Income Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,400 19,315
Excess of Cost over Fair Value of Net Assets Acquired . . . . . . . . . . . . . . . . . . . 26,586 22,208
Other Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,805 4,861
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,670 27,043
-------------------------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,303,311 $2,717,776
===============================

LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $451,802 $331,245
Savings, N.O.W. & Money Market Deposits . . . . . . . . . . . . . . . . . . . . . . . . . 1,153,739 1,325,628
Other Time Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 753,809 614,036
Certificates of Deposit, $100,000 and Over . . . . . . . . . . . . . . . . . . . . . . . . 176,110 71,978
-------------------------------
Total Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,535,460 2,342,887
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391,369 20,000
Other Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 50,000
Senior Note Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000 25,000
Accrued Expenses & Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,637 24,966
-------------------------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,993,466 2,462,853

STOCKHOLDERS' EQUITY
Preferred Stock, par value $1.00; authorized 10,000,000 shares, unissued . . . . . . . . . - -
Common stock, par value $2.50; authorized 50,000,000 shares;
issued & outstanding 1995, 24,879,196 shares; 1994, 23,049,187 shares . . . . . . . . . 62,198 57,623
Additional Paid in Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,398 94,526
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144,773 106,186
Unrealized Gains/(Losses) on Securities Available-for-Sale, net of taxes . . . . . . . . . 2,149 (2,871)
Deferred Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,020) (514)
Treasury Stock at cost; 36,187 shares in 1995; 1,945 shares in 1994 . . . . . . . . . . . (653) (27)
-------------------------------
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309,845 254,923
-------------------------------
Total Liabilities and Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . $3,303,311 $2,717,776
===============================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 19

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
--------------------------------------------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,235 $29,672 $25,647
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Provision for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . 9,000 3,275 10,300
Provision for Losses on Real Estate Acquired in
Settlement of Loans . . . . . . . . . . . . . . . . . . . . . . . . 353 2,486 10,055
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . 4,523 5,521 6,855
Amortization of Excess of Cost Over Fair Value of
Net Assets Acquired . . . . . . . . . . . . . . . . . . . . . . . . 1,667 1,470 1,595
Accretion of Discounts and Net Deferred Loan Fees . . . . . . . . . . . (4,021) (1,771) (939)
Amortization of Premiums . . . . . . . . . . . . . . . . . . . . . . . 4,384 7,957 10,154
Proceeds from Sales of Trading Account Securities . . . . . . . . . . . 40,920 - -
Purchases of Trading Account Securities . . . . . . . . . . . . . . . . (40,853) - -
Net Securities (Gains)/Losses . . . . . . . . . . . . . . . . . . . . . (6,379) 9,211 (1,457)
Other, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,594 (14,289) 2,456
--------------------------------------------
Net Cash Provided by Operating Activities . . . . . . . . . . . . . 66,423 43,532 64,666
--------------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities, Calls and Principal Repayments on
Securities Held-to-Maturity . . . . . . . . . . . . . . . . . . . . 125,061 138,706 415,103
Purchases of Securities Held-to-Maturity . . . . . . . . . . . . . . . (28,931) (269,519) (660,071)
Proceeds from Sales of Securities Available-for-Sale . . . . . . . . . 103,510 272,175 71,519
Maturities and Principal Repayments on
Securities Available-for-Sale . . . . . . . . . . . . . . . . . . . 70,895 150,831 49,967
Purchases of Securities Available-for-Sale . . . . . . . . . . . . . . (620,429) (106,008) (199,197)
Loans Originated and Principal Repayments
on Loans and Other Real Estate Owned, Net . . . . . . . . . . . . . (136,522) (120,191) (53,247)
Proceeds from Sales of Real Estate Acquired
in Settlements of Loans . . . . . . . . . . . . . . . . . . . . . . 10,750 15,586 27,993
Proceeds from the Sale of Loans . . . . . . . . . . . . . . . . . . . . 17,091 28,801 60,736
Purchases of Premises and Equipment, Net . . . . . . . . . . . . . . . (10,247) (3,250) (3,841)
Purchase of Great Neck Bank, Net of Cash Acquired . . . . . . . . . . . 10,868 - -
--------------------------------------------
Net Cash (Used in)/Provided by Investing Activities . . . . . . . . (457,954) 107,131 (291,038)
--------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase/(Decrease) in Deposits . . . . . . . . . . . . . . . . . . 102,313 (3,601) (56,332)
Proceeds from the Issuance of Senior Note Payable . . . . . . . . . . . - 25,000 -
Repayment of Senior Notes Payable . . . . . . . . . . . . . . . . . . . - (20,000) (20,000)
Net Increase/(Decrease) in Short-Term and Other Borrowings . . . . . . 331,369 (199,054) 226,322
Purchase of Treasury Shares . . . . . . . . . . . . . . . . . . . . . . (1,316) (35) (45)
Common Stock Sold for Cash . . . . . . . . . . . . . . . . . . . . . . 11,297 3,696 19,260
Dividends Paid to Shareholders . . . . . . . . . . . . . . . . . . . . (12,225) (7,030) (2,364)
--------------------------------------------
Net Cash Provided by/(Used in) Financing Activities . . . . . . . . 431,438 (201,024) 166,841
--------------------------------------------
Net Increase/(Decrease) in Cash and Cash Equivalents . . . . . . . 39,907 (50,361) (59,531)

Metro Activity for the Three Months Ended December 31, 1993 . . . . . . - 356 -
Cash and Cash Equivalents at Beginning of Year 67,916 117,921 177,452
--------------------------------------------
Cash and Cash Equivalents at End of Year $107,823 $67,916 $117,921
============================================
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 20

CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
----------------------------------------
(in thousands)
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Period for:
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $74,622 $72,101 $74,357
========================================
Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 32,759 $24,747 $14,671
========================================

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Securities Transferred from Held-to-Maturity to Available-for-Sale . . . . . . . . $191,449 $275,200 -
========================================

Real Estate Acquired in Settlement of Loans . . . . . . . . . . . . . . . . . . . $11,199 $5,126 $8,887
========================================

Loans to Facilitate the Sale of Other Real Estate . . . . . . . . . . . . . . . . . $7,696 $10,907 $14,075
========================================

On July 3, 1995, the Bank acquired all the outstanding
common stock of Great Neck Bancorp for cash and other
consideration. In connection with this acquisition, the following
assets were acquired and liabilities assumed:
Fair Value of Investments, Loans and Other Assets Acquired, Net . . . . . . . . $99,736
Cash Paid for Common Stock and Other Acquisition Expenses . . . . . . . . . . . (8,512)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
-----------
Deposits and Other Liabilities Assumed . . . . . . . . . . . . . . . . . . . . $91,224
===========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 21

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY

<TABLE>
<CAPTION>
Three Years Ended December 31, 1995
(Dollars in thousands, except per share amounts)

Additional Unrealized
Common Paid in Retained Securities Deferred Treasury
Stock Capital Earnings Gains/(Losses) Compensation Stock Total
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1993 $50,436 $77,883 $56,342 ($25) ($1,460) ($29) $183,147
Net Income - - 25,647 - - - 25,647
Cash Dividends (Metro Pre-Merger $.50 per share) (1) - - (2,364) - - - (2,364)
Sale of Common Stock (1,617,031 shares) . . . . . . . 4,061 11,192 - - - - 15,253
Exercise of Warrants (646,975 shares) . . . . . . . . 1,617 2,390 - - - - 4,007
Deferred Compensation Activity:
Restricted Stock Activity, net (2,466 shares) . . - 8 - - 247 73 328
Amortization of Other Deferred Compensation Plans - - - - 314 - 314
Purchase of Treasury Stock (3,926 shares) . . . . . . - - - - - (45) (45)
Fractional Share Adjustment . . . . . . . . . . . . . - - (2) - - - (2)
Net Change in Unrealized Depreciation on
Certain Marketable Equity Securities . . . . . . . - - - 25 - - 25
------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 . . . . . . . . . . . . . $56,114 $91,473 $79,623 - ($899) ($1) $226,310
Unrealized Gain on Securities Available-for-Sale,
net of taxes at January 1, 1994 . . . . . . . . . - - - 2,241 - - 2,241
Net Income . . . . . . . . . . . . . . . . . . . . . - - 29,672 - - - 29,672
Cash Dividends (The Company $.35 per share) . . . . . - - (5,882) - - - (5,882)
Cash Dividends (Metro Pre-Merger $.81 per share) (1) - - (4,125) - - - (4,125)
Sale of Common Stock (419,717 shares) . . . . . . . . 1,056 2,377 - - - - 3,433
Exercise of Warrants (176,616 shares) . . . . . . . . 442 390 - - - - 832
Deferred Compensation Activity:
Restricted Stock Activity, net (4,666 shares) . . 12 43 - - 120 9 184
Amortization of Other Deferred Compensation Plans - 247 61 - 265 - 573
Purchase of Treasury Stock (2,538 shares) . . . . . . - - - - - (35) (35)
Fractional Share Adjustment . . . . . . . . . . . . . (1) (4) - - - - (5)
Metro Net Income for the Three Months Ended
December 31, 1993 . . . . . . . . . . . . . . . . - - 6,837 - - - 6,837
Adjustment to Unrealized Gains/(Losses) on Securities
Available-for-Sale, net of taxes . . . . . . . . - - - (5,112) - - (5,112)
------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 . . . . . . . . . . . . . $57,623 $94,526 $106,186 ($2,871) ($514) ($27) $254,923
Net Income . . . . . . . . . . . . . . . . . . . . . - - 52,235 - - - 52,235
Cash Dividends ( $.55 per share) . . . . . . . . . . - - (13,648) - - - (13,648)
Sale of Common Stock (842,152 shares) . . . . . . . . 2,105 4,599 - - - - 6,704
Exercise of Warrants (987,857 shares) . . . . . . . . 2,470 3,138 - - - - 5,608
Deferred Compensation Activity:
Restricted Stock Activity, net (41,598 shares) . - 135 - - (712) 690 113
Amortization of Other Deferred Compensation Plans - - - - 206 - 206
Purchase of Treasury Stock (75,840 shares) . . . . . - - - - - (1,316) (1,316)
Adjustment to Unrealized Gains/(Losses) on Securities
Available-for-Sale, net of taxes . . . . . . . . - - - 5,020 - - 5,020
------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 . . . . . . . . . . . . . $62,198 $102,398 $144,773 $2,149 ($1,020) ($653) $309,845
==============================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

(1) Represents Metro's dividends per share based upon pre-merger shares
outstanding.

