<PAGE> 1
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, 1993
Commission File Number 0-10280
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.)
9025 MAIN ROAD, MATTITUCK, NEW YORK 11952
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (516) 298-5000
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. (X)
As of March 10, 1994, there were 14,120,849 shares of the Registrant's
common stock outstanding. The aggregate market value of the Registrant's
common stock (based on closing price quoted on March 10, 1994) held by
non-affiliates was approximately $171,435,290.
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PART I
ITEM 1 BUSINESS
(A) GENERAL DEVELOPMENT OF BUSINESS
North Fork Bancorporation, Inc. (the "Registrant") located in Mattituck, New
York, is a commercial bank holding company incorporated under the laws of
Delaware and registered under the Federal Bank Holding Company Act of 1956, as
amended. The Company's primary subsidiary, North Fork Bank (the "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. The Bank provides a wide range of
commercial banking services through 35 branch locations throughout Suffolk,
Nassau, Westchester and Rockland Counties, New York.
The Registrant was organized in 1980 and in 1981 acquired Bank & Trust, a
commercial bank operating primarily on eastern Long Island, New York. Bank &
Trust was chartered on April 26, 1905 under the name Mattituck Bank and in 1950
changed its name to The North Fork Bank & Trust Company. During the 1950's,
three other banks located on the north fork of eastern Long Island were merged
into Bank & Trust. Since then, Bank & Trust had expanded its branch network to
other areas of Long Island primarily through de novo branching.
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 under the regulation of the New York State
Banking Department ("Banking Department") and the Federal Deposit Insurance
Corporation ("FDIC"). Southold, established in 1858, was Suffolk County's
oldest savings institution. Its focus had traditionally been to develop a
stable core deposit base and invest those funds in residential real estate
loans. 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 throughout
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 has four 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, 1993.
At December 31, 1993, the Registrant had assets of $1.9 billion, deposits of
$1.4 billion and stockholder's equity of $154.5 million. A more detailed
discussion concerning the Registrant's financial condition and results of
operations is contained in Part II of this report.
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PART I (CONTINUED)
ITEM 1 BUSINESS (CONTINUED)
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
Not applicable.
(C) NARRATIVE DESCRIPTION OF BUSINESS
GENERAL
The Registrant operates primarily through the Bank, which attracts deposits
through thirty five (35) retail banking facilities throughout Suffolk, Nassau,
Westchester and Rockland Counties, New York. The Bank's business consists
principally of attracting demand, savings and time deposits from the general
public and investing those deposits, together with funds generated from
operations, in commercial loans to small and medium sized businesses,
residential one to four family mortgage loans, commercial mortgage loans,
consumer loans and construction and land development loans. The Bank can also
obtain funds through short term borrowings, such as repurchase agreements,
utilizing its unpledged portfolio of agency guaranteed mortgage backed
securities as collateral. A portion of the Bank's assets are invested in
securities such as U.S. treasury securities, U.S. government agency
obligations, state and municipal obligations and agency guaranteed mortgage
backed securities. During 1993, the Bank undertook a balance sheet leverage
strategy to utilize excess capital and enhance operating results while
benefitting from the existing steepness in the yield curve. By obtaining funds
through short term repurchase agreement borrowings, the Bank invested in 7 and
15 year maturity agency guaranteed mortgage backed securities, realizing almost
200 basis points on the assets.
COMPETITION
The Bank's major competitors across the entire line of its products and
services are local branches of large money-center banks which are headquartered
in New York City and banks headquartered in other sections of New York State.
Additionally, this subsidiary also competes for loans and deposits with other
independent commercial banks in its marketplace; for deposits and mortgage
loans with local savings and loan associations and savings banks; for deposits
and consumer loans with credit unions; for deposits with insurance companies
and money market funds; and for consumer loans with local consumer finance
organizations and the financing affiliates of consumer goods manufacturers,
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.
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ITEM 1 BUSINESS (CONTINUED)
SUPERVISION AND REGULATION
GENERAL
The Registrant, as a bank holding company, is regulated under the Bank
Holding Company Act of 1956, as amended (the "Act"), and is subject to the
supervision of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"). Generally, the Act limits the business of bank
holding companies to banking, or managing or controlling banks, performing
certain servicing activities for subsidiaries, and engaging in such other
activities as the Federal Reserve Board may determine to be closely related to
banking.
The Federal Reserve Board has formal capital guidelines which bank holding
companies are required to meet. These guidelines include the "risk-based"
capital ratios and the leverage ratios, discussed below. The risk-based
capital guidelines are designed to make regulatory capital requirements more
sensitive to differences in risk profile 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 will 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 capital to risk-weighted assets of 8.00%, including a minimum
ratio of Tier 1 capital to risk-weighted assets of 4.00%. The Federal Deposit
Insurance Corporation has adopted comparable capital guidelines for state banks
which are not members of the Federal Reserve System.
Tier 1 capital consists of common equity, qualifying perpetual preferred
equity and minority interests in the equity accounts of unconsolidated
subsidiaries, less goodwill and other non-qualifying intangibles. After
December 31, 1992, the allowance for loan losses qualifies only as supplementary
capital and then only to the extent of 1.25% of total risk-weighted assets.
Other elements of supplementary capital, which is limited overall to 100% of
Tier 1 capital, include perpetual preferred equity not qualifying for Tier 1,
mandatory convertible debt and subordinated and other qualifying securities.
The Registrant's bank subsidiary, as a state chartered and FDIC insured
depository institution, is subject to the supervision, regulation and
examination of the Banking Department and the FDIC. The FDIC has formal
capital guidelines which banks are required to meet which are similar to those
imposed by the Federal Reserve Bank.
There are certain restrictions on the ability of the Bank to pay dividends
to the Registrant. Dividends from the Bank to the parent company are limited by
the regulations of the New York State Banking Department to the Bank's current
year's earnings plus it's prior two years' retained net profits. Based on the
parameters of this regulation, the Bank's dividend capability at January 1,
1994 includes it's 1994 earnings plus approximately $24.3 million in priors
years retained net profits.
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ITEM 1 BUSINESS (CONTINUED)
SUPERVISION AND REGULATION (CONTINUED)
HOLDING COMPANY LIABILITY
Federal Reserve Board policy requires bank holding companies to serve as a
source of financial strength to their subsidiary banks by standing ready to use
available resources to provide adequate capital funds to subsidiary banks
during periods of financial stress or adversity. A bank holding company also
could be liable under certain provisions of a new banking law for the capital
deficiencies of an undercapitalized bank subsidiary. In the event of a bank
holding company's bankruptcy under Chapter 11 of the U.S. Bankruptcy Code, the
trustee will be deemed to have assumed and is required to cure immediately any
deficit under any commitment by the debtor to any of the federal banking
agencies to maintain the capital of an insured depository institution, and any
claim for a subsequent breach of such obligation will generally have priority
over most other unsecured claims.
TRANSACTIONS WITH AFFILIATES
The Bank is subject to restrictions under federal law which limit a bank's
extensions of credit to, and certain other transactions with, affiliates. Such
transactions by the Bank with any one affiliate are limited in amount to 10
percent of such subsidiary bank's capital and surplus and with all affiliates
to 20 percent of such subsidiary bank's capital and surplus. Furthermore, such
loans and extensions of credit, as well as certain other transactions, are
required to be secured in accordance with specific statutory requirements. The
purchase of low quality assets from affiliates is generally prohibited.
Federal law also provides that certain transactions with affiliates, including
loans and asset purchases, must be on terms and under circumstances, including
credit standards, that are substantially the same, or at least as favorable to
the institution as those prevailing at the time for comparable transactions
involving other non-affiliated companies or, in the absence of comparable
transactions, on terms and under circumstances, including credit standards,
that in good faith would be offered to, or would apply to, non-affiliated
companies.
FIRREA
The deposits of the Bank are insured up to applicable limits by the FDIC.
Recent federal legislation that affects the competitive environment for the
Registrant includes the Financial Institutions Reform, Recovery and Enforcement
Act of 1989 ("FIRREA") which, among other things, provides for the acquisition
of thrift institutions by bank holding companies, increases deposit insurance
assessments for insured banks, broadens the enforcement power of federal bank
regulatory agencies, and provides that any FDIC-insured depository institution
may be liable for any loss incurred by the FDIC, or any loss which the FDIC
reasonably anticipates incurring, in connection with the default of any
commonly controlled FDIC-insured depository institution or any assistance
provided by the FDIC to any such institution in danger of default.
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ITEM 1 BUSINESS (CONTINUED)
SUPERVISION AND REGULATION (CONTINUED)
FDICIA
On December 19, 1991, the President signed into law the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA"). FDICIA substantially
revises the depository institution regulatory and funding provisions of the
Federal Deposit Insurance Act and makes revisions to several other federal
banking statutes.
Among other things, FDICIA requires the federal banking regulators to take
prompt corrective action in respect of depository institutions that do not meet
minimum capital requirements. FDICIA establishes five capital categories:
"well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," and "critically undercapitalized."
Under the regulations, a "well capitalized" institution has a minimum total
capital to total risk-weighted assets ratio of at least 10 percent, a minimum
Tier 1 capital to total risk-weighted assets ratio of at least 6 percent, a
minimum leverage ratio of at least 5 percent and is not subject to any written
order, agreement, or directive; an "adequately capitalized" institution has a
total capital to total risk-weighted assets ratio of at least 8 percent, a Tier
I capital to total risk-weighted assets ratio of at least 4 percent, and a
leverage ratio of at least 4 percent (3 percent if given the highest regulatory
rating and not experiencing significant growth), but does not qualify as "well
capitalized." An "undercapitalized" institution fails to meet any one of the
three minimum capital requirements. A "significantly undercapitalized"
institution has a total capital to total risk-weighted assets ratio of less
than 6 percent, a Tier I capital to total risk-weighted assets ratio of less
than 3 percent or a Tier I leverage ratio of less than 3 percent. A "critically
undercapitalized" institution has a Tier I leverage ratio of 2 percent or
less. Under certain circumstances, a "well capitalized" "adequately
capitalized" or "undercapitalized" institution may be required to comply with
supervisory actions as if the institution was in the next lowest capital
category.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are subject to
restrictions on borrowing from the Federal Reserve System, effective December
19, 1993. In addition, undercapitalized depository institutions are subject to
growth and activity limitations and are required to submit "acceptable" capital
restoration plans. Such a plan will not be accepted unless, among other
things, the depository institution's holding company guarantees the capital
plan, up to an amount equal to the lesser of five percent of the depository
institution's assets at the time it becomes undercapitalized or the amount of
the capital deficiency as of the time the institution fails to comply with the
plan. The federal banking agencies may not accept a capital plan without
determining, among other things,
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ITEM 1 BUSINESS (CONTINUED)
SUPERVISION AND REGULATION (CONTINUED)
FDICIA
that the plan is based on realistic assumptions and is likely to succeed in
restoring the depository institution's capital. If adepository institution
fails to submit an acceptable plan, it is treated as if it is significantly
undercapitalized and may be placed into conservatorship or receivership.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, more stringent requirements to
reduce total assets, cessation of receipt of deposits from correspondent banks,
further activity restricting prohibitions on dividends to the holding company
and requirements that the holding company divest its bank subsidiary, in
certain instances. Subject to certain exceptions, critically undercapitalized
depository institutions must have a conservator or receiver appointed for them
within a certain period after becoming critically undercapitalized.
FDIC regulations adopted under FDICIA prohibit a bank from accepting,
renewing or rolling-over brokered deposits unless (i) it is well capitalized,
or (ii) it is adequately capitalized and receives a waiver from the FDIC. For
purposes of this regulation, a bank is defined to be well capitalized if it
maintains a leverage ratio of at least 5 percent, a risk-adjusted Tier I
capital ratio of at least 6 percent and a risk-adjusted total capital ratio of
at least 10 percent and is not otherwise in a "troubled condition" as specified
by its appropriate federal regulatory agency. A bank that is adequately
capitalized and has been granted an FDIC waiver to accept, renew or roll-over
brokered deposits may not pay an interest rate on any such deposits in excess
of 75 basis points over prevailing market rates on comparable deposits in
specified market areas. There are no such restrictions on a bank that is well
capitalized. The Registrant anticipates that these regulations will not have a
material adverse effect on its operations.
For the capital ratios of the Registrant, see page 16 of the Registrant's
Annual Report to Shareholders for the year ended December 31, 1993 included
herein as Exhibit 13, and incorporated herein by reference.
FDIC INSURANCE ASSESSMENTS
The Bank is subject to FDIC deposit insurance assessments. Pursuant to
FDICIA, the FDIC adopted a transition risk-based system for determining deposit
insurance assessments that became effective on January 1, 1993. Under the
risk-based system, an insured institution will be assessed at rates in the
range of .23 percent to .31 percent depending on its capital and supervisory
classifications, as assigned by its primary federal regulator. The insurance
assessment rate for the Bank in 1993 was .26 percent, as it was considered a
"well capitalized" institution in a Tier II supervisory classification.
The FDIC has proposed, in substance, that the transitional risk-based
assessment system be adopted, with minor modifications, as the permanent
risk-based assessment system that must be made effective by January 1, 1994.
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ITEM 1 BUSINESS (CONTINUED)
SUPERVISION AND REGULATION (CONTINUED)
CONSERVATORSHIP AND RECEIVERSHIP POWERS OF FEDERAL BANKING AGENCIES
FDICIA significantly expanded the authority of the federal banking
regulators to place depository institutions into conservatorship or
receivership to include, among other things, appointment of the FDIC as
conservator or receiver of an undercapitalized institution under certain
circumstances. In the event a bank is placed into conservatorship or
receivership, the FDIC is required, subject to certain exceptions, to choose
the method for resolving the institution that is least costly to the bank
insurance fund of the FDIC, such as liquidation.
The FDIC may provide federal assistance to a "troubled institution" -
without placing the institution into conservatorship or receivership. In such
case, pre-existing debtholders and shareholders may be required to make
substantial concessions and, insofar as practical, the FDIC will succeed to
their interests in proportion to the amount of federal assistance provided.
Various other legislation, including proposals to overhaul the banking
regulatory system and to limit the investments that a depository institution
may make with insured funds are from time to time introduced in Congress. The
Registrant cannot determine the ultimate effect that FDICIA and the
implementing regulations to be adopted thereunder, or any other potential
legislation, if enacted, would have upon its financial condition or results of
operations.
MEMORANDA OF UNDERSTANDINGS
On February 17, 1994, the Federal Deposit Insurance Corporation (the "FDIC")
notified the Bank that based on the improvement in it's financial condition,
the FDIC was terminating the Memorandum of Understanding (the "MOU") dated
August 25, 1993 between the Bank, the FDIC and the New York State Banking
Department (the "NYSBD"). The Bank received similar notification from the NYSBD
on February 23, 1994. The MOU required the Bank to, among other things, (i)
maintain a Tier I leverage ratio of 5.50%; (ii) reduce the level of classified
assets as a ratio of capital and reserves and (iii) charge off all assets
classified "Loss" and 50% of those classified "Doubtful" in the FDIC and NYSBD
Reports on Examination.
On February 1, 1994, the Federal Reserve Bank of New York notified the
Registrant that in light of the noticeable improvement in it's financial
condition the Memorandum of Understanding dated October 22, 1992 was
terminated. The Federal Reserve Bank memorandum prohibited the Registrant from,
among other things, the payment of dividends and the renewal or modification of
the terms of existing indebtedness without prior regulatory approval.
EMPLOYEES
As of December 31, 1993, the Registrant and its subsidiaries employed 503
full time and 152 part time employees.
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ITEM 1 BUSINESS (CONTINUED)
STATISTICAL DISCLOSURE BY BANK HOLDING COMPANIES
Information required by the Securities Act Industry Guide 3, or Exchange Act
Guide 3 is presented on pages 6 through 14 inclusive under the caption
Management's Discussion and Analysis, and Quarterly Financial Information
located on page 17 in the Registrant's Annual Report to Shareholders for the
year ended December 31, 1993 included herein as Exhibit 13, and incorporated
herein by reference.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES
Not applicable.
ITEM 2 PROPERTIES
The Registrant's principal corporate offices are in a 28,300 square foot
facility located at 9025 Main Road, Mattituck, New York. This facility is
owned by the Bank and leased to the Registrant.
The Registrant's banking subsidiary owns nineteen (19) buildings and occupies
twenty-seven (27) other facilities under lease arrangements. All but three of
the facilities are utilized by the banking subsidiary for branch banking
offices. Of these three, one is an owned facility used by the loan servicing
and operations departments of the Registrant, one is the headquarters
facilities and the other is utilized by the Company's Special Asset Division.
The premises occupied or leased by the Registrant and its subsidiaries are
considered to be well located and suitably equipped to serve as banking
facilities.
ITEM 3 LEGAL PROCEEDINGS
Information required by this item can be found under the caption "Note 13 -
Other Commitments and Contingent Liabilities - (b) Other Matters", on page 40
of the Registrant's 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
EXECUTIVE OFFICERS OF THE REGISTRANT
The names and ages of the executive officers of the Registrant and positions
held by them and their backgrounds are presented in the following table. The
officers are elected annually by the Board of Directors.
<TABLE>
<CAPTION>
Name Age Positions Held in Most Recent 5 Years
<S> <C> <C>
John Adam Kanas 47 Chairman, President and Chief Executive Officer of the Registrant and the Bank,
throughout the past 5 years (except that Mr. Kanas did not serve as Chairman of the
Board of the Registrant from 8/88 through 12/89).
John Bohlsen 51 Vice Chairman of the Registrant (since 10/1/92) and of the Bank (12/21/89). Mr. Bohlsen
has been President of The Helm Development Corp., a real estate company, throughout the
past 5 years.
Daniel M. Healy 51 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.
</TABLE>
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PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS'
MATTERS
The Registrant's common stock is traded on the New York Stock Exchange under
the symbol NFB. As of February 14, 1994, there were 5,300 shareholders of
record of the Registrant's common stock. The Registrant has not declared
dividends in 1993 or 1992. The Registrant intends to commence shareholder
dividends in 1994.
For information regarding other dividend and liquidity restrictions, see the
"Liquidity" section of Management's Discussion and Analysis located on page 11,
the paragraph below the table in Note 7 on page 29 and the sixth paragraph of
Note 10 on page 35 of the Registrant's Annual Report to Shareholders for the
year ended December 31, 1993 located herein as exhibit 13 and incorporated
herein by reference.
ITEM 6 SELECTED FINANCIAL DATA
Pages 1 and 2 of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1993 included herein as exhibit 13 is incorporated herein by
reference.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Pages 2 through 17 inclusive in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1993 included herein as exhibit 13
are incorporated herein by reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages 18 through 44 inclusive in the Registrant's Annual Report to
Shareholders for the year ended December 31, 1993 included herein as exhibit 13
are incorporated herein by reference.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None
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PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item will appear under the caption "Nominee
for Director and Directors Continuing in Office" on page 3 of the Registrant's
Proxy Statement for its Annual Meeting of Stockholders to be held April 26,
1994, included herein as exhibit 23 and is incorporated herein by reference.
ITEM 11 EXECUTIVE COMPENSATION
The information required by this item will appear under the caption
"Executive Compensation" on pages 8 through 11, and under the caption
"Retirement Plan" on page 17 of the Registrant's Proxy Statement for
its Annual Meeting of Stockholder's to be held April 26, 1994, included herein
as exhibit 23 and is incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item will appear under the caption "Certain
Beneficial Ownership" and "Nominees for Director and Directors Continuing in
Office" on pages 2 through 6 of the Registrant's Proxy Statement for its Annual
Meeting of Stockholder's to be held April 26, 1994, included herein as exhibit
23 and is incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item will appear under the caption
"Transactions with Directors, Executive Officers and Associates" on page 18 of
the Registrant's Proxy Statement for its Annual Meeting of Stockholders to be
held April 26, 1994 included herein as exhibit 23 and is incorporated herein by
reference.
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) The following consolidated financial statements of the Registrant, its
bank subsidiary and its other subsidiaries, and the independent auditors'
report thereon, included on Pages 18 through 44, inclusive, of Registrant's
Annual Report to Stockholders for the fiscal year ended December 31, 1993,
included herein as exhibit 13 are incorporated herein by reference.
1. Consolidated Financial Statements:
Statements of Operations - For the years ended December 31, 1993, 1992
and 1991;
Balance Sheets - December 31, 1993, and 1992;
Statements of Cash Flows - For the years ended December 31, 1993, 1992
and 1991;
Statements of Changes in Stockholders' Equity - For the years ended
December 31, 1993, 1992 and 1991;
Notes to Consolidated Financial Statements.
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ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K, CONTINUED
2. There are no financial statement schedules required to be filed by the
Registrant.
3. The following exhibits are incorporated herein by reference:
Exhibit Prior
Number Description Filing
3(a) Articles of Incorporation Previously filed on Form S-3
dated 8/16/91 as Exhibit 4(b)
(Registration No.33-42294) and
incorporated herein by
reference.
4(a) Rights Agreement dated Incorporated by reference to
2/28/89, between North Fork Form 8-A Registration
Bancorporation,Inc. and statement dated 3/21/89.
The North Fork Bank & Trust
Company, as rights agent.
4(b) Warrant Agreement Previously filed on Form S-3
as Exhibit 4(e) to Amendment
No. 3 filed 7/14/92
(Registration No. 33-42294) and
incorporated herein by
reference.
4(c) Warrant Agreement Previously filed on Form S-3
dated 10/7/92 (Registration No.
33-53058) and incorporated
herein by reference.
10(a) North Fork Bancorporation, Inc. Previously filed on Form S-3
Dividend Reinvestment and Stock dated 11/3/82 (Registration No.
Purchase Plan 2-80166) and incorporated
herein by reference.
10(b) North Fork Bancorporation, Inc. Previously filed on Form S-8
1982 Incentive Stock Option Plan dated 12/1/82 (Registration No.
2-80676) and incorporated
herein by reference.
10(c) North Fork Bancorporation, Inc. Previously filed on Form S-8
1982 Stock Purchase Plan dated 12/1/82. (Registration
for Employees No. 2-80677) and incorporated
herein by reference.
10(d) North Fork Bancorporation, Inc. Previously filed on Form S-8
1982 Employee Stock Option Plan dated 8/25/89 (Registration No.
33-30751 and incorporated
herein by reference.
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ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
10(e) North Fork Bancorporation, Inc. Previously filed on Form S-8
1985 Incentive Stock Option Plan dated 8/29/85. (Registration
No.2-99984) and incorporated
herein by reference.
10(f) North Fork Bancorporation, Inc. Previously filed on Form S-8
1987 Long Term Incentive Plan dated 6/12/87 (Registration No.
33-14903) and incorporated
herein by reference.
10(g) North Fork Bancorporation, Inc. Previously filed on Form S-8
1989 Executive Management dated 4/17/90 (Registration No.
Compensation Plan 33-34372) and incorporated
herein by reference.
10(h) North Fork Bancorporation, Inc. Previously filed on Form S-8
1991 Stock Purchase Plan dated 3/15/91 (Registration No.
for Employees 33-39449) and incorporated
herein by reference.
10(i) North Fork Bancorporation, Inc. Previously filed on Form S-8
401(k) Retirement Savings Plan dated 9/28/92 (Registration No.
33-52504) and incorporated
herein by reference.
The following exhibits are submitted herewith:
Exhibit
Number Description
3(b) By Laws
11 Statement re: Computation of earnings per share.
13 Annual Report to Shareholders for the year ended
December 31, 1993.
21 Subsidiaries of Registrant
22 Registrant's Proxy Statement for its Annual Meeting
of Stockholders'
23 Accountants' Consent
(b) Reports on Form 8-K filed during the quarter ended December 31, 1993:
None.
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933 (the
"Act"), the undersigned Registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into Registrant's Registration
Statements on Form S-8 No. 2-80676 (filed December 1, 1982), No. 2-80677 (filed
December 1, 1982), No. 2-99984 (filed August 29, 1985), No. 33-14903 (filed
June 12, 1987), No. 33-30751 (filed August 25, 1989), No. 33-34372 (filed April
17, 1990), No. 33-39449 (filed March 5, 1991), and No. 33-52504 (filed
September 28, 1992).
PAGE 13
<PAGE> 14
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the act and will be governed by the final
adjudication of such issue.
PAGE 14
<PAGE> 15
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.
Dated: March 9, 1994 BY:/s/ John A. Kanas
--------------------------
JOHN A. KANAS,
President
(Principal Executive
Officer)
BY: /s/Daniel M. Healy
------------------------
DANIEL M. HEALY,
Executive Vice President
& Chief Financial
Officer
(Principal Accounting
Officer)
PAGE 15
<PAGE> 16
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 President and March 9, 1994
- -------------------------- Chairman of the Board
John A. Kanas
Director
- --------------------------
John Bohlsen
Director
- --------------------------
Malcolm J. Delaney
/s/Allan C. Dickerson Director March 9, 1994
- --------------------------
Allan C. Dickerson
Director
- --------------------------
Lloyd A. Gerard
Director
- --------------------------
James F. Reeve
/s/James H. Rich, Jr. Director March 9, 1994
- --------------------------
James H. Rich, Jr.
/s/George H. Rowsom Director March 9, 1994
- --------------------------
George H. Rowsom
/s/Raymond W. Terry, Jr. Director March 9, 1994
- --------------------------
Raymond W. Terry, Jr.
PAGE 16
<PAGE> 17
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
3(b) By Laws
11 Statement re: Computation of earnings per share.
13 Annual Report to Shareholders for the year ended
December 31, 1993.
21 Subsidiaries of Registrant
22 Registrant's Proxy Statement for its Annual Meeting
of Stockholders'
23 Accountants' Consent
<PAGE> 1
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULED, AND REPORTS ON FORM 8-K
(CONTINUED)
EXHIBIT 3 BY LAWS
BY-LAWS OF NORTH FORK BANCORPORATION, INC.
(A Delaware Corporation)
ARTICLE 1
DEFINITIONS
As used in these By-laws, unless the context otherwise requires, the term:
1.1 "Assistant Secretary" means an Assistant Secretary of the Corporation.
1.2 "Assistant Treasurer" means an Assistant-Treasurer of the Corporation.
1.3 "Board" means the Board of Directors of the Corporation.
1.4 "By-laws" means the initial by-laws of the Corporation, as amended
from time to time.
1.5 "Certificate of Incorporation" means the initial certificate of
incorporation of the Corporation, as amended, supplemented or restated from
time to time.
1.6 "Chairman" means Chairman of the Board of the Corporation.
1.7 "Corporation" means North Fork Bancorporation, Inc.
1.8 "Directors" means directors of the Corporation.
1.9 "General Corporation Law" means the General Corporation Law of the
State of Delaware, as amended from time to time.
1.10 "Office of the Corporation" means the executive office of the
Corporation, anything in Section 131 of the General Corporation Law to the
contrary notwithstanding.
1.11 "President" means the President of the Corporation.
-1-
<PAGE> 2
EXHIBIT 3 BY LAWS (CONTINUED)
1.12 "Secretary" means the Secretary of the Corporation.
1.13 "Stockholders" means stockholders of the Corporation.
1.14 "Total number of directors" means the total number of directors
determined in accordance with Section 141(b) of the General Corporation Law and
Section 3.2 of the By-Laws.
1.15 "Treasurer" means the Treasurer of the Corporation.
1.16 "Vice President" means a Vice President of the Corporation.
1.17 "Whole Board" means the total number of directors of the Corporation.
ARTICLE 2
STOCKHOLDERS
2.1 Place of Meeting. Every meeting of stockholders shall be held at the
office of the Corporation or at such other place within or without the State of
Delaware as shall be specified or fixed in the notice of such meeting or in the
waiver or notice thereof.
2.2 Annual Meeting. A meeting of stockholders shall be held annually for
the election of directors and the transaction of other business at such hour
and on such business day in March, April or May as may be determined by the
Board and designated in the notice of meeting.
2.3 Deferred Meeting for the Election of Directors, Etc. If the annual
meeting of stockholders for the election of directors and the transaction of
other business is not held within the
-2-
<PAGE> 3
EXHIBIT 3 BY LAWS (CONTINUED)
months specified in Section 2.2, the Board shall call a meeting of stockholders
for the election of directors and the transaction of other business as soon
thereafter as convenient.
2.4 Other Special Meetings. A special meeting of stockholders (other
than a special meeting for the election of directors), unless otherwise
prescribed by statute, may be called at any time by the Board, by the Chairman
or by the President. At any special meeting of stockholders only such business
may be transacted as is related to the purpose or purposes of such meeting set
forth in the notice thereof given pursuant to Section 2.6 of the By-laws or in
any waiver of notice thereof given pursuant to Section 2.7 of the By-laws.
2.5 Fixing Record Date. For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock, or for the purpose of any other lawful action, the Board
may fix, in advance, a date as the record date for any such determination of
stockholders. Such date shall not be more than sixty nor less than ten days
before the date of such meeting, nor more than sixty days prior to any other
action. If no such record date is fixed:
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<PAGE> 4
EXHIBIT 3 BY LAWS (CONTINUED)
2.5.1 The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held;
2.5.2 The record date for determining stockholders entitled to express
consent to corporate action in writing without 2 meeting, when no prior action
by the Board is necessary, shall be the day on which the first written consent
is expressed;
2.5.3 The record date for determining stockholders for any purpose other
than those specified in Sections 2.5.1 and 2.5.2 shall be at the close of
business on the day on which the Board adopts the resolution relating thereto.
When a determination of stockholders entitled to notice of or to vote at any
meeting of stockholders has been made as provided in this Section 2.5 such
determination shall apply to any adjournment thereof, unless the Board fixes a
new record date for the adjourned meeting.
2.6 Notice of Meetings of Stockholders. Except as otherwise provided in
Sections 2.5 and 2.7 of the By-laws, whenever under the General Corporation Law
or the Certificate of Incorporation or the By-laws, stockholders are required
or permitted to take any action at a meeting, written notice shall be given
stating
-4-
<PAGE> 5
EXHIBIT 3 BY LAWS (CONTINUED)
the place, date and hour of the meeting and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. A copy of the notice
of any meeting shall be given, personally or by mail, not less than ten or more
than sixty days before the date of the meeting, to each stockholder entitled to
notice of or to vote at such meeting. If mailed, such notice shall be deemed
to be given when deposited in the United States mail, with postage prepaid,
directed to the stockholder at his address as it appears on the records of the
Corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the Corporation that the notice required by this section has
been given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken, and at the
adjourned meeting any business may be transacted that might have been
transacted at the meeting as originally called. If, however, the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.7 Waivers of Notice. Whenever notice is required to be given to any
stockholder under any provision of the General Corporation Law or the
Certificate of Incorporation or the By-
-5-
<PAGE> 6
EXHIBIT 3 BY LAWS (CONTINUED)
laws, a written waiver thereof, signed by the stockholder entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a stockholder at a meeting shall constitute a waiver of
notice of such meeting, except when the stockholder attends a meeting for the
express purpose of objections, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any
written waiver of notice.
2.8. List of Stockholders. The Secretary shall prepare and make, or cause
to be prepared and made, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
-6-
<PAGE> 7
EXHIBIT 3 BY LAWS (CONTINUED)
2.9 Quorum of Stockholders; Adjournment. The holders of a majority of
the shares of stock entitled to vote at any meeting of stockholders, present in
person or represented by proxy, shall constitute a quorum for the transaction
of any business at such meeting. When a quorum is once present to organize a
meeting of stockholders, it is not broken by the subsequent withdrawal of any
stockholders. The holders of a majority of the shares of stock present in
person or represented by proxy at any meeting of stockholders, including an
adjourned meeting, whether or not a quorum, is present; may adjourn such
meeting to another time and place.
2.10 Voting; Proxies. Unless otherwise provided in the Certificate of
Incorporation every stockholder of record shall be entitled at every meeting of
stockholders to one vote for each share of capital stock standing in his name
on the record of stockholders determined in accordance with Section 2.5 of the
By- laws. If the Certificate of Incorporation provides for more or less than
one vote for any share, on any matter, every reference in the By-laws or the
General Corporation Law to a majority or other proportion of stock shall refer
to such majority or other proportion of the votes of such stock. The
provisions of Sections 212 and 217 of the General Corporation Law shall apply
in determining whether any shares of capital stock may be voted and the
persons, if any, entitled to vote such shares; but the Corporation shall be
protected in treating the persons in whose names shares
-7-
<PAGE> 8
EXHIBIT 3 BY LAWS (CONTINUED)
of capital stock stand on the record of stockholders as owners thereof for all
purposes. At any meeting of stockholders (at which a quorum was present to
organize the meeting), all matters, except as otherwise provided by law or by
the Certificate of Incorporation or by the By-laws, shall be decided by a
majority of the votes cast at such meeting by the holders of shares ?resent in
person or represented by proxy and entitled to vote thereon, whether or not a
quorum is present when the vote is taken. All elections of directors shall be
by written ballot unless otherwise provided in the Certificate of
Incorporation. In voting on any other question on which a vote by ballot is
required by law or is demanded by any stockholder entitled to vote, the voting
shall be by ballot. Each ballot shall be signed by the stockholder voting or
by his proxy, and shall state the number of shares voted. On all other
questions, the voting may be viva voce. Every stockholder entitled to vote at
a meeting of stockholders or to express consent or dissent to corporate action
in writing without a meeting may authorize another person or persons to act for
him by proxy. The validity and enforceability of any proxy shall be determined
in accordance with Section 212 of the General Corporation Law.
