[TEXT]
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the period ended: March 31, 1994
NORTH FORK BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 36-3154608
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9025 Route 25, Mattituck, New York 11952
(Address of principal executive offices) (Zip Code)
</TABLE>
(516) 298-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days: Yes (X) No ( )
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
<TABLE>
<CAPTION>
CLASSES OF COMMON STOCK NUMBER OF SHARES OUTSTANDING 5/6/94
<S> <C>
$2.50 Par Value 14,206,670
/TABLE
<PAGE>
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
North Fork Bancorporation, Inc. and Subsidiaries
(1.) Consolidated Balance Sheets
(2.) Consolidated Statements of Income.
(3.) Consolidated Statements of Cash Flows.
(4.) Consolidated Statements of Changes in
Stockholders' Equity.
(5.) Notes to Consolidated Financial Statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 16, 1994 the United States District Court for the
Eastern District of New York entered a Final Order and Judgement
approving the January 5, 1993 agreement between the Registrant and
plaintiff and a class of all persons and entities that purchased
the common stock of the Registrant during the period from March 29,
1990 through and including January 24, 1992. The agreement resulted
in the full settlement of the class action shareholder suit which
contained claims regarding the Registrant's disclosure of its
provision and allowance for loan losses. The agreement called for
the creation of a settlement fund of $1.3 million, the majority of
which is covered by insurance.
The Board of Directors and management of the Registrant
believed that the claims were without merit, but, felt it was in
the best interest of the Registrant to settle the case as soon as
practicable to avoid a protracted period of costly litigation and
management distraction.
<PAGE>
<PAGE>
PART II. OTHER INFORMATION (continued)
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
The Registrant was operating under a Memorandum of Understanding
("MOU") entered into with the Federal Reserve Bank of New York
("Fed MOU") and its subsidiary, North Fork Bank, was operating
under an MOU with the Federal Deposit Insurance Corporation
("FDIC") and the New York State Banking Department ("NYSBD") ("Bank
MOU").
On February 1, 1994, February 17, 1994 and February 23, 1994; The
Federal Reserve Bank, The Federal Deposit Insurance Corporation and
the New York State Banking Department, respectively, advised the
Registrant that the MOU's were terminated. The termination of the
MOU's was described in the Registrant's Current Reports on Form 8-K
dated February 10, February 22 and February 28, 1994, respectively,
which are incorporated herein by reference.
On April 20, 1994 the Registrant issued in a private placement a
$25 million, 7.56% Senior Note (the "Note"), maturing April 20,
1999.
The proceeds were used to retire, prior to maturity, its $20
million 10.08% Senior Note which was due March 31, 1995 (the "Old
Note"). The remainder of the proceeds, less expenses associated
with the retirement of the Old Note, will be used for general
corporate purposes.
The Note Purchase Agreement pursuant to which the Note was issued
contains certain covenants relating to, among other things, the
maintenance of certain consolidated tangible net worth and total
risk based capital levels, limitations on the payment of dividends
and the repurchase of common stock and the maintenance of certain
non-performing asset levels.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11) Statement Re: Computation of per share earnings.
(b) Current Report on Form 8-K dated February 10, 1994
Current Report on Form 8-K dated February 22, 1994
Current Report on Form 8-K dated February 28, 1994
Current Report on Form 8-K dated March 22, 1994
Current Report on Form 8-K dated March 30, 1994
Current Report on Form 8-K dated April 29, 1994<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
ASSETS (unaudited) (unaudited)
Cash & Due from Banks $ 62,668 $ 75,070 $ 60,664
Interest Earning Deposits 292 290 217
Federal Funds Sold and
Securities Purchased
under Agreements to Resell 6,000 - 20,200
Securities Held to Maturity 616,670 548,497 446,764
Securities Available for
Sale (Market Value of $201,489