<PAGE> 22

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

GENERAL
North Fork Bancorporation, Inc. (the "Company"), a bank holding company
organized in 1980 under the laws of the State of Delaware, is registered under
the Bank Holding Company Act of 1956, as amended. The Company, through its
bank subsidiary, North Fork Bank (the "Bank") provides a variety of banking and
financial services to middle market and small business organizations, local
governmental units, and retail customers in the metropolitan New York area. On
November 30, 1994, Metro Bancshares Inc. ("Metro"), the parent company of
Bayside Federal Savings Bank ("Bayside"), was merged with and into the Company.
The merger was accounted for as a pooling-of-interests and, accordingly, the
Company's consolidated financial statements include the consolidated accounts
of Metro.

The following is a summary of the Company's significant accounting
and reporting policies:

(a) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company,
and its Bank and non-bank subsidiaries. The Company reports its financial
results on a calendar year basis, whereas Metro had reported its financial
results on a fiscal year basis which ended September 30. The consolidated
financial results for 1994 have been adjusted to conform Metro's year-end with
that of the Company. The consolidated financial results for the period ended
December 31, 1993, reflect the combination of the Company at and for the year
ended December 31 with Metro at and for the year ended September 30.

The accounting and reporting policies of the Company are in conformity
with generally accepted accounting principles and prevailing practices within
the financial services industry. The preparation of financial statements in
conformity with generally accepted accounting principles requires that
management make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses during the reporting period. Such estimates are subject to change in
the future as additional information becomes available or previously existing
circumstances are modified. Actual results could differ from those estimates.

(b) STATEMENT OF CASH FLOWS
For purposes of the Consolidated Statement of Cash Flows, cash and cash
equivalents includes those amounts included in the Balance Sheet captions -
Cash and Due from Banks, Interest Earning Deposits, Federal Funds Sold and
Securities Purchased Under Agreements to Resell, all of which have an initial
maturity of less than 90 days.
Cash flows from purchases, maturities and principal repayments, and sales
of available-for-sale securities are classified as cash flows from investing
activities, and such activity for prior periods has been similarly
reclassified.

(c) SECURITIES AND TRADING ACCOUNT ASSETS
The Company adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115")
in 1994. Securities that Management has the positive intent and ability to
hold to maturity are classified as held-to-maturity and carried at amortized
cost. Debt securities that may be sold in response to or in anticipation of
changes in interest rates and resulting prepayment risk, or other factors, and
marketable equity securities, are classified as available-for-sale and carried
at fair value. The unrealized gains and losses on these securities are
reported, net of applicable taxes, as a separate component of stockholders'
equity. Debt and equity securities that are purchased and held principally for
the purpose of selling them in the near term are classified as trading account
assets and reported at fair value. Management determines the appropriate
classification of securities at the time of purchase.
Interest income on securities, including amortization of premiums and
accretion of discounts, is recognized using the level yield method over the
lives of the individual securities. Realized gains and losses on sales of
securities are computed using the specific identification method. The cost
bases of individual held-to-maturity and available-for-sale securities are
reduced through write-downs to reflect other-than-temporary impairments in
value.

(d) LOANS
Loans are generally carried at the principal amount outstanding, net of
unearned income and net deferred loan fees. Mortgage loans held-for-sale are
carried at the lower of aggregate cost or market value. Interest income is
recognized using the interest method or a method that approximates a level rate
of return over the loan term. Unearned income and net deferred loan fees are
accreted into interest income over the loan term as a yield adjustment.

<PAGE> 23

(e) NON-ACCRUAL LOANS
Loans are placed on non-accrual status when, in the opinion of management,
there is doubt as to the collectibility of interest or principal, or when
principal and interest is past due 90 days or more and the loan is not well
secured and in the process of collection. Interest and fees previously accrued,
but not collected, are reversed and charged against interest income at the time
a loan is placed on non-accrual status. Interest payments received on
non-accrual loans are recorded as reductions of principal if, in management's
judgment, principal repayment is doubtful. Loans may be reinstated to an
accrual or performing status if future payments of principal and interest are
reasonably assured and the loan has a demonstrated period of performance.
Loans are classified as restructured loans when the Company has granted,
for economic or legal reasons related to the borrower's financial difficulties,
concessions to the borrower that it would not otherwise consider. Generally,
this occurs when the cash flows of the borrower are insufficient to service the
loan under its original terms.

(f) ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based on a periodic analysis of the loan
portfolio and reflects an amount which, in management's judgment, is adequate
to provide for possible loan losses in the existing portfolio. In evaluating
the portfolio, management takes into consideration numerous factors, such as
present and potential risks of the loan portfolio, loan growth, prior loss
experience, current economic conditions and periodic examinations conducted by
regulatory agencies. The allowance is maintained at a level considered by
management to be adequate to cover reasonably foreseeable loan losses. While
management uses available information to estimate possible loan losses, future
additions to the allowance may be necessary based on adverse changes in
economic conditions.
Effective January 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114 "Accounting by Creditors for Impairment of a
Loan", ("SFAS 114"), as amended by Statement of Financial Accounting Standards
No. 118, "Accounting by Creditors for Impairment of a Loan-Income Recognition
and Disclosures" ("SFAS 118") (collectively referred to as "the Statement").
The Statement requires that impairment of larger balance, non-homogeneous loans
be measured by comparing the net carrying value (or amount) of the loan to the
present value of the expected future cash flows discounted at the loan's
effective rate, the secondary market value of the loan, or the fair value of
the collateral for collateral-dependent loans. A valuation allowance is
established if necessary within the overall allowance for loan losses. Smaller
balance, homogeneous loans, such as residential mortgages and consumer loans
and leases, are collectively evaluated for impairment. Adoption of the
Statement had no impact on the level of the overall allowance for loan losses
and does not affect the Company's policies regarding charge-offs and
recoveries.

(g) PREMISES AND EQUIPMENT
Premises and equipment, including leasehold improvements, are stated at
cost, net of accumulated depreciation and amortization. Depreciation and
amortization are computed using the straight-line method over the estimated
useful life of the owned asset and, for leasehold improvements, over the
estimated useful life of the related asset or the lease term, whichever is
shorter.

(h) OTHER REAL ESTATE
Other real estate consists of property acquired through foreclosure or
deed in lieu of foreclosure. Other real estate is carried at the lower of the
recorded amount of the loan or the fair value of the property based on the
current appraised value adjusted for estimated disposition costs. Prior to
foreclosure, the recorded amount of the loan is written down, if necessary, to
the fair value of the real estate to be acquired by a charge to the allowance
for loan losses.
Subsequent to foreclosure, gains and losses on the periodic revaluation of
real estate acquired, and gains and losses on the disposition of such
properties, are credited or charged to other real estate expense.
In connection with the adoption of SFAS l14 effective January 1, 1995,
in-substance foreclosures are no longer classified as OREO and are instead
included in non-accrual loans.

(i) INCOME TAXES
The Company provides for income taxes under the asset and liability method
whereby deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in the period the change
occurs. Deferred tax assets are reduced, through a valuation allowance, if
necessary, by the amount of such benefits that is not expected to be realized
based on current available evidence.

<PAGE> 24

The Company files consolidated income tax returns with its subsidiaries.
Tax expenses or benefits are generally allocated among members in the
consolidated group based on a separate return basis.

(j) RETIREMENT AND BENEFIT PLANS
The Company has a non-contributory defined benefit pension plan covering
substantially all employees. Annual pension cost is provided over the
employee's expected service life utilizing the projected unit cost actuarial
method. Supplemental retirement benefits are provided for selected employees
where income tax limitations have been placed on the amount of retirement
benefits otherwise earned.
Postretirement and postemployment benefits are recorded on an accrual
basis with an annual provision that considers an actuarially determined future
obligation.

(k) EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the
weighted-average number of common shares and common stock equivalents
outstanding during the period.

(l) EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED
The excess of cost over fair value of net assets acquired is amortized on
a straight line basis over the estimated periods to be benefited. The
estimated periods to be benefited range from fifteen to twenty-five years.

(m) OFF-BALANCE SHEET INSTRUMENTS
Periodically, the Company enters into interest rate contracts, including
interest rate caps, floors and swap agreements, as part of its asset/liability
management of interest rate exposure. These instruments are entered into as
hedges against interest rate risk and are designated against specific assets
and liabilities. To qualify as a hedge, the instrument must be designated as a
hedge and effective in reducing the market risk of an existing asset, liability
on firm commitment. Effectiveness of the hedge is evaluated on an initial and
ongoing basis using statistical calculations of correlation. The premium paid
or received for any of these instruments is amortized over the term of the
agreement. These instruments are accounted for on an accrual basis in the
interest income or expense category of the related hedged asset or liability.
If the asset or liability being hedged is disposed of, the market value of the
interest rate contract is included in the determination of the gain or loss
from disposition. At December 31, 1995 and 1994, the Company had no contracts
or agreements outstanding.