2.11 Selection and Duties of Inspectors at Meetings or Stockholders. The
Board, in advance of any meeting of stockholders, may appoint one or more
inspectors to act at the meeting or any adjournment thereof. If inspectors are
not so appointed, the
-8-
<PAGE> 9
EXHIBIT 3 BY LAWS (CONTINUED)
person presiding at such meeting may, and on the request of any stockholder
entitled to vote thereat shall, appoint one or more inspectors. In case any
person appointed fails to appear or act, the vacancy may be filled by
appointment made by the Board in advance of the meeting or at the meeting by
the person presiding thereat. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector at such meeting with strict impartiality and according to
the best of his ability. The inspector or inspectors shall determine the
number of shares outstanding and the voting power of each, the shares
represented at the meeting, the existence of a quorum, the validity and effect
of proxies, and shall receive votes, ballots or consents, hear and determine
all challenges and questions arising in connection with the right to vote,
count and tabulate all votes, ballots or consents, determine the result, and do
such acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the meeting or any
stockholder entitled to vote thereat, the inspector or inspectors shall make a
report in writing of any challenge, question or matter determined by him or
them and execute a certificate of any fact found by him or them. Any report or
certificate made by the inspector or inspectors shall be prima facie evidence
of the facts stated and of the vote as certified by him or them.
2.12 Organization. At every meeting of stockholders, the Chairman, or in
the absence of the Chairman, the President, shall
-9-
<PAGE> 10
EXHIBIT 3 BY LAWS (CONTINUED)
act as chairman of the meeting. The Secretary, or in his absence one of the
Assistant Secretaries, shall act as secretary of the meeting. In case none of
the officers above designated to act as chairman or secretary of the meeting,
respectively, shall be present, a chairman or a secretary of the meeting, as
the case may be, shall be chosen by a majority of the votes cast as such
meeting by the holders of shares of capital stock present in person or
represented by proxy and entitled to vote at the meeting.
2.13 Order of Business. The order of business at all meetings of
stockholders shall be as determined by the chairman of the meeting, but the
order of business to be followed at any meeting at which a quorum is present
may be changed by a majority of the votes cast at such meeting by the holders
of shares of capital stock present in person or represented by proxy and
entitled to vote at the meeting.
2.14 Written Consent of Stockholders Without a Meeting. Unless otherwise
provided in the certificate of Incorporation, any action required by the
General Corporation Law to be taken at any annual or special meeting of
stockholders of the Corporation, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, shall be signed by the holders of outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at
-10-
<PAGE> 11
EXHIBIT 3 BY LAWS (CONTINUED)
a meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have
not consented in writing.
ARTICLE 3
DIRECTORS
3.1 General Powers. Except as otherwise provided in the Certificate of
Incorporation, the business and affairs of the Corporation shall be managed by
or under the direction of the Board. The Board may adopt such rules and
regulations, not inconsistent with the Certificate of Incorporation or the
By-laws or applicable laws, as it may deem proper for the conduct of its
meetings and the management of the Corporation. In addition to the powers
expressly conferred by the By-laws, the Board may exercise all powers and
perform all acts which are not required, by the By-laws or the Certificate of
Incorporation or by law, to be exercised and performed by the stockholders.
3.2 Number; Qualification; Term of Office. The Board shall consist of
five or more members. The total number and classes of directors shall be fixed
initially by the incorporator. Thereafter, the total number of directors may be
changed from time to time by vote of the total number of directors then in
office. Each director shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal, or reaching age
70.
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<PAGE> 12
EXHIBIT 3 BY LAWS (CONTINUED)
3.3 Election. Directors shall, except as otherwise required by law or by
the Certificate of Incorporation, be elected by a plurality of the votes cast
at a meeting of stockholders by the holders of shares entitled to vote in the
election.
3.4 Newly Created Directorships and Vacancies. Unless otherwise
provided in the Certificate of Incorporation, newly created directorships
resulting from an increase in the number of directors and vacancies occurring
in the Board for any other reason may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director, or may be elected by a plurality of the votes cast by the holders of
shares of capital stock entitled to vote in the election at a special meeting
of stockholders called for that purpose. No change in the total number of
directors or filling of newly created or vacant directorships shall affect the
class of any director in office prior to such increase or filling. A director
elected to fill a vacancy shall be elected to hold office until his successor
is elected and qualified, or until his earlier death, resignation or removal,
or reaching age 70.
3.5 Resignations. Any director may resign at any time by written notice
to the Corporation. Such resignation shall take effect at the time therein
specified, and, unless otherwise specified, the acceptance of such resignation
shall not be necessary to make it effective.
3.6 Removal of Directors. Subject to the provisions of Section 141(1) of
the General Corporation Law, any or all of the
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<PAGE> 13
EXHIBIT 3 BY LAWS (CONTINUED)
directors may be removed by the holders of a majority of the shares when
entitled to vote at an election of directors.
3.7 Compensation. Each director, in consideration of his service as such,
shall be entitled to receive from the Corporation such amount per annum or such
fees for attendance at directors' meetings, or both, as the Board may from time
to time determine, together with reimbursement for the reasonable expenses
incurred by him in connection with the performance of his duties. Each
director who shall serve as a member of any committee of directors in
consideration of his serving as such shall be entitled to such additional
amount per annum or such fees for attendance at committee meetings, or both, as
the Board may from time to time determine, together with reimbursement for the
reasonable expenses incurred by him in the performance of his duties. Nothing
contained in this section shall preclude any director from serving the
Corporation or its subsidiaries in any other capacity and receiving proper
compensation therefor.
3.8 Place and Time of Meetings of the Board. Meetings of the Board,
regular or special, may be held at any place within or without the State of
Delaware. The times and places for holding meetings of the Board may be fixed
from time to time by resolution of the Board or (unless contrary to resolution
of the Board) in the notice of the meeting.
3.9 Annual Meetings. On the day when and at the place where the annual
meeting of stockholders for the election of
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<PAGE> 14
EXHIBIT 3 BY LAWS (CONTINUED)
directors is held, and as soon as practicable thereafter, the Board may hold
its annual meeting, without notice of such meeting, for the purposes of
organization, the election of officers and the transaction of other business.
The annual meeting of the Board may be held at any other time and place
specified in a notice given as provided in Section 3.11 of the By-laws, or
special meetings of the Board or in a waiver of notice thereof.
3.10 Regular Meetings. Regular meetings of the Board may be held at such
times and places as may be fixed from time to time by the Board. Unless
otherwise required by the Board, regular meetings of the Board may be held
without notice. If any day fixed for a regular meeting of the Board shall be a
Saturday or Sunday or a legal holiday at the place where such meeting is to be
held, then such meeting shall be held at the same hour at the same place on the
first business day thereafter which is not a Saturday, Sunday or legal holiday.
3.11 Special Meetings. Special meetings of the Board shall be held
whenever called by the Chairman or the President or by any two or more
directors. Notice of each special meeting of the Board shall, if mailed, be
addressed to each director at the address designated by him for that purpose
or, if none is designated, at his last known address at least two days before
the date on which the meeting is to be held; or such notice shall be sent to
each director at such address by telegraph, cable or wireless, or be
delivered to him personally, not later than the day before the
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<PAGE> 15
EXHIBIT 3 BY LAWS (CONTINUED)
date on which such meeting is to be held. Every such notice shall state the
time and place of the meeting but need not state the purposes of the meeting,
except to the extent required by law. If mailed, each notice shall be deemed
given when deposited, with postage thereon prepaid, in a post office or
official depository under the exclusive care and custody of the United States
post office department. Such mailing shall be by first class mail.
3.12 Adjourned Meetings. A majority of the directors present at any
meeting of the Board, including an adjourned meeting, whether or not a quorum
is present, may adjourn such meeting to another time and place. Notice of any
adjourned meeting of the Board need not be given to any director whether or not
present at the time of the adjournment. Any business may be transacted and any
adjourned meeting that might have been transacted at the meeting as originally
called.
3.13 Waiver of Notice. Whenever notice is required to be given to any
director or member of a committee of directors under any provision of the
General Corporation Law or of the Certificate of Incorporation or By-laws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully
-15-
<PAGE> 16
EXHIBIT 3 BY LAWS (CONTINUED)
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors, or members of a committee
of directors, need be specified in any written waiver of notice.
3.14 Organization. At each meeting of the Board, the Chairman of the
Corporation, or in the absence of the Chairman, the President of the
Corporation, or in his absence, a chairman chosen by a majority of the
directors present, shall preside. The Secretary shall act as secretary at each
meeting of the Board. In case the Secretary shall be absent from any meeting
of the Board, an Assistant Secretary shall perform the duties of secretary at
such meeting; and in the absence from any such meeting of the Secretary and all
Assistant Secretaries, the person presiding at the meeting may appoint any
person to act as secretary of the meeting.
3.15 Quorum of Directors A majority of the total number of directors
shall constitute a quorum for the transaction of business or of any specified
item of business at any meeting of the Board.
3.16 Action by the Board. All corporate action taken by the Board or any
committee thereof shall be taken at a meeting of the Board, or of such
committee, as the case may be, except that any action required or permitted to
be taken at any meeting of the Board, or of any committee thereof, may be taken
without a meeting if all members of the Board or committee, as the case may be,
consent thereto in writing, and the writing or writings are
-16-
<PAGE> 17
EXHIBIT 3 BY LAWS (CONTINUED)
filed with the minutes of proceedings of the Board or committee. Members of the
Board, or any committee designated by the Board, may participate in a meeting
of the Board, or of such committee, As the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 3.16 shall constitute presence in person at
such meeting. Except as otherwise provided by the Certificate of Incorporation
or by law, the vote of a majority of the directors present (including those who
participate by means of conference telephone or similar communications
equipment) at the time of the vote, if a quorum is present at such time,
shall be the act of the Board.
ARTICLE 4
COMMITTEES OF THE BOARD
The Board may, by resolution passed by a majority of the whole Board,
designate one or more committees, each committee to consist of one or more of
the directors of the corporation. The Board may designate one or more directors
as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
to act at the meeting
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<PAGE> 18
EXHIBIT 3 BY LAWS (CONTINUED)
in the place of any such absent or disqualified member. Any such committee, to
the extent provided in the resolution of the Board, shall have and may exercise
all the powers and authority of the Board in the management of the business and
affairs of the Corpora- tion, and may authorize the seal of the Corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation,
recommendations to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets, recommending to the
stockholders a dissolution of the Corporation or a revocation of a dissolution,
or amending the By-laws of the Corporation; and, unless the resolution
designating it expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
ARTICLE 5
OFFICERS
5.1 Officers. The Board shall elect a Chairman, a President, a Secretary
and a Treasurer, and may elect or appoint one or more Vice Presidents and such
other officers as it may determine. The Board may designate one or more Vice
Presidents as Executive Vice Presidents, and may use descriptive words or
phrases to designate the standing, seniority or area of special competence of
the Vice Presidents elected or appointed by it. Each officer shall hold his
office until his successor is elected and qualified or until
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<PAGE> 19
EXHIBIT 3 BY LAWS (CONTINUED)
his earlier death, resignation or removal in the manner provided in Section 5.2
of the By-laws. Any two or more offices may be held by the same person. The
Board may require any officer to give a bond or other security for the faithful
performance of his duties, in such amount and with such sureties as the Board
may determine. All officers as between themselves and the Corporation shall
have such authority and perform such duties in the management of the
Corporation as may be provided in the By-laws or as the Board may from time to
time determine.
5.2 Removal of Officers. Any officer elected or appointed by the Board
may be removed by the Board with or without cause. The removal of an officer
without cause shall be without prejudice to his contract rights, if any. The
election or appointment of an officer shall not of itself create contract
rights.
5.3 Resignations. Any officer may resign at any time by so notifying the
Board or the President or the Secretary in writing. Such resignation shall
take effect at the date of receipt of such notice or at such later time as is
therein specified, and, unless otherwise specified, the acceptance of such
resignation shall not be necessary to make it effective. The resignation of an
officer shall be without prejudice to the contract rights of the Corporation,
if any.
5.4 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled for the unexpired
portion of the term in the manner
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prescribed in the By-laws for the regular election or appointment to such
office.
5.5 Compensation. Salaries or other compensation of the officers may be
fixed from time to time by the Board. No officer shall be prevented from
receiving a salary or other compensation by reason of the fact that he is also
a director.
5.6 Chairman. The Chairman shall preside at each meeting of the
stockholders and the Board of the Corporation. He may sign and execute in the
name of the Corporation deeds, mortgages, bonds, contracts and other
instruments, except in cases where the signing and execution thereof shall be
expressly delegated by the Board or by the By-laws to some other officer or
agent of the Corporation, or shall be required by law otherwise to be signed or
executed; and, in general, he shall perform all duties incident to the Office
of Chairman and such other duties as from time to time may be assigned to him
by the Board.
5.7 President. The President shall be the chief executive officer of the
Corporation and shall have general supervision over the business of the
Corporation, subject, however, to the control of the Board and of any duly
authorized committee of directors. The President shall, if present, in
absence of the Chairman, preside at all meetings of the stockholders and at all
meetings of the Board. He may, with the Secretary or the Treasurer or an
Assistant Secretary or an Assistant Treasurer, sign certificates for shares of
capital stock of the Corporation. He may sign and execute in the name of the
Corporation deeds, mortgages, bonds,
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contracts and other instruments, except in cases where the signing and
execution thereof shall be expressly delegated by the Board or by the By-laws
to some other officer or agent of the Corporation, or shall be required by
law otherwise to be signed or executed; and, in general, he shall perform all
duties incident to the office of President and such other duties as from time
to time may be assigned to him by the Board.
5.8 Vice Presidents. At the request of the President, or, in his
absence, at the request of the Board, the Vice Presidents shall (in such order
as may be designated by the Board or, in the absence of any such designation,
in order of seniority based on age) perform all of the duties of the President
and so acting shall have all the powers of and be subject to all restrictions
upon the President. Any Vice President may also, with the Secretary or the
Treasurer or an Assistant Secretary or an Assistant Treasurer, sign
certificates for shares of capital stock of the Corporation; may sign and
execute in the name of the Corporation deeds, mortgages, bonds, contracts or
other instruments authorized by the Board, except in cases where the signing
and execution thereof shall be expressly delegated by the Board or by the
By-laws to some other officer or agent of the Corporation, or shall be required
by law otherwise to be signed or executed; and shall perform such other duties
as from time to time may be assigned to him by the Board or by the President.
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5.9 Secretary. The Secretary, if present, shall act as secretary of all
meetings of the stockholders and of the Board, and shall keep the minutes
thereof in the proper book or books to be provided for that purpose; he shall
see that all notices required to be given by the Corporation are duly given and
served; he may, with the President or a Vice President, sign certificates for
shares of capital stock of the Corporation; he shall be custodian of the seal
of the Corporation and may seal with the seal of the Corporation, or a
facsimile thereof, all certificates for shares of capital stock of the
Corporation and all documents the execution of which on behalf of the
Corporation under its corporate seal is authorized in accordance with the
provisions of the By-laws; he shall have charge of the stock ledger and also of
the other books, records and papers of the Corporation relating to its
organization and management as a Corporation, and shall see that the reports,
statements and other documents required by law are properly kept and filed; and
shall, in general, perform all the duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the Board
or by the President.
5.10 Treasurer. The Treasurer shall have charge and custody of, and be
responsible for, all funds, securities and notes of the Corporation; receive
and give receipts for moneys due and payable to the Corporation from any
sources whatsoever; deposit all such moneys in the name of the Corporation in
such banks,
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trust companies or other depositaries as shall be selected in accordance with
these By-laws; against proper vouchers, cause such funds to be disbursed by
checks or drafts on the authorized depositaries of the Corporation signed in
such manner as shall be determined in accordance with any provisions of the
By-laws and be responsible for the accuracy of the amounts of all moneys so
disbursed; regularly enter or cause to be entered in books to be kept by him or
under his direction full and adequate account of all moneys received or paid by
him for the account of the Corporation; have the right to require, from time to
time, reports or statements giving such information as he may desire with
respect to any and all financial transactions of the Corporation from the
officers or agents transacting the same; render to the President or the Board,
whenever the President or the Board, respectively, shall require him so to do,
an account of the financial condition of the Corporation and of all his
transactions as Treasurer; exhibit at all reasonable times his books of account
and other records to any of the directors upon application at the office of the
Corporation where such books and records are kept; and, in general, perform all
the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him by the Board or by the President; and he
may sign with the President or a Vice President certificates for shares of
capital stock of the Corporation.
5.11 Assistant Secretaries and Assistant Treasurers. Assistant
Secretaries and Assistant Treasurers shall perform such
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duties as shall be assigned to them by the Secretary or by the Treasurer,
respectively, or by the Board or by the President. Assistant Secretaries and
Assistant Treasurers may, with the President or a Vice President, sign
certificates for shares of capital stock of the Corporation.
ARTICLE 6
CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.
6.1 Execution of Contracts. The Board may authorize any officer,
employee or agent, in the name and on behalf of the Corporation, to enter into
any contract or execute and satisfy any instrument, and any such authority may
be general or confined to specific instances, or otherwise limited.
6.2 Loans. The President or any other officer, employee or agent
authorized by the By-laws or by the Board may effect loans and advances at any
time for the Corporation from any bank, trust company or other institutions or
from any firm, corporation or individual and for such loans and advances may
make, execute and deliver promissory notes, bonds or other certificates or
evidences of indebtedness of the Corporation, and, when authorized by the
Board so to do, may pledge and hypothecate or transfer any securities or other
property of the Corporation as security for any such loans or advances. Such
authority conferred by the Board may be general or confined to specific
instances or otherwise limited.
6.3 Checks, Drafts, Etc. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation and all notes or other
evidences of indebtedness of the Corporation
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shall be signed on behalf of the Corporation in such manner as shall from time
to time be determined by resolution of the Board.
6.4 Deposits. The funds of the Corporation not otherwise employed shall
be deposited from time to time to the order of the Corporation in such banks,
trust companies or other depositaries as the Board may select or as may be
selected by an officer, employee or agent of the Corporation to whom such power
may from time to time be delegated by the Board.
ARTICLE 7
STOCK AND DIVIDENDS
7.1 Certificates Representing Shares. The shares of capital stock of
the Corporation shall be represented by certificates in such form (consistent
with the provisions of Section 158 of the General Corporation Law) as shall be
approved by the Board. Such certificates shall be signed by the President or a
Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and may be sealed with the seal of the Corporation
or a facsimile thereof. The signatures of the officers upon a certificate may
be facsimiles, if the certificate is countersigned by a transfer agent or
registrar other than the Corporation itself or its employee. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon any certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, such
certificate may, unless otherwise ordered by the Board, be issued by the
Corporation with
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the same effect as if such person were such officer, transfer agent or
registrar at the date of issue.
7.2 Transfer of Shares. Transfers of shares of capital stock of the
Corporation shall be made only on the books of the Corporation by the holder
thereof or by his duly authorized attorney appointed by a power of attorney
duly executed and filed with the Secretary or a transfer agent of the
Corporation, and on surrender of the certificate or certificates representing
such shares of capital stock properly endorsed for transfer and upon payment of
all necessary transfer taxes. Every certificate exchanged, returned or
surrendered to the Corporation shall be marked "Cancelled," with the date of
cancellation, by the Secretary or an Assistant Secretary or the transfer agent
of the Corporation. A person in whose name shares of capital stock shall stand
on the books of the Corporation shall be deemed the owner thereof to receive
dividends, to vote as such owner and for all other purposes as respects the
Corporation. No transfer of shares of capital stock shall be valid as against
the Corporation, its stockholders and creditors for any purpose, except to
render the transferee liable for the debts of the Corporation to the extent
provided by law, until such transfer shall have been entered on the books of
the Corporation by an entry showing from and to whom transferred.
7.3 Transfer and Registry Agents. The Corporation may from time to time
maintain one or more transfer offices or agents and
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registry offices or agents at such place or places as may be determined from
time to time by the Board.
7.4 Lost, Destroyed, Stolen and Mutilated Certificates. The holder of any
shares of capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, theft or mutilation of the certificate
representing such shares, and the Corporation may issue a new certificate to
replace the certificate alleged to have been lost, destroyed, stolen or
mutilated. The Board may, in its discretion, as a condition to the issue of
any such new certificate, require the owner of the lost, destroyed, stolen or
mutilated certificate, or his legal representatives, to make proof satisfactory
to the Board of such loss, destruction, theft or mutilation and to advertise
such fact in such manner as the Board may require, and to give the Corporation
and its transfer agents and registrars, or such of them as the Board may
require, a bond in such form, in such sums and with such surety or sureties
as the Board may direct, to indemnify the Corporation and its transfer agents
and registrars against any claim that may be made against any of them on
account of the continued existence of any such certificate so alleged to have
been lost, destroyed, stolen or mutilated and against any expense in connection
with such claim.
7.5 Regulations. The Board may make such rules and regulations as it
may deem expedient, not inconsistent with the By-laws or with the Certificate
of Incorporation, concerning the issue,
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transfer and registration of certificates representing shares of its capital
stock.
7.6 Restriction on Transfer of Stock. A written restriction on the
transfer or registration of transfer of capital stock of the Corporation, if
permitted by Section 202 of the General Corporation Law and noted conspicuously
on the certificate representing such capital stock, may be enforced against the
holder of the restricted capital stock or any successor or transferee of the
holder including an executor, administrator, trustee, guardian or other
fiduciary entrusted with like responsibility for the person or estate of the
holder. Unless noted conspicuously on the certificate representing such
capital stock, a restriction, even though permitted by Section 202 of the
General Corporation Law, shall be ineffective except against a person with
actual knowledge of the restriction. A restriction on the transfer or
registration of transfer of capital stock of the Corporation may he imposed
either by the Certificate of Incorporation or by an agreement among any number
of stockholders or among such stockholders and the Corporation. No
restriction so imposed shall be binding with respect to capital stock issued
prior to the adoption of the restriction unless the holders of such capital
stock are parties to an agreement or voted in favor of the restriction.
7.7 Dividends, Surplus, Etc. Subject to the provisions of the
Certificate of Incorporation and of law, the Board:
7.7.1 May declare and pay dividends or make other distributions on the
outstanding shares of capital stock in
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such amounts and at such time or times as, in its discretion, the condition of
the affairs of the Corporation shall render advisable;
7.7.2 May use and apply, in its discretion, any of the surplus of the
Corporation in purchasing or acquiring any shares of capital stock of the
Corporation, or purchase warrants therefor, in accordance with law, or any of
its bonds, debentures, notes, scrip or other securities or evidences or
indebtedness;
7.7.3 May set aside from time to time out of such surplus or net profits
such sum or sums as, in is discretion, it may think proper, as a reserve fund
to meet contingencies, or for equalizing dividends or for the purpose of
maintaining or increasing the property or business of the Corporation, or for
any purpose it may think conducive to the best interests of the Corporation.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification of Officers and Directors. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was a director or an officer of the Corporation, against expenses
(including attorneys' fees), judgments, fines and amounts
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paid in settlement actually and reasonably incurred by him in connection with
such action, suit or proceeding to the fullest extent and in the manner set
forth in and permitted by the General Corporation Law, and any other applicable
law, as from time to time in effect. Such right of indemnification shall not
be deemed exclusive of any other rights to which such director or officer may
be entitled apart from the foregoing provisions. The foregoing provisions of
this Section 8.1 shall be deemed to be a contract between the Corporation and
each director and officer who serves in such capacity at any time while this
Article 8 and the relevant provisions of the General Corporation Law and other
applicable law, if any, are ln effect, and any repeal or modification thereof
shall not affect any rights or obligations then existing with respect to any
state of facts then or theretofore existing or any action, suit or proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts.
8.2 Indemnification of Other Persons. The Corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was an employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
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enterprise, against expenses (including attorneys' fees), judgments fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding to the extent and in the manner
set forth in and permitted by the General Corporation Law, and any other
applicable law, as from time to time in effect. Such right of indemnification
shall not be deemed exclusive of any other rights to which any such person may
be entitled apart from the foregoing provisions.
8.3 Insurance. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of Sections 8.1 and
8.2 of the By-laws or under Section 145 of the General Corporation Law or any
other provision of law.
ARTICLE 9
BOOKS AND RECORDS
9.1 Books and Records. The Corporation shall keep correct and complete
books and records of account and shall keep minutes of the proceedings of the
stockholders, the Board and any committee
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of the Board. The Corporation shall keep at the office designated in the
Certificate of Incorporation or at the office of the transfer Agent or
registrar of the Corporation, a record containing the names and addresses of
all stockholders, the number and class of shares held by each and the dates
when they respectively became the owners of record thereof.
9.2 Form of Records. Any records maintained by the Corporation in the
regular course of its business, including its stock ledger, books of account,
and minute books, may be kept on, or be in the form of, punch cards, magnetic
tape, photographs, microphotographs, or any other information storage device,
provided that the records so kept can be converted into clearly legible written
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
9.3 Inspection of Books and Records. Except as otherwise provided by
law, the Board shall determine from time to time whether, and, if allowed, when
and under what conditions and regulations, the accounts, books, minutes and
other records of the Corporation, or any of them, shall be open to the
inspection of the stockholders.
ARTICLE 10
SEAL
The Board may adopt a corporate seal which shall be in the form of a
circle and shall bear the full name of the Corporation, the year of its
incorporation and the word "Delaware."
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ARTICLE 11
FISCAL YEAR
The fiscal year of the Corporation shall be determined, and may be
changed, by resolution of the Board.
ARTICLE 12
VOTING OF SHARES HELD
Unless otherwise provided by resolution of the Board, the President may,
from time to time, appoint one or more attorneys or agents of the Corporation,
in the name and on behalf of the Corporation, to cast the votes which the
Corporation may be entitled to cast as a stockholder or otherwise in any other
corporation, any of whose shares or securities may be held by the Corporation,
at meetings of the holders of stock or other securities of such other
corporation, or to consent in writing to any action by any such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such votes or giving such consent, and may execute or cause
to be executed on behalf of the Corporation and under its corporate seal, or
otherwise, such written proxies, consents, waivers or other instruments as he
may deem necessary or proper in the premises; or the President may himself
attend any meeting of the holders of the stock or other securities of any such
other corporation and thereat vote or exercise any or all other powers of the
Corporation as the holder of such stock or other securities of such other
corporation.
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ARTICLE 13
AMENDMENTS
The By-laws may be altered, amended, supplemented or repealed, or new
By-laws may be adopted, by vote of the holders of the shares entitled to vote
in the election of directors. The By-laws may be altered, amended,
supplemented or repealed, or new By-laws may be adopted, by the Board. Any
By-laws adopted, altered, amended, or supplemented by the Board may be altered,
amended, or supplemented or repealed by the stockholders entitled to vote
thereon.
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Amendment to By-laws of North Fork Bancorporation, Inc. adopted by Board of
Directors on January 18, 1984:
2.15 Consideration of Submission of Tender Offers to Stockholder Vote.
The Officers and Board of Directors of the Corporation shall consider, on
an ongoing basis, not less often than annually, presenting to the stockholders
for ratification or rejection any tender offer (for the stock of any bank or
non-banking organization) that would involve the issuance of securities or the
payment of cash of a value of more than five percent of the total assets and
more than five percent of the net earnings and revenues, such percentages being
those which are determined at the end of each fiscal year of the Corporation.
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AMENDMENT TO BYLAWS OF NORTH FORK BANCORPORATION, INC. ADOPTED BY BOARD OF
DIRECTORS ON MARCH 21, 1984:
3.2 Number; Qualification; Term of Office. The Board shall consist
of five or more members. The total number and classes of directors shall be
fixed initially by the incorporator. Thereafter, the total number of directors
may be changed from time to time by vote of the total number of directors then
in office. Each director shall hold office until his successor is elected and
qualified or until his earlier death, resignation or removal, or until the
Annual Meeting next following his reaching age 70.
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AMENDMENT TO BYLAWS OF NORTH FORK BANCORPORATION, INC. ADOPTED BY BOARD OF
DIRECTORS ON JULY 26, 1988:
3.2 Number; Qualification; Term of Office. The Board shall consist
of five or more members. The total number and classes of directors shall be
fixed initially by the incorporator. Thereafter, the total number of
directors may be changed from time to time by vote of the total number of
directors then in office. Each director shall hold office until his successor
is elected and qualified or until his earlier death, resignation or removal,
or until his reaching age 70.
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AMENDMENT TO BYLAWS OF NORTH FORK BANCORPORATION, INC. ADOPTED BY BOARD OF
DIRECTORS ON JULY 28, 1992:
2.6 Notice of Meetings of Stockholders.
Section 2.6 of Article 2 is hereby amended by adding at the end of said
Section the following:
No business may be transacted at an annual meeting of stockholders, other
than business that is either (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors (or
any duly authorized committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of Directors (or any
duly authorized committee thereof) or (c) otherwise properly brought before the
annual meeting by any stockholder of the Company (i) who is a stockholder of
record on the date of the giving of the notice provided for in this Section 2.6
and on the record date for the determination ofstockholders entitled to vote at
such annual meeting and (ii) who complies with the notice procedures set forth
in this Section 2.5.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary
of the Company.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Company not
less than sixty (6) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not later
than the close of business on the tenth (10th) day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure or the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary must
set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii)
the class or series and number of shares of capital stock or the Company which
are owned beneficially or of record by such stockholder, (iv) a description
of all arrangements or understandings between such stockholder and any other
person or persons (including their names) in connection with the proposal of
such business by such stockholder and any material interest of such stockholder
in such business and (v) a representation that such stockholder intends to
appear in person or by proxy at the annual meeting to bring such business
before the meeting.
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No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 2.6, Provided, however, that, once
business has been properly brought before the annual meeting in accordance with
such procedures, nothing in this Section 2.6 shall be deemed to preclude
discussion by any stockholder of any such business. If the Chairman of an
annual meeting determines that business was not properly brought before the
annual meeting in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the business was not properly brought before the
meeting and such business shall not be transacted.
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AMENDMENT TO BYLAWS OF NORTH FORK BANCORPORATION, INC. ADOPTED BY BOARD OF
DIRECTORS ON JULY 28, 1992:
3.3 Elections.
Section 3.3 of Article 3 is hereby amended by adding at the end of said
Section the following:
Only persons who hare nominated in accordance with the following
procedures shall be eligible for election as directors of the Company.
Nominations of persons for election to the Board of Directors may be made at
any annual meeting of stockholders (a) by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (b) by any stockholder
of the Company who (i) who is a stockholder of record on the date of the giving
of the notice provided for in this Section 3.3 and on the record date for the
determination of stockholders entitled to vote at such annual meeting and (ii)
who complies with the notice procedures set forth in this Section 3.3.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof
in proper written form to the Secretary of the Company.
To be timely, a stockholder's notice to the Secretary must be delivered to
or mailed and received at the principal executive offices of the Company not
less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within thirty (30) days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received not later
than close of business on the tenth (10th) day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
of the date of the annual meeting was made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposed to nominate
for election as a director (i) the name, age, business address and residence
address of each person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares by the person and (iv)
any other information relating to the person that required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving such notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of capital stock of
the Company which are owned beneficially or of record by such stockholder,
(iii) a description of all arrangements or understandings between such
stockholder and each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s) are to be made by
such stockholder, (iv) a representation that such stockholder intends to appear
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in person or by proxy at the annual meeting to nominate the persons named in
its notice and (v) any other information relating to such stockholder that
would be required to be disclosed in a proxy statement or other filings
required to be made in connection with solicitations or proxies for election of
directors pursuant to Section 14 or the Exchange Act and the rules and
regulations promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a nominee and to
serve as a director if elected.
No person shall be eligible for election as a director of the Company
unless nominated in accordance with the procedures set forth in this Section
3.3. If the Chairman of the annual meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall
declare to the meeting that the nomination was defective and such defective
nomination shall be disregarded.