at December 31,1993 & $185,779
at March 31, 1993) 209,658 200,219 183,953
Loans: 1,024,135 1,029,763 1,023,389
Less: Unearned Income
& Fees 11,790 12,679 15,652
Allowance for
Loan Losses 45,636 46,625 56,895
Net Loans 966,709 970,459 950,842
Premises & Equipment, Net 32,789 33,277 34,874
Accrued Income Receivable 12,521 11,924 10,771
Other Real Estate 18,359 21,899 56,472
Other Assets 14,980 12,955 14,271
Excess of Cost over Fair Value
of Net Assets Acquired 9,115 9,291 9,818
Total Assets $ 1,949,760 $ 1,883,881 $ 1,788,846
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits $ 254,020 $ 257,447 $ 207,209
Savings, N.O.W. &
Money Market Deposits 869,965 866,808 873,790
Certificates of Deposits
in Amounts of $100,000
& Over 39,701 32,297 34,161
Other Time Deposits 278,377 285,718 323,206
Total Deposits 1,442,062 1,442,270 1,438,366
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase 317,920 255,643 71,550
Senior Note Payable 20,000 20,000 20,000
Mortgage Note Payable - - 171
Accrued Taxes, Interest
& Other Expenses 9,498 9,439 5,984
Other Liabilities 1,879 2,057 4,488
Dividends Payable 1,059 - -
Purchased Security
Liabilities - - 106,379
Total Liabilities $ 1,792,419 $ 1,729,409 $ 1,646,938
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
14,126,193, 14,109,554,
and 13,997,845 shares at
the periods ending,
respectively 35,315 35,274 34,995
Additional Paid-in capital 94,625 94,487 93,880
Retained Earnings 29,594 25,140 13,632
Less:
Unrealized (Loss) on
Securities Available
for Sale, Net of Taxes (1,817) - -
Restricted Stock Awards (354) (428) (563)
Treasury Stock, at
cost: 1,740, 73,
and 3,780 shares at the
periods ending, respectively (22) (1) (36)
Total Stockholders'
Equity 157,341 154,472 141,908
Total Liabilities and
Stockholders' Equity $ 1,949,760 $ 1,883,881 $ 1,788,846
/TABLE
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
<TABLE>
<CAPTION>
(dollars in thousands, except per share amounts)
Three Months Ended
March 31, March 31,
1994 1993
(unaudited) (unaudited)
<S> <C> <C>
INTEREST INCOME
Loans (including fee income) $ 20,307 $ 21,741
Mortgage-Backed Securities 8,508 6,329
U.S. Treasury & Government
Agency Securities 768 445
State & Municipal Obligations 415 243
Other Securities 27 31
Federal Funds Sold and
Securities Purchased
under Agreements to Resell 127 276
Interest Earning Deposits 2 2
Total Interest Income 30,153 29,067
INTEREST EXPENSE
Savings, NOW &
Money Market Deposits 4,416 5,452
Certificates of Deposit,
$100,000 and Over 372 248
Other Time Deposits 2,379 3,250
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase 2,393 488
Other Borrowings 528 918
Total Interest Expense 10,088 10,356
Net Interest Income 20,065 18,711
Provision for Loan Losses 1,000 2,500
Net Interest Income after
Provision for Loan Losses 19,065 16,211
NON-INTEREST INCOME
Service Charges on Deposit Accounts 2,228 1,788
Trust Fees & Commissions 435 422
Mortgage Banking Operations 599 905
Other Operating Income 1,089 1,258
Net Securities (Losses)\Gains (77) 1,349
Total Non-Interest Income 4,274 5,722
NON-INTEREST EXPENSE
Salaries & Benefits 6,229 5,984
Occupancy, Net 1,265 1,260
Equipment 980 1,275
Other Real Estate 2,022 3,040
FDIC Assessment 903 960
Amortization of Excess of Cost Over
Fair Value of Net Assets Acquired 176 176
Other 3,268 3,422
Total Non-Interest Expense 14,843 16,117
Income Before Provision for Income Taxes 8,497 5,816
Provision for Income Taxes 2,984 2,227
Net Income $ 5,513 $ 3,589
Earnings and Dividends Per Share:
Net Income $ 0.37 $ 0.27
Cash Dividends $ 0.075 $ -
Weighted Average Shares Outstanding 14,898,272 13,338,897
/TABLE
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1994 1993
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 5,513 $ 3,589
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Loan Losses 1,000 2,500
Depreciation and Amortization of Premises
and Equipment 967 1,468
Provision for Losses on Real Estate
Acquired in Settlement of Loans 1,107 2,937
Amortization of Excess of Cost Over Fair
Value of Net Assets Acquired 176 176
Accretion of Discounts and Net Deferred Loan Fees (320) (177)
Amortization of Premiums 2,761 1,228
Net Losses\(Gains) on Securities Transactions 77 (1,349)
Other - Net 1,959 1,706
Net Cash Provided by
Operating Activities 13,240 12,078
INVESTING ACTIVITIES:
Maturities, Calls and Principal Repayments