NOTE 2 - MERGERS AND ACQUISITIONS

COMPLETED ACQUISITIONS

METRO BANCSHARES INC.
On November 30, 1994, the Company acquired Metro in a transaction
accounted for under the pooling-of-interests method of accounting. Pursuant to
the merger agreement, the Company issued 1.645 shares of common stock for each
share of Metro's common stock outstanding (8,440,746 common shares issued) and
reserved for issuance 739,038 common shares for Metro's outstanding stock
options as of the acquisition date. Metro had consolidated total assets,
deposits and shareholders' equity of $964.3 million, $832.5 million and $84.7
million respectively at November 30, 1994. Metro's operating results for the
three month period ended December 31, 1993 have been set forth separately as a
component of consolidated stockholders' equity and are not included in the
Company's consolidated statements of income. During this three month period,
Metro had net interest income of $10.7 million and net income of $6.8 million,
which included a $3.7 million credit for the cummulative effect of Metro's
change in accounting for income taxes.
In connection with the merger, the Company recorded a charge for
merger and related restructuring expenses of $14.3 million in 1994. As of
December 31, 1995, all cash payments associated with this charge have been made
except for certain rent payments due under long-term leases.

GREAT NECK BANCORP
In July 1995, the Bank consummated the cash purchase of Great Neck
Bancorp, the parent company of Bank of Great Neck, a Long Island based
commercial bank ("Great Neck"). Net assets acquired were $91 million,
including $49.4 million in net loans and deposit liabilities assumed were $90.3
million. The excess of cost over fair value of net assets acquired was $6.0
million and is being amortized over fifteen years. The operating results of
this purchased business are not significant to the consolidated financial
statements of the Company.

<PAGE> 25

PENDING ACQUISITIONS

EXTEBANK DOMESTIC COMMERCIAL BANKING BUSINESS
In September 1995, the Company announced that it had entered into an
agreement with Banco Exterior de Espana, S.A., Spain ("BEX") whereby the
Company will acquire the domestic commercial banking business of Extebank
("Extebank"), a wholly owned subsidiary of BEX, for $47.0 million in cash. As
of December 31, 1995, Extebank had approximately $410 million in total assets,
$222 million in net loans, $375 million in deposits and $30 million in
capital. The Company will merge Extebank into the Bank.

FIRST NATIONWIDE BANK - LONG ISLAND BRANCHES
In September 1995, the Company announced that the Bank had entered into an
agreement with First Nationwide Bank to acquire its ten Long Island branches
with approximately $600 million in deposits at a deposit premium of 6.35%.
The Company will receive cash of approximately $562 million.

The foregoing transactions are expected to close during the first quarter
of 1996.

NOTE 3 - SECURITIES

On November 15, 1995, the Financial Accounting Standards Board released a
special report, "A Guide to Implementation of SFAS 115", which allowed for a
one-time redesignation of securities out of the held-to-maturity category
without the otherwise required reevaluation of other securities in that
category. As a result, the Company transferred $191.5 million (fair value of
$190.9 million) in securities from held-to-maturity to available-for-sale on
December 30, 1995.

HELD-TO-MATURITY SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of held-to-maturity securities were as follows at
December 31,

<TABLE>
<CAPTION>
1995 1994
GROSS GROSS Gross Gross
AMORTIZED UNREALIZED UNREALIZED FAIR Amortized Unrealized Unrealized Fair
(in thousands) COST GAINS (LOSSES) VALUE Cost Gains (Losses) Value
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mortgage-Backed Securities . . . . $281,418 $2,101 ($2,293) $281,226 $485,650 $93 ($32,130) $453,613
State & Municipal Obligations . . . 60,725 448 (474) 60,699 64,672 217 (2,100) 62,789
U.S. Government Agencies' Obligations - - - - 54,793 - (4,462) 50,331
U.S. Treasury Securities . . . . . - - - - 26,377 2 (2) 26,377
--------------------------------------------------------------------------------------------
$342,143 $2,549 ($2,767) $341,925 $631,492 $312 ($38,694) $593,110
============================================================================================
</TABLE>

AVAILABLE-FOR-SALE SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of available-for-sale securities were as follows at
December 31,

<TABLE>
<CAPTION>
1995 1994
GROSS GROSS Gross Gross
AMORTIZED UNREALIZED UNREALIZED FAIR Amortized Unrealized Unrealized Fair
(in thousands) COST GAINS (LOSSES) VALUE Cost Gains (Losses) Value
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-Backed Securities . . . . . . $677,640 $3,410 ($1,064) $679,986 $100,903 $111 ($4,990) $96,024
U.S. Government Agencies' Obligations . 58,696 55 (199) 58,552 - - - -
U.S. Treasury Securities . . . . . . . 19,989 154 - 20,143 20,077 6 (292) 19,791
SBA Securities . . . . . . . . . . . . 29,500 468 - 29,968 - - - -
Equity Securities . . . . . . . . . . . 24,907 1,036 (107) 25,836 25,839 284 (133) 25,990
-------------------------------------------------------------------------------------------
$810,732 $5,123 ($1,370) $814,485 $146,819 $401 ($5,415) $141,805
===========================================================================================
</TABLE>

Mortgage-backed securities classified as held-to-maturity included $1.0
million and $92.8 million in collateralized mortgage obligations ("CMO") at
December 31, 1995 and 1994, respectively. Mortgage-backed securities ("MBS")
classified as available-for-sale included $216.1 million and $1.0 million in
CMO's at December 31, 1995 and 1994. These CMO securities, collaterialized by
either U.S. Government agency MBS's or whole loans, are principally
conservative current pay sequentials or PAC structures with a current weighted
average life of 3.5 years.

<PAGE> 26

The amortized cost and estimated fair value of securities at December 31,
1995, by contractual maturity, are presented in the table below. Expected
maturities will differ from contractual maturities since issuers may have the
right to call or prepay obligations without call or prepayment penalties.

<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
Amortized Fair Amortized Fair
(in thousands) Cost Value Cost Value
------------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less . . . . . . . . . . . . $21,709 $21,748 $19,607 $19,693
Due after one year through five years . . . . . 20,220 20,223 10,028 10,140
Due after five years through ten years . . . . 18,796 18,728 49,050 48,862
------------------------------------------------------
Subtotal . . . . . . . . . . . . . . . . . . 60,725 60,699 78,685 78,695
Mortgage-Backed and SBA Securities . . . . . . 281,418 281,226 707,140 709,954
Equity Securities . . . . . . . . . . . . . . - - 24,907 25,836
------------------------------------------------------
$342,143 $341,925 $810,732 $814,485
======================================================
</TABLE>

The prepayment of MBS's including CMO's is actively monitored through the
portfolio management function. Management typically invests in MBS's with
stable cash flows and relatively short duration, thereby limiting the impact of
interest rate fluctuations on the portfolio. Management regularly performs
simulation testing to assess the impact that interest and market rate changes
would have on its MBS portfolio.
The proceeds, gross realized gains and gross realized losses on the sale
of securities available-for-sale were as follows at December 31,

<TABLE>
<CAPTION>
(in thousands) 1995 1994
-------------------------------
<S> <C> <C>
Proceeds from Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $103,510 $272,175
===============================

Gross Realized Gains . . . . . . . . . . . . . . . . . . . . . . . . . . 6,728 2,467
Gross Realized Losses . . . . . . . . . . . . . . . . . . . . . . . . . . (349) (11,678)
-------------------------------
Net Realized Gains/(Losses) . . . . . . . . . . . . . . . . . . . . . . . $6,379 ($9,211)
===============================
</TABLE>

Gross realized gains in 1995 primarily resulted from the sale of equity
positions in certain financial institutions. In addition, the Company
recognized a $.9 million recovery on the settlement of a CMO written down in
1994. Gross realized losses for 1994 contain a $3.2 million charge to reduce
the carrying value of the aforementioned CMO, received by Metro in 1991 as a
partial settlement in a troubled debt loan restructuring. Proceeds from sales
of investments and debt securities were $73.2 million in 1993 with a gross
realized gain of $1.4 million.
At December 31, 1995, held-to-maturity securities carried at $278.5
million and available-for-sale securities carried at $315.9 were pledged for
various purposes as required by law and to secure securities sold under
agreements to repurchase and other borrowings. At December 31, 1994,
held-to-maturity securities carried at $127.8 million and available-for-sale
securities carried at $17.1 million were similarly pledged as collateral.

NOTE 4 - LOANS

The composition of the loan portfolio is summarized as follows at December
31,

<TABLE>
<CAPTION>
(dollars in thousands) 1995 1994
------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Loans-Multi-family . . . . . . . . . . . $662,329 33.4% $524,167 28.6%
Mortgage Loans-Residential . . . . . . . . . . . 552,681 27.8% 598,711 32.7%
Mortgage Loans-Commercial . . . . . . . . . . . . 367,158 18.5% 340,157 18.6%
Commercial & Industrial . . . . . . . . . . . . . 245,956 12.4% 241,544 13.2%
Consumer Loans and Leases . . . . . . . . . . . . 111,475 5.6% 72,098 3.9%
Land and Construction Loans . . . . . . . . . . . 45,429 2.3% 54,789 3.0%
------------------------------------------------------
Total . . . . . . . . . . . . . . . . . . . . $1,985,028 100.0% $1,831,466 100.0%
Less:
Unearned Income and Fees . . . . . . . . . . . . 18,588 17,429
Allowance for Loan Losses . . . . . . . . . . . 50,210 50,069
--------------- ------------
Net Loans . . . . . . . . . . . . . . . . . $1,916,230 $1,763,968
=============== ============
</TABLE>

<PAGE> 27

The loan portfolio is principally located in the metropolitan New York
area. The risk inherent in this portfolio is dependent not only upon regional
and general economic stability which affects property values, but also the
financial well-being and creditworthiness of the borrowers.
To minimize the credit risk related to the portfolio's real estate
concentration, management utilizes prudent underwriting standards as well as
diversifying the type and locations of loan placements. The multi-family
lending business includes loans of various types and geograhically diverse
apartment complexes. Multi-family loans are dependent largely on sufficient
income to cover operating expenses and may be affected by government
regulation, such as rent control regulations, which could impact the future
cash flows of the property. Most multi-family loans do not fully amortize.
Therefore, the principal outstanding is not significantly reduced prior to
contractual maturity. The residential mortgage portfolio is comprised
primarily of first mortgage loans on owner occupied 1-4 family residences
located in the metropolitan New York area. The commercial mortgage portfolio
contains loans secured by industrial developments, professional office
buildings, retail stores and shopping centers. Land loans are loans to finance
the acquisition of vacant land for future residential and commercial
development. Construction loans principally finance the construction of
industrial developments and single-family subdivisions.
Commercial and industrial loans consist primarily of loans to small and
medium size businesses. Consumer loans and leases represent credit to
individuals for household, family, and other personal expenditures and consist
primarily of loans and leases to finance new and used automobiles.
The Company's real estate underwriting standards include various limits on
the loan to value ratios based on the type of property, and the Company
considers among other things, the creditworthiness of the borrower, the
location of the real estate, the condition and value of the security property,
the quality of the organization managing the property, and the viability of the
project including occupancy rates, tenants and lease terms. Additionally, the
underwriting standards require appraisals and periodic inspections of the
properties as well as ongoing monitoring of operating results.
Included in residential mortgage loans at December 31, 1995 and 1994 were
loans held-for-sale of $1.3 million and $.6 million, respectively. Mortgage
loans serviced for others aggregated $421.7 million and $442.0 million as of
December 31, 1995 and 1994, respectively.