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ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE.
(dollars in thousands, except per share amounts)
Net Income $ 15,097
Weighted Average Equivalent
Shares Outstanding:
Average Outstanding Shares 13,730,647
Common Stock Equivalents (1) 651,222
Wtd Avg Shares 14,381,870
Earnings Per Share $ 1.05
(1) Represents warrants and options.
-1-
<PAGE> 1
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(CONTINUED)
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS
SELECTED FINANCIAL DATA
Selected financial data for each of the years in the five year period ended
December 31, 1993 are set forth below. The Registrant's consolidated financial
statements and notes thereto as of December 31, 1993 and 1992 and for each of
the years in the three year period ended December 31, 1993 are included
elsewhere herein.
<TABLE>
<CAPTION>
1993 1992 1991(1) 1990 1989
---- ---- ------- ---- ----
(in thousands, except ratios and per share amounts)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Interest Income (tax equivalent basis)(2) $ 119,924 $ 132,245 $ 154,489 $ 178,662 $ 176,991
Interest Expense 41,136 59,578 88,209 112,710 107,982
--------- ---------- ---------- --------- ---------
Net Interest Income (tax equivalent basis) 78,788 72,667 66,280 65,952 69,009
Less: Tax Equivalent Basis Adjustment 1,435 1,505 2,121 3,215 4,033
--------- ---------- ---------- --------- ---------
Net Interest Income 77,353 71,162 64,159 62,737 64,976
Provision for Loan Losses 6,000 21,000 64,800 31,282 3,550
Other Non-Interest
Income, net of net security gains 16,510 14,647 11,305 7,798 7,187
Net Security Gains 1,457 9,408 8,942 3,080 1,863
Other Expense, net of other real estate expense 52,396 54,299 47,833 45,548 41,326
Other Real Estate Expense 14,307 15,998 10,340 5,220 325
--------- ---------- ---------- --------- ---
Income/(Loss) Before Taxes 22,617 3,920 (38,567) (8,435) 28,825
Provision/(Benefit) for Income Taxes 7,520 2,190 (4,941) (4,958) 7,959
--------- ---------- ---------- --------- ---------
Net Income/(Loss) $ 15,097 $ 1,730 $ (33,626) $ (3,477) $ 20,866
========= ========== ========== ========= =========
AVERAGE BALANCE SHEET DATA:
Securities $ 643,726 $ 397,542 $ 296,786 $ 399,733 $ 316,856
Loans, net of unearned income 1,003,679 1,139,265 1,260,131 1,244,673 1,228,589
Assets 1,818,464 1,770,971 1,760,185 1,819,264 1,683,434
Deposits 1,456,562 1,545,624 1,486,505 1,436,820 1,355,694
Senior Notes 22,863 40,000 40,000 36,822 40,000
Federal Funds Purchased & Securities
Sold Under Agreements
to Repurchase 176,519 57,568 73,881 167,020 79,623
Stockholders' Equity 142,604 109,875 137,470 144,220 140,689
BALANCE SHEET DATA AT DECEMBER 31:
Securities $ 748,716 $ 441,927 $ 316,658 $ 321,255 $ 338,756
Loans, net of unearned income 1,017,084 1,045,183 1,218,829 1,194,031 1,293,033
Assets 1,883,881 1,700,857 1,778,182 1,657,179 1,790,304
Deposits 1,442,270 1,499,935 1,612,352 1,335,379 1,445,788
Senior Notes 20,000 40,000 40,000 40,000 40,000
Federal Funds Purchased & Securities
Sold Under Agreements
to Repurchase 255,643 28,200 366 132,705 114,072
Stockholders' Equity 154,472 119,823 109,791 131,386 142,577
PER SHARE:
Net Income/(Loss) $1.05 $0.16 $(3.36) $(0.39) $2.25
Cash Dividends - - 0.34 0.64 0.81
Book Value at December 31 10.95 10.12 10.18 14.45 15.79
Market Value at December 31 12.88 8.13 4.75 5.75 16.38
</TABLE>
1
<PAGE> 2
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
SELECTED FINANCIAL DATA (continued)
<TABLE>
<CAPTION>
1993 1992 1991(1) 1990 1989
---- ---- ------- ---- ----
(in thousands, except ratios and per share amounts)
<S> <C> <C> <C> <C> <C>
SELECTED RATIOS:
Return on Average Assets .83% 0.10% (1.91)% (0.19)% 1.24%
Return on Average Stockholder's Equity 10.59 1.54 (24.46) (2.41) 14.83
Core Efficiency Ratio (3) 54.98 60.82 61.68 63.19 54.24
Interest Rate Margin During Period 4.70 4.52 4.08 3.91 4.40
Interest Rate Spread During Period 4.27 4.19 3.45 3.16 3.47
Average Stockholders' Equity to Average Assets 7.84 6.41 7.81 7.93 8.36
Tier I Capital Ratio (4) 13.59 10.09 7.76 9.74 -
Risk Adjusted Capital Ratio (4) 14.88 11.39 9.26 11.28 -
Leverage Ratio (4) 7.55 6.50 5.61 7.24 -
Allowance for Loan Losses/NPL's 132.10 89.86 69.41 45.92 44.29
Net Charge-offs/Average Net Loans 1.78 1.46 4.26 1.01 0.17
Market Value/Book Value at December 31 117.63 80.34 46.66 39.79 103.74
AVERAGE EQUIVALENT SHARES OUTSTANDING 14,382 11,025 9,999 9,020 9,292
FULL TIME EQUIVALENT EMPLOYEES AT DEC 31 579 593 654 640 645
NUMBER OF BRANCH OFFICES 35 35 41 36 32
</TABLE>
(1) The results of operations for the Registrant include the results of
operations for Eastchester Savings Bank from July 1, 1991.
(2) Interest income on a tax equivalent basis includes the additional amount of
interest income that would have been earned if the Registrant'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 Federal income
taxes yielding the same after tax income.
(3) The core efficiency ratio is defined as the ratio of other expenses, net of
other real estate related costs and other non-recurring charges, to net
interest income on a taxable equivalent basis and other non-interest income net
of net security gains.
(4) In January 1989, the Federal Reserve Board issued final risk based capital
guidelines to be phased in over a two year transition period beginning December
31, 1990. As such, the Registrant's tier I, total risk based and leverage
capital ratios as of December 31, 1989 are not reported.
MANAGEMENT'S DISCUSSION AND ANALYSIS
This section presents management's discussion and analysis of the
consolidated financial condition and results of operations of North Fork
Bancorporation, Inc. (the "Registrant"), a $1.9 billion commercial bank holding
company whose primary subsidiary, North Fork Bank (the "Bank") operates 35
retail banking facilities throughout Suffolk, Nassau, Westchester and Rockland
Counties, New York. The Bank was created through the October 1992 merger of the
Registrant's banking subsidiaries, Southold Savings Bank and The North Fork
Bank & Trust Company. This discussion and analysis should be read in
conjunction with the financial statements and supplementary financial data
contained elsewhere in this 1993 Annual Report to Shareholders.
GENERAL OVERVIEW
During 1993, the Registrant returned to a consistent quarterly pattern of
core earnings, improved the quality of assets and strengthened it's liquidity
and capital. Earnings improved to $15.1 million this year, from $1.7 million
in the prior period, the result of a continued steady reduction in
non-performing assets, an expansion of the net interest margin, diversification
of revenue sources and exemplary cost savings initiatives. As asset quality
concerns were diminished, the provision for loan losses declined $15 million,
or 71%, to $6 million in 1993. Efforts to successfully integrate the
businesses of the Registrant's merged banking subsidiaries into one full
service commercial bank were illustrated by the expansion of the demand deposit
base to 17.9% of total deposits, growth in other non-interest income net of
security gains to $16.5 million, or 17.3% of total revenues while the
Registrant's core efficiency ratio continued its decline to 55.0%. Further
contributing to the improvement in the Registrant's operating results was the
continued decline in funding costs which caused an expansion in the margin to
4.70% in 1993, coupled with the additional earnings generated from the
Registrant's balance sheet leverage strategy described below.
2
<PAGE> 3
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
RESULTS OF OPERATIONS
The Registrant recognized net income of $15.1 million, or $1.05 per share, in
1993, as compared with $1.7 million, or $.16 per share, in 1992, and a net loss
of $33.6 million, or ($3.36) per share, in 1991. The Registrant's operating
results in 1992 included net security gains of $9.4 million and a $1.2 million
restructure charge associated with the October 1992 merger of the Registrant's
banking subsidiaries. The improvement in operating results in 1993 is primarily
attributable to the continued consistent decline in non-performing assets which
resulted in a reduction in the provision for loan losses to $6.0 million, as
compared with $21.0 million in 1992 and $64.8 million in 1991. Other factors
contributing to the positive progression in earnings include a $6.1 million
increase in net interest income, a $1.9 million increase in other non-interest
income net of security gains, a $3.6 million decline in operating costs,
partially offset by a $5.3 million increase in the income tax provision. Each
component of the improvement in the Registrant's 1993 operating results is
discussed in more detail below.
NET INTEREST INCOME
Net interest income, which represents the difference between interest earned
on interest earning assets and interest paid on interest bearing liabilities,
is the Registrant's primary source of earnings. It is affected by the level and
composition of interest earning assets and interest bearing liabilities, as
well as changes in market interest rates. The level of average interest earning
assets and average interest bearing liabilities slightly fluctuated from prior
years, with average interest earning assets increasing $69.6 million while
average interest bearing liabilities declined $49.0 million. In addition to the
effects of this change in the level of average interest earning assets and
average interest bearing liabilities, the following factors contributed to the
increase in net interest income: (i) a continued reduction in market interest
rates, (ii) the Registrant's balance sheet leverage strategy and (iii) growth
in the demand deposit base. Together these factors, partially offset by the
lack of strength in quality loan demand within the Registrant's marketplace,
contributed to a $6.1 million increase in net interest income, on a fully
taxable equivalent basis, to $78.8 million in 1993, from the $72.7 million
realized in 1992. The components of this increase include an $18.4 million
decline in interest expense, partially offset by a $12.3 million decline in
interest income.
Interest expense declined to $41.1 million in 1993, equating to an effective
cost of funds of 2.88%, as compared with $59.6 million, or an effective cost of
funds of 4.03%, in 1992. Of the $18.4 million decline in interest expense,
$14.7 million is the result of the short term interest rate environment in
1993, while the remaining $3.7 million is due to the changing composition of
the Registrant's funding cost and liability structure. As market interest rates
continued their decline during 1993, the value of the Registrant's low cost,
stable core deposit base became more evident. Declining deposit funding costs
contributed $14.6 million to the reduction in interest expense, as the rates
offered on savings deposits remain at historic lows, and maturing certificates
of deposits were reinvested at current lower market rates. Further contributing
to the decline in interest expense is the changing composition of the
Registrant funding sources. As comparatively higher yielding mutual funds and
annuities encouraged certain depositors to reinvest funds from maturing
certificates of deposits into non-bank products, and the success of the
conversion of the Registrant's former savings bank subsidiary into a full
service commercial bank evolves, the average balance of time deposits has
declined $120.4 million, or 25.9%, from prior period levels. The average
balance of savings and money market accounts aggregating $885.7 million in
1993, declined $30.4 million or 3.3% from the prior period. This decline may
also be attributable to the movement of depositor funds into higher yielding
alternative investments. Conversely, however, the average balance of demand
deposits has increased to $226.6 million in 1993, or $61.7 million, from prior
period levels, further evidence of the success of the former savings bank's
conversion to a full service commercial bank and efforts to expand the
Registrant's small and medium sized commercial client base. Demand deposits
comprise 17.9% of total deposits at December 31, 1993, as compared to 12.0% in
1992.
Partially offsetting the decline in interest expense is the interest
incurred on repurchase agreement borrowings, which increased to $6.2 million in
1993, or $3.8 million from the prior period. The average balance of repurchase
agreement borrowings increased to $176.5 million, or $119.0 million from the
prior year, the result of the Registrant's balance sheet leverage strategy.
During 1993, the Registrant implemented a balance sheet leverage plan so as to
stabilize net interest income, effectively utilize capital and benefit from the
existing steepness in the yield curve. Utilizing funds obtained through short
term repurchase agreements, the Registrant invested in agency guaranteed
mortgage backed securities realizing a spread of approximately 200 basis points
on the assets. The repurchase agreement borrowings are usually for a period of
ninety days, whereas the funds are invested primarily in seven and fifteen year
mortgage backed securities with an original weighted average life of
approximately four years. To mitigate interest rate risk due to the different
maturities of these assets and borrowings, the Registrant entered into an
interest rate swap agreement.
3
<PAGE> 4
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
NET INTEREST INCOME (CONTINUED)
A final component of the decline in interest expense is the full prepayment
of the Registrant's $20 million 9.30% Series B Senior Note during the 1993
first quarter, which reduced interest expense $1.6 million from 1992. This note
carried an effective interest rate of 10.30% as supplemental interest
aggregating 1.00% of the principal balance was required by the amended note
agreement for the period from August 1992 until the note was fully repaid.
Interest income, on a fully taxable equivalent basis, aggregated $119.9
million in 1993, a $12.3 million decline from the $132.2 million earned in
1992. The yield on interest earning assets, on a taxable equivalent basis,
declined to 7.15% in 1993 from 8.22% in the comparable prior year period.
Declining market interest rates and the lack of quality credit demand within
the Registrant's marketplace, partially offset by the success of the
Registrant's balance sheet leverage strategy, are the primary factors
contributing to this reduction in interest income. Interest earned on the
Registrant's loan portfolio declined $16.8 million when comparing 1993 and
1992, $11.7 million of the decline is attributable to a reduction in loan
origination volume and increased levels of loan repayments and satisfactions,
whereas $5.1 million of the decline is attributable to current market interest
rates and their effects on the Registrant's adjustable earning assets. The
average balance of loans has declined $135.6 million to $1,003.7 million in
1993 while the yield on the loan portfolio has also declined to 8.43% for the
year ended December 31, 1993, as compared with 8.90% in the comparable prior
year period. Improving asset quality has partially mitigated the decline in
loan yields as interest foregone, or that amount of income that would have been
recognized had the Registrant's non-accrual loans and other real estate
remained on an accrual basis declined to $5.0 million in 1993, as compared to
$15.0 million and $16.0 million in 1992 and 1991, respectively.
Income earned on the Registrant's mortgage backed securities portfolio
increased to $30.6 million in 1993, as compared with $23.9 million in 1992. The
average balance of mortgage backed securities, classified in the Registrant's
Held for Sale and Investment portfolios, increased to $580.0 million, or $241.8
million from the prior year. The primary source of the increase in the
average balance of mortgage backed securities was the Registrant's balance
sheet leverage strategy. The balance sheet leverage strategy utilized funds
generated from repurchase agreement borrowings and invested them in agency
guaranteed mortgage backed securities so as to effectively utilize capital,
take advantage of the steep yield curve and enhance operating results. Growth
in the average balance of mortgage backed securities has increased interest
income by $13.9 million. This increase was partially offset by $7.2 million due
to the effects of declining interest rates and the short term nature of the
securities in the Registrant's portfolio. The yield on the Registrant's
mortgage backed securities portfolio declined to 5.27% in 1993, as compared
with 7.07% in the comparable prior year period. The Registrant's strategy with
regard to its securities portfolio is to maintain a short weighted average
life, operating under the assumption that interest rates are near the bottom of
the interest rate cycle, so as to reduce the risk of depreciation in value if
interest rates were to increase, and to provide a source of cash flows that may
be reinvested as market interest rates begin to increase. The weighted average
life of the Registrant's Investment and Held for Sale portfolios at
December 31, 1993 was 2.82 years and 3.02 years, respectively.
4
<PAGE> 5
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
NET INTEREST INCOME (CONTINUED)
Net Interest income on a taxable equivalent basis for the year ended
December 31, 1992 increased $6.4 million to $72.7 million, from the $66.3
million realized in 1991. This growth in net interest income was the result of
a $28.6 million reduction in interest expense, partially offset by a $22.2
million reduction in interest income. Interest expense declined to $59.6
million in 1992, or 32.5%, as compared with $88.2 million incurred in 1991.
Lower market interest rates coupled with a significant change in composition of
the Registrant's funding sources were the primary factors contributing to the
reduction in interest expense. As lower market interest rates allowed the
Registrant to reduce rates offered on deposit products with limited risk of
significant deposit outflow during 1992, the Registrant's average cost of funds
declined to 4.03% in 1992, or 204 basis points, from 6.07% incurred in 1991.
Further contributing to this decline were the effects of the restructuring of
the Registrant's deposit base. The average balance of savings deposits, which
have proven to be historically lower cost deposits, increased $245.0 million,
or 36.5% from the 1991 average balance. Simultaneously, the average balance of
historically higher cost time deposits decreased $204.4 million, or 30.6% from
the 1991 average balance. This apparent migration can be attributed to the
movement of depositor's funds from maturing time deposits into more liquid
savings accounts, as the current yield on time deposits did not compensate the
depositor for the illiquidity associated with that deposit type. Another
factor contributing to the growth in the Registrant's net interest margin was
the $18.5 million, or 12.6%, growth in the average balance of demand deposits.
A continued emphasis communicated throughout the Registrant's branch network to
develop and build demand deposit account relationships and the success of
efforts to convert the former savings bank branches to full-service commercial
branches have contributed to this increase. Interest income, on a taxable
equivalent basis, declined $22.2 million to $132.3 million for the year ended
December 31, 1992, as compared with $154.5 million in 1991. This decline was
attributable to lower market interest rates and their effect on the yield of
the Registrant's adjustable rate interest earning assets, weak loan demand
within the Registrant's marketplace resulting in the investment of funds
generated from operations in securities at lower current market rates and
income foregone on non-accrual loans and other real estate. The average balance
of loans decreased to $1,139.3 million, or $120.9 million from 1991 levels
primarily due to weak loan demand, transfers to in-substance foreclosure and
other real estate owned, and charge-offs. The yield on the Registrant's loan
portfolio decreased to 8.90% from 9.85% due to lower market interest rates and
approximately $15.0 million of income foregone on non-accrual loans and other
real estate. Conversely, the average balance of securities, which include
trading assets, securities held for sale and investment securities, increased
to $398.9 million, or 32.3% from $301.5 million in 1991.
5
<PAGE> 6
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
NET INTEREST INCOME (CONTINUED)
The following table sets forth, for periods presented, a summary analysis of
changes in interest income and interest expense, and the resulting net interest
income on a tax equivalent basis for the periods presented, each as compared
with the preceding period. Because of the numerous simultaneous volume and rate
changes during the period analyzed, it is not possible to precisely allocate
changes between volumes and rates. For the purposes of this table, 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 rate as they compare to each other.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1993 over 1992 1992 over 1991
Changes due to Changes due to
Net Net
(in thousands) Volume Rate Change Volume Rate Change
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Deposits $ (324) $ (125) $ (449) $ 282 $ (65) $ 217
Trading Account Securities (56) - (56) (185) (121) (306)
Taxable Securities* (216) (220) (436) 1,238 (305) 933
Non-Taxable State and Municipal Obligations* 658 (759) (101) (1,521) 49 (1,472)
Mortgage-Backed Securities 13,895 (7,228) 6,667 7,470 (5,410) 2,060
Taxable Loans, including non-accrual loans (11,340) (5,207) (16,547) (10,817) (11,317) (22,134)
Non-Taxable Loans* (365) 118 (247) (644) 82 (562)
Federal Funds Sold (911) (241) 1,152) 145 (1,125) (980)
------- ------- ------- ------- -------- -------
Total Interest Earning Assets* 1,341 (13,662) (12,321) (4,032) (18,212) (22,244)
------- ------- ------- ------- -------- -------
INTEREST BEARING LIABILITIES:
Savings and Other Interest Bearing Deposits (6,004) (14,576) (20,580) (1,362) (24,882) (26,244)
Short Term Borrowings 4,215 (458) 3,757 (952) (1,663) (2,615)
Other borrowings (1,909) 290 (1,619) (1) 229 228
------- ------- ------- ------- -------- -------
Total Interest Bearing Liabilities (3,698) (14,744) (18,442) (2,315) (26,316) (28,631)
------- ------- ------- ------- -------- -------
Net Change in Net Interest Income* $ 5,039 $ 1,082 $ 6,121 $ (1,717) $ 8,104 $ 6,387
======= ======= ======= ======== ======== =======
</TABLE>
* Taxable equivalent basis.
The Registrant's net interest margin improved to 4.70% for the year ended
December 31, 1993, as compared with 4.52% in 1992, primarily the result of
lower funding costs, an increase in the average balance of demand deposits and
capital, partially offset by the decline in the yield on interest earning
assets. Lower market interest rates and the changing composition of interest
bearing liabilities had the positive effect of reducing funding costs 115 basis
points to 2.88% in 1993. Current market interest rates have provided the
Registrant with an opportunity to reduce rates offered on deposit products and
enhance the net interest margin. Further, the average balance of historically
higher cost time deposits has declined $120.4 million while simultaneously the
average balance of lower cost repurchase agreement borrowings has increased.
This change in funding composition is the result of two main events, (i) the
movement of depositors' funds from maturing time deposits into higher yielding
alternative investment products and (ii) the implementation of the Registrant's
balance sheet leverage strategy. Further contributing to the enhanced net
interest margin is the 37.4% increase in average demand deposit accounts and
the prepayment of the Registrant's senior note obligation during 1993. Capital
raised during the latter part of 1992 and in the 1993 first quarter, as well as
available cash at the holding company, provided the Registrant with the ability
to prepay its $20 million senior note obligation which carried an effective
interest rate of 10.30% utilizing funds which, during 1993, had no associated
cost.
As discussed previously, lower market interest rates and the lack of quality
loan demand have had an adverse effect on the Registrant's yield on interest
earning assets, reducing the proportion of higher yielding loans to interest
earning assets. The Registrant's balance sheet leverage strategy, while
increasing the level of interest income, further contributed to this change in
interest earning asset composition and decline in asset yield. The Registrant
invested the proceeds from repurchase agreement borrowings in short duration,
and thus lower yielding, agency mortgage backed securities so as to provide
cash flow and reduce the risk to capital in an increasing interest rate
6
<PAGE> 7
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
NET INTEREST INCOME (CONTINUED)
environment. As the securities portfolio has increased in proportion to level
of interest earning assets, the net yield on interest earning assets has
declined.
The Registrant's net interest margin improved to 4.52% for the year ended
December 31, 1992, as compared with 4.08% in 1991, as lower market interest
rates and the change in the Registrant's deposit composition significantly
reduced its cost of funds. The cost of funds associated with funding sources,
excluding the Registrant's senior note obligations, declined 211 basis points
to 3.85% in 1992, as compared with 5.96% in 1991. Growth in the Registrant's
core savings account deposits, coupled with the repayment of higher cost
repurchase agreements throughout 1991 and lower market interest rates were the
primary factors contributing to this decline. The effect of this reduction in
funding costs on the Registrant's net interest margin was partially offset by a
decline in the yield on average earning assets, the result of lower market
interest rates and their effect on the Registrant's adjustable rate earning
assets, the reinvestment of funds generated from operations in securities at
current lower market interest rates as well as income foregone on non-accrual
loans and other real estate.
The following table presents an analysis of net interest earnings by each
major category of interest earning assets and interest bearing liabilities:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993 1992
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 $ 528 $ 14 2.65% $ 10,988 $ 463 4.21%
Trading Account Securities - - - 1,379 56 4.06%
Taxable Securities* 38,116 2,154 5.65% 41,759 2,590 6.20%
Non-Taxable Municipals* 25,616 1,695 6.62% 17,571 1,796 10.22%
Mortgage-Backed Securities 579,994 30,563 5.27% 338,212 23,896 7.07%
Taxable Loans 990,614 82,668 8.35% 1,123,670 99,215 8.83%
Non-Taxable Loans* 13,065 1,920 14.69% 15,595 2,167 13.90%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 30,136 910 3.02% 59,340 2,062 3.47%
---------- ------- ---------- --------
Total Interest Earning Assets $1,678,069 119,924 7.15% $1,608,514 $132,245 8.22%
---------- ------- ---------- --------
Allowance for Loan Losses (56,075) (59,737)
Cash and Due from Banks 66,764 67,694
Other Non-Interest Earning Assets 129,706 154,500
---------- ----------
Total Assets $1,818,464 $1,770,971
========== ==========
INTEREST BEARING LIABILITIES:
Savings, N.O.W & Money Market Deposits $ 885,716 19,984 2.26% $ 916,124 $ 30,842 3.37%
Time Deposits 344,230 12,404 3.60% 464,580 22,126 4.76%
-------- ------ ------- ------
Total Savings & Time Deposits $1,229,946 32,388 2.63% 1,380,704 52,968 3.84%
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase 176,519 6,166 3.49% 57,568 2,409 4.18%
Other Borrowed Funds 22,995 2,582 11.23% 40,181 4,201 10.46%
---------- ----- ------ --------
Total Interest Bearing Liabilities $1,429,460 41,136 2.88% $1,478,453 $ 59,578 4.03%
---------- ------ ---------- --------
Rate Spread 4.27% 4.19%
Non-Interest Bearing Deposits $ 226,616 164,920
Other Non-Interest Bearing Liabilities 19,784 17,723
----------- ----------
Total Liabilities $ 1,675,860 $1,661,096
Stockholders' Equity 142,604 109,875
------------ ----------
Total Liabilities and Stockholders' Equity $ 1,818,464 $1,770,971
============ ==========
Net Interest Income* and Net Interest Margin* 78,788 4.70% 72,667 4.52%
Less: Tax Equivalent Basis Adjustment 1,435 1,505
------ -------
Net Interest Income 77,353 $71,162
====== =======
YEAR ENDED DECEMBER 31, 1991
Average Average
(dollars in thousands) Balance Interest Rate
<S> <C> <C> <C>
INTEREST EARNING ASSETS
Interest Earning Deposits $ 4,569 $ 246 5.40%
Trading Account Securities 4,755 362 7.61%
Taxable Securities* 22,403 1,657 7.40%
Non-Taxable Municipals* 32,464 3,268 10.07%
Mortgage-Backed Securities 241,919 21,836 9.03%
Taxable Loans 1,239,884 121,349 9.79%
Non-Taxable Loans* 20,247 2,729 13.48%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 56,538 3,042 5.38%
------ --------
Total Interest Earning Assets $1,622,779 $154,489 9.52%
---------- --------
Allowance for Loan Losses (39,912)
Cash and Due from Banks 64,803
Other Non-Interest Earning Assets 112,515
----------
Total Assets $1,760,185
==========
INTEREST BEARING LIABILITIES:
Savings, N.O.W & Money Market Deposits $671,093 $34,281 5.11%
Time Deposits 668,953 44,931 6.72%
------- ------
Total Savings & Time Deposits 1,340,046 79,212 5.91%
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase 73,881 5,024 6.80%
Other Borrowed Funds 40,193 3,973 9.89%
------ --------
Total Interest Bearing Liabilities $1,454,120 $ 88,209 6.07%
---------- --------
Rate Spread 3.45%
Non-Interest Bearing Deposits 146,459
Other Non-Interest Bearing Liabilities 22,136
----------
Total Liabilities $1,622,715
Stockholders' Equity 137,470
----------
Total Liabilities and Stockholders' Equity $1,760,185
==========
Net Interest Income* and Net Interest Margin* 66,280 4.08%
Less: Tax Equivalent Basis Adjustment 2,121
-------
Net Interest Income $64,159
=======
</TABLE>
* Interest income on a tax equivalent basis includes the additional amount of
interest and dividend income that would have been earned if the Registrant'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 $1.54, $1.58, $1.43 and $1.03 in 1993, $1.56, $1.54, $1.41 and
$1.03 in 1992, and $1.51, $1.50, $1.41 and $1.03 in 1991.
7
<PAGE> 8
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
ASSET/LIABILITY MANAGEMENT
The Registrant's risk management policies are established by the
Asset/Liability Committee ("ALCO"). ALCO is comprised of members of senior
management and the Board who meet on a monthly basis to, among other things,
evaluate the sensitivity of the Registrant's assets and liabilities to changes
in market interest rates and the resultant impact of those anticipated changes
on net interest income and capital. The basic responsibilities of ALCO include
the management of net interest income and the market value of the securities
portfolio, as well as the Registrant's liquidity position, to ensure minimal
capital risk and adequate funding.
Generally, where interest rate-sensitive assets exceed rate-sensitive
liabilities, the net interest margin will be positively impacted during periods
of rising interest rates and negatively affected in a declining interest rate
environment. Conversely, when interest-rate sensitive liabilities exceed
rate-sensitive assets, the net interest margin will be positively impacted in a
declining interest rate environment and negatively impacted in an increasing
rate environment. The difference between the maturities or repricing
characteristics of interest earning assets and interest bearing liabilities
during a given time period is commonly referred to as the "gap" for that
period. While the gap analysis employed by ALCO is a useful management tool as
it considers the quantity of assets and liabilities subject to repricing in a
given time period, it does not consider the relative sensitivity to market
interest rate changes characteristic of various interest rate sensitive assets
and liabilities. To supplement this analysis, ALCO utilizes an income
simulation model to assess and monitor interest rate risk. Income simulation
analysis determines the effect of various interest rate scenarios and changes
therein on the Registrant's net interest margin. It considers the maturity,
repricing characteristics and relative sensitivities of each asset and
liability to fluctuations in interest rates, as well as the probability of each
asset and liability reacting to such fluctuations. Through this process,
management can more clearly establish and monitor the interest rate risk in the
Registrant's balance sheet. ALCO has established current limits for the
estimated volatility of the net interest margin of +/-10% assuming a 300 basis
point increase in market interest rates and a 100 basis point decrease in
market interest rates in this current interest rate environment. The results
of the most recent income simulation model show that the interest sensitivity
of the Registrant's balance sheet is within guidelines established.
During 1993 ALCO determined that, based on the Registrant's excess capital
level and liquidity position and the continuing impact of declining interest
rates and lackluster loan demand on interest income, a balance sheet leverage
strategy was appropriate. This strategy is described in more detail in the Net
Interest Income section of this discussion. In summary, the Registrant obtained
funds through short term repurchase agreement borrowings and reinvested those
funds primarily in short duration 7 and 15 year agency guaranteed mortgage
backed securities, realizing an almost 200 basis points spread on the assets.
To mitigate the interest rate risk associated with the differences in these
asset and liability maturities, and maintain the volatility of the margin
within ALCO guidelines, the Registrant entered into certain off balance sheet
hedging agreements.
8
<PAGE> 9
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
ASSET/LIABILITY MANAGEMENT (CONTINUED)
The following table reflects the sensitivity of the Registrant's balance sheet,
or it's "gap" position at December 31, 1993 (dollars in thousands):
<TABLE>
<CAPTION>
0-90 91-180 181-365 1-5 Over
Days Days Days Years 5 Years Total
---- ------ ------- ----- ------- -------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Deposits $ 290 $ - $ - $ - $ - $ 290
Securities:
Held for Investment(1) 116,283 70,120 74,339 243,786 43,969 548,497
Held for Sale(1) 19,723 17,737 39,515 102,187 21,057 200,219
Loans, net of unearned income (2)(3) 436,887 68,072 137,534 236,844 104,263 983,600
-------- -------- -------- -------- -------- ----------
Total Interest Earning Assets $573,183 $155,929 $251,388 $582,817 $169,289 $1,732,606
-------- -------- -------- -------- -------- ----------
INTEREST BEARING LIABILITIES:
Savings, N.O.W. & Money Market Deposits (4) $ 79,305 $ 79,305 $158,609 $549,589 $ - $ 866,808
Time Deposits 100,824 83,309 72,840 60,505 537 318,015
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase 206,332 49,311 - - - 255,643
Senior Note Obligation - - - 20,000 - 20,000
-------- -------- -------- -------- -------- ----------
Total Interest Bearing Liabilities $386,461 $211,925 $231,449 $630,094 $ 537 $1,460,466
-------- -------- -------- -------- -------- ----------
Gap $186,722 $(55,996) $ 19,939 $(47,277) $168,752
-------- -------- -------- -------- --------
Effect of Off Balance Sheet Hedge Agreements 24,000 - - (24,000)
Gap, Net of Effect of
Off Balance Sheet Hedge Agreements $210,722 (55,996) 19,939 (71,277) 168,752
Cumulative Difference Between Interest Earning
Assets and Interest Bearing Liabilities $210,722 $154,726 $174,665 $103,388 $272,140
======== ======== ======== ======== ========
Cumulative Difference as a Percentage of
Total Assets 11.19% 8.21% 9.27% 5.49% 14.45%
===== ==== ==== ==== =====
</TABLE>
Notes: (1) Based upon (a) contractual maturity, (b) repricing date, if
applicable, and (c) projected repayments of principal based upon
experience.