on Securities Held to Maturity 49,720 16,898
Purchases of Securities Held to Maturity (151,963) (76,366)
Proceeds from Sale of Securities Available
for Sale 47,013 36,138
Maturities and Principal Repayments on
Securities Available of Sale 19,146 3,494
Purchases of Securities Available for Sale (50,829) (62,397)
Loans Originated and Principal Repayments
on Loans and Other Real Estate Owned, Net (12,617) 19,892
Proceeds from Sales of Loans 16,025 12,301
Proceeds from Sales of Real Estate
Acquired in Settlements of Loans 2,095 3,271
Purchases of Premises and Equipment, Net (479) (524)
Net Cash (Used in) Investing Activities (81,889) (47,293)
/TABLE
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1994 1993
(unaudited) (unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Decrease in Deposits $ (207) $ (61,568)
Net Increase Short-Term Borrowings 62,277 43,350
Repayments of Other Borrowings - (20,004)
Common Stock Sold for Cash 179 18,366
Net Cash Provided by (Used in)
Financing Activities 62,249 (19,856)
Net (Decrease) in Cash and
Cash Equivalents (6,400) (55,071)
Cash and Cash Equivalents at Beginning of Year 75,360 136,154
Cash and Cash Equivalents at End of Period 68,960 81,083
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid (Received) During the Period for:
Interest Expense $ 10,102 $ 12,452
Income Taxes $ (10) $ (91)
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Real Estate Acquired in Settlement of Loans and
In-Substance Foreclosures $ 169 $ 7,568
Investment Securities Transferred to Securities
Available for Sale $ 47,005 -
During the period the Registrant purchased
various investment securities which
settled in April $ 15,051 $ 106,379
During the period the Registrant sold
various investment securities which
settled in April $ 18,413 -
/TABLE
<PAGE>
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(Dollars in thousands)
<TABLE>
<CAPTION> Unrealized Depreciation
on Certain
Marketable
Common Retained Equity Restricted Treasury
Stock Surplus Earnings Securities Stock Awards Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Bal. 12/31/92 $ 29,614 80,895 10,043 (25) (676) (28) 119,823
Net Income - - 3,589 - - - 3,589
Sale of Common Stock
(1,540,322 shares)3,851 10,678 - - - - 14,529
Exercise of Warrants
(611,975 shares) 1,530 2,313 - - - - 3,843
Amortization of Deferred
Compensation re: Restricted
Stock Awards - - - - 77 - 77
Removal of Restrictions Accelerated
re: Restricted Stock Awards
(4,500 shares) - - - - 22 - 22
Forfeiture of Restricted Stock Awards
(667 shares) - (6) - - 14 (8) 0
Net Change in Unrealized Depreciation
on Certain Marketable Equity
Securities - - - 25 - - 25
Bal. 3/31/93 $ 34,995 93,880 13,632 - (563) (36) 141,908
Unrealized
(Loss)
on Securities
Common Retained Available Restricted Treasury
Stock Surplus Earnings for Sale Stock Awards Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Bal. 12/31/93 $ 35,274 94,487 25,140 - (428) (1) 154,472
Net Income - - 5,513 - - - 5,513
Cash Dividends Declared
($0.075 per share) - - (1,059) - - - (1,059)
Sale of Common Stock
(13,639 shares) 34 132 - - - - 166
Exercise of Warrants
(3,000 shares) 7 7 - - - - 14
Amortization of Deferred
Compensation re: Restricted
Stock Awards - - - - 53 - 53
Forfeiture of Restricted Stock Awards
(1,667 shares) - (1) - - 21 (21) (1)
Net Change in Fair Value of Securities
Available for Sale,
Net of Taxes - - - (1,817) - - (1,817)
Bal. 3/31/94 $ 35,315 94,625 29,594 (1,817) (354) (22) 157,341
/TABLE
<PAGE>
<PAGE>
North Fork Bancorporation, Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 1994 and 1993
General
In the opinion of management, all significant intercompany accounts
and transactions have been eliminated in consolidation. In addition,
all adjustments necessary for a fair presentation of the consolidated
financial position and results of operations of the Registrant for the
interim periods have been made. All such adjustments are of a normal
and recurring nature. These statements should be read in conjunction
with the Registrant's summary of significant accounting policies which
are incorporated herein by reference in its 1993 Annual Report on Form
10-K.
Results of operations for the quarter ended March 31, 1994 are not
necessarily indicative of the results of operations which may be
expected for the full year 1994 or any other interim periods.