NON-PERFORMING ASSETS
Non-performing assets include loans ninety days past due and still
accruing, non-accrual loans and other real estate. Other real estate consists
of property acquired through foreclosure or deeds in lieu of foreclosure.
Non-performing assets at December 31, consisted of the following:

<TABLE>
<CAPTION>
(in thousands) 1995 1994
------------------------------
<S> <C> <C>
Loans Ninety Days Past Due and Still Accruing $1,088 $1,597
Non-Accrual Loans . . . . . . . . . . . . . . 31,506 40,516
------------------------------
Non-Performing Loans . . . . . . . . . . . 32,594 42,113
Other Real Estate . . . . . . . . . . . . . . 4,805 4,861
------------------------------
Non-Performing Assets . . . . . . . . . . $37,399 $46,974
==============================
</TABLE>

The largest concentration of non-performing loans are those secured by
real estate aggregating $24.6 million, or 75.3% of non-performing loans, at
December 31, 1995.
Interest foregone on non-accrual loans and other real estate, or the
amount of income that would have been earned had those loans remained
performing, aggregated $3.6 million, $4.5 million and $5.6 million in 1995,
1994, and 1993, respectively.

RESTRUCTURED LOANS
Restructured, accruing loans were $31.9 million and $37.0 million at
December 31, 1995 and 1994, respectively. Restructured loans on non-accrual
status at December 31, 1995 and 1994 were $.3 million and $2.2 million,
respectively. The amount of interest income recorded on restructured loans was
approximately $2.3 million, $3.0 million and $3.2 million in 1995, 1994 and
1993, respectively. The difference between income included in the results of
operations under the restructured terms and that amount which would have been
recognized had these loans performed in accordance with their original terms
was $.9 million, $.8 million and $.9 million in 1995, 1994 and 1993,
respectively.

The Company had no commitments to lend additional funds to borrowers whose
loans are non-performing or whose terms have been previously restructured at
December 31, 1995.

<PAGE> 28

RELATED PARTY LOANS
Loans to related parties include loans to directors and their related
companies and executive officers of the Company and any of its subsidiaries.
Such loans are made in the ordinary course of business on substantially the
same terms as loans to other individuals and businesses of comparable risks.
Related party loans aggregated $1.2 million and $.7 million at December 31,
1995 and 1994, respectively.

NOTE 5 - ALLOWANCE FOR LOAN LOSSES
A summary of changes in the allowance for loan losses is shown below for
the years ended December 31,

<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
-------------------------------------
<S> <C> <C> <C>
Balance at Beginning of Year . . . . . . . . . . . . . . . . . . . $50,069 $56,556 $69,583
Provisions for Loan Losses . . . . . . . . . . . . . . . . . . . . 9,000 3,275 10,300
Recoveries Credited to the Allowance . . . . . . . . . . . . . . . 3,642 4,331 3,678
-------------------------------------
62,711 64,162 83,561
Losses Charged to the Allowance . . . . . . . . . . . . . . . . . . (12,993) (14,457) (27,005)
Additional Allowance Acquired in Acquisition . . . . . . . . . . . 492 - -
Metro Net Activity for the Three Months Ended December 31, 1993 . . - 364 -
-------------------------------------
Balance at End of Year . . . . . . . . . . . . . . . . . . . . $50,210 $50,069 $56,556
=====================================
</TABLE>

As of December 31, 1995, $22.5 million in loans were impaired within the
scope of SFAS 114 and were carried on a non-accrual basis. Approximately 13%
of these loans were measured for impairment using the fair value of collateral,
while the remaining 87% were measured using the present value of the expected
future cash flows discounted at the loan's effective date. The application of
SFAS 114 measurement principles indicated that approximately $5.9 million of
these loans required valuation allowances, totalling $1.1 million, which are
included within the overall allowance for loan losses at December 31, 1995.
Residential mortgages and consumer loans and leases outside the scope of SFAS
114 are collectively evaluated for impairment. During 1995, the average amount
of impaired loans within the scope of SFAS 114 was approximately 27.0 million,
and the amount of cash basis interest income recognized on these loans was $1.1
million.

NOTE 6 - PREMISES AND EQUIPMENT
The following is a summary of premises and equipment at December 31,

<TABLE>
<CAPTION>
(in thousands)

1995 1994
------------------------------
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $9,164 $9,299
Bank Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,427 24,908
Leasehold Improvements . . . . . . . . . . . . . . . . . . . . . . 8,781 6,723
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,399 31,049
------------------------------
80,771 71,979
Accumulated Depreciation and Amortization . . . . . . . . . . . . . (35,602) (32,811)
------------------------------
$45,169 $39,168
==============================
</TABLE>

<PAGE> 29

NOTE 7 - SHORT TERM BORROWINGS

Federal funds purchased and securities sold under agreements to repurchase
and related information is summarized as follows at and for the years ended
December 31,

<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
Federal Funds Purchased

Period End Balance $ - $ 20,000 $ -
Maximum Amount Outstanding at Any Month End 60,000 25,000 -
Average Outstanding Balance 11,133 5,032 28
Weighted Average Interest Rate Paid 5.89% 5.47% 3.10%
Weighted Average Interest Rate at Year End - 6.00% -

Securities Sold Under Agreements to Repurchase
Period End Balance $391,369 $ - $255,643
Maximum Amount Outstanding at Any Month End 391,369 322,876 325,779
Average Outstanding Balance 90,362 239,656 176,491
Weighted Average Interest Rate Paid 5.77% 4.25% 3.49%
Weighted Average Interest Rate at Year End 5.81% - 3.41%
</TABLE>

Federal Home Loan Bank Advances with original maturities of less than one year
were $40.0 million at December 31, 1994 with a weighted average interest rate
of 5.63%. At December 31, 1995, the Company had no advances outstanding.

The Bank has arrangements with various correspondent banks providing
short-term credit for regulatory liquidity requirements. These lines of credit
aggregated $135.0 million at December 31, 1995.

NOTE 8 - LONG TERM BORROWINGS

During 1994, the Company issued a $25.0 million, 7.56% Senior Note (the
"Note") due April 20, 1999. The Note imposes certain restrictions on the
Company. These restrictions include, but are not limited to, the maintenance
of certain capital levels, limitations on the payment of dividends, limitations
on the repurchase of common stock, and additionally, the Note contains certain
prepayment penalties. A portion of the Note proceeds were used to prepay the
$20.0 million, 10.08% Senior Note due March 28, 1995. At December 31, 1995,
the Company was in compliance with the covenants of the Note.
Long-term Federal Home Loan Bank advances totaled $10 million at December
31, 1995 and 1994. These borrowings bear an interest rate of 10.00% and mature
on April 28, 1999.

<PAGE> 30

NOTE 9 - INCOME TAXES

The components of the consolidated income tax provision is shown below
for the years ended December 31,

<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
--------------------------------------
<S> <C> <C> <C>
Current Tax Expense . . . . . . . . . . . . . . . . . . . . . . $37,338 $22,268 $15,539

Deferred Tax Expense . . . . . . . . . . . . . . . . . . . . 1,141 1,508 2,922
Adjustment to Deferred Tax Assets and Liabilities
for Enacted Changes in Tax Rates . . . . . . . . . . . . . -- -- (193)
Change in Valuation Allowance . . . . . . . . . . . . . . . . . -- (6,850) (1,292)
--------------------------------------
Income Tax Provision . . . . . . . . . . . . . . . . . . . . . $38,479 $16,926 $16,976
======================================
</TABLE>

The following table reconciles the statutory U.S. Federal tax rate to the
effective tax rate on income before income taxes for the years ended December
31,

<TABLE>
<CAPTION>
RECONCILIATION OF STATUTORY RATE TO EFFECTIVE RATE 1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
Federal Income Tax Expense at Statutory Rates . . . . . . . . . 35.00% 35.00% 34.90%
Increase/(Reduction) Resulting from:
State and Local Income Taxes, Net of Federal Income Tax . . 7.87 9.3 4.6
Tax Exempt Interest, net . . . . . . . . . . . . . . . . . (1.08) (2.1) (1.8)
Accretion/Amortization of Purchase Accounting
Premiums and Discounts . . . . . . . . . . . . . . . . . (0.01) (0.5) (0.5)
Amortization of Excess Cost Over Fair Value of
Net Assets Acquired . . . . . . . . . . . . . . . . . . . 0.64 1.2 1.3
Recapture of Tax Bad Debt Reserve Due to Merger -- 7.3 -
Change in Valuation Allowance . . . . . . . . . . . . . . . -- (14.7) (2.7)
Federal Bad Debt Deduction less than Financial
Statement Provision . . . . . . . . . . . . . . . . . . . -- -- 2.5
Other, Net . . . . . . . . . . . . . . . . . . . . . . . . -- 0.8 1.5
---------------------------------------
Effective Tax Rate . . . . . . . . . . . . . . . . . . . . . . 42.42% 36.3% 39.8%
=======================================
</TABLE>