(2) Based upon (a) contractual maturity, (b) repricing date, if
applicable, and (c) management's estimates of prepayments of
principal.
(3) Excludes non-accrual loans of $33.5 million.
(4) Savings, N.O.W. and Money Market Deposits are allocated to specific
time bands in accordance with the proposed rule Section 305 of the
Federal Deposit Insurance Corporation Improvement Act.
9
<PAGE> 10
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
ASSET/LIABILITY MANAGEMENT (CONTINUED)
The following are approximate contractual maturities and sensitivities to
changes in interest rates of certain loans, exclusive of non-commercial real
estate mortgages and consumer loans, as of December 31, 1993:
<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:
Commercial, Financial & Agricultural $201,123 $44,931 $11,097 $257,151
Mortgage Loans-Commercial 148,921 108,368 34,868 292,157
Mortgage Loans-Construction 16,138 3,486 204 19,828
-------- -------- ------- --------
Total $366,182 $156,785 $46,169 $569,136
======== ======== ======= ========
RATE PROVISIONS:
Amounts with Fixed Interest Rates $ 33,305 $114,839 $ 45,458 $193,602
Amounts with Adjustable Interest Rates $332,877 $ 41,946 $ 711 $375,534
-------- -------- -------- --------
Total $366,182 $156,785 $ 46,169 $569,136
======== ======== ======= ========
</TABLE>
The table which follows depicts the book value, contractual maturities and
approximate weighted average yield of the Registrant's investment security
portfolio at December 31, 1993 (dollars in thousands):
<TABLE>
<CAPTION>
U.S.
U.S. Government State & Mortgage-
Treasury Agencies' Municipal Backed
Maturity Securities Yield Obligations Yield Obligations Yield Securities Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Within 1 Year $ - .- % $ 5,570 3.67% $31,856 4.25% $ - .- %
After 1 But Within 5 Years 26,991 5.57 5,362 6.16 4,738 9.23 73,777 5.10
After 5 But Within 10 Years - .- - .- 7,475 8.87 155,310 4.43
After 10 Years - .- - .- - .- 236,215 5.10
--------- -------- -------- --------
Subtotal 26,991 5.57 10,932 4.89 44,069 5.57 465,302 4.88
Equity Securities - .- - .- - - - -
--------- -------- -------- --------
Total Securities $ 26,991 5.57% $ 10,932 4.89% $ 44,069 5.57% $465,302 4.88%
========= ======== ======== ========
<CAPTION>
Maturity Other Yield TOTAL Yield
<S> <C> <C> <C> <C>
Within 1 Year $ - .- % $ 37,426 4.16%
After 1 But Within 5 Years - .- 110,868 5.44
After 5 But Within 10 Years - .- 162,785 4.63
After 10 Years - .- 236,215 5.10
------- --------
Subtotal - .- 547,294 4.96
Equity Securities 1,203 .- 1,203 .-
------- --------
Total Securities $ 1,203 .- % $548,497 4.96%
======= ========
</TABLE>
The following table shows the classification of the average daily deposits of
the Registrant for each of the periods indicated:
<TABLE>
<CAPTION>
(in thousands)
- --------------
For the Year Ended December 31, 1993 1992 1991
------------------------------------------
<S> <C> <C> <C>
Demand Deposits $ 226,616 $ 164,920 $ 146,459
Savings Deposits 684,737 703,746 441,515
Time Deposits 344,230 464,580 668,953
Money Market Deposits 200,979 212,378 229,578
---------- ---------- ----------
Total Deposits $1,456,562 $1,545,624 $1,486,505
========== ========== ==========
</TABLE>
10
<PAGE> 11
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
ASSET/LIABILITY MANAGEMENT (CONTINUED)
At December 31, 1993, the remaining maturities of the Registrant's
Certificates of Deposit in amounts of $100,000 or greater were as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
3 months and less $18,821
3 to 6 months 6,415
6 to 12 months 4,255
One to five years 2,655
Greater than five years 151
=======
</TABLE> $32,297
=======
LIQUIDITY
Liquidity is defined as the Registrant's ability to generate sufficient cash
flow to fund growth in interest earning assets, depositor withdrawals and the
repayment of borrowings. The Registrant's bank subsidiary has numerous sources
of liquidity including loan principal repayments, lines of credit with other
financial institutions, the ability to borrow under repurchase agreements
utilizing its unpledged securities portfolio, the securitization of loans
within the portfolio, whole loan sales and growth in its core deposit base. The
Registrant's liquidity position is monitored to ensure the maintenance of an
optimum level and the most cost efficient use of the Registrant's available
funds.
Cash flows are generated from operating, investing and financing activities.
Cash flows from operating activities include earnings adjusted for non-cash
items and funds obtained through and utilized in the management of the
Registrant's Securities Held for Sale portfolio. During 1993, the Registrant
acquired $199.2 million in securities classified as Held for Sale using the
proceeds from sales, principal repayments and maturities of $121.5 million of
similarly classified securities. The remaining balance was acquired through the
use of funds generated principally through repurchase agreement borrowings. As
discussed in a previous paragraph, the Registrant implemented a balance sheet
leverage strategy during 1993 to enhance operating results, effectively utilize
capital and take advantage of the current steepness in the yield curve. Funds
obtained through short term repurchase agreement borrowings were reinvested
primarily in agency guaranteed mortgage-backed securities, some classified as
Held for Sale, thereby impacting cash flow from operations, and others
classified as Investment Securities thereby impacting the Registrant's
investing activities.
Cash used in investing activities aggregated $198.4 million during 1993, as
funds aggregating $193.7 million provided by maturities, calls and principal
repayments of investment securities and the repurchase agreement borrowings
discussed earlier were reinvested in $432.2 million of securities, primarily
agency guaranteed mortgage-backed securities, classified as Investment
Securities. Further contributing to cash provided by investing activities was
the $26.9 million provided by the sale of other real estate during 1993.
The primary contributor of cash provided by financing activities include
$227.4 million of repurchase agreement borrowings, obtained to finance the
acquisition of agency guaranteed mortgage backed securities as part of the
Registrant's balance sheet leverage strategy. Cash utilized in financing
activities at the subsidiary bank level include the funding of the net $57.7
million decrease in deposits.
The Registrant's sources of funds include dividends from the bank subsidiary,
borrowings and funds available through the capital markets. Dividends from the
bank subsidiary are limited by the regulations of the New York State Banking
Department ("NYSBD") to the current year's earnings plus the prior two years
retained net profits. According to the parameters of this regulation, the
Registrant's bank subsidiary has $24.3 million of retained earnings available
for dividends to the holding company as of January 1, 1994.
During the 1993 first quarter, the Registrant prepaid in full its $20 million
9.30% Senior Note obligation utilizing the proceeds from capital raised through
the revised Dividend Reinvestment Program in the latter part of 1992 and early
1993, as well as through available cash at the holding company, the private
placement of approximately 1 million shares of the Registrant's common stock
and the exercise of certain of the Registrant's outstanding warrants. The
Registrant's remaining 10.08% Senior Note obligation matures March 28, 1995.
Possible sources of funds that may be used to repay this obligation upon
maturity include the utilization of existing cash available at the holding
company, proceeds from the exercise of outstanding warrants, dividends from the
Registrant's bank subsidiary, or funds raised through the capital markets. At
December 31, 1993, the holding company's available cash position was $7.7
million.
11
<PAGE> 12
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
ASSET QUALITY
Loans, net of unearned income, declined 2.7% to $1,017.1 million at December
31, 1993, as compared with $1,045.2 million in the comparable prior year
period. The Registrant experienced loan growth in the commercial and
residential mortgage portfolios, which increased 7.9% and 2.8%, respectively,
whereas the concentration of real estate development loans, classified as
construction and land loans, continued their decline, aggregating $57.0
million, 28.9% less than the $80.1 million outstanding at December 31, 1992.
The loan portfolio is concentrated primarily in loans secured by real estate in
Suffolk and Nassau Counties and to a lesser extent Westchester and Rockland
Counties, New York. Real estate related loans, which include commercial and
residential mortgages, construction and land development loans, aggregated
69.2% of the total loan portfolio at December 31, 1993. Residential mortgage
loans comprise the largest real estate concentration within the Registrant's
loan portfolio, aggregating $363.6 million and representing 51.0% of the real
estate concentration. During 1993, the Registrant changed its strategy with
regard to its 15 year residential mortgage loan product, deciding to maintain
these loans within the portfolio instead of selling them in the secondary
market. This change in strategy, coupled with the $14.3 million acquisition of
residential mortgage loans during the year, contributed to the increase in the
balance of residential mortgages when comparing 1993 and 1992. Commercial
mortgages aggregated $292.2 million at December 31, 1993, a $21.5 million or
7.9% increase from the prior year period. This increase is primarily
attributable to the Registrant's financing of the sales of other real estate
during the year. Commercial, financial and agricultural loans, which are loans
to small and medium sized businesses to finance working capital needs secured
by accounts receivable, inventory, UCC filings and real estate in the form of
side collateral, declined to $257.2 million at December 31, 1993, a $31.0
million or 10.7% decline from the prior period. This decline is the result of
charge offs during the year and increased levels of loan satisfactions, coupled
with the lack of commercial loan demand within the Registrant's marketplace.
Consumer loans declined to $59.8 million at December 31, 1993, a $9.8 million
or 14.1% decline from the prior period. The decline in the consumer loan
portfolio when comparing 1993 and 1992 is significantly less than the decline
demonstrated in prior years as a plan to purchase high quality car lease paper
for retention in the portfolio was implemented during 1993.
The following table delineates the components of the Registrant's loan
portfolio for the years ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991 1990 1989
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Commercial, Financial & Agricultural $ 257,151 $ 288,114 $ 318,670 $ 316,582 $ 250,077
Mortgage Loans-Commercial 292,157 270,666 277,737 276,138 268,993
Mortgage Loans-Residential 363,644 353,725 448,347 371,615 513,528
Mortgage Loans-Construction 19,828 30,080 55,235 60,716 64,987
Land Loans 37,160 50,059 48,100 89,400 99,400
Consumer Loans 59,823 69,632 95,285 112,082 135,344
---------- ---------- ---------- ---------- ----------
Total $1,029,763 $1,062,276 $1,243,374 $1,226,533 $1,332,329
========== ========== ========== ========== ==========
</TABLE>
Non-performing assets, which include loans past due ninety days and still
accruing interest, non-accrual loans and other real estate, declined 54.8% to
$57.2 million at December 31, 1993, as compared with $126.5 million in the
comparable prior year period. This decline began in the second quarter of 1992
and each quarter thereafter a consistent pattern of improving asset quality has
been demonstrated. Non-performing assets now comprise 3.04% of total assets, as
compared with 7.44% at December 31, 1992 and 8.66% at December 31, 1991. The
primary components of the decline in non-performing assets when comparing 1993
and 1992 include $42.7 million in other real estate dispositions and cash
collections, $9.5 million in write downs of other real estate to current fair
value and net loan charge offs of $17.9 million.
The components of the Registrant's non-performing assets are detailed below:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans 90 Days or More Past Due & Still Accruing $ 1,811 $ 5,425 $ 6,660 $ 16,516 $ 7,148
Non-Accrual Loans 33,484 59,670 71,374 45,549 14,828
-------- -------- -------- -------- --------
Total Non-Performing Loans 35,295 65,095 78,034 62,065 21,976
Other Real Estate 21,899 61,383 75,887 23,187 2,949
-------- -------- -------- -------- --------
Total Non-Performing Assets $ 57,194 $126,478 $153,921 $ 85,252 $ 24,925
======== ======== ======== ======== ========
Restructured, Accruing Loans $ 15,237 $ 13,332 $ 14,589 $ 6,518 $ -
======== ======== ======== ======== ========
</TABLE>
12
<PAGE> 13
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
ASSET QUALITY (CONTINUED)
Loans are classified as restructured loans when the Company has granted, for
economic or legal reasons related to the borrowers financial difficulties, a
concession to the customer that the Company would not otherwise consider.
Generally this occurs when the cash flow of the borrower is insufficient to
service the loan under its original terms.
Potential problem loans, which are loans that are currently performing under
present loan repayment terms but where known information about possible credit
problems of borrowers cause management to have serious doubts as to the ability
of the borrower to continue to comply with the present repayment terms,
aggregated $24.9 million at December 31, 1993.
The following table sets forth the changes in the Registrant's other real
estate for the periods presented:
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991 1990 1989
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance at Beginning of Year $ 61,383 $ 75,887 $ 23,187 $ 2,949 $ 460
Increases:
Foreclosures and Deeds in Lieu of Foreclosure 5,909 6,121 6,150 15,250 2,489
In-Substance Foreclosure 6,867 28,901 64,265 13,200 -
Assumed in Acquisition - - 5,992 - -
Decreases:
Dispositions and Cash Collections (42,725) (37,577) (16,048) ( 8,212) -
Gross Write-Downs (9,535) (11,949) ( 7,659) - -
--------- -------- -------- -------- --------
Balance at End of Year $ 21,899 $ 61,383 $ 75,887 $ 23,187 $ 2,949
========= ======== ======== ======== ========
</TABLE>
Management determines what it deems to be the appropriate level of the
Registrant's allowance for loan losses on an ongoing basis by reviewing
individual loans within as well as the composition of the loan portfolio. In
reviewing the composition of the loan portfolio, management considers, among
other things, concentrations therein, delinquency trends, as well as recent
charge-off experience and third party evidentiary matter (such as appraisals)
to assist in assessing the degree of credit risk in the portfolio. Various
appraisals and estimates of current value influence the calculation of the
required allowance at any point in time. The continued and consistent decline
in the Registrant's non-performing assets during 1993 resulted in a reduction
in the provision for loan losses when compared with prior years. The provision
for loan losses declined to $6.0 million in 1993 from $21.0 million in 1992 and
$64.8 million in 1991. Net charge offs increased to $17.9 million in 1993, or
1.78% of average net loans, as compared with $16.7 million, or 1.46% of average
net loans, during 1992. This increase demonstrates the Registrant's effective
utilization of reserves during a period of improving asset quality and sluggish
loan demand. The allowance for loan losses as a ratio of non-performing loans
increased to 132.10% at December 31, 1993, as compared with 89.86% at December
31, 1992. While management uses available information to provide for 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
Registrant's allowance for loan losses. Such agencies may require the
Registrant 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,
1993 adequate to cover the possible risk of loss in the loan portfolio.
13
<PAGE> 14
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
ASSET QUALITY (CONTINUED)
Transactions in the Allowance for Loan Losses are maintained by six major
categories and are summarized as follows for the years ended December 31,
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991 1990 1989
- ---------------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans (net of unearned income):
Average Balance $1,003,679 $1,139,265 $1,260,131 $1,244,673 $1,228,589
End of Period 1,017,084 1,045,183 1,218,829 1,194,031 1,293,033
Analysis of Allowance for Loan Losses:
Balance at Beginning of Period $ 58,497 $ 54,164 $ 28,501 $ 9,734 $ 8,238
Loans Charged-Off:
Commercial, Financial & Agricultural $ 14,362 $ 13,029 $ 19,151 $ 4,439 $ 630
Mortgage Loans Commercial 2,310 2,717 15,776 - -
Mortgage Loans Residential 2,588 149 472 43 -
Mortgage Loans Construction 68 - 7,660 4,274 801
Land Loans 1,006 1,174 8,177 2,300 -
Consumer Loans 1,214 2,207 3,217 1,873 1,111
---------- ---------- ---------- ---------- ----------
Total Charge-Offs $ 21,548 $ 19,276 $ 54,453 $ 12,929 $ 2,542
Recoveries of Loans Charged-Off:
Commercial, Financial & Agricultural $ 2,557 $ 1,097 $ 212 $ 44 $ 201
Mortgage Loans Commercial 452 156 - -
Mortgage Loans Residential 50 125 - - -
Mortgage Loans Construction 51 115 41 - -
Land Loans 60 562 185 - -
Consumer Loans 506 554 298 370 287
---------- ---------- ---------- ---------- ----------
Total Recoveries $ 3,676 $ 2,609 $ 736 $ 414 $ 488
Net Loans Charged-Off $ 17,872 $ 16,667 $ 53,717 $ 12,515 $ 2,054
Provision for Loan Losses 6,000 21,000 64,800 31,282 3,550
Additional Allowance Resulting from Acquisition - - 14,580 - -
---------- ---------- ---------- ---------- ----------
Balance at End of Period $ 46,625 $ 58,497 $ 54,164 $ 28,501 $ 9,734
========== ========== ========== ========== ==========
Ratio of Net Charge-Offs to Average Loans 1.78% 1.46% 4.26% 1.01% 0.17%
==== ==== ==== ==== ====
Ratio of Allowance for Loan Losses
to Non-performing Loans 132.10% 89.86% 69.41% 45.92% 44.29%
====== ===== ===== ===== =====
</TABLE>
Pursuant to a regulatory requirement, the table below provides the components
of the allowance for loan losses by loan classification at each year end. As
such amounts reflect management's best estimate of possible losses and may not
necessarily be indicative of actual future charge-offs by loan classification.
It should be further emphasized that management believes that the allowance
must be viewed in its entirety and is therefore available for loan losses in
any classification.
<TABLE>
<CAPTION>
(dollars in thousands) Percentage Percentage Percentage
of of of
Loans to Loans to Loans to
1993 Total 1992 Total 1991 Total
Amount Loans Amount Loans Amount Loans
<S> <C> <C> <C> <C> <C> <C>
Commercial, Financial & Agricultural $ 18,120 24.97% $ 25,030 27.12% $ 25,538 25.63%
Mortgage Loans-Commercial 19,810 28.37 16,485 25.48 14,808 22.34
Mortgage Loans-Residential 2,254 35.31 1,537 33.30 1,084 36.06
Mortgage Loans-Construction 2,153 1.93 2,752 2.83 6,546 4.44
Land Loans 2,516 3.61 4,406 4.71 4,861 3.87
Consumer Loans 897 5.81 788 6.56 1,327 7.66
Unallocated 875 - 7,499 - - -
--------- ------ ------- ------- -------- ------
Total $ 46,62 100.00% $ 58,497 100.00% $ 54,164 100.00%
--------- ------ -------- ------ -------- ------
<CAPTION>
(dollars in thousands) Percentage Percentage
of of
Loans to Loans to
1990 Total 1989 Total
Amount Loans Amount Loans
<S> <C> <C> <C> <C>
Commercial, Financial & Agricultural 14,666 25.81% $ 5,709 18.77%
Mortgage Loans-Commercial 7,814 22.51 1,814 20.19%
Mortgage Loans-Residential 209 30.30 109 38.54%
Mortgage Loans-Construction 2,993 4.95 493 4.88%
Land Loans 1,710 7.29 500 7.46%
Consumer Loans 1,109 9.14 1,109 10.16%
Unallocated - - - -
------- ------ ------- ------
Total $28,501 100.00% $ 9,734 100.00%
======= ====== ======= ======
</TABLE>
14
<PAGE> 15
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
OTHER NON-INTEREST INCOME
Other income, net of security gains, increased to $16.5 million, or 12.7%
from the $14.6 million realized in 1992. Net security gains in 1993 were $1.5
million, as compared with $9.4 million in the comparable prior year period.
Since the beginning of 1992, the Registrant has emphasized the
diversification of revenue sources to enhance operating results and expand the
Registrant's revenue base. Through the conversion of the former savings bank
branches into full service commercial branches, growth in the demand deposit
base, increases in per item fees, new products and services and internal
analysis to ensure the optimum level of cost and benefit are attained, the
Registrant has realized improvements in substantially all facets of
non-interest revenue. Fees and service charges on deposit accounts improved
25.1% to $7.5 million in 1993; trust fees and commissions realized a 10.4%
improvement to $1.7 million in 1993 and income from mortgage banking operations
demonstrated a 10.6% increase to $3.6 million in 1993. Growth in income from
mortgage banking operations, however, was partially offset in 1993 by the
acceleration of the amortization of certain servicing intangibles.
OTHER EXPENSES
Other expenses decreased to $66.7 million in 1993, or $3.6 million, from that
incurred in the prior year, primarily the result of a $1.7 million decline in
other real estate related expenses, a $1.2 million restructure charge recorded
in the prior year and a $1.6 million decline in other operating costs. These
improvements were partially offset by minimal increases in other expense
categories. The Registrant's core efficiency ratio, which represents the ratio
of other expenses, net of other real estate related costs and other
non-recurring charges, to net interest income on a tax equivalent basis and
other income net of security gains, improved to 54.98% in 1993 from 60.82% in
the comparable prior year period. This improvement was achieved as operating
expense levels declined while the amount of net interest income and other fee
based income improved.
Other real estate related operating expenses declined to $14.3 million in
1993 as compared with $16.0 million in the prior year. Included in the 1993
balance was $7.9 million in net write downs to current fair value, representing
a $2.2 million decline from the prior year, and $6.4 million in other real
estate operating expenses which include costs such as legal fees, taxes,
maintenance, title and lien filing fees. As the level of other real estate
continues to decline, the Registrant anticipates that related costs will also
decrease.
PROVISION FOR INCOME TAXES
Effective January 1, 1993, the Registrant adopted the new accounting standard
for income taxes, Statement of Financial Accounting Standards ("SFAS") No. 109.
Prior to 1993, the Registrant determined its income tax expense under the
provisions of Accounting Principles Board Opinion No. 11. SFAS No. 109 requires
the use of the asset and liability method in determining the tax effect of
temporary differences in the recognition of items of income and expense. SFAS
No. 109 allows the recognition of a tax benefit for net operating loss
carryforwards if realization of that benefit is "more likely than not". A
valuation allowance is to be established to reduce the deferred tax asset if,
based on the Registrant's current valuation, it believes that it is "more
likely than not" that all or some of that asset will not be realized. The
adoption of SFAS No. 109 did not have a material effect on the Registrant's
financial position or results of operations as a corresponding valuation
allowance for the entire amount of the additional net tax benefit was
established. The valuation allowance for deferred tax assets relates to both
the establishment of a reserve upon the adoption of SFAS No. 109 which
approximated previous unrealized potential tax benefits and a reserve
equivalent to the potential New York State tax benefit. The Registrant has
elected to fully reserve for the potential New York State benefit due to the
uncertainties of realization since state law does not provide for the
utilization of net operating loss carryforwards or carrybacks. The Registrant
has and will continue to recognize these benefits on a when realized basis.
The Registrant recorded a $7.5 million provision for income taxes in 1993,
equating to an effective income tax rate of 33.3%, as compared with a provision
of $2.2 million, or an effective income tax rate of 55.9%, in 1992. The primary
components of the decline in the effective tax rate include a reduction in the
Registrant's state income taxes coupled with the realization of state benefits.
CAPITAL
During the latter part of 1992 and early 1993, the Registrant undertook a
capital raising plan to raise the funds necessary to repay the Registrant's $20
million Series B Senior Note obligation ("Series B Notes") due August 1, 1993.
In November 1992, the Registrant's Dividend Reinvestment Plan was revised to
(i) increase the discount to market value at which participants could purchase
shares of the Registrant's common stock, (ii) increase the maximum optional
cash investment and (iii) permit cash investments in excess of the maximum
allowed with prior written approval of the Registrant. As a result, the
Registrant raised approximately $13 million in capital through the revised
Dividend Reinvestment Plan. An additional source of capital was the exercise of
the Registrant's Series A common stock warrants, which were issued in August
1992 to the holders of the Registrant's senior note obligations and which
expired upon full repayment of the Series B Senior Notes. In anticipation of
full prepayment of the Series B Notes, the holders of the warrants exercised
them in February 1993, receiving 536,975 shares of the Registrant's common
stock in exchange for $3.5 million. The final step in the Registrant's capital
raising plan was the overseas private placement of approximately 1 million
shares of common stock in March 1993, raising approximately $9.5 million in
capital. These capital raising endeavors, coupled with the retention of
earnings during 1993, increased stockholders equity to $154.5 million at
December 31, 1993.
15
<PAGE> 16
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
CAPITAL (CONTINUED)
The Federal Reserve Board has formal capital guidelines which bank holding
companies are required to meet. These guidelines include the "risk-based"
capital ratios and the leverage ratios, discussed below. The risk-based
capital guidelines are designed to make regulatory capital requirements more
sensitive to differences in risk profile 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 will 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 capital to risk-weighted assets of 8.00%, including a minimum
ratio of Tier 1 capital to risk-weighted assets of 4.00%. The Federal Deposit
Insurance Corporation has adopted comparable capital guidelines for state banks
which are not members of the Federal Reserve System.
Tier 1 capital consists of common equity, qualifying perpetual preferred
equity and minority interests in the equity accounts of unconsolidated
subsidiaries, less goodwill and other non-qualifying intangibles. After
December 31, 1992, the allowance for loan losses qualifys only as supplementary
capital and then only to the extent of 1.25% of total risk-weighted assets.
Other elements of supplementary capital, which is limited overall to 100% of
Tier 1 capital, include perpetual preferred equity not qualifying for Tier 1,
mandatory convertible debt and subordinated and other qualifying securities.
The following table sets forth the Registrant's regulatory capital as of
December 31, 1993 under the rules applicable at such date. The Registrant was
in compliance with applicable regulatory requirements in effect as of such
date.
<TABLE>
<CAPTION>
As of December 31, 1993
(dollars in thousands)
Amount Ratio
<S> <C> <C>
Tier 1 Capital $ 145,095 13.59%
Regulatory Requirement 42,717 4.00%
---------- ------
Excess $ 102,378 9.59%
========== ======
Total Risk Adjusted Capital $ 158,854 14.88%
Regulatory Requirement 85,434 8.00%
---------- ------
Excess $ 73,420 6.88%
---------- ======
Risk Weighted Assets $1,067,920
==========
</TABLE>
The Registrant's leverage ratio at December 31, 1993 was 7.55%.
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
in respect of depository institutions that do not meet minimum capital
requirements. FDICIA establishes five categories: "well capitalized",
"adequately capitalized", "undercapitalized", "significantly undercapitalized"
and "critically undercapitalized". Under the regulations, a "well-capitalized"
institution has a minimum total capital to total risk weighted assets of at
least 10%, a minimum Tier I capital to total risk weighted assets of 6%, a
minimum leverage ratio of at least 5% and is not subject to any written order,
agreement or directive.
16
<PAGE> 17
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
REGULATORY MATTERS
On February 17, 1994, the Federal Deposit Insurance Corporation (the "FDIC")
notified the Bank that based on the improvement in it's financial condition,
the FDIC was terminating the Memorandum of Understanding (the "MOU") dated
August 25, 1993 between the Bank, the FDIC and the New York State Banking
Department (the "NYSBD"). The MOU required the Bank to, among other things, (i)
maintain a Tier I leverage ratio of 5.50%; (ii) reduce the level of classified
assets as a ratio of capital and reserves and (iii) charge off all assets
classified "Loss" and 50% of those classified "Doubtful" in the FDIC and NYSBD
Reports on Examination. The Bank received similar notification from the NYSBD
on February 23, 1994.
On February 1, 1994, the Federal Reserve Bank of New York notified the
Registrant that in light of the noticeable improvement in its financial
condition the Memorandum of Understanding dated October 22, 1992 was
terminated. The Federal Reserve Bank memorandum prohibited the Registrant from,
among other things, the payment of dividends and the renewal or modification of
the terms of existing indebtedness without prior regulatory approval.
EFFECTS OF INFLATION
Virtually all of the assets and liabilities of a financial institution are
monetary in nature. As a result, interest rates have a more significant impact
on a financial institution's performance than the general levels of inflation.
Interest rates do not necessarily move in the same direction or in the same
magnitude as the prices of goods and services.
SELECTED STATISTICAL DATA
<TABLE>
<CAPTION>
Quarterly Financial Information
(unaudited)
1993 1992
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 $29,067 $29,482 $29,880 $30,060 $33,201 $34,522 $31,900 $31,117
Interest Expense 10,356 10,234 10,224 10,322 17,454 15,788 14,316 12,020
------- ------- ------- ------- ------- ------- ------- -------
Net Interest Income 18,711 19,248 19,656 19,738 15,747 18,734 17,584 19,097
Provision for Loan Losses 2,500 2,000 1,000 500 8,000 5,500 4,500 3,000
------- ------- ------- ------- ------- ------- ------- -------
Net Interest Income after Provision for
Loan Losses 16,211 17,248 18,656 19,238 7,747 13,234 13,084 16,097
Other Non-Interest Income 5,722 4,267 4,231 3,747 1,461 5,954 13,601 3,039
Other Expense 16,117 16,385 17,155 17,046 15,193 18,006 19,186 17,912
------- ------- ------- ------- ------- ------- ------- -------
Income/(Loss) Before Taxes 5,816 5,130 5,732 5,939 (5,985) 1,182 7,499 1,224
Provision for Income Taxes 2,227 1,608 1,861 1,824 62 213 1,409 506
------- ------- ------- ------- ------- ------- ------- -------
Net Income/(Loss) $ 3,589 3,522 3,871 4,115 $(6,047) $ 969 $ 6,090 $ 718
======= ======= ======= ======= ======= ======= ======= =======
Per Share Data:
Net Income/(Loss) $ 0.27 $ 0.24 $ 0.26 $ 0.28 $ (0.56) $ 0.09 $ 0.55 $ 0.06
Common Stock Price Range
High $12.13 $13.25 $12.38 $ 13.25 $ 7.13 $ 6.25 $ 9.50 $ 8.13
Low $ 7.63 $ 9.88 $11.13 $ 10.75 $ 4.63 $ 4.63 $ 4.75 $ 6.88
</TABLE>
The Registrant's common stock is traded on the New York Stock Exchange under
the symbol NFB. At February 14, 1994, there were 5,300 holders of the
Registrant's common stock. The table above sets forth the quarterly high and
low last sales prices of the Registrant's Common Stock during 1993 and 1992, as
reported by the New York Stock Exchange. There were no cash dividends declared
in 1993 or 1992.
17
<PAGE> 18
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(dollars in thousands, except per share amounts)
1993 1992 1991
<S> <C> <C> <C>
INTEREST INCOME
Loans (including fee income) $ 83,881 $ 100,619 $ 123,169
Interest Earning Deposits 14 463 246
Federal Funds Sold & Securities
Purchased Under Agreements to Resell 910 2,062 3,042
Trading Account Interest - 56 362
Mortgage Backed Securities 30,563 23,896 21,836
U.S. Treasury and Government Agency Securities 1,887 2,071 977
State and Municipal Obligations 1,155 1,222 2,248
Other Securities 79 351 488
--------- --------- ---------
Total Interest Income 118,489 130,740 152,368
--------- --------- ---------
INTEREST EXPENSE
Savings, NOW and Money Market Deposits 19,984 30,842 34,281
Certificates of Deposit, $100,000 and Over 1,049 1,620 5,686
Other Time Deposits 11,355 20,506 39,245
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase 6,166 2,409 5,024
Other Borrowings 2,582 4,201 3,973
--------- -------- ---------
Total Interest Expense 41,136 59,578 88,209
--------- -------- ---------
Net Interest Income 77,353 71,162 64,159
Provision for Loan Losses 6,000 21,000 64,800
--------- -------- ---------
Net Interest Income/(Expense) after Provision for Loan Losses 71,353 50,162 (641)
--------- -------- ---------
OTHER NON-INTEREST INCOME
Fees and Service Charges on Deposit Accounts 7,531 6,019 4,790
Trust Income 1,665 1,508 1,420
Mortgage Banking Operations 3,556 3,216 1,740
Other Operating Income 3,758 3,876 2,783
Net Securities Gains 1,457 9,408 8,942
Trading Account Profit and Fees - 28 572
--------- -------- ---------
Total Non-Interest Income 17,967 24,055 20,247
--------- -------- ---------
OTHER EXPENSES
Salaries and Employee Benefits 23,650 23,180 21,571
Occupancy 5,032 4,825 4,519
Equipment 4,986 4,936 5,266
Other Real Estate 14,307 15,998 10,340
FDIC Insurance Premiums 3,752 3,611 3,012
Restructure Charge - 1,200 -
Other Operating Expense 14,273 15,823 12,887
Amortization of Excess of Cost Over
Fair Value of Net Assets Acquired 703 724 578
--------- --------- ---------
Total Other Expenses 66,703 70,297 58,173
--------- --------- ---------
Income/(Loss) Before Taxes 22,617 3,920 (38,567)
Provision/(Benefit) for Income Taxes 7,520 2,190 (4,941)
--------- --------- ---------
Net Income/(Loss) $ 15,097 $ 1,730 $ (33,626)
========= ========= =========
EARNINGS AND DIVIDENDS PER SHARE
Net Income/(Loss) $ 1.05 $ 0.16 $ (3.36)
Cash Dividends $ - $ - $ 0.34
</TABLE>
See accompanying notes to consolidated financial statements.
18
<PAGE> 19
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(dollars in thousands, except per share amounts)
December 31,
1993 1992
<S> <C> <C>
ASSETS
Cash & Due from Banks $ 75,070 $ 71,928
Interest Earning Deposits 290 291
Federal Funds Sold & Securities Purchased under Agreements to Resell - 63,934
Securities:
Investment Securities (Market value $550,648 in 1993; $319,253 in 1992) 548,497 319,285
Securities Held for Sale (Market value $201,489 in 1993; $123,553 in 1992) 200,219 122,642
---------- ----------
Total Securities 748,716 441,927
---------- ----------
Loans 1,029,763 1,062,276
Less: Unearned Income & Fees 12,679 17,093
Allowance for Loan Losses 46,625 58,497
---------- ----------
Net Loans 970,459 986,686
---------- ----------
Premises & Equipment, Net 33,277 35,569
Accrued Income Receivable 11,924 10,827
Other Real Estate 21,899 61,383
Other Assets 12,955 18,318
Excess of Cost over Fair Value of Net Assets Acquired 9,291 9,994
---------- -----------
Total Assets $1,883,881 $ 1,700,857
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits $ 257,447 $ 179,735
Savings, N.O.W. and Money Market Deposits 866,808 913,874
Certificates of Deposits in Amounts of $100,000 & Over 32,297 27,300
Other Time Deposits 285,718 379,026
---------- -----------
Total Deposits 1,442,270 1,499,935
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase 255,643 28,200
Senior Notes Payable 20,000 40,000
Mortgage Notes Payable - 174
Accrued Taxes, Interest & Other Expenses 9,439 8,419
Other Liabilities 2,057 4,306
---------- -----------
Total Liabilities $1,729,409 $ 1,581,034
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 1993, 14,109,554 shares; 1992, 11,845,548 shares 35,274 29,614
Additional Paid in Capital 94,487 80,895
Retained Earnings 25,140 10,043
Less: Unrealized depreciation on certain marketable equity securities - (25)
Less: Restricted Stock Awards (428) (675)
Less: Treasury Stock; 1993, 73 shares; 1992, 3,113 shares at cost (1) (29)
---------- ----------
Total Stockholders' Equity 154,472 119,823
---------- ----------
Total Liabilities and Stockholders' Equity $1,883,881 $1,700,857
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE> 20
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1993 1992 1991
(in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(Loss) $ 15,097 $ 1,730 $ (33,626)
Adjustments to Reconcile Net Income/(Loss) to
Net Cash (Used In)/Provided by Operating Activities:
Provision for Loan Losses 6,000 21,000 64,800
Provision for Losses on Real Estate Acquired in
Settlement of Loans 9,535 11,949 7,659
Depreciation and Amortization 5,730 5,562 5,797
Amortization of Excess of Cost Over Fair Value of
Net Assets Acquired 703 724 578
Accretion of Discounts and Net Deferred Loan Fees (780) (1,128) (1,883)
Amortization of Premiums 9,268 1,126 130
Net Gains on Trading Account Activities - (28) (572)
Purchases of Trading Account Securities - (62,909) (189,991)
Proceeds from Sales of Trading Account Securities - 62,937 190,563
Net Gains on Securities Held for Sale (1,437) (9,407) (8,942)
Purchases of Securities Held for Sale (199,197) (367,767) (376,131)
Proceeds from Sales of Securities Held for Sale 71,519 555,040 421,348
Maturities and Principal Repayments of Securities Held for Sale 49,967 15,115 31,854
Net Gains on Sales of Investment Securities (20) (1) -
Other, Net 2,385 6,687 (6,215)
--------- --------- ---------
Net Cash (Used in)/Provided by Operating Activities (31,230) 240,630 105,369
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sales of Investment Securities 1,702 245 34,781
Maturities, Calls and Principal Repayments on Investment Securities 193,717 34,504 65,986
Purchases of Investment Securities (432,171) (328,676) (9,794)
Loans Originated and Principal Repayments
on Loans and Other Real Estate Owned, Net 28,279 104,314 54,488
Proceeds from Sales of Real Estate Acquired
in Settlements of Loans 26,887 31,150 16,280
Purchases of Loans (14,320) - -
Purchases of Premises and Equipment, Net (2,460) (1,622) (2,674)
Purchase of Bank Subsidiary, Net of Cash and Cash Equivalents Acquired - - 82,835
--------- --------- ---------
Net Cash (Used in)/Provided by Investing Activities (198,366) (160,085) 241,902
--------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE> 21
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEARS ENDED
DECEMBER 31,
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Deposits $ (57,665) $(112,417) $(154,688)
Net Increase (Decrease) in Short-Term Borrowings 227,443 27,834 (132,339)
Repayments of Other Borrowings (20,174) (13) (12)
(Purchase) Sale of Treasury Shares (45) 269 1,427
Common Stock Sold for Cash 19,244 7,246 10,395
Dividends Paid to Shareholders - - (3,265)
--------- --------- ---------
Net Cash Provided by/(Used In) Financing Activities 168,803 (77,081) (278,482)
--------- --------- ---------
Net (Decrease)/Increase in Cash and Cash Equivalents (60,793) 3,464 68,789
Cash and Cash Equivalents at Beginning of Year 136,153 132,689 63,900
Cash and Cash Equivalents at End of Year $ 75,360 $ 136,153 $ 132,689
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash Paid/(Received) During the Period for:
Interest Expense $ 42,274 $ 61,079 $ 92,559
========= ========= =========
Income Taxes $ 3,995 $ (7,834) $ 3,968
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Real Estate Acquired in Settlement of Loans and
In-Substance Foreclosures $ 12,776 $ 35,022 $ 70,416
========= ========= =========
Securities Received in Exchange for Residential Mortgage Loans $ - $ 24,706 $ -
========= ========= =========
On June 28, 1991, the Registrant acquired all outstanding common
stock of Eastchester Financial Corporation for cash of $59.9 million.
In connection with this acquisition, the following assets were acquired
and liabilities assumed:
Fair Value of Investments, Loans and Other Assets Acquired $ 498,733
Cash Paid for Common Stock and Other Acquisition Expenses (63,575)
---------
Deposits and Other Liabilities Assumed $ 435,158
=========
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE> 22
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY THREE YEARS ENDED
DECEMBER 31, 1993
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNREALIZED DEPRECIATION
ON CERTAIN
ADDITIONAL MARKETABLE RESTRICTED
COMMON PAID IN RETAINED EQUITY STOCK TREASURY
STOCK CAPITAL EARNINGS SECURITIES AWARDS STOCK TOTAL
---------- --------------------------------------------------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1990 $ 23,365 72,208 45,204 (3,446) (1,793) (4,152) 131,386
Net Loss - - (33,626) - - - (33,626)
Cash Dividend
($.34 per share) - - (3,265) - - - (3,265)
Sale of Common Stock
(1,493,000 shares) 3,733 6,662 - - - - 10,395
Restricted Stock Awards
(9,000 shares) - (54) - - (92) 146 -
Amortization of Deferred Compensation
re: Restricted Stock Awards - - - - 218 - 218
Removal of Restrictions Accelerated
re: Restricted Stock Awards
(9,500 shares) - (37) - - 42 81 86
Forfeiture of Restricted Stock
Awards (32,000 shares) - (371) - - 575 (204) -
Sale of Treasury Stock
(210,051 shares) - (1,992) - - - 3,419 1,427
Net Change in Unrealized Depreciation on
Certain Marketable Equity Securities - - - 3,170 - - 3,170
-------- ------ ------- ------ ------ ------ -------
BALANCE DECEMBER 31, 1991 $ 27,098 76,416 8,313 (276) (1,050) (710) 109,791
Net Income - - 1,730 - - - 1,730
Sale of Common Stock
(1,006,362 shares) 2,516 4,730 - - - - 7,246
Issuance of Warrants
(742,500 shares) - 185 - - - - 185
Restricted Stock Awards
(11,500 shares) - (66) - - (68) 134 -
Amortization of Deferred Compensation
re: Restricted Stock Awards - - - - 341 - 341
Removal of Restrictions Accelerated
re: Restricted Stock Awards
(1,000 shares) - - - - 10 - 10
Forfeiture of Restricted Stock
Awards (5,500 shares) - (62) - - 92 (30) -
Purchase of Treasury Stock
(1,302 shares) - - - - - (7) (7)
Sale of Treasury Stock
(50,753 shares) - (308) - - - 584 276
Net Change in Unrealized Depreciation on
Certain Marketable Equity Securities - - - 251 - - 251
-------- ------ ------- ------ ------ ------ -------
BALANCE DECEMBER 31, 1992 $ 29,614 80,895 10,043 (25) (675) (29) 119,823
Net Income - - 15,097 - - - 15,097
Sale of Common Stock
(1,617,031 shares) 4,043 11,194 - - - - 15,237
Exercise of Warrants
(646,975 shares) 1,617 2,390 - - - - 4,007
Restricted Stock Awards
(8,000 shares) 18 (102) 84 -
Amortization of Deferred Compensation
re: Restricted Stock Awards - - - - 306 - 306
Removal of Restrictions Accelerated
re: Restricted Stock Awards
(4,500 shares) - - - - 22 - 22
Forfeiture of Restricted Stock
Awards (1,034 shares) - (10) - - 21 (11) -
Purchase of Treasury Stock
(3,926 shares) - - - - - (45) (45)
Net Change in Unrealized Depreciation on
Certain Marketable Equity Securities - - - 25 - - 25
-------- ------ ------- ------ ------ ------ -------
BALANCE DECEMBER 31, 1993 $ 35,274 94,487 25,140 - (428) (1) 154,472
======== ====== ======= ====== ====== ====== =======
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The consolidated financial statements of North Fork Bancorporation, Inc. (the
"Registrant") and subsidiaries are prepared in conformity with generally
accepted accounting principles and prevailing practices within the financial
services industry. The following is a summary of the Registrant's significant
accounting and reporting policies.
(A) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Registrant include its primary
banking subsidiary, North Fork Bank ( the "Bank"), and its direct and indirect
wholly-owned subsidiaries. The Bank was established through the October 1992
merger of the Registrant's banking subsidiaries, The North Fork Bank & Trust
Company and Southold Savings Bank. All significant intercompany accounts and
transactions have been eliminated in consolidation.
(B) TRADING ACCOUNT ACTIVITIES
Trading account assets are stated at market value. Realized and unrealized
gains and losses on trading account activities are reflected in other income as
trading account profit and fees.
(C) SECURITIES
Included in securities are investment securities and securities held for
sale. Management determines the appropriate classification at the time of
purchase. Investment securities are securities that management has the intent
and the Registrant has the ability to hold until maturity. Securities held for
sale are securities that will be held for indefinite periods of time and
include securities that management intends to use as part of its
asset/liability strategy, or that may be sold in response to changes in
interest rates, changes in prepayment risk, or other factors. Investment
securities are carried at cost adjusted for amortization of premiums and
accretion of discounts. Securities held for sale are carried at the lower of
amortized cost or market value with any valuation adjustments reflected in the
current period's results of operations. Premiums and discounts are amortized
utilizing a level yield method over the lives of the individual securities. The
amortization of premiums and discounts associated with the Registrant's
mortgage backed securities portfolio may be significantly impacted by changes
in prepayment assumptions. Market interest rates and economic conditions may
effect the yield and carrying value of the mortgage backed securities within
the Registrant's investment and held for sale portfolios. Marketable equity
securities are carried at the lower of cost or market value with any unrealized
losses reflected as a separate component of stockholders' equity. Any security
for which there has been a decline in value that is considered other than
temporary is written down to its estimated market value. Realized gains and
losses on sales of securities are computed using the specific identification
method.
(D) LOANS
Loans are carried at the principal amount outstanding, net of unearned income
and deferred loan fees. Mortgage loans held for sale are valued at the lower of
aggregate cost or market value. Unearned income and deferred loan fees are
accreted utilizing a method which approximates a level yield. Deferred loan
fees are reflected net of direct expenses.
(E) NON-ACCRUAL LOANS
Loans are placed on non-accrual status when, in the opinion of management,
there are doubts 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
the related 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 each of the following conditions are met: (i)
payments of principal and interest are current, (ii) future payments of
principal and interest are reasonably assured to be made as scheduled, (iii)
the loan is classified as substandard or better and (iv) the reinstatement is
approved by the Registrant's Loan and Asset Recovery Committee.
Loans are classified as restructured loans when the Registrant has granted,
for economic or legal reasons related to the borrower's financial difficulties,
a concession to the customer that the Registrant would not otherwise consider.
Generally this occurs when the cash flow of the borrower is insufficient to
service the loan under its original terms.
23
<PAGE> 24
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(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 judgement, is adequate
to provide for possible loan losses in the existing portfolio. In evaluating
the portfolio, management takes into consideration numerous factors, such as
loan growth, prior loss experience, present and potential risks of the loan
portfolio and current economic conditions. Management believes that the
allowance for loan losses is adequate. While management uses available
information to provide for possible loan losses, future additions to the
allowance may be necessary based on economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Registrant's bank subsidiary's allowance for loan
losses. Such agencies may require the Registrant to recognize additions to the
allowance based on their judgment of information available to them at the time
of their examinations.
(G) PREMISES AND EQUIPMENT, NET
Premises and equipment are stated at cost net of accumulated depreciation and
amortization. Depreciation and amortization included in other expenses are
computed utilizing the straight line method over the lesser of the estimated
useful lives of the related assets or the term of the lease.
(H) OTHER REAL ESTATE
Other real estate consists of property acquired by foreclosure, by deed in
lieu of foreclosure, and loans classified as in-substance foreclosures. Loans
are classified as in-substance foreclosures when the Registrant has
substantively assumed all incidents of ownership of the underlying collateral.
Real estate acquired is carried at the lower of (1) the recorded amount of the
loan for which the foreclosed property previously served as collateral, or (2)
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 charging the allowance for loan losses.
Subsequent to foreclosure, gains or losses on the sale of and losses on the
periodic revaluation of real estate acquired are credited or charged to other
real estate expense. Net costs of maintaining and operating foreclosed
properties are expensed as incurred.
(I) INCOME TAXES
Deferred income taxes are provided for items of income or expense that are
reported in different periods for financial statement and income tax purposes.
Assets and liabilities are recorded to account for these temporary differences.
This asset and liability method establishes deferred tax assets and liabilities
for the temporary differences between the financial reporting basis and the tax
basis of the Registrant's assets and liabilities at enacted tax rates expected
to be in effect when such amounts are realized or settled. Anticipated or
expected future events are considered when establishing a deferred tax assets
ultimate realization.
The Registrant files consolidated income tax returns with its subsidiaries.
Tax expense or benefit is allocated among members in the consolidated group.
(J) RETIREMENT PLAN AND BENEFIT PLANS
The Registrant has a non-contributory defined benefit pension plan covering
substantially all employees. An annual pension cost is provided over the
expected employee's 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
benefit otherwise earned.
Post-retirement 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 are computed by dividing net income/(loss) by the
weighted-average number of shares of common stock outstanding and common stock
equivalents, when dilutive. The common stock equivalents consist of common
stock options and warrants. Average equivalent shares outstanding were
14,381,870, 11,025,161 and 9,999,328 in 1993, 1992 and 1991, respectively.
(L) INTANGIBLE ASSETS
The excess of cost over fair value of net assets acquired is being amortized
on a straight line basis over twenty-five years. Identified intangibles which
arose as a result of various branch acquisitions by the Registrant's banking
subsidiary are being amortized on a straight line basis over the estimated
periods to be benefited not to exceed ten years.
(M) CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash,
federal funds sold and other short-term securities, all of which have initial
maturities of less than ninety days.
24
<PAGE> 25
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(N) OFF BALANCE-SHEET INSTRUMENTS
The Registrant 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 on specific assets and liabilities. The premium paid or
received for any of these instruments is amortized over the term of the
agreement. Gains and losses on such contracts are deferred and amortized over
the expected remaining term of the hedged asset or liability. If the asset or
liability being hedged is disposed of, any unamortized gain or loss is included
in the determination of the gain or loss from disposition.
(O) RECLASSIFICATIONS
Reclassifications are made to prior year's financial statements whenever
necessary to conform with the current year's presentation.
NOTE 2 - SECURITIES
The carrying value, gross unrealized gains, gross unrealized losses and
estimated market value of Investment Securities are as follows at December 31,
<TABLE>
<CAPTION>
1993 1992
Gross Gross Gross Gross
Carrying Unrealized Unrealized Market Carrying Unrealized Unrealized Market
(in thousands) Value Gains Losses Value Value Gains Losses Value
----- ----- ------ ----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury Securities $ 26,991 394 - $ 27,385 $ 27,604 171 - $ 27,775
U.S. Government Agencies' Obligations 10,932 155 3 11,084 5,973 8 - 5,981
State & Municipal Obligations 44,069 634 40 44,663 17,570 475 - 18,045
Mortgage Backed Securities 465,302 3,360 2,564 466,098 265,176 1,061 1,749 264,488
Marketable Equity Securities
Preferred - - - - 1,723 - - 1,723
Common 1,203 215 - 1,418 1,002 - - 1,002
Valuation Allowance - - - - (25) - - (25)
Other Securities - - - - 262 2 - 264
------- ----- ----- -------- -------- ----- ----- --------
548,497 4,758 2,607 550,648 $319,285 1,717 1,749 $319,253
======= ===== ===== ======== ======== ===== ===== ========
</TABLE>
State and Municipal Obligations consist primarily of short-term tax
anticipation notes and other longer term general obligation bonds issued by
local municipalities. Changes in economic conditions may subject the Registrant
to market and credit risk relating to these securities. Mortgage-Backed
Securities consist primarily of Government National Mortgage Association,
Federal National Mortgage Association and Federal Home Loan Mortgage
Corporation agency mortgage-backed securities. Changes in economic conditions
and market interest rates may subject the Registrant to market and interest
rate risk relating to these securities.
Proceeds from the sale of debt securities classified as investment securities
were $0.2 million and $31.1 million in 1992 and 1991, respectively. There were
no sales of debt securities classified as investment securities during 1993.
During 1993, the Registrant sold $1.7 million in preferred stock carried in
the Investment portfolio in order to comply with banking regulations which do
not allow commercial banks to invest in equity securities. There were no
significant realized gains or losses on marketable equity securities in 1993
and 1992. The Registrant realized a net loss on the sale of marketable equity
securities of $1.8 million in 1991.
At December 31, 1993 and 1992, investment securities carried at $299.5
million and $106.3 million, respectively, were pledged for various purposes as
required by law and to secure securities sold under agreements to repurchase
borrowings.
The amortized cost and estimated market value of investment securities at
December 31, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because issuers may have the
right to call or prepay obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
Carrying Market
(in thousands) Value Value
<S> <C> <C>
Due in one year or less $ 37,426 $ 37,431
Due after one year through five years 110,868 112,503
Due after five years through ten years 162,785 162,018
Due after ten years 236,215 237,278
-------- --------
547,294 549,230
Other Equity Securities 1,203 1,418
-------- --------
$548,497 $550,648
-------- --------
</TABLE>
25
<PAGE> 26
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - SECURITIES (CONTINUED)
The carrying value, gross unrealized gains, gross unrealized losses and
approximate market values of Securities Held for Sale are as follows at
December 31,
<TABLE>
<CAPTION>
1993 1992
Gross Gross Gross Gross
Carrying Unrealized Unrealized Market Carrying Unrealized Unrealized
(in thousands) Value Gains Losses Value Value Gains Losses Value
----- ----- ------ ----- ----- ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-Backed Securities $200,219 1,817 547 $201,489 $122,642 1,563 652 $123,553
======== ===== === ======== ======== ===== === ========
</TABLE>
Proceeds from the sale of debt securities classified as securities held for
sale were $71.5 million, $555.0 million and $421.3 million, respectively, in
1993, 1992 and 1991.
At December 31, 1993 and 1992, securities held for sale carried at $50.2
million and $13.8 million, respectively, were pledged for various purposes as
required by law and to secure securities sold under agreements to repurchase
borrowings.
The amortized cost and estimated market value of securities held for sale at
December 31, 1993, by contractual maturity, are set forth below. Expected
maturities will differ from contractual maturities because issuers may have the
right to call or prepay obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
Carrying Market
(in thousands) Value Value
<S> <C> <C>
Due in one year or less $ - $ -
Due after one year through five years - -
Due after five years through ten years 113,166 113,880
Due after ten years 87,053 87,609
--------- ---------
$ 200,219 $ 201,489
========= =========
</TABLE>
Gross gains on the sale of securities classified as Securities Held for Sale
of $1.4 million, $11.2 million and $14.0 million were recognized in 1993, 1992
and 1991, respectively. Gross losses on the sale of securities classified as
Securities Held for Sale of $1.8 million and $5.1 million were recognized in
1992 and 1991, respectively. There were no losses recognized on the sale of
Securities Held for Sale in 1993.
In 1994 the Registrant will adopt Statement of Financial Accounting Standards
("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", which is effective for fiscal years ending after December 15, 1993
and is to be applied prospectively. SFAS No. 115 addresses the accounting and
reporting for investments in equity and debt securities. Commencing in 1994,
all unrealized gains and losses associated with securities available for sale
will be reflected as a segregation of stockholders' equity. It is anticipated
that the adoption of this Standard will not have a significant effect on the
Registrant's financial position or materially alter the manner in which it
manages the activities in its securities portfolio.
NOTE 3 - LOANS
The loan portfolio consists of the following as of December 31,
<TABLE>
<CAPTION>
(in thousands) 1993 1992
<S> <C> <C>
Commercial, Financial and Agricultural $ 257,151 $ 288,114
Mortgage Loans-Commercial 292,157 270,666
Mortgage Loans-Residential 363,644 353,725
Mortgage Loans-Construction 19,828 30,080
Land Loans 37,160 50,059
Consumer Loans 59,823 69,632
---------- ----------
Total $1,029,763 $1,062,276
Less:
Unearned Income and Fees 12,679 17,093
Allowance for Loan Losses 46,625 58,497
---------- ----------
Net Loans $ 970,459 $ 986,686
========== ==========
</TABLE>
26
<PAGE> 27
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - LOANS (CONTINUED)
The Registrant's loan portfolio is principally located on Long Island, New
York, and to a lesser extent in Westchester and Rockland Counties, New York.
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. The portfolio is
similarly concentrated in real estate related loans, comprising 69.2% of the
portfolio at December 31, 1993. Residential mortgage loans are the largest
component of the real estate related portfolio, comprising 51.0% of that
portfolio. Commercial mortgages are the next largest component of this
concentration, representing 41.0% of the real estate related portfolio, and
contain loans secured by industrial developments, professional office
buildings, retail stores and shopping centers. Land loans, comprising 5.2% of
the real estate concentration, are loans to finance the acquisition of vacant
land for future residential and commercial development. Construction loans,
which are loans to finance the construction of industrial developments and
single family subdivisions, are the smallest component of the portfolio's real
estate concentration, aggregating 2.8% of the real estate concentration.
Included in Mortgage Loans - Residential at December 31, 1993 and 1992 were
loans held for sale of $5.5 million and $9.2 million, respectively. The
Registrant receives fee income for servicing mortgage loans. Mortgages serviced
for others aggregated $403.2 million and $449.9 million as of December 31, 1993
and 1992, respectively.
Non-performing assets include loans ninety days past due and still accruing,
non-accrual loans and other real estate. Other real estate includes property
acquired through foreclosure, deeds in lieu of foreclosure and loans classified
as in-substance foreclosures.
The Registrant's non-performing assets consisted of the following at December
31,
<TABLE>
<CAPTION>
(in thousands) 1993 1992
<S> <C> <C>
Loans Ninety Days Past Due and Still Accruing $ 1,811 $ 5,425
Non-Accrual Loans 33,484 59,670
-------- --------
Non-Performing Loans 35,295 65,095
Other Real Estate 7,426 10,052
In Substance Foreclosures 14,473 51,331
-------- --------
Non-Performing Assets $ 57,194 $126,478
========= ========
</TABLE>
The largest concentration of non-performing loans are those secured by real
estate aggregating $17.6 million, or 49.9% of non-performing loans, at December
31, 1993. Net charge-offs resulting from lending transactions secured by real
estate aggregated $5.4 million, or 30.0% of the Registrant's credit loss on its
portfolio as a whole. Commercial loan net charge-offs represented the largest
concentration of credit losses in 1993, aggregating $11.8 million or 66.0% of
net charge offs.
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 $5.0 million, $15.0 million and $16.0 million in 1993, 1992 and
1991, respectively.
Restructured loans were $18.0 million and $18.4 million in 1993 and 1992,
respectively. Restructured loans on a non-accrual basis at December 31, 1993
and 1992 were $2.7 million and $5.1 million, respectively. The amount of
interest income recorded on restructured loans was approximately $1.3 million,
$1.8 million and $2.5 million in 1993, 1992 and 1991, respectively. The
difference between income included in the Registrant's 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 $.2
million, $.2 million and $.3 million in 1993, 1992 and 1991, respectively.
The Registrant had no commitment to lend additional funds to borrowers whose
loans are non-performing or whose terms have been restructured at December 31,
1993.
SFAS No. 114 "Accounting by Creditors for the Impairment of a Loan", which is
effective for fiscal years beginning after December 15, 1994, and is to be
applied prospectively, requires that impaired loans within the scope of the
statement be measured based on the present value of expected future cash flows
discounted at the loans effective interest rate, observable market price or
fair value of the underlying collateral. The Registrant is currently assessing
the financial implications of SFAS No. 114 and believes that implementation
will not have a material adverse effect on the Registrant's financial position
or results of operations.
Loans to related parties include loans to directors and their related
companies, and executive officers of the Registrant and any of its
subsidiaries. These loans were made on substantially the same terms as loans to
other individuals and businesses of comparable risks.
27
<PAGE> 28
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - LOANS (CONTINUED)
The following analysis shows the activity of related party loans for 1993:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Balance at December 31, 1992 $ 1,040
New Loans and Additional Disbursements 178
Repayments (578)
--------
Balance at December 31, 1993 $ 640
========
</TABLE>
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
The changes in the allowance for loan losses are as follows for the years
ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1993 1992 1991
<S> <C> <C> <C>
Balance at Beginning of Year $ 58,497 $ 54,164 $ 28,501
Additional Allowance Resulting from Acquisition - - 14,580
Provisions for Loan Losses 6,000 21,000 64,800
Recoveries Credited to the Allowance 3,676 2,609 736
------- ------- --------
68,173 77,773 108,617
Losses Charged to the Allowance 21,548 19,276 54,453
-------- ------- --------
Balance at End of Year $ 46,625 $ 58,497 $ 54,164
======== ======== ========
</TABLE>
NOTE 5 - PREMISES AND EQUIPMENT
The following is a summary of premises and equipment at December 31,
<TABLE>
<CAPTION>
(in thousands) 1993 1992
<S> <C> <C>
Land $ 7,580 $ 7,861
Bank Premises 18,836 18,106
Leasehold Improvements 5,225 5,169
Equipment 28,131 27,278
-------- --------
59,772 58,414
Accumulated Depreciation and Amortization 26,495 22,845
-------- --------
$ 33,277 $ 35,569
======== ========
</TABLE>
Depreciation and amortization charged to operations for the years ended
December 31, 1993, 1992 and 1991 was $4.8 million, $4.6 million and $5.4
million, respectively.
NOTE 6 - FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE
Federal funds purchased and securities sold under agreements to repurchase
and related information are summarized as follows:
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992 1991
<S> <C> <C> <C>
Federal Funds Purchased
Balance at December 31, $ - $ - $ -
Maximum Amount Outstanding at Any Month End - - 11,000
Average Outstanding Balance 28 - 770
Weighted Average Interest Rate Paid 3.10% - 6.54%
Weighted Average Interest Rate at Year End - - -
Securities Sold Under Agreements to Repurchase
Balance at December 31, $ 255,643 $ 28,200 $ 366
Maximum Amount Outstanding at Any Month End 325,779 116,188 165,655
Average Outstanding Balance 176,491 57,568 73,111
Weighted Average Interest Rate Paid 3.49% 4.18% 6.80%
Weighted Average Interest Rate at Year End 3.41% 5.04% 4.39%
</TABLE>
28
<PAGE> 29
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE, CONTINUED
The maturity of the borrowings, and the book value and market value of the
respective securities sold under repurchase agreements at December 31, 1993 are
as follows:
<TABLE>
<CAPTION>
Repurchase
Agreement Interest Security Security
(dollars in thousands) Borrowing Rate Book Value Market Value
<S> <C> <C> <C> <C>
Overnight $ - -% $ - $ -
Within 0-30 days 25,190 3.32 27,616 27,471
After 30 but within 90 days 181,142 3.40 188,055 188,071
Over 90 days 49,311 3.47 55,733 55,923
--------- ----- --------- ---------
TOTAL $ 255,643 3.41% $ 271,404 $ 271,465
========= ===== ========= =========
</TABLE>
The securities which underlie the repurchase agreement borrowings are
primarily Federal Home Loan Mortgage Corporation and Federal National Mortgage
Association agency mortgage backed securities. Accrued interest payable on
securities sold under repurchase agreement borrowings aggregated $1.1 million
at December 31, 1993 and is included in Accrued taxes, interest and other
expenses in the Registrant's consolidated balance sheet.
The Registrant's bank subsidiary has arrangements with various correspondent
banks providing short-term credit for regulatory liquidity requirements. These
lines of credit aggregated $5.0 million at December 31, 1993.
NOTE 7 - OTHER BORROWED FUNDS
Other borrowed funds represent obligations with original maturities exceeding
one year and consist of the following loans and obligations at December 31,
<TABLE>
<CAPTION>
(dollars in thousands) 1993 1992
<S> <C> <C>
Senior Notes Payable
9.30% Series B Due August 1, 1993 $ - $ 20,000
10.08% Senior Note due March 28, 1995 20,000 20,000
-------- --------
20,000 40,000
-------- --------
Mortgage Note Payable
15.00% Due Monthly Through January 1, 2000 - 174
-------- --------
- 174
-------- --------
$ 20,000 $ 40,174
======== ========
</TABLE>
During 1993, the Registrant repaid the Series B Notes utilizing the proceeds
from common stock sales and available cash at the holding company. The
Registrant's $20.0 million 10.08% Senior Note agreement (the "Note"), as
amended, imposes various restrictions on the Registrant. These restrictions
include, but are not limited to, the maintenance of tangible capital levels,
regulatory minimum capital ratios, limitations on the payments of dividends and
the repurchase of common stock. The Registrant is in compliance with the
covenants of the Note at December 31, 1993.
The mortgage note was prepaid in full during 1993.
29
<PAGE> 30
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - INCOME TAXES
The Registrant provides for income taxes under the asset and liability method
required by SFAS No. 109. Under this method, the Registrant is required to
establish deferred tax assets and liabilities for the temporary differences
between the financial reporting basis and the tax basis of the Registrant's
assets and liabilities at the enacted tax rates expected to be in effect when
such amounts are realized or settled. A valuation allowance is to be
established to reduce the deferred tax asset if it is "more likely than not"
that some or all of the deferred tax asset will not be realized.