<PAGE> 31

The components of the net deferred tax asset are included in "Other Assets" in
the accompanying consolidated balance sheets at December 31, and are as
follows:

<TABLE>
<CAPTION>
(in thousands) 1995 1994
-------------------------
<S> <C> <C>
Deferred Tax Assets
Allowance for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . $20,352 $20,985
Deferred Compensation and Other Employee Benefit Plans . . . . . . . . . . 1,337 1,615
Unrealized Loss on Securities Available-for-Sale . . . . . . . . . . . . . . -- 2,143
Excess of Tax Basis Over Book Basis-Other Real Estate . . . . . . . . . . . 93 58
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,493 7,261
-------------------------
Gross Deferred Tax Asset . . . . . . . . . . . . . . . . . . . . . . . . $24,275 $32,062
Valuation Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,391) (3,391)
-------------------------
Deferred Tax Asset . . . . . . . . . . . . . . . . . . . . . . . . . . . $20,884 $28,671
=========================

Deferred Tax Liability
Tax Bad Debt Recapture . . . . . . . . . . . . . . . . . . . . . . . . . . ($4,185) ($5,873)
Unrealized Gain on Securities Available-for-Sale . . . . . . . . . . . . . ($3,391) --
Excess of Book Basis Over Tax Basis, Premises & Equipment . . . . . . . . . (375) (496)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,438) (2,004)
-------------------------
Deferred Tax Liability . . . . . . . . . . . . . . . . . . . . . . . . . ($9,389) ($8,373)
-------------------------
Net Deferred Tax Asset . . . . . . . . . . . . . . . . . . . . . . . . . $11,495 $20,298
=========================
</TABLE>

During 1994, the Company reduced its valuation allowance by $6.9 million
due to the improved earnings potential and the continued strengthening of the
quality of assets. During 1995, the Company's valuation allowance remained at
$3.4 million as it continues to reserve for a portion of the New York State and
City deferred tax assets due to uncertainties of realization since state and
city law does not provide for the utilization of net operating loss
carryforwards or carrybacks.

NOTE 10 - RETIREMENT AND OTHER EMPLOYEE BENEFITS PLANS

RETIREMENT PLAN
The Company maintains a retirement plan (the "Plan") covering
substantially all of its employees. Metro did not maintain a retirement Plan
and subsequent to the merger all former Metro employees became eligible for
participation in the Plan. Participants accrue a benefit each year equal to
five percent of their annual compensation, as defined, plus a rate of interest
based on one-year Treasury Bill rates, credited quarterly. Plan assets are
invested in a diversified portfolio of fixed income securities, mutual funds
and equity securities. The Company contributes to the Plan an amount
sufficient to meet Employee Retirement Income Security Act ("ERISA") funding
standards. The following table sets forth the funded status of the Plan, and
amounts recognized in the accompanying consolidated financial statements.

<TABLE>
<CAPTION>
December 31, 1995 1994
----------------------------
(in thousands)
<S> <C> <C>
Actuarial Present Value of Accumulated Benefit Obligation:
Vested Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ($17,676) ($14,653)
Non-Vested Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . (452) (315)
============================
Accumulated Benefit Obligation . . . . . . . . . . . . . . . . . . . . . . . (18,128) (14,968)
Effect of Projected Future Compensation Levels . . . . . . . . . . . . . . . (400) (372)
----------------------------
Projected Benefit Obligation . . . . . . . . . . . . . . . . . . . . . . . . (18,528) (15,340)
Plan Assets at Fair Value . . . . . . . . . . . . . . . . . . . . . . . . . . 18,344 14,376
----------------------------
Plan Assets Less than of Projected Benefit Obligation . . . . . . . . . . . . (184) (964)
Unrecognized Net Asset Value Existing at Plan Year End . . . . . . . . . . . (394) (458)
Unrecognized Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,573 3,845
Unrecognized Prior Service Cost . . . . . . . . . . . . . . . . . . . . . . . (2,787) (3,037)
----------------------------
Prepaid/ (Accrued) Pension Cost . . . . . . . . . . . . . . . . . . . . . . . $1,208 ($614)
============================
</TABLE>

<PAGE> 32

<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
--------------------------------------
<S> <C> <C> <C>
Components of Net Periodic Pension Expense:
Service Cost-Benefits Earned During the Year . . . . . . . . $834 $710 $613
Interest Cost on Projected Benefit Obligation . . . . . . . 1,268 1,188 1,115
Net Amortization and Deferral . . . . . . . . . . . . . . . 1,630 (1,685) (639)
--------------------------------------
$3,272 $213 $1,089
Less Actual Return on Plan Assets . . . . . . . . . . . . . . . 2,954 (184) 1,079
--------------------------------------
Net Periodic Pension Expense . . . . . . . . . . . . . . . . $778 $397 $10
======================================
Assumptions Used in Actuarial Computations were:
Weighted Average Discount Rate . . . . . . . . . . . . . . 7.25% 8.50% 7.50%
Rate of Increase in Future Compensation Levels . . . . . . 4.50% 4.50% 4.50%
Expected Long-Term Rate of Return on Assets . . . . . . . . 8.50% 8.50% 8.50%
</TABLE>

The Company maintains a supplemental retirement plan which restores to
specified senior executives the full level of retirement benefits they would
have been entitled to receive absent the ERISA provision limiting maximum
payouts under tax qualified plans. The actuarial present value of the
accumulated benefit obligation and the projected benefit obligation, which are
unfunded, was $164 thousand at December 31, 1995 and $162 thousand at December
31, 1994. Net periodic pension expense incurred in 1995, 1994 and 1993, for
the supplemental retirement plan was $33 thousand, $40 thousand and $31
thousand, respectively. The weighted average discount rate utilized to
determine the projected benefit obligation was 7.25% for 1995, 8.50% for 1994
and 7.50% for 1993. The assumed rate of future compensation increases was
4.50% for 1995 and 1994, and 5.50% for 1993 . The expected long-term rate of
return on plan assets was 8.50% for 1995 and 1994, and 7.0% for 1993.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits to
eligible retired employees. Health care benefits received range between 0% and
100% of coverage premiums based on an employee's age, years of service and
retirement date. Participants who retire after November 1, 1992 are
responsible for all premium increases after 1997. The Company's plan for its
postretirement obligation is unfunded.

The following table sets forth information related to the Company's
postretirement benefit obligations at December 31,

<TABLE>
<CAPTION>
(in thousands) 1995 1994
-----------------------------
<S> <C> <C>
Accumulated Postretirement Benefit Obligation
Retirees and Beneficiaries Eligible for Benefits . . . . . . . . . . . . $5,198 $3,725
Active Employees Fully Eligible for Benefits . . . . . . . . . . . . . . 743 619
-----------------------------
Accumulated Postretirement Benefit Obligation . . . . . . . . . . . 5,941 4,344
Unrecognized Transition Obligation (amortized over 20 year period) . . . 3,506 3,769
Unrecognized Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . 1,841 277
-----------------------------
Accrued Postretirement Benefit Obligation . . . . . . . . . . . . . . . . $594 $298
=============================
</TABLE>

The weighted average discount rate utilized to determine the accumulated
postretirement benefit obligation was 7.25% and 8.50% in 1995 and 1994,
respectively. The assumed rate of future compensation increases was 5.50% for
both years. The weighted average discount rate utilized to determine the net
periodic postretirement benefits expense was 8.50% and 7.50% for 1995 and 1994,
respectively.
In measuring the APBO, a 9.00% annual trend rate for health care costs was
assumed for the year ended December 31, 1995. These rates are assumed to
decline ratably to 5.5% through 2010, and remain at that level thereafter.
However, for retirees after November 1, 1992 no increases in the annual trend
rate are assumed for after 1997. If the assumed health care cost trend rate
changed by 1%, the APBO at December 31, 1995 would change by 6.5%. The effect
of a 1% change in the health care cost trend rate on the service and interest
cost components of net periodic postretirement benefits expense would be a
change of 6.3%.

<PAGE> 33

The net periodic postretirement benefits expense for the years ended
December 31, consisted of the following:

<TABLE>
<CAPTION>
(in thousands) 1995 1994 1993
---------------------------------------
<S> <C> <C> <C>
Service Cost (Benefits Earned During the Year) . . . . . . . . . . $48 $115 $39
Interest Cost on Accumulated Postretirement Benefit Obligation . . 411 396 325
Amortization of Transition Obligation and Net Loss . . . . . . . . 234 263 208
---------------------------------------
Net Periodic Postretirement Benefits Expense . . . . . . . . . . $693 $774 $572
=======================================
</TABLE>

401-(k) SAVINGS PLAN
The Company maintains a savings plan under section 401-(k) of the Internal
Revenue Code, covering substantially all current full-time and certain
part-time employees. Newly hired employees can elect to participate in the
savings plan after completing one year of service. Under the provisions of the
savings plan, employee contributions are partially matched by the Company.
This matching is fully vested for employees participating at the inception date
of the plan, however, the matching vests for all other plan participants 25%
per year beginning the second year of participation. Participant account
balances are invested at the direction of the participant into one or more
investment funds, including a fund which invests in shares of the Company's
common stock. The 401-(k) plan expense was $.7 million, $.8 million, and $.8
million for the years ended 1995, 1994 and 1993, respectively.

NOTE 11 - STOCK OPTIONS AND RIGHTS PLANS

1985 INCENTIVE STOCK OPTION PLAN
Under the plan, 360,000 shares of common stock were reserved for
issuance to key employees. Options were awarded by the Compensation and Stock
Committee of the Board of Directors ("Compensation Committee"), a committee
appointed by the Board of Directors. The plan provided that the option price
would not be less than the fair market value of the stock on the date the
option was granted. All options are exercisable upon the grant for a period of
ten years. At December 31, 1995, no shares remain authorized and unissued.