The components of the Registrant's consolidated income tax provision for the
year ended December 31, 1993 under SFAS No. 109 is as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Current tax expense $5,483
Deferred tax expense
(exclusive of the effects of the components listed below) 3,522
Adjustments to deferred tax assets and
liabilities for enacted changes in tax laws and rates (193)
Valuation change, principally realized state benefit (1,292)
------
Income tax provision $7,520
======
</TABLE>
The components of the Registrant's consolidated income tax
provision/(benefit) for the years ended December 31, 1992 and 1991, were as
follows:
<TABLE>
<CAPTION>
(in thousands) 1992 1991
<S> <C> <C>
Current:
Federal $ 4,544 $ (9,927)
State 1,610 410
-------- --------
6,154 (9,517)
Deferred (3,964) 4,576
-------- --------
Total $ 2,190 $ (4,941)
======== ========
</TABLE>
Deferred income taxes result from temporary differences in the recognition of
revenue and expense for tax and financial statement purposes. The sources of
these differences and the tax effect of each for the years ended December 31,
1992 and 1991 are as follows:
<TABLE>
<CAPTION>
1992 1991
(in thousands)
<S> <C> <C>
Deduction for Tax Purposes
(Under)/Over Book Provision $(1,988) $5,504
Recapture of Tax Bad Debt Reserve (1,016) -
Other Real Estate Valuation Allowance (640) -
Cash to Accrual Adjustments - (128)
Deferred Compensation (73) (39)
Tax Deferred Loan Fees (107) (100)
Accelerated Tax Depreciation (777) (1)
Accrued Expenses 85 884
State Income Taxes/(Benefit),
Net of Federal Income Tax 784 (976)
Accrued Pension Plan Expense (169) (235)
Other, net (63) (333)
-------- ------
Total $ (3,964) $4,576
======== ======
</TABLE>
30
<PAGE> 31
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - INCOME TAXES (CONTINUED)
The total tax expense/(benefit) differed from the amounts computed by
applying the Federal income tax rate to income/(loss) before income taxes as a
result of the following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Federal Income Tax Expense/(Benefit) at Statutory Rates 35.0% 34.0% (34.0)%
Increase/(Reduction) of Taxes Resulting From:
Tax Exempt Interest, Net (3.3) (20.4) (3.0)
State Income Taxes, Net of Federal Income Tax 7.8 27.1 5.4
Accretion/Amortization of Purchase Accounting Premiums and Discounts 0.8 4.3 (2.0)
Amortization of Excess of Cost over Fair Value of Net Assets Acquired 1.2 6.4 0.5
Nondeductible Restructure Expense - 1.8 -
Tax Benefit not Recognized - - 19.6
Capital Loss Carryforward (0.6) 0.6 0.5
Valuation Allowance Change (5.7) - -
Other - Net (1.9) 2.1 0.2
---- ---- -----
Effective Tax Rate 33.3% 55.9% (12.8)%
==== ==== =====
</TABLE>
The components of the Registrant's net deferred tax asset at December 31, and
January 1, 1993 are as follows:
<TABLE>
<CAPTION>
December 31, January 1,
(in thousands)
<S> <C> <C>
Deferred Tax Assets
Allowance for Loan Losses $18,626 $23,163
Excess of Tax Basis over Book Basis - Other Real Estate 472 589
Deferred Compensation and Other
Employee Benefit Plans 1,130 1,105
Other, net 1,306 970
------- -------
Gross Deferred Tax Asset $21,534 $25,827
Valuation Allowance (9,710) (11,002)
-------
Total Net Assets $11,824 $14,825
------- -------
Deferred Tax Liabilities
Savings Bank Tax Bad Debt Recapture $ 4,576 $ 5,561
Excess of Book Basis over Tax
Basis for Premises and Equipment 1,015 994
------- -------
Gross Deferred Tax Liability $ 5,591 $ 6,555
------- -------
Net Deferred Tax Asset $ 6,233 $ 8,270
======= =======
</TABLE>
The valuation allowance for deferred tax assets relates to both the
establishment of a reserve upon the adoption of SFAS No. 109 which approximated
previous unrealized potential tax benefits and a reserve equivalent to the
potential New York State tax benefit. The Registrant has elected to fully
reserve for the potential New York State benefit due to the uncertainties of
realization since state law does not provide for the utilization of net
operating loss carryforwards or carrybacks. The Registrant has and will
continue to recognize these benefits on a when realized basis.
31
<PAGE> 32
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - RETIREMENT PLAN AND OTHER EMPLOYEE BENEFITS
RETIREMENT PLAN
The Registrant maintains a retirement plan (the "Plan") covering
substantially all of its employees. Effective October 1, 1992, the Plan was
amended to incorporate the change in the benefit formula from a final pay
formula to a career average formula. Under the final pay formula, benefits were
based upon the highest average compensation received during any three
consecutive years during the participant's period of plan participation. Under
the career average formula, participants accrue a benefit each year equal to
five percent of their annual compensation, as defined, plus a fixed rate of
interest based on one-year Treasury Bill rates, credited quarterly. Upon
revision of the Plan's benefit formula, previously accrued benefits were
converted to a lump-sum equivalent value representing the participant's
beginning account balance. In conjunction with the aforementioned change in
plan benefit formula, the Registrant elected to change the retirement plan year
from a fiscal plan year ending September 30 to a calendar year ending December
31. The effect of the Plan amendment in 1992 was not material and will reduce
pension expense in future years. Plan assets are held in trust by the Bank and
are invested in a diversified portfolio of fixed income securities, mutual
funds and equity securities.
The following table sets forth the Plan's funded status, based principally
on measurement dates of December 31, 1993 and 1992, and amounts recognized in
the Registrant's consolidated financial statements.
<TABLE>
<CAPTION>
DECEMBER 31, (in thousands) 1993 1992
<S> <C> <C>
Actuarial Present Value of Accumulated Benefit Obligation:
Vested Benefits $15,691 $13,647
Non-Vested Benefits 566 170
Projected Benefit Obligation for Service Rendered to Date 16,257 13,817
Plan Assets at Fair Value 16,279 17,185
------- -------
Plan Assets in Excess of Projected Benefit Obligation 22 3,368
Unrecognized Net Asset Value Existing at Plan Year End (521) (585)
Unrecognized Net Loss 3,562 539
Prior Service Cost (3,279) (3,529)
------- -------
Accrued Pension Cost $ (216) $ (207)
======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31, December 31, September 30,
Net Pension Expense Included the Following Components (in thousands): 1993 1992 1991
<S> <C> <C> <C>
Service Cost-Benefits Earned During the Year $ 613 $ 1,102 $ 1,020
Interest Cost on Projected Benefit Obligations 1,115 1,400 1,143
Net Amortization and Deferral (639) (1,366) 1,500
--------- --------- --------
$ 1,089 $ 1,136 3,663
Less Actual Return on Plan Assets 1,079 800 3,048
--------- --------- --------
Net Pension Expense $ 10 $ 336 $ 615
========= ========= ========
</TABLE>
The weighted average discount rate utilized to determine the projected
benefit obligation was 7.50% in 1993 and 8.50% in 1992. The assumed rate of
future compensation increases was 4.50% in 1993 and 5.50% in 1992. The
expected long-term rate of return on Plan assets was 8.50% in 1993 and 1992.
On January 1, 1993, the Registrant adopted 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 at
December 31, 1993 were $181 thousand. The projected benefit obligation exceeded
the fair value of the plan assets by $80 thousand. Net pension expense incurred
in 1993 for the supplemental retirement plan was $31 thousand. The weighted
average discount rate utilized to determine the projected benefit obligation
was 7.50%, the assumed rate of future compensation increases was 5.50% and the
expected long-term rate of return on plan assets was 7.00%.
-32-
<PAGE> 33
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - RETIREMENT PLAN AND OTHER EMPLOYEE BENEFITS (CONTINUED)
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Registrant provides certain health care and life insurance benefits to
eligible retired employees. Benefits received range between 0% and 100% of
coverage premiums based on an employees age, years of service and retirement
date. Effective January 1, 1993, the Registrant adopted SFAS No. 106
"Accounting for Postretirement Benefits Other than Pensions", which resulted in
a change in the method of accounting for postretirement health care and life
insurance benefits from a pay-as-you-go basis to an accrual basis. Under SFAS
No. 106, the expected cost of postretirement benefits other than pensions is
actuarialy determined and accrued ratable over the employees period of service.
The Accumulated Postretirement Benefit Obligation ("APBO") existing at January
1, 1993 of $4.1 million is being amortized in accordance with SFAS No. 106 over
20 years.
The following table sets forth the Registrant's APBO at December 31, 1993:
<TABLE>
<S> <C>
(in thousands)
Retirees and beneficiaries $ 4,116
Fully eligible active plan participants 655
-------
APBO at December 31, 1993 4,771
Plan Assets at Fair Value -
Unrecognized Transition Obligation 3,922
Unrecognized Net Loss 817
Prior Service Cost -
-------
Accrued Pension Cost $ 32
=======
</TABLE>
In measuring the APBO, a 7.50% annual trend rate for health care costs for
persons over the age of 65, and 8.60% annual trend rate for health care costs
for those persons under the age of 65, was assumed for the year ended December
31, 1993. This rate is assumed to decline ratably over the next 20 years to
6.00% for those persons over the age of 65 and 6.10% for those persons under
the age of 65, and remain at that level thereafter. If the assumed health care
cost trend rate changed by 1%, the APBO at December 31, 1993 would change by
18%. The effect of a 1% change in the cost trend rate on the service and
interest cost components of net periodic postretirement benefits expense would
be a change of 16%.
The weighted average discount rate used in 1993 in the determination of the
APBO was 7.50%.
The net periodic postretirement benefits expense for the year ended
December 31, 1993 was comprised of the following:
<TABLE>
<S> <C>
(in thousands)
Service cost (benefits for service during the year) 39
Interest cost on APBO 325
Actual return on plan assets -
Amortization of Transition Obligation 208
------
Net Postretirement Benefits Expense $ 572
======
</TABLE>
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112 "Employers Accounting for Post-employment Benefits". SFAS No. 112
establishes the accounting standard for employers who provide benefits to
former or inactive employees after employment but before retirement. This
statement is effective for fiscal years beginning after December 15, 1993, and
is to be applied prospectively. Because the Registrant does not provide any
significant post-employment benefits other than pensions, the Registrant
believes that the adoption of SFAS No. 112 will not have a material impact on
it's financial condition or results of operations.
-33-
<PAGE> 34
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - RETIREMENT PLAN AND OTHER EMPLOYEE BENEFITS (CONTINUED)
SAVINGS PLAN
On October 1, 1992, the Registrant adopted 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 Registrant. This matching is fully vested for employees participating at
the inception date of the plan, 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 Registrant's common stock. The total savings plan expense for the plan
years of 1993 and 1992 was $566 thousand and $155 thousand, respectively.
NOTE 10 - COMMON STOCK PLANS
STOCK PURCHASE PLAN
The Employees' Stock Purchase Plan allowed participants to elect to
allocate from 2% to 8% of their salary towards the purchase of the Registrant's
common stock. The Registrant made an additional bi-weekly contribution to the
plan, on the employees' behalf, equal to one-third of the sums allocated by the
participants. In November 1992, the Registrant amended the Employee's Stock
Purchase Plan to deregister 96,642 shares which remained unsold.
INCENTIVE STOCK OPTION PLAN
Under the Incentive Stock Option Plan, 360,000 shares of the Registrant's
common stock were reserved for issuance to key employees. Options are awarded
by a committee appointed by the Board of Directors. The plan provides that the
option price shall not be less than the fair market value of the stock on the
date the option is granted. All options are exercisable upon the grant for a
period of ten years. At December 31, 1993, 7,889 shares remain authorized and
unissued.
LONG TERM INCENTIVE PLAN
In 1987, the Registrant adopted the Long Term Incentive 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
employees by a committee appointed by the Board of Directors. The maximum
aggregate number of shares of common stock which may be issued by the
Registrant under the plan, either as restricted stock awards or non-qualified
stock options, is 400,000 shares. Restricted stock awarded under the plan may
not be sold, assigned, transferred, pledged, hypothecated or otherwise disposed
of, except by will or the laws of descent and distribution for a certain period
of time after the date of award. The restrictions on 33 1/3% of such shares
shall lapse on the date which is exactly 5 years from the date of grant, the
restrictions on 33 1/3% of such shares shall lapse on the date which is exactly
6 years from the date of grant and the restrictions on the final 33 1/3% of
such shares shall lapse on the date which is exactly 7 years from the date of
grant. The value of the awards 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 period the restrictions lapse. Notwithstanding
the foregoing, the committee, in its sole discretion, may accelerate the
removal of any or all restrictions. If the Registrant is a party to a merger,
consolidation, sale of substantially all assets or similar transaction and, as
a result, the common stock of the Registrant 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, 1993, no shares remain authorized and unissued.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Dividend Reinvestment and Stock Purchase Plan provides the Registrant's
stockholders with a method of investing cash dividends and or optional cash
payments in additional common stock of the Registrant. Under the plan, as
amended in November 1992, cash dividends and/or optional cash payments can be
used to purchase the Registrant's common stock at 95% of the average market
value of the stock for the ten trading days preceding the day of purchase. 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 owning more than 200 shares of $1.00 for each share previously
owned or $25,000, whichever is less. The monthly maximum can be exceeded with
prior written approval from the Registrant. At December 31, 1993, 701,665
shares remain authorized and unissued.
-34-
<PAGE> 35
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - COMMON STOCK PLANS (CONTINUED)
EXECUTIVE MANAGEMENT COMPENSATION PLAN
In 1989, the Registrant adopted the 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 of the Registrant and its subsidiaries by a
committee appointed by the Board of Directors. The maximum aggregate number of
shares of common stock which may be issued by the Registrant 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 Registrant's 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, 1993, 750 shares remain
authorized and unissued.
SHAREHOLDERS' RIGHTS PLAN
On February 29, 1989, the Registrant declared a dividend distribution of
one preferred stock purchase right for each outstanding share of common stock
to stockholders of record at the close of business on March 13, 1989. Each
right 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 Registrant 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 Registrant or common stock of an
acquiring corporation at a substantial discount. Under certain circumstances,
the Registrant 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 Registrant.
1994 KEY EMPLOYEE STOCK PLAN
In December 1993 the Registrant segregated 700,000 shares of common stock
to establish a long term incentive plan for officers and other key employees of
the Registrant. 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 by a committee appointed by the Board of
Directors. The purpose of this plan is to encourage those key employees to
acquire and maintain an interest in the value of the Registrant's common stock
and therefore additional incentive to work for the continued success of the
Registrant. During 1993, 86,500 incentive stock options, 13,500 non-qualified
stock options and 8,000 restricted shares were awarded. The plan is subject to
shareholder approval.
-35-
<PAGE> 36
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - COMMON STOCK PLANS (CONTINUED)
The following is a summary of the activity in the Registrant's common stock
plans for the three year period ended December 31, 1993:
<TABLE>
<CAPTION>
RESTRICTED
EXERCISE STOCK GRANT
OPTIONS PRICE AWARDS PRICE
------- ----- ------ -----
<S> <C> <C> <C> <C>
Outstanding December 31, 1990 745,720 $4.44 - $25.13 156,400 $ 7.75 - $23.25
Granted 66,500 $8.81 - $10.25 14,000 $ 8.81 - $10.25
Exercised (8,000) $6.88 - $8.69 - -
Forfeited (58,289) $15.75 - $20.75 (32,000) $10.25 - $20.75
Removal of Restrictions Accelerated - - ( 9,500) $ 8.81 - $ 9.38
--------
Outstanding December 31, 1991 745,931 $ 4.44 - $25.13 128,900 $ 7.75 - $23.25
Granted 40,500 $ 5.44 - $ 8.31 11,500 $ 5.44 - $ 7.94
Exercised (8,200) $ 4.44 - $ 6.88 - -
Forfeited (157,900) $ 6.88 - $23.25 (5,500) $14.69 - $20.75
Vested - - (11,758) $20.75 - $23.25
Removal of Restrictions Accelerated - - ( 1,000) $ 5.69
-------- --------
Outstanding 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 December 31, 1993 758,831 $ 5.44 - $25.13 102,211 $ 5.44 - $23.25
======== ========
</TABLE>
-36-
<PAGE> 37
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 - PARENT COMPANY ONLY
CONDENSED FINANCIAL STATEMENTS (IN THOUSANDS)
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS DECEMBER 31, 1993 1992
<S> <C> <C>
ASSETS
Deposits with Subsidiary Bank $ 2,781 $ 8,371
Deposits with Other Financial Institutions 100 7,015
Securities Purchased Under Agreements to Resell with Subsidiaries 7,600 -
Investment Securities (Market Value 1993,$1,093; 1992,$1,068) 964 1,068
Investment in Subsidiaries 159,579 141,571
Premises and Equipment, Net 239 355
Receivables from Subsidiaries 46 103
Other Assets 1,167 806
Excess of Cost Over Fair Value of Net Assets Acquired 8,610 9,050
--------- ---------
Total $ 181,086 $ 168,339
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior Notes Payable $ 20,000 $ 40,000
Mortgage Note Payable - 174
Capital Note Payable to Subsidiary 3,250 3,250
Other Liabilities 3,364 5,092
Stockholders' Equity 154,472 119,823
--------- ---------
Total $ 181,086 $ 168,339
========= =========
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
INCOME
Dividends from Bank Subsidiaries $ - $ 518 $ 20,000
Management Fees from Subsidiaries - 10,200 9,770
Other 254 145 661
Net Securities Losses (295) (136) (1,917)
------- ------- --------
Total (Losses)/Income (41) 10,727 28,514
------- ------- --------
EXPENSE
Interest on Other Borrowings 2,582 4,201 3,974
Interest on Capital Note Payable to Subsidiary 363 363 417
Salaries and Employee Benefits - 3,930 3,495
Amortization of Deferred Compensation
re: Restricted Stock Awards 328 351 260
Depreciation of Premises and Equipment 82 19 179
Other Occupancy and Equipment Expenses - 961 901
Other Expenses 1,412 5,955 4,010
Amortization of Excess of Cost Over Fair Value of Net Assets Acquired 440 440 440
------- ------- --------
Total Expenses 5,207 16,220 13,676
------- ------- --------
(Loss)/Income before Income Taxes and Equity
in Undistributed Earnings of Subsidiaries (5,248) (5,493) 14,838
Income Tax Benefit (2,156) (2,152) (1,683)
Equity in Undistributed Earnings/(Losses) of Subsidiaries
Bank Subsidiary 18,294 5,338 (30,352)
Non-Bank Subsidiaries (105) (267) 205
Distribution of Bank Subsidiary Equity - - (20,000)
------- ------- --------
Net Income/(Loss) $15,097 $ 1,730 $(33,626)
======= ======= ========
</TABLE>
-37-
<PAGE> 38
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 - NORTH FORK BANCORPORATION, INC. (PARENT COMPANY ONLY) (CONTINUED)
CONDENSED FINANCIAL STATEMENTS (IN THOUSANDS)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income/(Loss) $ 15,097 $ 1,730 $ (33,626)
Adjustments to Reconcile Net Income/(Loss)
to Net Cash (Used) In/Provided by Operating Activities:
Depreciation and Amortization 410 370 439
Amortization of Excess of Cost Over Fair Value of Net Assets Acquired 440 440 440
Equity in Undistributed (Earnings)/Losses of Subsidiaries (18,189) (5,071) 50,147
Loss on Sales of Investment Securities 295 136 1,917
Other, Net (2,000) 4,952 (4,497)
-------- -------- ----------
Net Cash (Used) in/Provided by Operating Activities (3,947) 2,557 14,820
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sales of Investment Securities 17 - 16,991
Additional Investments in Bank Subsidiaries - (167) (36,500)
Liquidation of Investment in Non-Bank Subsidiary - - 320
Purchases of Premises and Equipment, Net - (39) (153)
-------- -------- ----------
Net Cash Provided by/(Used) in Investing Activities 17 (206) (19,342)
-------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Other Borrowings (20,174) (13) (1,011)
Treasury Shares (Purchased)/Sold, Net (45) 269 1,427
Common Stock Sold 19,244 7,246 10,395
Dividends Paid - - (3,265)
-------- -------- ----------
Net Cash (Used) in/Provided by Financing Activities (975) 7,502 7,546
-------- -------- ---------
Net (Decrease)/Increase in Cash and Cash Equivalents (4,905) 9,853 3,024
Cash and Cash Equivalents at Beginning of Year 15,386 5,533 2,509
-------- -------- ---------
Cash and Cash Equivalents at End of Year $ 10,481 $ 15,386 $ 5,533
======== ======== =========
</TABLE>
Dividends from the Bank to the parent company are limited by the regulations
of the New York State Banking Department to the Bank's current year's earnings
plus it's prior two years' retained net profits. Based on the parameters of
this regulation, the Bank's dividend capability at January 1, 1994 includes
it's 1994 earnings plus approximately $24.3 million in prior years retained net
profits.
NOTE 12 - STOCKHOLDERS' EQUITY
During 1993, the Registrant raised $9.5 million in capital through the
private placement of approximately 1 million shares of its common stock, $4.8
million through the Dividend Reinvestment Plan and $3.5 million from the
exercise of certain warrants. The proceeds, as well as available cash at the
holding company, were used to prepay the Registrant's $20 million Series B
Senior Note in the 1993 first quarter.
During 1992, in conjunction with the renegotiation of the terms of the
Registrant's $20 million Series B Senior Note (the"Series B Notes") and the
10.08% Senior Note (the "Note"; together with the Series B Notes, the "Notes"),
the Registrant issued to the holders of the Notes 1,073,949 warrants to
purchase the Registrant's common stock at an exercise price of $6.50 per share.
At December 31, 1993, 536,974 warrants remained outstanding which expire upon
full repayment of the Note.
At December 31, 1993, the Registrant also had 632,500 warrants outstanding
with an exercise price of $4.70 per share which expire June 29, 1995.
The Bank was formed in October 1992 through the merger of the Registrant's
former banking subsidiaries, Southold Savings Bank ("Southold") and The North
Fork Bank & Trust Company. Prior to the Registrant's acquisition of Southold,
Southold converted from a mutual to a stock form of ownership. Upon conversion,
a liquidation reserve account was established for the benefit of all eligible
account holders of Southold who continue to maintain their deposits in
Southold. In the event of a complete liquidation of Southold, each eligible
account holder would be entitled to their interest in the liquidation account
prior to any payments to the Registrant by Southold. The liquidation reserve
balance at December 31, 1993 and 1992 was $3.6 million and $4.6 million,
respectively. Eastchester Savings Bank, which was acquired by Southold in
1991, similarly converted from a mutual to a stock form savings bank. The
remaining balance in Eastchester's liquidation account at December 31, 1993 and
1992 was $9.4 million and $11.7 million, respectively.
-38-
<PAGE> 39
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 - OTHER COMMITMENTS AND CONTINGENT LIABILITIES
(a) OFF-BALANCE SHEET RISKS
The Registrant 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
Registrant's consolidated financial statements when and if proceeds associated
with the commitments are disbursed. The Registrant's 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. The Registrant uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance sheet financial instruments.
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments are expected to expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Registrant evaluates each customers
creditworthiness on a case-by-case basis. The amount of collateral obtained if
deemed necessary by the Registrant upon extension of credit is based on
managements credit evaluation of the counterparty. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment, and
income- producing commercial properties.
Standby letters of credit are conditional commitments issued by the
Registrant 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.
The Registrant enters into interest rate contracts including interest rate
caps, floors and swaps in managing its interest rate exposure. These
instruments are entered into as hedges against interest rate risk on specific
assets and liabilities. Interest rate swap transactions generally involve the
exchange of fixed and floating rate interest payment obligations without the
exchange of the underlying principal. Interest rate caps and floors provide for
the receipt of funds from the counterparty if short term interest rates exceed
the interest rate cap, or fall below the interest rate floor. Interest rate
swap, cap and floor agreements contain a degree of credit risk, regarding the
ability of the counterparty to the transaction to perform under the terms of
the contract, as well as replacement risk, which represents the cost to replace
the contract at current market rates should the counterparty default prior to
settlement date. The Registrant has established counterparty limits to minimize
the counterparty and replacement risk.
During 1993, the Registrant entered into a balance sheet leverage strategy
whereby funds obtained through repurchase agreement borrowings were invested in
agency guaranteed mortgage backed securities. This strategy was implemented to
utilize excess capital and benefit from the steepness in the yield curve. In
order to mitigate the interest rate risk assumed in this strategy due to the
differences in these asset and liability maturities and maintain the level of
interest rate risk within management's established guidelines, the Registrant
entered into certain off balance sheet agreements. Specifically, the Registrant
entered into (i) a 24 month interest rate swap agreement, paying a fixed
interest rate and receiving a variable interest rate on $24 million notional
principal, (ii) a 24 month interest rate cap on 3 month LIBOR set at 5.00% on
$48 million notional principal, and (iii) a 27 month interest rate floor on 3
month LIBOR set at 5.00% on $27 million notional principal. The three month
LIBOR was 3.31% at December 31, 1993. The estimated market value of the
Registrant's interest rate contracts in a gain position aggregated $69.8
thousand at December 31, 1993. The interest rate swap, cap and floor agreements
outstanding as of December 31, 1993 mature September 1995.
The notional principal amount of the Company's off-balance sheet financial
instruments at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Contract or Notional
Amount
------
(in thousands)
--------------------
<S> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit $72,367
Standby letters of credit 16,261
Financial instruments whose notional or contract amounts exceed the amount of credit risk:
Interest rate swap agreements 24,000
Interest rate caps 48,000
Interest rate floors 27,000
</TABLE>
-39-
<PAGE> 40
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 - OTHER COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
(b) LEASE COMMITMENTS
At December 31, 1993, the Registrant was obligated under a number of
non-cancelable leases for land and buildings used for bank purposes. Minimum
annual rentals, exclusive of taxes and other charges under non-cancelable
leases are summarized as follows:
<TABLE>
<CAPTION>
Minimum
Year Ended December 31, (in thousands): Rentals
-------
<S> <C>
1994 1,356
1995 1,077
1996 876
1997 841
1998 703
Thereafter 1,819
</TABLE>
Total rent expense for the years ended December 31, 1993, 1992 and 1991
amounted to $1.3 million, $1.3 million and $1.4 million, respectively.
(B) OTHER MATTERS
During 1993, the Registrant's bank subsidiary was required to maintain
balances with the Federal Reserve Bank of New York for reserve and clearing
requirements. These balances averaged $9.0 million in 1993.
Because of the nature of their activities, the Registrant and its
subsidiaries are subject to certain pending and threatened legal actions which
arise out of the normal course of business. The Registrant 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. On January
5, 1993, the Registrant reached an agreement in principle in full settlement of
a class action shareholder suit which contained claims regarding the
Registrant's disclosure of its provision and allowance for loan losses. The
agreement calls for the creation of a settlement fund of $1.3 million, the
majority of which is covered by insurance. The agreement is subject to final
court approval.
In December 1991, the Securities and Exchange Commission (the "Commission")
advised the Registrant that it has issued a formal order of investigation
concerning, among other things, the provision for loan losses reported by the
Registrant in certain periods since January 1, 1989. The Commission has issued
to the Registrant a subpoena seeking certain information. The Registrant has
cooperated fully with the Commission in its investigation. At this time,
management is not able to predict the final outcome of the investigation.
NOTE 14 - REGULATORY MATTERS
On February 17, 1994, the Federal Deposit Insurance Corporation (the "FDIC")
notified the Bank that based on the improvement in it's financial condition,
the FDIC was terminating the Memorandum of Understanding (the "MOU") dated
August 25, 1993 between the Bank, the FDIC and the New York State Banking
Department (the "NYSBD"). The Bank received similar notification from the NYSBD
on February 23, 1994. The MOU required the Bank to, among other things, (i)
maintain a Tier I leverage ratio of 5.50%; (ii) reduce the level of classified
assets as a ratio of capital and reserves and (iii) charge off all assets
classified "Loss" and 50% of those classified "Doubtful" in the FDIC and NYSBD
Reports on Examination.
On February 1, 1994, the Federal Reserve Bank of New York notified the
Registrant that in light of the noticeable improvement in it's financial
condition the Memorandum of Understanding dated October 22, 1992 was
terminated. The Federal Reserve Bank memorandum prohibited the Registrant from,
among other things, the payment of dividends and the renewal or modification of
the terms of existing indebtedness without prior regulatory approval.
-40-
<PAGE> 41
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 - REGULATORY MATTERS, CONTINUED
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
imposes various new mandatory supervisory and regulatory measures. FDICIA
includes prompt corrective action provisions which define five capital
categories based on numerical thresholds for the following capital ratios:
Total Risk Based, Tier I Risk Based, Leverage, and Tangible Equity. FDICIA
further mandates the assessment of FDIC deposit insurance premiums based on a
risk assessment system which consists of three capital categories and three
supervisory categories. A financial institution's deposit insurance assessment
is dependent upon the category and subcategory to which it is assigned. FDICIA
also requires financial institutions to take certain actions relating to their
internal operations, including annual audit and reporting requirements,
standards for internal control and audit committee composition. Additionally,
FDICIA contains certain standards for safety and soundness which address three
categories: operational and managerial, asset quality and earnings, and
compensation.
NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments",
requires that the Registrant disclose estimated fair values for its financial
instruments. Fair value estimates, methods, and assumptions are set forth
below.
CASH, CASH EQUIVALENTS, AND SECURITIES
The carrying amounts for cash, cash equivalents, and short-term securities
approximate fair value as they mature in 90 days or less and do not present
unanticipated credit concerns. The fair value of longer-term securities,
except certain state and municipal obligations, is estimated based on bid
prices published in financial newspapers or bid quotations received from
securities dealers. The fair value of certain state and municipal obligations
is not readily available through market sources other than dealer quotations,
so fair value estimates are based on quoted market prices of similar
instruments, adjusted for differences between the quoted instruments and the
instruments being valued.
The following table represents the carrying value and estimated fair value
of cash, cash equivalents, and securities at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1993 1992 1992
Carrying Estimated Carrying Estimated
(in thousands) Amount Fair Value Amount Fair Value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents $ 75,360 $75,360 $136,153 $136,153
U.S. Treasury Securities 26,991 27,385 27,604 27,775
U.S. Government Agency Obligations 10,932 11,084 5,973 5,981
State and Municipal Obligations 44,069 44,663 17,570 18,045
Mortgage Backed Securities 665,521 667,587 387,818 388,041
Other 1,203 1,418 2,962 2,964
-------- -------- -------- --------
Total Securities $824,076 $827,497 $578,080 $578,959
======== ======== ======== ========
</TABLE>
LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. The fair value of performing loans is calculated by
discounting scheduled cash flows through the estimated maturity using market
discount rates that reflect the credit and interest rate risk inherent in the
loan category. Management has made estimates of fair value discount rates that
it believes to be reasonable. However, because there is no market for many of
these financial instruments, management has no basis to determine whether the
fair value presented would be indicative of the value negotiated in an actual
sale.
Fair value for non-performing loans is generally based on recent external
appraisals of the underlying collateral or management's estimate of the fair
value based on an evaluation of the loan's inherent credit risk.
-41-
<PAGE> 42
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
The following table presents the carrying value and estimated fair value of
the Registrant's loan portfolio as of December 31, 1993 and 1992.
<TABLE>
<CAPTION>
1993 1993 1992 1992
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
(in thousands)
Commercial, Financial and Agricultural 239,904 243,075 263,038 259,125
Mortgage Loans - Commercial 285,242 304,627 259,065 257,318
Mortgage Loans - Residential 356,338 359,310 340,973 343,553
Mortgage Loans - Construction 18,088 18,129 22,254 22,037
Land Loans 35,494 35,193 43,243 42,461
Consumer Loans 59,403 64,776 68,608 69,801
--------- --------- --------- ---------
Total Accruing Loans 994,469 1,025,110 997,181 994,295
Non-Accrual Loans 35,294 29,491 65,095 56,806
--------- --------- --------- ---------
Total Loans 1,029,763 1,054,601 1,062,276 1,051,101
</TABLE>
DEPOSIT LIABILITIES
Under SFAS 107, the fair value of deposits with no stated maturity, such as
non-interest bearing deposits, savings, NOW, and money market accounts, is
equal to the amount payable on demand as of December 31, 1993. The fair value
of time deposits is based on the discounted value of contractual cash flows.
The discount rate is estimated using the rates currently offered for deposits
of similar remaining maturities. At December 31, 1993, the carrying amount and
estimated fair value of the Registrant's time deposits were $318.0 million and
$321.2 million, respectively. At December 31, 1992, the carrying amount and
estimated fair value of the Company's time deposits were $406.3 million and
$408.5 million, respectively.
LONG TERM DEBT
The fair value of the Registrant's long-term debt is estimated based on the
current rates offered to the Registrant for debt of the same remaining
maturity. At December 31, 1993, the estimated fair value of the Registrant's
$20.0 million 10.08% Senior Note due March 28, 1995 is $21.3 million. The
estimated fair value of the Company's senior note obligations at December 31,
1992 was $40.2 million.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT, AND UNUSED LINES OF
CREDIT
The fair value of standby letters of credit is based on fees currently
charged for similar agreements or on the estimated cost to terminate them or
otherwise settle the obligations with the counterparties. Commitments to
extend credit are short term in nature and as such their estimated fair value
approximates the contractual obligation. The estimated fair value of lines of
credit, which are variable rate, approximates the contractual obligation.
The contractual amount, carrying amount, and estimated fair value for
commitments to extend credit, standby letters of credit, and financial
guarantees written for the years ended December 31, 1993 and 1992 are as
follows:
<TABLE>
<CAPTION>
(in thousands) 1993 1993 1992 1992
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Commitments to Extend Credit 72,367 72,367 89,438 89,438
Standby Letters of Credit 16,261 16,261 13,434 13,434
</TABLE>
INTEREST RATE CAP, FLOOR AND SWAP AGREEMENTS
The Registrant enters into a variety of interest rate contracts including
interest rate caps, floors and swaps to hedge interest rate risk. The interest
rate contracts had a notional value of $99.0 million with a positive net market
value of $67.0 thousand as of December 31, 1993.
-42-
<PAGE> 43
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (continued)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
LIMITATIONS
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Registrant's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of
the Registrant's financial instruments, fair value estimates are based on
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. For example, the Registrant has a mortgage servicing
department that contributes fee income annually. The mortgage servicing
department is not considered a financial instrument, and its value has not been
incorporated into the fair value estimates. Other significant assets and
liabilities that are not considered financial assets or liabilities include the
trust department, broker/dealer operations, property, equipment, goodwill and
deferred taxes.
-43-
<PAGE> 44
EXHIBIT 13 ANNUAL REPORT TO SECURITY HOLDERS (CONTINUED)
INDEPENDENT AUDITORS' REPORT
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, 1993 and 1992, the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1993. These consolidated financial statements are the responsibility of the
Registrant's 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 at December 31, 1993 and 1992, the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1993, in conformity with generally
accepted accounting principles.
As discussed in Notes 8 and 9 to the consolidated financial statements, the
Registrant adopted the provisions of Statements of Financial Accounting
Standards No. 109, Accounting for Income Taxes, and No. 106, Postretirement
Benefits Other Than Pensions.
KPMG PEAT MARWICK
Jericho, New York
January 17, 1994
REPORT OF MANAGEMENT
The management of North Fork Bancorporation, Inc. is responsible for the
preparation and integrity of the consolidated financial statements and all
other information whether audited or unaudited 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 nest estimates and judgments. The financial information contained
elsewhere in this annual report is consistent with that 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 and conformity with generally accepted accounting
principles.
North Fork Bancorporation, Inc. maintains a system of internal controls that
provide reasonable assurance that its accounting, administrative procedures and
reporting practices are of the highest quality and integrity. Because of
inherent limitations in any system, there can be no absolute assurance that
errors or irregularities will not occur. Nevertheless, management believes that
this system provides reasonable assurance that assets are safeguarded and
reliable financial records are maintained for preparing financial statements.
An internal auditing function is also 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 directors
who are not employees of North Fork Bancorporation, Inc. The Audit Committee
meets periodically with the independent auditors, internal auditors and with
management to discuss the internal control system, accounting, auditing and
financial reporting matters. The Audit Committee reviews and approves the scope
and timing of both the internal and external audits, including recommendations
made with respect to the system of internal control by the independent and
internal auditors and the various regulatory agencies.
John Adam Kanas
Chairman, President and Chief Executive Officer
Daniel M. Healy
Executive Vice President and Chief Financial Officer
-44-
<PAGE> 1
EXHIBIT 22 SUBSIDIARIES OF REGISTRANT
North Fork Bank
North Fork Leasing Corp.
North Fork Capital Corp.
Compass Investment Services Corp.
AcuData Service Corp. (inactive)
SUBSIDIARIES OF NORTH FORK BANK
NFB Development Corp.
Howard Enterprises, Inc. (inactive)
Cutchco Corp. (inactive)
First Settlers Corp. (inactive)
Clare Elm Corp (inactive)
North Fork Information Services, Inc. (inactive)
North Fork Loan Service Corp. (inactive)
<PAGE> 1
[LOGO]
March 18, 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of North
Fork Bancorporation, Inc., to be held at the Radisson Hotel Islandia, 3635
Express Drive North, Hauppauge, New York at 9:00 a.m. on Tuesday, April 26,
1994.
There are two scheduled matters to be acted upon at the meeting:
- The election of three directors to Class 1 of the Board of Directors, and
- The approval of the 1994 Key Employee Stock Plan.
The Board of Directors believes that the election of the nominees listed in the
attached proxy statement and the approval of the Key Employee Stock Plan are in
the best interest of the Company and its stockholders and unanimously recommends
a vote "FOR" the nominees and the Stock Plan.
Whether or not you plan to attend in person, it is important that your shares
are represented at the meeting. Accordingly, you are requested to promptly sign,
date and mail the enclosed proxy in the postage prepaid envelope provided.
Please be sure to mark the appropriate box if you do plan to attend.
Thank you for your consideration and continued support.
Sincerely,
John Adam Kanas
John Adam Kanas
Chairman of the Board and President
9025 ROUTE 25, MATTITUCK, NEW YORK 11952 (516) 298-5000
<PAGE> 2
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 26, 1994
To the Stockholders of
North Fork Bancorporation, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of North
Fork Bancorporation, Inc., a Delaware corporation (the "Company"), will be held
at the Radisson Hotel Islandia, 3635 Express Drive North, Hauppauge, New York
11788, on Tuesday, April 26, 1994, at 9:00 a.m. for the purpose of considering
and voting upon the following matters:
1. The election of three directors to Class 1 of the Company's Board
of Directors, each to hold office for a term of three years, and until
their successors have been duly elected and qualified;
2. The approval of the 1994 Key Employee Stock Plan; and
3. Any other business which may properly be brought before the meeting
or any adjournment thereof.
In accordance with Delaware law and the Bylaws of the Company, a list of
the holders of Company Common Stock entitled to vote at the 1994 annual meeting
will be available for examination by any stockholder for any purpose germane to
the meeting at the branch of North Fork Bank located at 1455 Veteran's Memorial
Highway, Hauppauge, New York, for ten days prior to the meeting, between the
hours of 9:00 a.m. and 3:00 p.m., and at the annual meeting during the entire
time thereof.
By Order of the Board of Directors
March 18, 1994 ANTHONY J. ABATE
----------------------------
ANTHONY J. ABATE
Vice President and Secretary
YOU ARE REQUESTED TO SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
WHETHER YOU PLAN TO ATTEND THE MEETING IN PERSON OR NOT. YOU MAY REVOKE YOUR
PROXY AT ANY TIME PRIOR TO THE MEETING, OR IF YOU DO ATTEND THE MEETING YOU MAY
REVOKE YOUR PROXY AT THAT TIME, IF YOU WISH.
<PAGE> 3
NORTH FORK BANCORPORATION, INC.
9025 ROUTE 25
MATTITUCK, NEW YORK 11952
------------------------------------------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
APRIL 26, 1994
------------------------------------------------------------
This proxy statement is being furnished in connection with the solicitation
by the Board of Directors of North Fork Bancorporation, Inc. (the "Company") of
proxies to be voted at the Annual Meeting of Stockholders (the "Meeting") to be
held at 9:00 a.m. on Tuesday, April 26, 1994, at the Radisson Hotel Islandia,
3635 Express Drive North, Hauppauge, New York 11788, and at any adjournment
thereof. This proxy statement and the enclosed form of proxy are first being
sent to stockholders on or about March 18, 1994.
PROXIES
Any stockholder executing a proxy which is solicited hereby has the power
to revoke it prior to exercise of the authority conferred thereby. Revocation
may be made effective by attending the Meeting and voting the shares of stock in
person, or by delivering to the Secretary of the Company at the principal office
of the Company prior to the Meeting a written notice of revocation or a later-
dated, properly-executed proxy.
Proxies will be solicited by mail. They also may be solicited by directors,
officers and other employees of the Company or its subsidiary bank, North Fork
Bank, personally or by telephone or telegraph, but such persons will receive no
additional compensation for their services. Arrangements will be made with
brokerage houses and other custodians, nominees and fiduciaries to send this
proxy statement and form of proxy to their principals, and the Company will
reimburse such persons for out-of-pocket expenses incurred in forwarding the
materials. The Company also has retained D.F. King & Co., Inc. to aid in the
solicitation of proxies, at an estimated cost of $5,500, plus reimbursement of
reasonable out-of-pocket expenses. All expenses of solicitation will be paid by
the Company.
RECORD DATE AND VOTING RIGHTS
The Board of Directors has fixed the close of business on March 1, 1994, as
the record date for determining stockholders who are entitled to notice of, and
to vote at, the Meeting. At the close of business on that date, there were
outstanding and entitled to vote 14,120,849 shares of common stock, par value
$2.50 per share, of the Company (the "Common Stock"), which is the only class of
stock of the Company outstanding. Only holders of record of Common Stock at the
close of business on the record date are entitled to notice of and to vote at
the Meeting. Each stockholder of record on that
<PAGE> 4
date is entitled to one vote for each share held with respect to each matter
submitted to a vote at the Meeting.
The required vote for the election of directors is the affirmative vote of
a plurality of the shares present in person or represented by proxy at the
Meeting and entitled to vote on the election of directors. The required vote for
approval of the 1994 Key Employee Stock Plan and all other matters submitted to
the stockholders is the affirmative vote of a majority of the shares present in
person or represented by proxy at the Meeting and entitled to vote on the matter
submitted. A majority of the outstanding shares present or represented by proxy
will constitute a quorum at the Meeting.
Consistent with applicable state law and the Company's Certificate of
Incorporation and Bylaws, the Company will treat all shares represented by
proxies or ballots presented at the Meeting as shares present or represented at
the Meeting for purposes of determining a quorum. Shares represented by proxies
or ballots marked "ABSTAIN" on any proposal will be treated as shares present or
represented at the Meeting for purposes of such proposal. Shares held in "street
name" by brokers but not voted by such brokers, for any reason, on a particular
matter (so-called "broker non-votes") will not be deemed present or represented
at the Meeting for purposes of such matter, even if such shares have been
properly voted by such broker, in person or by proxy, on one or more other
matters brought before the Meeting. Thus, on proposals, such as approval of the
1994 Key Employee Stock Plan, requiring the affirmative vote of a majority of
the shares present or represented at the Meeting and entitled to vote on the
proposal, proxies or ballots marked "ABSTAIN" will have the effect of a vote
against the proposal, but broker non-votes will not have the effect of a vote
against the proposal. On proposals, such as the election of directors, requiring
the affirmative vote of a plurality of the shares present or represented at the
Meeting and entitled to vote, neither broker non-votes nor shares voted
"WITHHOLD" or "ABSTAIN" will have the effect of a vote against such a proposal.
Votes will be counted and vote totals announced at the Meeting by the
inspectors of election.
CERTAIN BENEFICIAL OWNERSHIP
As of December 31, 1993, there was no person known by the Board of
Directors of the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock.
ITEM 1. ELECTION OF DIRECTORS AND INFORMATION WITH RESPECT TO DIRECTORS AND
OFFICERS
The first item to be acted upon at the Meeting is the election of three
directors to Class 1 of the Board of Directors, each to hold office for three
years (through the 1997 annual meeting) and until his successor shall have been
duly elected and qualified. Presently, the Board of Directors of the Company
consists of nine members divided into three classes.
All proxies that are timely received by the Secretary in proper form and
that have not been revoked will be voted "FOR" the three nominees to Class 1
listed below (unless any nominee is unable or unwilling to serve for any
reason), subject to any specific voting instructions received with any proxy,
including the withholding of authority to vote for any or all of the nominees.
2
<PAGE> 5
Each of the nominees listed below has consented to being named in this
proxy statement and to serve if elected, and the Board has no reason to believe
that any nominee will decline or be unable to serve, if elected. In the event
any nominee is unable or unwilling to serve for any reason, it is intended that
the holders of the proxies may vote for the election of such other person or
persons as may be designated by the Board of Directors.
The following information is provided with respect to each nominee for
director and each present director whose term of office extends beyond the date
of the Meeting.
NOMINEES FOR DIRECTOR AND DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
SERVED OWNED AS OF
AS A DECEMBER 31, 1993(C)
NAME, AGE, PRINCIPAL OCCUPATION AND DIRECTOR ------------------------
OTHER POSITIONS WITH THE COMPANY(A)(B) SINCE NO. OF SHARES PERCENT
- -------------------------------------------------------------- -------- ------------- -------
<S> <C> <C> <C>
NOMINEES FOR DIRECTOR:
CLASS 1 (terms to expire in 1997):
Allan C. Dickerson, 61........................................ 1988 12,792(1) *
President, Roy H. Reeve Agency, Inc. (general insurance
company)
Lloyd A. Gerard, 62........................................... 1981 102,704(2) *
Antique Dealer and Auctioneer
John Adam Kanas, 47........................................... 1981 427,407(3) 3.03%
President and Chief Executive Officer of the Company;
Chairman of the Board (since January 1, 1990); Chairman
of the Board, President and Chief Executive Officer of
North Fork Bank
DIRECTORS CONTINUING IN OFFICE:
CLASS 2 (terms expiring in 1995):
James F. Reeve, 53............................................ 1988 49,191(4) *
President, Harold R. Reeve & Sons, Inc. (general
construction)
George H. Rowsom, 58.......................................... 1981 7,337(5) *
President, S.T. Preston & Son, Inc. (retail marine supplies
store)
Raymond W. Terry, Jr., 63..................................... 1988 35,578(6) *
Chairman of the Board of Southold Savings Bank (January 1,
1990, to September 30, 1992); President of Southold
Savings Bank (1980 to 1989); Chairman of the Board of the
Company (August 1, 1988, to December 31, 1989)
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
SERVED OWNED AS OF
AS A DECEMBER 31, 1993(C)
NAME, AGE, PRINCIPAL OCCUPATION AND DIRECTOR ------------------------
OTHER POSITIONS WITH THE COMPANY(A)(B) SINCE NO. OF SHARES PERCENT
- -------------------------------------------------------------- -------- ------------- -------
<S> <C> <C> <C>
CLASS 3 (terms expiring in 1996):
John Bohlsen, 51.............................................. 1986 86,416(7) *
President, The Helm Development Corp. (real estate); Vice
Chairman of the Company (since October 22, 1992); Vice
Chairman of North Fork Bank (since December 21, 1989)
Malcolm J. Delaney, 67........................................ 1991 65,968(8) *
Vice Chairman of the Board of Southold Savings Bank (June
28, 1991, to September 30, 1992); President and Chief
Executive Officer of Eastchester Financial Corporation
(1986 to 1991)
James H. Rich, Jr., 66........................................ 1988 10,036(9) *
President, Southold Lumber Co., Inc. (building supplies)
</TABLE>
SHARES BENEFICIALLY OWNED BY OTHER EXECUTIVE OFFICERS AND ALL
DIRECTORS AND OFFICERS AS A GROUP
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY
OWNED AS OF
DECEMBER 31, 1993(C)
NAME, AGE, AND POSITIONS ------------------------
WITH THE COMPANY(10) NO. OF SHARES PERCENT
- ----------------------------------------------------------------------- ------------- -------
<S> <C> <C>
Daniel M. Healy, 51.................................................... 60,516(11) *
Executive Vice President and Chief Financial Officer of the Company
All 11 Director Nominees, Continuing Directors and Executive Officers
as a Group........................................................... 933,519(12) 6.61%
</TABLE>
- ---------------
NOTES:
* Less than one percent (1%).
(a) Except as otherwise noted, each of the nominees for director and continuing
directors has held the occupation or position listed for at least the past
five years.
(b) All persons listed as nominees for director or as continuing directors are
also directors of North Fork Bank.
(c) Beneficial ownership of shares, as determined in accordance with applicable
Securities and Exchange Commission Rules, includes shares as to which a
person directly or indirectly has or shares voting power and/or investment
power (which includes the power to dispose) and all shares which the person
has a right to acquire within 60 days of the reporting date. Listed totals
do not include shares of restricted stock conditionally granted in December
1993 to certain of the
4
<PAGE> 7
named individuals under the proposed 1994 Key Employee Stock Plan, which
shares will not carry dividend and voting rights until stockholder approval
of the Plan (see Item 2 of this proxy statement).
(1) Includes 6,225 shares held by Mr. Dickerson's wife.
(2) Includes 1,727 shares held by Mr. Gerard in joint tenancy with his daughter
and 78,321 shares held by him in joint tenancy with his brother and sister.
(3) Includes 61,333 shares of restricted stock and options to purchase 269,900
shares previously granted to Mr. Kanas under the Company's compensatory
stock plans, 100 shares held by him in joint tenancy with his wife, 12,641
shares held by his wife, 4,700 shares held by his children, and warrants to
purchase 8,300 shares held by his wife.
(4) Includes warrants to purchase 5,000 shares held by Mr. Reeve and 15,290
shares held by his wife.
(5) Includes 1,000 shares held by Mr. Rowsom in joint tenancy with his wife,
150 shares held by his wife, and 3,000 shares held by the S. T. Preston &
Sons, Inc. Profit Sharing Trust, in which Mr. Rowsom shares voting power
with two others.
(6) Includes 29,847 shares held by Mr. Terry in joint tenancy with his wife.
(7) Includes options to purchase 21,000 shares previously granted to Mr.
Bohlsen under the Company's compensatory stock plans, 790 shares and
warrants to purchase 8,300 shares held by Mr. Bohlsen's wife, and 4,800
shares held by his children.
(8) Includes options to purchase 10,000 shares held by Mr. Delaney, and 37,504
shares held by him in joint tenancy with his wife.
(9) Includes 6,031 shares held by Mr. Rich in joint tenancy with his wife, and
150 shares held by his wife.
(10) Although not listed in this table, Conrad J. Gunther, Jr., who is 47 years
of age, served as Executive Vice President of the Company and North Fork
Bank from November 1989 until December 31, 1993, on which date his service
in these positions ended. As of December 31, 1993, Mr. Gunther beneficially
owned 75,574 shares, constituting less than 1 percent of the total number
of shares issued and outstanding. Included in this total were 10,000 shares
of restricted stock and options to purchase 61,000 shares previously
granted to Mr. Gunther under the Company's compensatory stock plans and
warrants to purchase 1,000 shares. The beneficial ownership totals listed
for all nominees, continuing directors and executive officers as a group
include Mr. Gunther's beneficially-owned shares.
(11) Includes options to purchase 46,000 shares previously granted to Mr. Healy
under the Company's compensatory stock plans, and warrants to purchase
3,500 shares held by him.
(12) Includes 71,333 shares of restricted stock and options to purchase an
aggregate of 407,900 shares previously granted to such persons under the
Company's compensatory stock plans and warrants to purchase 26,100 shares
held by such persons.
During 1993, the nominees, continuing directors and executive officers of
the Company made timely filings of all securities transaction reports required
to be filed by them with the Securities and Exchange Commission under Section
16(a) of the Securities Exchange Act of 1934, except for one late
5
<PAGE> 8
filing of a transaction report by director Dickerson (filed seven days late) and
one late filing of a transaction report by former director F. Y. Reeve (filed 27
days late).
The Board of Directors met 19 times during 1993. Each of the directors
attended at least 75 percent of the total number of meetings of the Board and of
all committees of which the director was a member during the period he was a
director or served on such committees.
BOARD COMMITTEES
The Board of Directors of the Company has an Audit Committee. The functions
performed by the Audit Committee include reviewing the adequacy of internal
controls, internal auditing and the results of examinations made by supervisory
authorities and the scope and results of audit and nonaudit services rendered by
the Company's independent public accountants. The present members of the Audit
Committee are directors Delaney, Gerard and Rowsom. The Audit Committee met
eight times during 1993.
The Company's Board of Directors also has a Compensation and Stock
Committee (the "Compensation Committee"). The Compensation Committee reviews and
makes recommendations on senior officer compensation and administers all of the
Company's compensatory stock plans. The Committee has been designated to
administer the proposed 1994 Key Employee Stock Plan (see Item 2 of this proxy
statement). The Compensation Committee consists of three directors appointed by
the Company's Board of Directors, none of whom may be eligible to participate in
any of the Company's discretionary stock plans. The present members of the
Committee are directors Dickerson, Gerard and Rowsom. Mr. Healy attends meetings
of the Compensation Committee in an ex officio capacity, to provide information
requested by, or to respond to questions from, Committee members. During 1993
the Committee met five times. (See "Report of the Compensation Committee" on
page 12.)
The Company's Board of Directors has no nominating committee or committee
performing functions similar to those of a nominating committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is now, or has been at any time
within the past three years, an officer or employee of the Company or any of its
subsidiaries.
COMPENSATION OF DIRECTORS
At the July 27, 1993, meeting of the Board of Directors of the Company, the
Board set the fee for directors of the Company at $18,000 per year. This fee is
for all services as a director of the Company, including any service as a member
of one or more committees of the Board of Directors of the Company. Also in July
1993, the Board of Directors of North Fork Bank set the fee for directors of the
Bank (who currently are the same individuals as the directors of the Company) at
$400 for each meeting attended of the Bank's Board of Directors and each meeting
attended of any committee thereof of which the director is a member (except that
Mr. Kanas does not receive a fee for attendance at any committee meetings). The
Chairman of the Bank's Strategic Planning Subcommittee (presently,
6
<PAGE> 9
director Reeve) also receives $300 for each meeting of the Subcommittee
attended. The fee structure for directors of the Company and the Bank described
above represents a return to the fee structure which existed prior to November
1991, when the Boards of Directors of both the Company and the Bank voluntarily
reduced directors' fees to 50% of the above-described levels, in light of the
financial conditions which then prevailed.
The Company maintains a Directors' Deferred Compensation Plan, under which
a director may defer receipt of 50% or 100% of all fees earned by him as
director of the Company and the Bank for five or ten years or until retirement
or age 70. During the deferral period, amounts deferred earn interest at the
highest rate offered by North Fork Bank to its customers on its certificate of
deposit individual retirement accounts.
Certain directors of the Company who were previously directors of Southold
Savings Bank prior to the Company's acquisition of Southold in 1988 currently
receive, or in the future will be entitled to receive, payments from the Bank
under deferred directors' fee agreements entered into by them with Southold
prior to the acquisition. These agreements, similar to the Company's optional
Deferred Compensation Plan for directors described above, permitted Southold
directors to defer receipt of some or all of their director's fees in exchange
for a right to receive, commencing on some designated future date and continuing
for a fixed period thereafter, regular monthly cash payments in a specified
amount. The designated payment amounts essentially represented the estimated
future value of the deferred fees, with compounding of interest at assumed rates
during the intervening years. Company director Rich is currently receiving
payments from the Bank under such a deferred fee agreement, and Company
directors Dickerson and Reeve are entitled to receive such payments in the
future.
7
<PAGE> 10
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation and
compensatory awards received in the last three years by the Chief Executive
Officer of the Company and each other executive officer whose cash compensation,
including salary and bonus, exceeded $100,000 in 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
------------------------------------
ANNUAL COMPENSATION AWARDS
---------------------------------- ---------------------- PAYOUTS
(E) ---------- (I)
(A) OTHER (F) (G) ALL
NAME AND ANNUAL RESTRICTED OPTIONS/ (H) OTHER
PRINCIPAL (B) (C) (D) COMPEN- STOCK SARS(4) LTIP COMPEN-
POSITION YEAR SALARY(1) BONUS SATION(2) AWARDS(3) (SHARES) PAYOUTS(5) SATION(6)
- ------------------------------ ----- --------- ------- ------- ---------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John Adam Kanas............... 1993 $388,254 $75,000 $43,341 $128,750(7) 103,000 (7) $0 $31,863
Chairman of the Board, 1992 374,862 0 0 0 0 0 20,138
President, Chief 1991 415,352 0 0 0 0 0
Executive Officer
John Bohlsen(8)............... 1993 122,485 40,000 0 38,625(7) 46,000 (7) 0 5,192
Vice Chairman of the 1992 -- -- -- -- -- -- --
Board 1991 -- -- -- -- -- --
Daniel M. Healy............... 1993 240,000 50,000 2,095 38,625(7) 51,000 (7) 0 11,119
Executive Vice President, 1992 173,654 0 0 34,875 25,000 0 7,697
Chief Financial Officer 1991 -- -- -- -- -- -- --
Conrad J. Gunther, Jr.(9)..... 1993 250,000 0 0 0 10,000 0 6,745
Executive Vice President 1992 233,653 0 0 10,875 8,000 0 2,670
1991 225,000 0 0 30,750 10,000 0
</TABLE>
- ---------------
NOTES:
(1) Includes salary deferred at the election of the named officer (such as
deferred salary under the Company's 401(k) Plan) and all directors' fees
from the Company and the Bank, whether paid or deferred. Salary deferrals
under the 401(k) Plan in 1993 were $8,994 for Mr. Kanas, $6,923 for Mr.
Bohlsen, $8,994 for Mr. Healy, and $8,994 for Mr. Gunther. Total directors'
fees for 1993 were $17,100 for Mr. Kanas and $17,100 for Mr. Bohlsen.
(2) Listed amounts represent tax payments made by the Company on behalf of the
named officer under the Company's newly-adopted Supplemental Executive
Retirement Plan ("SERP").
(3) Represents the dollar value of shares of restricted stock granted to the
named officer during the year in question, calculated by multiplying the
closing market price of the Company's Common Stock on the date of grant by
the number of shares awarded. Generally, shares of restricted stock granted
under the Company's compensatory stock plans carry from the date of grant
the same dividend rights as unrestricted shares of Common Stock. However,
those shares of restricted stock conditionally granted to certain of the
named officers in December 1993 under the proposed Key Employee Stock Plan
(see Note 7) will have no dividend rights until the date of stockholder
approval. As of December 31, 1993, the total market value of the restricted
stock held by Messrs. Kanas, Bohlsen, Healy and Gunther was $815,412,
$38,625, $38,625, and $128,750,
8
<PAGE> 11
respectively, based on a market price for Common Stock on that date of
$12.875 per share. Such totals include any shares of restricted stock
conditionally granted to these officers in December 1993.
(4) Includes total number of shares subject to options and/or stand-alone stock
appreciation rights (SARs) granted to the named officers during the year in
question. (No options granted to the named officers have been accompanied
by SARs.)
(5) The Company has no "long-term incentive plans" as defined in the Securities
and Exchange Commission Rules.
(6) Includes, among other things, any Company contributions to the 401(k) Plan
and the defined contribution plan feature of the SERP on behalf of the
named officer and specified premiums paid by the Company on certain
insurance arrangements covering the officer. In 1993, listed amounts
include 401(k) Plan contributions by the Company on behalf of Messrs.
Kanas, Bohlsen, Healy, and Gunther of $6,745, $5,192, $6,745 and $6,745,
respectively; contributions by the Company to the defined contribution plan
feature of the SERP on behalf of Messrs. Kanas and Healy of $6,753 and
$2,920, respectively; and the following insurance premiums paid by the
Company on behalf of Mr. Kanas: $10,641 in premiums paid on a disability
policy, $686 in premiums paid on a $100,000 life insurance policy, $4,900
in premiums paid on a $1 million life insurance policy and $2,138 in
premiums paid on a $2 million split dollar insurance policy. The total for
Mr. Healy also includes $1,454 in residual moving expenses paid by the
Company in connection with Mr. Healy's relocation.
(7) Includes a conditional award of restricted stock or stock options, granted
on December 21, 1993, to the named officer under the proposed 1994 Key
Employee Stock Plan. Such conditional awards are as follows: Mr. Kanas -
$25,750 of restricted stock, options for 45,000 shares; Mr. Bohlsen -
$38,625 of restricted stock, options for 25,000 shares; Mr. Healy - $38,625
of restricted stock, options for 30,000 shares. All such awards are
conditional upon stockholder approval of the Plan (See Item 2) and will be
deemed null and void if the Plan is not approved. Such awards of restricted
stock carry no voting or dividend rights until stockholder approval of the
Plan.
(8) Mr. Bohlsen served as a director of the Company in the years preceding 1993
but did not become an executive officer until 1993.
(9) On December 31, 1993, Mr. Gunther's service ended as Executive Vice
President of the Company and the Bank. Under the terms of an arrangement
subsequently reached between Mr. Gunther and the Company, Mr. Gunther will
be paid at a rate equal to 100 percent of his 1993 base salary for the
first six months of 1994 and at a rate equal to 50 percent of his 1993 base
salary for the last six months of 1994. In return, Mr. Gunther will provide
consultative and such other services as are requested by the Company. If
Mr. Gunther should accept other full-time employment at any time during
1994, his compensation from the Company will be reduced to $100 per week
for the remainder of the year. Also under the arrangement, all options held
by Mr. Gunther on December 31, 1993, and not then exercisable by him were
made exercisable immediately and through March 31, 1995.
9
<PAGE> 12
STOCK OPTIONS
The following table sets forth information concerning stock options granted
in 1993 to the executive officers named in the Summary Compensation Table on
page 8.
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN THE YEAR ENDED DECEMBER 31, 1993
- ------------------------------------------------------------------------------------------------
(C)
% OF
(B) TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS (D)
UNDERLYING GRANTED EXERCISE (F)
OPTIONS/ TO OR BASE GRANT DATE
SARS EMPLOYEES PRICE (E) PRESENT
(A) GRANTED(1) IN FISCAL (DOLLARS/ EXPIRATION VALUE(2)
NAME (SHARES) YEAR SHARE) DATE (DOLLARS)
- -------------------------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
John Adam Kanas........... 25,000(3) 8.79% $ 7.9375 1/14/03 $ 80,750
25,000(4) 8.79% 11.50 8/18/03 116,750
8,000(5) 2.81% 12.69 12/21/03 41,280
31,500(6) 11.07% 15.00 12/21/03 122,227
13,500(7) 4.75% 15.00 12/21/03 57,150
John Bohlsen.............. 15,000(4) 5.27% 11.50 8/18/03 70,050
6,000(5) 2.11% 12.69 12/21/03 30,960
25,000(6) 8.79% 15.00 12/21/03 105,190
Daniel M. Healy........... 15,000(3) 5.27% 7.9375 1/14/03 48,450
6,000(5) 2.11% 12.69 12/21/03 30,960
30,000(6) 10.54% 15.00 12/21/03 122,858
Conrad J. Gunther, Jr..... 10,000(3) 3.51% 7.9375 1/14/03 32,300
</TABLE>
- ---------------
NOTES:
(1) All options listed were granted without tandem stock appreciation rights.
(2) Estimated grant date present value determined by using the Black-Scholes
option pricing model, a commonly-used method of valuing options on the date
of grant. The assumptions utilized in applying the Black-Scholes model were
as follows: (a) the useful life of the options was estimated to be five
years from the date of grant; (b) the risk-free discount rate applied for
purposes of the valuation, consistent with the five-year estimated life of
the options, was the five-year Treasury Rate as of the date of grant; (c)
the volatility factor utilized was the one-year volatility of the Company's
Common Stock, or 39.1 percent (volatility is calculated based on
fluctuations of 1993 weekly closing stock prices); (d) the dividend yield on
the Common Stock was assumed to be zero for purposes of the analysis only;
and (e) a discount of 5 percent per year was utilized reflecting anticipated
risk of forfeiture prior to vesting (for example, options vesting within one
year have been discounted at 5 percent, and options vesting in three years
have been discounted at 15 percent).
(3) Incentive stock options, granted on January 14, 1993. Of the grants to Mr.
Kanas and Mr. Healy, options for 12,598 shares were, in each case, first
exercisable on the date of grant, and options for the remaining shares first
become exercisable on the first anniversary of the date of grant. All such
options granted to Mr. Gunther were immediately exercisable on the date of
grant.
(4) Nonqualified stock options, granted on August 18, 1993. All such options
were immediately exercisable on the date of grant.
10
<PAGE> 13
(5) Nonqualified stock options, granted on December 21, 1993. All such options
were immediately exercisable on the date of grant.
(6) Incentive stock options, conditionally granted on December 21, 1993, under
the proposed 1994 Key Employee Stock Plan, and subject to stockholder
approval of the Plan (see Item 2 of the proxy statement). For Mr. Kanas, the
options first become exercisable for approximately one quarter of the
underlying shares on each of the second, third, fourth and fifth
anniversaries of the date of grant, respectively. For Mr. Bohlsen, 31.5
percent of the options first become exercisable on each of the first, second
and third anniversaries of the date of grant, and the remaining options on
the fourth anniversary. For Mr. Healy, approximately 21 percent of the
options first become exercisable on the first anniversary of the date of
grant, approximately 26 percent on each of the second, third and fourth
anniversaries, and the remaining options on the fifth anniversary.
(7) Nonqualified stock options, conditionally granted on December 21, 1993,
under the proposed 1994 Key Employee Stock Plan, and subject to stockholder
approval of the Plan (see Item 2 of the proxy statement). One-third of the
options initially become exercisable on each of the first, second and third
anniversaries of the date of grant, respectively.