1987 LONG TERM INCENTIVE PLAN
The plan provided for two types of awards, non-qualified stock options and
restricted stock, to be granted either separately or in combination. Awards
were granted to employees by the Compensation Committee. The maximum aggregate
number of shares of common stock which could have been issued under the plan,
either as restricted stock awards or non-qualified stock options, was 400,000
shares. The value of restricted stock awarded under the plan is reflected as
deferred compensation at fair market value of the shares at the date of grant,
and amortized as additional compensation expense over the years the
restrictions lapse, which is generally 33 1/3% per year from years five to
seven after the grant date. The Compensation Committee, in its sole
discretion, may also accelerate the removal of any or all restrictions. If the
Company is a party to a merger, consolidation, sale of substantially all assets
or similar transaction and, as a result, the common stock is exchanged for
stock of another corporation, cash or other consideration, all restrictions on
restricted stock awarded under the plan and then outstanding will lapse and
cease to be effective, as of the day on which such corporate change is
consummated. At December 31, 1995, no shares remain authorized and unissued.

1989 EXECUTIVE MANAGEMENT COMPENSATION PLAN
The plan provides for two types of awards, non-qualified stock options and
restricted stock, to be granted either separately or in combination. Awards are
granted to executive officers by the Compensation Committee. The maximum
aggregate number of shares of common stock which may be issued under the plan,
either as restricted stock awards or non-qualified stock options, is 460,000
shares. Each non-qualified stock option awarded under the plan shall vest and
become exercisable with respect to 20% of the shares subject to the option on
the first anniversary of the date of grant. Thereafter, each option shall vest
and become exercisable with respect to an additional 20% of the original shares
subject to the option on each consecutive anniversary of the date of grant.
Restricted stock awarded under the plan contains similar restrictions as those
issued under the 1987 Long Term Incentive Plan. The right to grant awards under
the plan will terminate upon the earlier of December 31, 1999, or the issuance
of a number of shares equal to the maximum aggregate number reserved for
issuance under the plan. At December 31, 1995, 18,518 shares remain authorized
and unissued.

<PAGE> 34

1994 KEY EMPLOYEE STOCK PLAN
The plan provides for three types of awards (incentive stock options,
non-qualified stock options and restricted stock) to be granted either
separately or in combination. Awards are granted to employees by the
Compensation Committee . The maximum aggregate number of shares of common
stock which could be issued under the plan is 700,000 shares, with no more than
200,000 authorized for Restricted Stock. Restricted stock awarded under the
plan contains similar restrictions as those under the 1987 Long Term Incentive
Plan. The Compensation Committee, in its sole discretion, may also accelerate
the removal of any or all restrictions. If the Company is a party to a merger,
consolidation, sale of substantially all assets or similar transaction and, as
a result, the common stock is exchanged for stock of another corporation, cash
or other consideration, all restrictions on restricted stock awarded under the
plan and then outstanding will lapse and cease to be effective, as of the day
on which such corporate change is consummated. At December 31, 1995, 325,400
shares remain authorized and unissued. Of this amount, 186,250 shares were
issued in January 1996.

METRO STOCK PLANS - PRE-MERGER
Metro maintained several incentive stock option and non-qualified stock
option plans for its officers, directors and key employees. Generally, these
plans granted options to individuals at a price equivalent to the fair market
value of the stock at the date of grant and were exercisable over a ten year
period from the date of grant. Pursuant to the merger agreement, options
outstanding under these plans were converted into 739,038 options on the
Company's stock at exercise prices of $2.38 and $10.57 based on the merger
exchange ratio of 1.645. At December 31, 1995, 13,748 options remained
outstanding. Also, Metro had a Stock Appreciation Rights Plan (SAR) under
which participants became fully vested at the merger date. Compensation
expense recorded for these SAR's in 1994 and 1993 was $2.0 million and $1.0
million, respectively.

The following is a summary of the activity in the common stock option and
restricted stock plans for the three year period ended December 31, 1995.
<TABLE>
<CAPTION>
Restricted
Exercise Stock Grant
Options Price Awards Price
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1992 . . . . . 620,331 $5.44 - $25.13 122,142 $5.44 - $23.25
Granted . . . . . . . . . . . . . . . . . . 184,500 $7.94 - $12.69 8,000 $12.69
Exercised . . . . . . . . . . . . . . . . . (15,650) $6.88 - $8.81 - -
Forfeited . . . . . . . . . . . . . . . . . (30,350) $8.81 - $20.75 (1,034) $15.94 - $20.75
Vested . . . . . . . . . . . . . . . . . . - - (22,397) $5.81 - $23.25
Removal of Restrictions Accelerated - - (4,500) $7.94
----------- --------------

Outstanding at December 31, 1993 . . . . . 758,831 $5.44 - $25.13 102,211 $5.44 - $23.25
Metro Options Outstanding at Nov. 30, 1994 . 739,038 $2.38 - $10.57 - -
Granted . . . . . . . . . . . . . . . . . . 315,000 $10.57 - $15.75 10,000 $11.75 - $12.69
Exercised . . . . . . . . . . . . . . . . . (167,009) $2.38 - $12.69 - -
Forfeited . . . . . . . . . . . . . . . . . (31,700) $10.25 - $20.75 (4,334) $10.25 - $19.06
Vested . . . . . . . . . . . . . . . . . . - - (11,735) $13.94 - $19.06
Removal of Restrictions Accelerated - - (1,000) $12.25
----------- --------------

Outstanding at December 31, 1994 . . . . . 1,614,160 $2.38 - $25.13 95,142 $5.44 - $23.25
Granted . . . . . . . . . . . . . . . . . 42,500 $15.69 - $21.75 58,600 $12.69 - $22.88
Exercised . . . . . . . . . . . . . . . . . (698,068) $2.38 - $20.75 - -
Forfeited . . . . . . . . . . . . . . . . . (55,500) $18.13 - $20.75 (17,002) $5.44 - $19.06
Vested . . . . . . . . . . . . . . . . . . - - (3,836) $7.75 - $22.75
----------- --------------

OUTSTANDING AT DECEMBER 31, 1995 . . . . . 903,092 $2.38 - $25.13 132,904 $5.44 - $23.25
=========== ==============
</TABLE>

The table does not reflect the activity of the Metro plans pre-merger.
For the period from October 1, 1992 through November 30, 1994, Metro issued
104,260 options while 31,468 options were exercised, based upon the merger
exchange ratio of 1.645.

<PAGE> 35

DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Dividend Reinvestment and Stock Purchase Plan provides stockholders
with a method of investing cash dividends and/or optional cash payments in
additional common stock. Under the plan, cash dividends and/or optional cash
payments can be used to purchase common stock without brokerage commission .
The discount can be revised by the Board of Directors at its discretion. The
amount of optional cash payment allowed in any month is restricted requiring a
minimum optional cash payment of $200 per month and a maximum optional cash
payment for participants of $15,000 regardless of the number of shares owned.
At December 31, 1995, 407,107 shares remain authorized and unissued.

SHAREHOLDERS' RIGHTS PLAN AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company maintains a shareholders' rights plan. Each right under the
plan entitles the holder, following the occurrence of certain events, to
purchase a unit, consisting of one one-hundredth of a share of Series A Junior
Participating Preferred Stock, at a purchase price of $70 per unit, subject to
adjustment. The rights will become exercisable and transferable apart from the
common stock 10 days after the public announcement that a person or group has
acquired 20% or more of the outstanding shares of common stock, 10 business
days following the commencement of a tender or exchange offer that would result
in a person or group beneficially owning 25% or more of the outstanding shares
of common stock, or 10 days after the Board of Directors has determined that
any person has become the beneficial owner of a substantial amount (defined as
10% or greater) of the outstanding shares of common stock and that such
beneficial ownership is adverse to the Company in certain specified respects.
Rights held by such an acquiring person or persons may thereafter become void.
Under certain circumstances, a right may become a right to purchase common
stock or assets of the Company or common stock of an acquiring corporation at a
substantial discount. Under certain circumstances, the Company may redeem the
rights for $.01 per right. The rights will expire at the close of business on
March 13, 1999 unless earlier redeemed or exchanged by the Company.
The Company has arrangements with certain key executive officers that
provide for the payment of a multiple of base salary, should a
change-in-control, as defined, of the Company occur. These payments are
limited under guidelines for deductibility pursuant to Internal Revenue Service
regulations. Also, in connection with a potential change-in-control, the
Company adopted performance plans in which substantially all employees could
participate in a cash distribution. The amount of the performance plan cash
fund is established when a change-in-control transaction exceeds industry
averages and achieves an above average return for shareholders. A limitation
is placed on the amount of the fund and no performance pool is created if the
transaction does not exceed industry averages.