The following table sets forth information concerning stock options
exercised in 1993 or held at year-end 1993 by the executive officers named in
the Summary Compensation Table on page 8.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN THE YEAR ENDED DECEMBER 31, 1993,
AND YEAR-END OPTION/SAR VALUES
- --------------------------------------------------------------------------------------------------------------
(D) (E)
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
DECEMBER 31, DECEMBER 31,
(B) 1993 1993(1)
SHARES ACQUIRED (C) (EXERCISABLE/ (EXERCISABLE/
(A) ON EXERCISE VALUE REALIZED UNEXERCISABLE) UNEXERCISABLE)
NAME (SHARES) (DOLLARS) (SHARES) (DOLLARS)
- ------------------------------ --------------- -------------- --------------- --------------------
<S> <C> <C> <C> <C>
John Adam Kanas............... 0 $0 E - 257,498 E - $281,396
U - 89,402(2) U - 61,235
John Bohlsen.................. 0 0 E - 21,000 E - 21,735
U - 25,000(2) U - 0
Daniel M. Healy............... 0 0 E - 43,598 E - 239,876
U - 32,402(2) U - 11,860
Conrad J. Gunther, Jr......... 0 0 E - 61,000 E - 183,125
U - 0 U - 0
</TABLE>
- ---------------
NOTES:
(1) Calculated by subtracting the exercise price of options from the market
value of underlying securities as of the fiscal year-end, based on a closing
market price of the Common Stock on December 31, 1993, of 12.875 per share.
(2) Includes options conditionally granted on December 21, 1993, under the 1994
Key Employee Stock Plan, subject to stockholder approval of the Plan, as
follows: Mr. Kanas, options for 45,000 shares; Mr. Bohlsen, options for
25,000 shares; and Mr. Healy, options for 30,000 shares.
11
<PAGE> 14
PERFORMANCE GRAPH
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate by reference future
filings, including this Proxy Statement, in whole or in part, the following
Performance Graph and Compensation Committee Report shall not be incorporated by
reference into any such filings.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
AMONG NORTH FORK BANCORPORATION, S&P 500 AND KBW EASTERN
<TABLE>
<CAPTION>
NORTH FORK
MEASUREMENT PERIOD BANCORPORA- S&P 500 IN- KBW EASTERN
(FISCAL YEAR COVERED) TION DEX REGION
<S> <C> <C> <C>
1988 100.00 100.00 100.00
1989 92.00 130.59 102.03
1990 35.20 126.49 62.88
1991 30.28 164.80 110.58
1992 51.72 177.25 152.71
1993 81.95 194.98 159.26
</TABLE>
The KBW Eastern Region Index is a market-capitalization-weighted stock
index combining stock price information from 12 of the larger bank holding
companies in the eastern United States.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Company's Board of Directors is
responsible for conducting periodic reviews of executive compensation and for
taking certain actions regarding the compensation of senior executives,
including the Chief Executive Officer. The Compensation Committee consists of
not less than three directors, none of whom may be an officer or employee of the
Company or any of its subsidiaries. The names of current Committee members are
listed at the end of this report. The Compensation Committee makes
recommendations to the full Board of Directors concerning salary levels for
senior executives and other officers and types and amounts of cash bonuses to be
distributed
12
<PAGE> 15
to these individuals if and as appropriate. The Compensation Committee also has
the discretion to determine grants of compensatory awards to key employees,
including senior officers, under certain of the Company's stock-based
compensation plans.
The Compensation Committee is submitting this report summarizing its
involvement in the compensation decisions and policies adopted by the Company
for executive officers generally and for Chairman, President and Chief Executive
Officer, John Adam Kanas, specifically.
GENERAL POLICY
The Company's executive compensation practices are designed to reward and
provide an incentive for executives based on the achievement of corporate and
individual goals. Compensation levels for executives are established after
giving consideration to a variety of quantitative measures including, but not
limited to, financial performance, peer group comparisons and labor market
conditions. Furthermore, qualitative factors such as commitment, leadership,
teamwork and community involvement are included in compensation deliberations.
Before making decisions, the Compensation Committee elicits the recommendations
and advice of the CEO and other executive officers regarding appropriate or
desired levels of compensation for them and management personnel generally. The
Committee has complete access to all necessary Company personnel records,
financial reports and other data and may seek the advice of experts and analysts
if appropriate. Furthermore, members of the Compensation Committee have periodic
contact with members of management through their involvement in other board
committees, thus providing Committee members with additional information on
which to base their assessments.
The ultimate purpose of the Company's compensation structure is to attract
and retain executives of the highest caliber and to motivate these executives to
put forth maximum effort toward the achievement of specified corporate goals
identified through the strategic planning process of the Board and management.
Also, the compensation design is intended to create an incentive process that
will encourage these individuals to maintain their focus on the paramount
importance of long-term stockholder interests.
COMPONENTS OF COMPENSATION
In evaluating executive compensation, the Compensation Committee focuses
upon several fundamental components: salary, annual bonus and long-term
incentive compensation.
Salary levels for senior executives and other officers are reviewed by the
Compensation Committee on an annual basis. Currently, the Company and its
subsidiaries do not have any long-term employment agreements with executive
officers. Salary levels are reflective of an individual's responsibilities and
experience and competitive marketplace conditions.
The annual bonus component of executive compensation has historically been
provided, if and as appropriate, through the Company's annual incentive
compensation program (the "Annual Bonus Program"). During profitable periods,
the Annual Bonus Program has been used to provide year-end cash distributions to
Company executives, depending upon a variety of factors relating to individual
performance, Company performance and, in selected cases, operational department
achievements.
13
<PAGE> 16
The decision on annual bonuses for executives typically is made on or about the
end of each calendar year.
The third component of the Company's executive compensation strategy is its
long-term incentive compensation program, under which executives receive
stock-based awards offering them the possibility of future value, depending on
the executives' continued employment by the Company and the long-term price
appreciation of the Company's Common Stock. In the view of the Committee, a
substantial portion of the total compensation of senior executives over a period
of years should consist of such long-term incentive awards. In the past, these
awards have been granted through the Company's stock-based compensation plans,
including its 1982 and 1985 Incentive Stock Option Plans, 1987 Long-Term
Incentive Plan and 1989 Executive Management Compensation Plan. Awards under
these plans have consisted of stock options and restricted stock. Because
virtually no shares remain available for issuance under the Company's existing
stock-based compensation plans, the Committee has approved, and recommends for
stockholder approval at the 1994 annual meeting, a new Key Employee Stock Plan.
Under this new Plan, awards for up to 700,000 shares of Common Stock would be
available for issuance to key employees in the form of incentive stock options,
nonqualified stock options or restricted stock. In 1993, Congress adopted a new
provision of the Internal Revenue Code, Section 162(m), which disallows a tax
deduction to public companies for any compensation exceeding $1 million paid to
certain top executives. The 1994 Key Employee Stock Plan has been designed so
that options granted under the Plan will qualify for an exemption under this new
statute for certain types of performance-based compensation.
The Committee has made conditional awards under this new Plan to the
Company's top three executives, subject to stockholder approval. See Item 2 of
the proxy statement for a discussion of the new Plan. Although the Committee may
grant awards under the Company's stock plans at any time, it generally makes
such determinations at year-end, concurrent with its review and recommendations
regarding base salary and annual bonuses for senior executives.
COMPENSATION COMMITTEE REVIEW OF EXECUTIVE COMPENSATION
The Compensation Committee, in making its recommendations and
determinations at year-end 1993 regarding executive compensation, was influenced
by numerous positive considerations. The principal factor underlying the
Committee's decisions was the significant progress accomplished in the past year
toward restoring the Company to profitability and financial strength and the
role of management and, in particular, key members of the senior management team
in that accomplishment. All of the basic measurements of financial performance
reflected major improvement that either met or exceeded previously-established
goals. The specific areas of performance where target goals were realized or
surpassed in 1993 included, without limitation, capital creation, earnings,
improved asset quality, enhanced asset and liability management techniques and
expense controls. Other accomplishments during the year not measurable in
quantitative form but of equal importance to the Company included improvements
in strategic direction, strengthened internal controls and regulatory
compliance. The Committee believes that as a result of management's efforts, the
Company is favorably positioned to attain future successful performance and thus
benefit its shareholders. In response to
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<PAGE> 17
recent and anticipated future performance, the market price of the Company's
stock increased by 58% between year-end 1992 and 1993.
The Committee believes that management was primarily responsible for the
restoration of the Company's financial strength and the speed with which it was
achieved. Moreover, as the area's largest independent commercial bank, North
Fork has successfully met the challenge of diversifying its services to attract
new and retain existing customers. Also, the Committee believes management has
not lost sight of its obligation to service those communities in which it is
located. At the same time, enhanced stockholder value has remained management's
primary focus.
When the Company experienced financial difficulties at the beginning of the
1990s, the Committee concurred in the Board's determination to freeze executive
salaries and benefits and to reduce management staffing, even though it was
widely perceived that many of the Company's problems at the time were
attributable to harsh economic conditions in its market area and in the
financial services industry generally. The Committee also elected to curtail
stock award grants during these years, with the exception of occasional small
grants offered to attract new executives in lieu of other forms of compensation.
Management accepted the Committee's disciplinary approach and has responded
effectively, with the results noted.
In light of the positive changes in 1993, the Committee determined at
year-end that moderate increases in executive compensation were justifiable, if
structured so as both to reward management for accomplishments to date and to
encourage future performance. Accordingly, at year-end 1993 the Committee
accepted management's proposal and recommended to the Board a schedule of modest
salary increases and cash bonuses for management which the Committee believes
were commensurate with the financial results.
Moreover, the Committee elected at year-end to grant modest levels of
stock-based awards to management. The Committee first utilized the limited
remaining capacity under existing stock plans to grant awards of options and
restricted stock to members of management. In order to permit appropriate
additional stock-based awards to senior executive officers at the present time,
as well as to enable future grants of awards to management generally, the
Committee also approved at year-end (and has recommended for stockholder
approval at the meeting) a new Key Employee Stock Plan, discussed in Item 2 of
the proxy statement. After the Committee and the Board of Directors approved the
new Plan, the Committee made grants of options and restricted stock under the
new Plan to the Company's three senior executives, conditional upon stockholder
approval of the Plan. The Committee notes that all options granted at year-end
under this new Plan were "premium options," that is, the option exercise price
was set at a premium of 18% above the current market price of the Common Stock
on the date of grant. This above-market option pricing, although unusual, is
expected to give the executives an even stronger incentive to improve the
Company's financial performance, which presumably will increase the market price
of its stock.
The Committee also has concurred with management's proposal to establish
for senior officers of the Company a new Supplemental Executive Retirement Plan
effective for 1993. This Plan, which is funded through a secular trust, restores
to senior executives upon their retirement from the Company the full level of
retirement benefits which they would have been entitled to receive under the
formula
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<PAGE> 18
contained in the Company's retirement plan, absent the provision in federal law
limiting maximum payouts under tax-qualified retirement plans.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
In assessing appropriate types and amounts of compensation for the Chief
Executive Officer, the Compensation Committee evaluates both corporate and
individual performance. Corporate factors included in the evaluation are return
on stockholders' equity, return on assets, levels and changes in non-performing
assets, the market price of the Common Stock and the Company's performance
compared to peer group institutions. Individual factors include the CEO's
initiation and implementation of successful business strategies, formation of an
effective management team and various personal qualities, including leadership,
commitment and professional and community standing.
After reviewing the 1993 corporate results, as discussed in the preceding
section on executive compensation generally, as well as individual
contributions, the Committee concluded that CEO John Adam Kanas performed with
skill and diligence during 1993. The year was marked by substantial improvement
in financial performance, and Mr. Kanas deserves a large measure of the credit
for this accomplishment. He assumed personal responsibility for an array of
ambitious operating strategies which were adopted and successfully pursued,
including aggressive cost-cutting across the organization and streamlining of
systems and personnel. At the same time, Mr. Kanas devoted substantial time and
effort to the Company's program for resolving problem assets, which realized
significant progress during the period in bringing asset quality under control.
Finally, Mr. Kanas has been personally responsible, the Committee believes, for
the rapidity with which the Company has rebounded from its financial
difficulties; he has brought a sense of mission and urgency to the recovery
process which, in the Committee's view, has been vital.
For these reasons, the Committee concurred in August 1993 in the
reinstatement of Mr. Kanas' salary at its pre-recession level of $400,000, up
from the reduced level of $350,000 which Mr. Kanas voluntarily accepted in
November 1991. In addition, at the end of 1993, the Committee approved and
recommended payment of a $75,000 cash bonus to Mr. Kanas, as well as coverage of
Mr. Kanas under the newly-adopted SERP discussed above. The Committee also
granted to Mr. Kanas various incentive-based stock awards in 1993 under both
existing, pre-approved stock plans of the Company and the new Key Employee Stock
Plan, with the latter awards conditioned upon stockholder approval of the Plan.
CONCLUSION
The Compensation Committee believes that the compensation amounts and
awards recently established for the Company's senior executives reflect
appropriate levels, given Company and individual performance by management
during 1993. The Committee will continue to emphasize longer term strategic
performance objectives as the Company's recovery proceeds.
Committee members:
Allan C. Dickerson, Chairman
Lloyd A. Gerard
George H. Rowsom
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<PAGE> 19
RETIREMENT PLANS
Executive officers of the Company participate in a retirement plan (the
"Retirement Plan") which is a defined benefit plan maintained and administered
by the Company. The Retirement Plan covers all employees who have attained age
21, completed at least one year of service and worked a minimum of 1,000 hours
per year. A participant becomes 100% vested under the Retirement Plan after five
years of service.
Under the Plan's benefit formula, participants accrue an amount through the
Plan each year equal to five percent of their annual compensation as defined
under the Plan plus a fixed rate of interest based on one-year Treasury Bill
rates, credited quarterly. These amounts are subject to limitations under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"). The
benefits subsequently paid under the Retirement Plan to each participant after
retirement are payments based on the accrued total amount in the Plan for that
participant, projected over an assumed life expectancy.
Compensation under the Retirement Plan is total salary and bonuses (i.e.,
columns (c) and (d) in the Summary Compensation Table, excluding any directors'
fees), as well as certain other taxable compensation received by the executives
that is listed in column (i) of the Summary Compensation Table, excluding
Company contributions under the 401(k) Plan and the defined contribution feature
of the SERP.
In addition to the Retirement Plan, the Company adopted in 1993 a new
Supplemental Executive Retirement Plan (the "SERP"). The SERP, which was
effective for fiscal year 1993, restores to specified senior executives upon
their retirement from the Company the full level of retirement benefits that
they would have been entitled to receive under the formula contained in the
Retirement Plan, absent the ERISA provision limiting maximum payouts and maximum
compensation under tax-qualified retirement plans. The SERP also provides for
participating executives a nonqualified defined contribution plan feature, under
which executives may elect to make post-tax contributions, which will be
entitled to matching Company contributions, much like 401(k) plan deferrals, but
not subject to the Internal Revenue Code's limitation on maximum 401(k) plan
contributions. The SERP may be funded through a combination of elective
contributions by covered individuals of post-tax dollars and Company
contributions to a secular trust. Under the SERP, the Company will also pay on
behalf of covered individuals any income taxes payable by them as a result of
Company contributions on their behalf. Of the executive officers named in the
Summary Compensation Table on page 8, Mr. Kanas and Mr. Healy are covered under
the SERP.
Based upon their current compensation, Messrs. Kanas, Bohlsen and Healy
would receive upon retirement at normal retirement age (65), annual benefits
payable thereafter, under both the Retirement Plan and the SERP, of
approximately $204,800, $17,500 and $30,300, respectively.
Although Mr. Gunther is no longer an executive officer of the Company and
all of his affiliation with the Company will end after 1994, he is fully vested
in the Retirement Plan. Based upon the compensation received or to be received
by Mr. Gunther from the Company prior to the end of his affiliation, it is
estimated that he would receive upon retirement at normal age (65) annual
benefits payable thereafter under the Retirement Plan of approximately $28,900.
17
<PAGE> 20
TRANSACTIONS WITH DIRECTORS, EXECUTIVE OFFICERS
AND ASSOCIATED PERSONS
Since January 1, 1993, certain of the directors and executive officers of
the Company (and members of their immediate families and corporations,
organizations and trusts with which these individuals are associated) have been
indebted to the Company's subsidiary bank in amounts of $60,000 or more. All
such loans were made in the ordinary course of business, did not involve more
than normal risk of collectability or present other unfavorable features, and
were made on substantially the same terms, including interest rates and
collateral requirements, as those prevailing at the same time for comparable
loan transactions with unaffiliated persons. No such loan was classified by the
subsidiary bank as of December 31, 1993, as a non-accrual, past due,
restructured or potential problem loan.
ITEM 2. APPROVAL OF 1994 KEY EMPLOYEE STOCK PLAN
The second item to be acted upon at the Meeting is a proposal to approve
the North Fork Bancorporation, Inc. 1994 Key Employee Stock Plan (the "1994
Plan" or the "Plan"). The 1994 Plan is intended to replace the Company's
existing compensatory stock plans. Virtually all of the shares authorized for
issuance to management and other key employees under these existing plans have
either been issued or are subject to outstanding but unexercised options. If the
Company is to continue its policy of including, as a major component of
executive compensation, grants of long-term incentive awards such as options and
restricted stock, the value of which is based not only on the executives'
remaining with the Company but also on the long-term appreciation of the
Company's stock price, approval of the new Plan is essential and appropriate. A
significant number of outstanding, unexercised options held by executives and
other key employees are currently "out of the money," that is, such options bear
exercise prices higher than the current market value of Common Stock. Although
the 1994 Plan will authorize the issuance of additional stock options to these
persons, it is not currently anticipated by the Board of Directors that the 1994
Plan will be used to issue so-called replacement options, replacing (presumably
at lower exercise prices) any out-of-the-money, unexercised options previously
granted to these persons.
The 1994 Plan will authorize the issuance of nonqualified stock options and
incentive stock options. In addition, the 1994 Plan will authorize the issuance
of restricted shares of Common Stock. These restricted stock awards, which are
described in more detail below, are generally considered to be at least as
effective as stock options in retaining the services of key employees and tying
their overall compensation to long-term corporate performance.
The total number of shares authorized for issuance under the 1994 Plan is
700,000 (subject to adjustments), which can be divided up in any fashion among
nonqualified stock options, incentive stock options and restricted stock,
provided that no more than 200,000 of such shares may be issued as restricted
stock. As of March 8, 1994, the last sale price of Common Stock, as reported on
the New York Stock Exchange, was 13.00 per share. No individual may receive
under the Plan in any one year option grants for more than 150,000 shares. The
1994 Plan will not authorize the grant of stock appreciation rights, often
referred to as "SARs," whether in conjunction with stock options or otherwise.
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<PAGE> 21
On December 21, 1993, the Compensation Committee conditionally granted
awards under the 1994 Plan to three executive officers of the Company,
contingent upon subsequent stockholder approval of the Plan. In the aggregate,
the awards consisted of options to acquire 100,000 shares and 8,000 shares of
restricted stock. The awards granted to each of the executive officers are shown
in the New Plan Benefits table below. All options conditionally granted under
the Plan carried an option exercise price set at a significant premium (18.2%)
over the market price of the Company's Common Stock on the date of grant. All
8,000 shares of restricted stock conditionally granted under the Plan will not
possess dividend or voting rights until stockholder approval of the Plan.
Approval of the 1994 Plan requires the affirmative vote of a majority of
the shares of Common Stock represented in person or by proxy at the Meeting.
Dissenting votes give rise to no rights on the part of the dissenting
stockholders. The 1994 Plan was adopted by the Board of Directors on November
23, 1993, subject to approval by the stockholders of the Company.
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1994 KEY EMPLOYEE STOCK PLAN(1)
----------------------------------------------------
DOLLAR VALUE ($)(3) NUMBER OF UNITS
--------------------- ----------------------------
STOCK RESTRICTED STOCK OPTIONS RESTRICTED
NAME AND POSITION(2) OPTIONS SHARES (SHARES) SHARES
- ------------------------------------------------- -------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
John Adam Kanas(4)............................... $179,377 $ 25,750 45,000(5) 2,000
Chairman of the Board, President,
Chief Executive Officer
John Bohlsen..................................... 105,190 38,625 25,000(6) 3,000
Vice Chairman of the Board
Daniel M. Healy.................................. 122,858 38,625 30,000(7) 3,000
Executive Vice President, Chief Financial
Officer
Executive Group.................................. 407,425 103,000 100,000 8,000
Non-Executive Director Group..................... 0 0 0 0
Non-Executive Officer Employee Group............. 0 0 0 0
</TABLE>
- ---------------
NOTES:
(1) All listed options and restricted shares were conditionally granted by the
Compensation Committee on December 21, 1993. Any additional awards that may
be made under the 1994 Plan are not determinable at this time.
(2) Mr. Gunther, who was listed in the Summary Compensation Table on page 8, is
no longer an executive officer of the Company and is not eligible for awards
under the new Plan.
(3) The listed dollar value of the options is the estimated grant date present
value of such options, determined by using the Black-Scholes option pricing
model, discussed in footnote 2 to the table entitled "Options/SAR Grants in
the Year ended December 31, 1993" on page 10. The assumptions utilized in
applying the Black-Scholes model were the same assumptions set forth in the
earlier footnote 2. The dollar value of restricted shares, determined in
accordance with the rules of the
19
<PAGE> 22
Securities and Exchange Commission, represents the closing market price of
the Company's Common Stock on the date of grant multiplied by the number of
shares awarded. All options conditionally granted under the 1994 Plan that
are listed in the table above may be exercised at $15.00 per share, which
was approximately 18.2 percent above the fair market value of the Company's
Common Stock on the date of grant. The market value for the Company's Common
Stock as of March 8, 1994, was $13.00 per share.
(4) Mr. Kanas is also a nominee for election as director.
(5) The options conditionally granted to Mr. Kanas in December 1993 consisted of
incentive stock options for 31,500 shares and nonqualified stock options for
13,500 shares, and together constitute more than five percent of the total
number of options which may be granted under the 1994 Plan. These options
will terminate December 21, 2003 (unless terminated sooner under the terms
of the 1994 Plan), and are first exercisable as follows: (a) nonqualified
stock options for 4,500 shares on December 21, 1994; (b) nonqualified stock
options for 4,500 shares and incentive stock options for 7,880 shares on
December 21, 1995; (c) nonqualified stock options for 4,500 shares and
incentive stock options for 7,880 shares on December 21, 1996; (d) incentive
stock options for 7,880 shares on December 21, 1997; and (e) incentive stock
options for 7,860 shares on December 21, 1998.
(6) The options conditionally granted to Mr. Bohlsen in December 1993 are all
incentive stock options. These options will terminate December 21, 2003
(unless terminated sooner under the terms of the 1994 Plan), and are first
exercisable as follows: (a) options for 7,880 shares on December 21, 1994;
(b) options for 7,880 shares on December 21, 1995; (c) options for 7,880
shares on December 21, 1996; and (d) options for 1,360 shares on December
21, 1997.
(7) The options conditionally granted to Mr. Healy in December 1993 are all
incentive stock options. These options will terminate December 21, 2003
(unless terminated sooner under the terms of the 1994 Plan), and are first
exercisable as follows: (a) options for 6,304 shares on December 21, 1994;
(b) options for 7,880 shares on December 21, 1995; (c) options for 7,880
shares on December 21, 1996; (d) options for 7,880 shares on December 21,
1997; and (e) options for 56 shares on December 21, 1998.
PURPOSE
It is intended that the 1994 Plan will provide increased incentive for
certain key employees of the Company or any subsidiary or affiliate of the
Company and will encourage them to acquire a proprietary interest in the Company
and to work diligently to help the Company achieve its long-term goals,
including consistent profitability and the attainment of better-than-average
financial results as compared to its peer group. It is also believed that the
Plan will assist the Company in attracting and retaining high quality personnel.
Awards under the 1994 Plan will be made only to key employees of the Company or
any subsidiary or affiliate of the Company as determined from time to time by
the Compensation Committee of the Board of Directors of the Company. The
Compensation Committee will also serve as administrator of the Plan.
20
<PAGE> 23
AUTHORIZED TYPES OF AWARDS
Awards granted under the 1994 Plan may take one of three forms: incentive
stock options, nonqualified stock options or restricted shares. The 700,000
shares authorized for issuance under the Plan may be divided among these types
of awards as the Compensation Committee sees fit, provided that not more than
200,000 restricted shares may be issued under the Plan.
Incentive Stock Options. The 1994 Plan provides for the grant of incentive
stock options as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). An incentive stock option differs from a nonqualified
stock option in that the optionee exercising an incentive stock option is not
subject to federal income taxation upon exercise but only upon subsequent
disposition of the shares; by contrast, the optionee exercising a nonqualified
stock option is subject to federal income taxation upon exercise. See "Federal
Income Tax Consequences." The exercise price per share for incentive stock
options may not be less than the fair market value per share of Common Stock on
the date of grant, with fair market value to be determined according to the New
York Stock Exchange price listing (or the price listing of another applicable
exchange or market system or, if no such exchange or system applies, by the
Compensation Committee). An incentive stock option, by its terms, may be
exercised only during an option period established by the Compensation Committee
upon grant of the option, provided that the option period may not commence
earlier than the date six months after the date of grant and may not extend
longer than ten years after the date of grant, and subject to certain additional
restrictions. Incentive stock options may be exercised only during a limited
period after termination of employment as established by the Compensation
Committee, which will not normally extend for more than three months after
termination. There are certain quantity limitations on the number of incentive
stock options that may be granted to any one employee in any calendar year. In
addition, if optionees exercising incentive stock options are to receive the tax
benefits provided under the Code for such options, the shares received by them
upon exercise of incentive stock options may not be sold for a period of one
year following exercise or for a period of two years following grant. A sale
within either of these periods will result in disqualification of the incentive
stock option status of the option and loss of the tax benefits. Full payment for
shares purchased shall be made at the time of exercise of an option. Payment
must be made in cash or, if authorized by the Compensation Committee in the
grant, in whole or in part in Common Stock valued at fair market value. Options
may be exercised in whole or in part.
Nonqualified Stock Options. The 1994 Plan also provides for the grant of
nonqualified stock options ("NQSOs"). Unlike incentive stock options, NQSOs are
not subject to any restrictions under the Code, but are limited only by the
terms of the Plan. Like incentive stock options, NQSOs may be exercised only
during an option period specified by the Compensation Committee upon grant of
the option, which may not commence earlier than six months after the date of
grant and may not extend longer than ten years after the date of grant. Also
like incentive stock options, NQSOs granted under the Plan may be exercised only
during a limited period following termination of employment as established by
the Compensation Committee upon grant, which will not normally extend for more
than one year after termination. The manner of exercise provisions for NQSOs are
identical to those provisions for incentive stock options. The exercise price
per share for NQSOs as set by the
21
<PAGE> 24
Compensation Committee may not be less than the fair market value of the
underlying shares on the date of grant.
Restricted Shares. Restricted shares also may be granted under the 1994
Plan. Typically, restricted shares will be granted at no purchase price,
although if required under applicable corporate law, the Compensation Committee
may establish a purchase price set at par value of the Common Stock, payable in
cash or by other means, including recognition of past employment. Restricted
shares are merely shares of Common Stock which the grantee is not entitled to
sell or otherwise transfer until ownership of the shares vests. The vesting
schedule for restricted shares is determined by the Compensation Committee upon
grant. The minimum vesting period is three years. If so determined by the
Compensation Committee upon grant, recipients of restricted shares may receive
certain other rights attaching to shares of Common Stock generally, such as
dividend and voting rights, as of the date of grant or such later date as the
Committee may determine (but not later than the date of vesting for such
shares). If the recipient of restricted shares ceases to be employed by the
Company including its subsidiaries and affiliates before the vesting date, the
restricted shares will be forfeited to the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the federal income tax consequences of
the various awards which may be granted under the 1994 Plan. The discussion is
for purposes of general information only and does not address the specific facts
and circumstances that may apply to individual award recipients. All persons who
receive awards under the Plan should consult their own tax advisor to determine
the particular tax consequences to them of their Plan awards.
Incentive Stock Options. Persons receiving incentive stock options under
the 1994 Plan will not recognize any income for federal income tax purposes upon
the grant to them of the options, nor will the Company receive any tax deduction
at the time of the grant. Moreover, if upon exercise of the incentive stock
option the optionee complies with all provisions of the Code relating to
incentive stock options and subsequently complies with the Code provisions
requiring holding periods before disposing of the shares, the optionee will not
recognize any taxable income upon exercise. Upon subsequent disposition of the
shares, the optionee will recognize capital gain or loss equal to the difference
between the sale price of the shares and the purchase price paid therefor upon
exercise, and the Company will receive no tax deduction. If an optionee disposes
of the option shares before expiration of the required holding periods under the
Code (one year after exercise, two years after grant), some or all, depending on
the facts, of the optionee's gain upon disposition of the option shares will be
characterized as compensation income taxable as ordinary income.
Nonqualified Stock Options. Persons receiving NQSOs under the 1994 Plan
will not recognize any income for federal income tax purposes upon the grant to
them of the options, nor will the Company receive any tax deduction at the time
of grant. Upon exercise of a nonqualified stock option, in cash or by surrender
of stock already owned, the difference between the fair market value of the
shares acquired at exercise and the purchase price paid therefor will be treated
as ordinary income received as additional compensation, subject to federal
income tax withholding and employment tax provisions,
22
<PAGE> 25
and the Company will receive a corresponding tax deduction. Generally,
subsequent disposition of the option shares will result in recognition by the
holder of capital gain or loss.
Restricted Shares. Under Section 83 of the Code, persons receiving
restricted shares under the 1994 Plan will not recognize any income for federal
income tax purposes upon grant, and the Company will not receive any tax
deduction, as long as the restricted shares are subject to a substantial risk of
forfeiture and are non-transferable. At such time as the substantial risk of
forfeiture ceases to exist or the shares become transferable, the shares will be
taxable to the recipient as ordinary income received as compensation in an
amount equal to the then fair market value of the shares (less the purchase
price of the shares, if any), subject to federal income tax withholding and
employment tax provisions, and the Company will be entitled to a corresponding
tax deduction.
The above description is a summary of the significant provisions of the
1994 Plan. Stockholders may obtain a copy of the Plan for their review upon
request to the Secretary of the Company, Mr. Anthony J. Abate, at North Fork
Bancorporation, 9025 Route 25, Mattituck, New York 11952, (516) 298-5000.
The Board of Directors believes adoption of the 1994 Plan will be in the
best interests of the stockholders and, accordingly, recommends a vote FOR this
proposal, which is ITEM 2 on the Proxy Card. Proxies received in response to the
Board's solicitation will be voted "FOR" approval of the 1994 Plan if no
specific instructions are included thereon for Item 2.
STOCKHOLDER PROPOSALS
Stockholder proposals to be considered for inclusion in the Company's proxy
materials for the 1995 Annual Meeting of Stockholders must be received in
writing by the Secretary of the Company at the Company's principal executive
office no later than November 18, 1994. Such proposals must also meet the other
requirements established by the Securities and Exchange Commission for
stockholder proposals.
INDEPENDENT AUDITORS
KPMG Peat Marwick, Certified Public Accountants, were the independent
auditors of the Company for the year ended December 31, 1993, and have also been
selected to serve as auditors for 1994. Representatives of KPMG Peat Marwick are
expected to be present at the Meeting with an opportunity to make a statement if
they so desire and are expected to be available to respond to appropriate
questions from stockholders.
23
<PAGE> 26
OTHER MATTERS TO COME BEFORE THE MEETING
The Board of Directors of the Company is not aware of any other matters
that may come before the Meeting. However, the proxies may be voted with
discretionary authority with respect to any other matters that may properly come
before the Meeting.
Date: March 18, 1994
By Order of the Board of Directors
ANTHONY J. ABATE
--------------------------------------
ANTHONY J. ABATE
Vice President and Secretary
24
<PAGE> 1
EXHIBIT 24 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, 33-30751, 33- 34372, 33-39449 and
33-52504) on Form S-8 and (Nos. 2-80166, 33-42294 and 33-53058) on Form S-3 of
North Fork Bancorporation, Inc. of our report dated January 17, 1994.
Relating to the consolidated balance sheets of North Fork Bancorporation, Inc.
and subsidiaries as of December 31, 1993 and 1992 and the related consolidated
statements of operations, changes in stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 1993, which
report is incorporated by reference in the December 31, 1993 annual report on
Form 10-K of North Fork Bancorporation, Inc. Our report refers to a change in
the methods of accounting for income taxes and post retirement benefits other
than pensions.
KPMG PEAT MARWICK
Jericho, New York
March 18, 1994