<PAGE> 36

NOTE 12 - PARENT COMPANY ONLY

CONDENSED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
(in thousands)
CONDENSED BALANCE SHEETS DECEMBER 31, 1995 1994
---------------------------
<S> <C> <C>
ASSETS
Deposits with Bank Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . $330 $2,186
Deposits with Other Financial Institutions . . . . . . . . . . . . . . . . . . . . . . 234 125
Securities Purchased Under Agreements to Resell with Bank Subsidiary . . . . . . . . . 10,000 7,500
Securities Available-for-Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,248 8,554
Investment in Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,609 258,344
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 755 819
Excess of Cost Over Fair Value of Net Assets Acquired . . . . . . . . . . . . . . . . . 7,731 8,171
---------------------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $341,907 $285,699
===========================

LIABILITIES AND STOCKHOLDERS' EQUITY
Senior Note Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $25,000 $25,000
Dividends Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,726 2,304
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,336 3,472
Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309,845 254,923
---------------------------
Total Liabilities & Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . $341,907 $285,699
===========================
</TABLE>

<TABLE>
<CAPTION>
(in thousands)

CONDENSED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
-------------------------------------------
<S> <C> <C> <C>
INCOME
Dividends from Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000 $8,300 $2,600
Net Securities Gains/(Losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,041 1,109 (295)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 745 345 298
-------------------------------------------
Total Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,786 9,754 2,603
-------------------------------------------

EXPENSE
Interest on Long-Term Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 1,901 1,966 2,582
Interest on Capital Note Payable to Bank Subsidiary . . . . . . . . . . . . . . . . - 129 363
Compensation & Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . 113 172 328
Occupancy & Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 73 82
Merger & Related Restructure Charges . . . . . . . . . . . . . . . . . . . . . . . - 1,122 -
Prepayment Penalty-Senior Notes Payable . . . . . . . . . . . . . . . . . . . . . . - 877 -
Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,114 1,297 1,606
Amortization of Excess of Cost Over Fair Value of Net Assets Acquired . . . . . . . 440 440 440
-------------------------------------------
Total Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,603 6,076 5,401
-------------------------------------------
Income/(Loss) before Income Taxes and Equity in Undistributed Earnings
of Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,183 3,678 (2,798)
Income Tax Expense/(Benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,022 (1,388) (2,227)
Equity in Undistributed Earnings of Subsidiaries
Bank Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,989 24,296 26,323
Non-Bank Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 310 (105)
-------------------------------------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,235 $29,672 $25,647
===========================================
</TABLE>

<PAGE> 37

<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995 1994 1993
--------------------------------------
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $52,235 $29,672 $25,647
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
(USED IN)/PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization . . . . . . . . . . . . . . . . . . . . . . . . . 147 245 410
Amortization of Excess of Cost Over Fair Value of Net Assets Acquired . . . . . 440 440 440
Equity in Undistributed Earnings of Subsidiaries . . . . . . . . . . . . . . . (50,074) (24,606) (26,218)
Net Securities (Gains)/Losses . . . . . . . . . . . . . . . . . . . . . . . . . (5,041) (1,109) 295
Other, Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479 1,236 (1,990)
--------------------------------------
Net Cash (Used in)/Provided by Operating Activities . . . . . . . . . . . . . (1,814) 5,878 (1,416)
--------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Securities Available-for-Sale . . . . . . . . . . . . . 20,963 3,819 17
Purchases of Securities Available-for-Sale . . . . . . . . . . . . . . . . . . (16,152) (10,266) -
--------------------------------------
Net Cash Provided by/(Used in) Investing Activities . . . . . . . . . . . . . 4,811 (6,447) 17
--------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the Issuance of Senior Note Payable . . . . . . . . . . . . . . . - 25,000 -
Repayments of Senior Notes Payable . . . . . . . . . . . . . . . . . . . . . . - (20,000) (20,000)
Repayment of Other Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . - (3,250) (174)
Purchase of Treasury Shares . . . . . . . . . . . . . . . . . . . . . . . . . . (1,316) (35) (45)
Common Stock Sold for Cash . . . . . . . . . . . . . . . . . . . . . . . . . . 11,297 3,696 19,260
Dividends Paid to Shareholders . . . . . . . . . . . . . . . . . . . . . . . . (12,225) (7,030) (2,364)
--------------------------------------
Net Cash Used in Financing Activities . . . . . . . . . . . . . . . . . . . . (2,244) (1,619) (3,323)
--------------------------------------
Net Increase/(Decrease) in Cash and Cash Equivalents . . . . . . . . . . . . 753 (2,188) (4,722)

Cash and Cash Equivalents at Beginning of Year . . . . . . . . . . . . . . . . . 9,811 12,665 17,387
Metro Activity for the Three Months Ended December 31, 1993 . . . . . . . . . . . - (666) -
--------------------------------------
Cash and Cash Equivalents at End of Year . . . . . . . . . . . . . . . . . . . . $10,564 $9,811 $12,665
======================================
</TABLE>

NOTE 13 - REGULATORY MATTERS

The Company is subject to the requirements of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"). FDICIA imposes a
number of mandatory supervisory measures on banks and thrift institutions.
Among other matters, FDICIA established five capital categories
(well-capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized). Such classifications are
used by the FDIC and other bank regulatory agencies to determine matters
ranging from each institution's semi-annual FDIC deposit insurance premium
assessments, approvals of applications authorizing institutions to grow their
asset size or otherwise expand business activities and to acquire other
depository and non-depository institutions.
Banks are generally required to maintain, for regulatory compliance and
reporting purposes, regulatory defined minimum Leverage and Risk-based capital
ratio levels at least 5% and 8%, respectively.
The Company and the Bank are considered well capitalized in accordance
with the requirements of FDICIA.
Dividends from the Bank to the Company are limited by the regulations of
the New York State Banking Department to the Bank's
current year's earnings plus the prior two years' retained net profits. The
Bank's dividend capability at January 1, 1996, pursuant to the regulations, was
approximately $74.6 million.
Certain of the Bank's deposits are insured under the Savings Association
Insurance Fund (SAIF). In connection with a proposed merging of the SAIF with
the Bank Insurance Fund (BIF), these SAIF insured deposits may be subject to a
one-time assessment. The Bank's SAIF deposits aggregated approximately $900
million at December 31, 1995. Further, the pending acquisition of deposits from
First Nationwide Bank (Note 2) are also insured under SAIF. These deposits
aggregate approximately $600 million at December 31, 1995. The amount of
assessment and approximate date of payment has not as yet been determined. The
Bank, which is considered an OAKAR institution, may receive a reduction of the
aggregate amount of the assessment.

<PAGE> 38

NOTE 14 - OTHER COMMITMENTS AND CONTINGENT LIABILITIES

(a) OFF-BALANCE SHEET RISKS
The Company is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend credit
and standby letters of credit. Such financial instruments are reflected in the
consolidated financial statements when and if proceeds associated with the
commitments are disbursed. The exposure to credit loss in the event of
nonperformance by the other party to the financial instrument for commitments
to extend credit and standby letters of credit is represented by the
contractual notional amount of those instruments. Management uses the same
credit policies in making commitments and conditional obligations as it does
for on-balance sheet financial instruments.
Commitments to extend credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Management evaluates each customer's creditworthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary, upon extension of
credit, is based on management's credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable, inventory,
property, plant and equipment, and income-producing properties.
Standby letters of credit are conditional commitments issued to guarantee
the performance of a customer to a third party. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers.
During 1994, the Company terminated its interest rate swap and cap
contracts which were used as hedges against interest rate risk associated with
certain securities available-for-sale. These contracts had an aggregate
notional value of $99 million, and were terminated at a net gain of $.9
million. At December 31, 1995, and 1994, the Company had no interest rate
swap or cap contracts outstanding.

The notional principal amount of the off-balance sheet financial
instruments at December 31, are as follows:

<TABLE>
<CAPTION>
1995 1994
CONTRACT OR Contract or
NOTIONAL Notional
AMOUNT Amount
(IN THOUSANDS) (in thousands)
---------------------------------
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk
Commitments to extend credit . . . . . . . . . . . . . . . . . . . . . $189,529 $124,050
Standby letters of credit . . . . . . . . . . . . . . . . . . . . . . . 13,468 13,933
</TABLE>

<PAGE> 39

(b) LEASE COMMITMENTS
At December 31, 1995, the Company was obligated under a number of
non-cancelable leases for land and buildings that expire at various dates
through August 2014. Minimum annual rental commitments , exclusive of taxes
and other charges, under non-cancelable leases are summarized as follows:

<TABLE>
<CAPTION>
Year Ended December 31, Minimum
(in thousands) Rentals
--------------------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . . . $3,364
1997 . . . . . . . . . . . . . . . . . . . . . 3,289
1998 . . . . . . . . . . . . . . . . . . . . . 2,653
1999 . . . . . . . . . . . . . . . . . . . . . 2,291
2000 . . . . . . . . . . . . . . . . . . . . . 1,927
Thereafter . . . . . . . . . . . . . . . . . . 9,768
</TABLE>

Rent expense for the years ended December 31, 1995, 1994 and 1993 amounted
to $2.4 million, $2.3 million and $2.0 million, respectively.

(c) OTHER MATTERS
The Bank is required to maintain balances with the Federal Reserve Bank of
New York for reserve and clearing requirements. These balances averaged $22.3
million in 1995.
The Company and its subsidiaries are subject to certain pending and
threatened legal actions which arise out of the normal course of business.
Management believes that the resolution of any pending or threatened
litigation will not have a material adverse effect on its financial condition
or results of operations.

NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107 "Disclosure about Fair
Value of Financial Instruments" ("SFAS 107") requires that the Company disclose
estimated fair values for its financial instruments. Fair value estimates are
based on relevant market information and information about the financial
instrument. SFAS 107 has no effect on financial position or results of
operations in the current year or any future period. Furthermore, the fair
values disclosed under SFAS 107 are not representative of the total value of
the Company.
If quoted market prices are not available, SFAS 107 permits using the
present value of anticipated future cash flows to estimate fair value.
Accordingly, the estimated fair value will be influenced by prepayment and
discount rate assumptions. This method may not provide the actual amount that
would be realized in the ultimate sale of the financial instrument. Fair value
estimates, methods and assumptions are set forth below.

CASH, CASH EQUIVALENTS, AND SECURITIES
The carrying amounts for cash and cash equivalents are reasonable
estimates of fair value. The fair value of securities is estimated based on
quoted market prices as published by various quotation services or if quoted
market prices are not available, on dealer quotes. The following table
presents the carrying value and estimated fair value of cash, cash equivalents,
and securities at December 31,

<TABLE>
<CAPTION>
(in thousands)
1995 1994
------------------------------------------------------------
CARRYING ESTIMATED Carrying Estimated
AMOUNT FAIR VALUE Amount Fair Value
------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents . . . . . . . . . $107,823 $107,823 $67,916 $67,916
Securities Held-to-Maturity . . . . . . . . 342,143 341,925 631,492 593,110
Securities Available-for-Sale . . . . . . . 814,485 814,485 141,805 141,805
------------------------------------------------------------
Total Cash, Cash Equivalents and Securities $1,264,451 $1,264,233 $841,213 $802,831
------------------------------------------------------------
</TABLE>

LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. The fair value of performing loans is calculated by
discounting the estimated cash flows through its expected maturity or repricing
using the current rates at which similar loans would be made to borrowers with
similar credit risks. For

<PAGE> 40

non-performing loans, the present value is separately discounted consistent
with management's assumptions in evaluating the adequacy of the allowance for
loan losses. The following table presents the carrying value and the estimated
fair value of the loan portfolio as of December 31, 1995 and 1994.

<TABLE>
<CAPTION>
(in thousands)
1995 1994
-----------------------------------------------------------
CARRYING ESTIMATED Carrying Estimated
AMOUNT FAIR VALUE Amount Fair Value
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Gross Loans . . . . . . . . . . . . . . . . $1,985,028 $1,970,175 $1,831,466 $1,747,761
===========================================================
</TABLE>

DEPOSIT LIABILITIES AND BORROWINGS
The carrying amount for demand deposits, savings, N.O.W., money market
accounts and borrowings with a term of 90 days or less are reasonable estimates
of fair value. Fair value for certificates of deposit and longer term
borrowings are estimated by discounting the future cash flows using the rates
currently offered for deposits and borrowings of similar remaining maturities.
The following table presents the carrying value and estimated fair value of the
deposits and borrowings as of December 31,

<TABLE>
<CAPTION>
(in thousands)

1995 1994
----------------------------------------------------------
CARRYING ESTIMATED Carrying Estimated
AMOUNT FAIR VALUE Amount Fair Value
----------------------------------------------------------
<S> <C> <C> <C> <C>
Demand Deposits . . . . . . . . . . . . . . $451,802 $451,802 $331,245 $331,245
Savings, N.O.W. and Money Market . . . . . 1,153,739 1,153,739 1,325,628 1,325,628
Certificates of Deposit . . . . . . . . . . 929,919 938,309 686,014 672,135
Borrowings with Terms of 90 Days or Less . 391,369 391,369 60,000 60,000
Borrowings with Terms Greater than 90 Days 35,000 36,761 35,000 33,678
----------------------------------------------------------
Total Deposits and Borrowings . . . . . $2,961,829 $2,971,980 $2,437,887 $2,422,686
==========================================================
</TABLE>

COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
These financial instruments generally are not sold or traded, and
estimated fair values are not readily available. However, the fair value of
commitments to extend credit and standby letters of credit is based on fees
currently charged to enter into similar agreements with comparable credit risks
and the current creditworthiness of the counterparties. Commitments to extend
credit issued by the Company are generally short-term in nature and, if drawn
upon, are issued under current market terms and conditions for credits with
comparable risks.
At December 31, 1995 and 1994, there was no significant unrealized
appreciation or depreciation on these financial instruments.

INTEREST RATE CAP, FLOOR AND SWAP AGREEMENTS
In 1993, the Company entered into a variety of interest rate contracts
including interest rate caps, floors and swaps to hedge against interest rate
risk. During 1994, the Company terminated its interest rate swap and cap
contract. The Company had no interest rate swap or cap contracts outstanding
at December 31, 1995 and 1994.

NOTE 16 - ACCOUNTING DEVELOPMENTS

ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of" ("SFAS 121"). This
Statement establishes the accounting and reporting standards for the
recognition of impairment on long-lived assets, certain identifiable
intangibles, and goodwill related to those assets. SFAS 121 does not apply to
financial instruments, long-term customer relationships of a financial
institution (such as core deposit, intangibles, mortgage servicing rights and
deferred tax assets, all of which are covered by existing accounting
standards).
SFAS 121 requires that an entity review long-lived assets, such as
premises and equipment and other real estate owned, and certain identifiable
intangibles for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. In these
situations, an entity is required to

<PAGE> 41

recognize an impairment loss if the sum of the estimated future cash flows, on
an undiscounted basis, is less than the carrying amount of the asset.
SFAS 121 is effective for fiscal years that begin after December 15, 1995.
Management is currently assessing the financial implications of implementing
SFAS 121 and believes that the adoption will not have a material adverse effect
on its financial condition or results of operations.

ACCOUNTING FOR MORTGAGE SERVICING RIGHTS
In May 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" ("SFAS 122"). This Statement amends certain provisions of Statement of
Financial Accounting Standards No. 65, "Accounting for Certain Mortgage Banking
Activities " requiring an entity to capitalize the rights to service mortgage
loans for others, whether those rights are acquired through loan origination
activities or purchased from others. Additionally, SFAS 122 requires an entity
to assess its capitalized mortgage servicing rights for impairment based on the
fair value of those rights.
SFAS 122 is effective for fiscal years that begin after December 15, 1995.
Management is currently assessing the financial implications of implementing
SFAS 122 and believes that it will not have a material adverse effect on its
financial condition or results of operations.

ACCOUNTING FOR STOCK BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock Based
Compensation" ("SFAS 123"). This Statement establishes the financial
accounting and reporting standards for employee stock-based compensation plans
in which an employer grants shares of its stock or other equity instruments to
employees except for employee stock ownership plans. SFAS 123 permits a
company to choose either a new fair value based method or continue to follow
the current arrangements under Accounting Principles Board Opinion No. 25
("Opinion No. 25") practice in accounting for its stock-based compensation.
SFAS 123 requires proforma disclosures of net income and earnings per
share computed as if the fair value based method had been applied in financial
statements of companies that continue to follow current practice in accounting
for such arrangements under Opinion No. 25.
SFAS 123 is effective for fiscal years that begin after December 15, 1995.
Management will adopt SFAS 123 in 1996 and expects to continue to follow the
current practice in accounting for such arrangements under Opinion No. 25.

<PAGE> 42

INDEPENDENT AUDITORS' REPORT LLP

KPMG Peat Marwick

To the Stockholders and Board of Directors of North Fork Bancorporation, Inc.:

We have audited the accompanying consolidated balance sheets of North Fork
Bancorporation, Inc. and subsidiaries as of December 31, 1995 and 1994, the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1995. These consolidated financial statements are the responsibility of North
Fork Bancorporation, Inc. management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of North Fork
Bancorporation, Inc. and subsidiaries as of December 31, 1995 and 1994, the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.

As discussed in the Notes to the consolidated financial statements, North
Fork Bancorporation, Inc. adopted Statement of Financial Accounting Standards
Nos. 114 and 118 in 1995, No. 115 in 1994 and Nos. 106 and 109 in 1993.

/s/ KPMG PEAT MARWICK LLP
- - -------------------------
New York, New York
January 16, 1996

<PAGE> 43

REPORT OF MANAGEMENT

Management of North Fork Bancorporation, Inc. is responsible for the
preparation, content and integrity of the consolidated financial statements and
all other information contained in this annual report. The consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles and, where necessary, are based on management's best
estimates and judgments. The financial information contained elsewhere in this
annual report is consistent with that contained in the consolidated financial
statements.

North Fork Bancorporation, Inc.'s independent auditors have been engaged to
perform an audit of the consolidated financial statements in accordance with
generally accepted auditing standards and the independent auditors' report
expresses their opinion as to the fair presentation of the consolidated
financial statements in accordance with generally accepted accounting
principles.

North Fork Bancorporation, Inc. maintains an internal control structure that
provides reasonable assurance that its accounting and administrative procedures
and reporting practices are of the highest quality and integrity. Because of
inherent limitations in any internal control structure, there can be no
absolute assurance that errors or irregularities will not occur. Nevertheless,
management believes that this structure provides reasonable assurance that
assets are safeguarded and reliable financial records are maintained for
preparing financial statements. An internal audit function is maintained to
continually evaluate the adequacy and effectiveness of such internal controls,
policies and procedures.

The Board of Directors pursues its oversight role for the financial
statements through the Audit Committee, which is composed entirely of outside
directors. The Audit Committee meets periodically with management, the
internal auditor and the independent auditor, to discuss the internal control
structure and accounting, auditing and financial reporting matters. The Audit
Committee reviews and approves the scope of internal and external audits, as
well as recommendations made with respect to the internal control structure by
the independent and internal auditors and the various regulatory agencies.

/s/ John Adam Kanas
- - -------------------
Chairman, President and Chief Executive Officer

/s/ Daniel M. Healy
- - -------------------
Executive Vice President and Chief Financial Officer

<PAGE> 1
EXHIBIT 21 SUBSIDIARIES OF REGISTRANT

North Fork Bank
North Fork Leasing Corp.
North Fork Capital Corp.
Compass Investment Services Corp.
North Interim
AcuData Service Corp. (inactive)

SUBSIDIARIES OF NORTH FORK BANK

NFB Development Corp.
Cutchco Corp.
First Settlers Corp.
Claire Elm Corp.
Howard Enterprises, Inc.
North Fork Information Services, Inc. (inactive)
North Fork Loan Service Corp. (inactive)
Long Island Mortgage Corp. (inactive)
Unified Management Corp. (inactive)
CPS Service Corp. (inactive)
East Quogue Health & Racquet Club, Inc. (inactive)
Bay Advertising (inactive)
BFS Service Corp. (inactive)
Great Weston Realty Corp. (inactive)
Bay Abstract (inactive)

<PAGE> 1
EXHIBIT 23 ACCOUNTANTS CONSENT

The Stockholders and Board of Directors
North Fork Bancorporation, Inc.:

We consent to the incorporation by reference in the Registration Statements
(Nos. 2-80676, 2-80677, 2-99984, 33-14903, 33-34372, 33-52504, 33-53467,
333-00675, and 33-56743) on Form S-8 and (Nos. 33-42294 and 33-54222) on Form
S-3 of North Fork Bancorporation, Inc. of our report dated January 16, 1996
relating to the consolidated balance sheets of North Fork Bancorporation, Inc.
and subsidiaries as of December 31, 1995 and 1994 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1995, which report is
incorporated by reference in the December 31, 1995 Annual Report on Form 10-K
of North Fork Bancorporation, Inc.

Our report refers to a change in the methods of accounting as discussed in the
notes to those statements.

/s/ KPMG PEAT MARWICK LLP
-------------------------
New York, New York
March 26, 1996

<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEC FORM
10-K FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

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