Recent Regulatory Matters
The Registrant was operating under a memorandum of understanding
("MOU") with the Federal Reserve Bank of New York (the "Fed MOU") and
its subsidiary, North Fork Bank, had been operating under an MOU with
the Federal Deposit Insurance Corporation and the New York State Banking
Department (the "Bank MOU" and together with the Fed MOU, the "MOU's").
On February 1, 1994, February 17, 1994 and February 23, 1994; The
Federal Reserve Bank, The Federal Deposit Insurance Corporation and the
New York State Banking Department, respectively, advised the Registrant
that the MOU's were terminated. The termination of the MOU's was
described in the Registrant's Current Reports on Form 8-K dated February
10, February 22 and February 28, 1994, respectively, which are
incorporated herein by reference.
RECENT ACCOUNTING DEVELOPMENTS:
Accounting for Certain Investments in Debt and Equity Securities:
Statement of Financial Accounting Standards No. 115, ("SFAS 115").
The Registrant adopted SFAS 115 "Accounting for Certain Investments in
Debt and Equity Securities", effective January 1, 1994. Debt and Equity
Securities are classified into one of three categories and are accounted
for as follows:<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
RECENT ACCOUNTING DEVELOPMENTS: (continued)
* Debt securities that the Registrant has the positive intent
and ability to hold to maturity are classified as securities
held to maturity and reported at amortized cost.
* Debt and equity securities that are bought and held
principally for the purpose of selling them in the near term
are classified as trading securities and carried at fair
value. Unrealized gains and losses from marking the portfolio
to fair value are included in earnings.
* Debt and equity securities not classified as either
securities held to maturity or trading securities are
classified as securities available for sale and reported at fair
value. Unrealized gains and losses are excluded from
earnings, and reported as a separate component of
stockholders' equity, net of taxes. For the periods ended
December 31, 1993, and March 31, 1993 these securities were
reported at the lower of cost or market.
Employers Accounting for Post-Employment Benefits.
Statement of Financial Accounting Standards No. 112 ("SFAS 112")
The Registrant adopted SFAS 112, "Employers Accounting for Post-
Employment Benefits", effective January 1, 1994. The adoption did not
have a material adverse effect on its financial condition and its
results of operations.
This statement introduces changes to accounting for the estimated cost
of post-employment benefits provided to former or inactive employees (as
well as their dependents) after employment but before retirement.
Accounting by Creditors for Impairment of a Loan:
Statement of Financial Accounting Standards No. 114, ("SFAS 114")
This statement addresses the accounting by creditors for impairment of
certain loans. It is applicable to all creditors and to all loans,
uncollateralized as well as collateralized, except large groups of
smaller-balance homogeneous loans that are collectively evaluated for
impairment, loans that are measured at fair value or at the lower of
cost or fair value, leases, and debt securities as defined in SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities." It
applies to all loans that are restructured in a troubled debt
restructuring involving a modification of terms.
It requires that impaired loans that are within the scope of this
statement be measured based on the present value of expected future cash
flows discounted at the loan's effective interest rate or, as a
practical expedient, at the loan's observable market price or the fair
value of the collateral if the loan is collateral dependent.
This statement applies to financial statements for fiscal years
beginning after December 15, 1994. The Registrant is currently
assessing the financial implications of the implementation of SFAS 114
and believes that it will not have a material adverse effect on its
financial condition and its results of operations.<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Earnings Summary
North Fork Bancorporation, Inc. (the "Registrant") recognized net
income of $5.5 million, or $.37 per share, for the quarter ended March
31, 1994, as compared with net income of $3.6 million, or $.27 per share
for the comparable prior year period. Per share results are based on
weighted average shares outstanding of 14,898,272 and 13,338,897 for the
quarters ended March 31, 1994 and 1993, respectively.
The increase in the Registrant's 1994 first quarter results of
operations when compared with the comparable prior year period is the
result of a $1.4 million increase in net interest income, a $1.5 million
decrease in the provision for loan losses and a $1.3 million decline in
non-interest expense. This activity was partially offset by a $1.4
million decline in non-interest income, which resulted primarily from
net security gains recognized during the first quarter of 1993, and a
$.8 million increase in the provision for income taxes.
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. Average interest earning assets increased $270.2 million or
17.5% to $1,814.5 million for the first quarter of 1994, as compared to
$1,544.3 million for the comparable prior year period. Average interest
bearing liabilities increased $148 million or 10.9% to $1,503.7 million
for the first quarter of 1994 as compared to $1,355.7 million for the
comparable prior year period. The increase in average interest earning
assets and interest bearing liabilities is attributable to the
Registrant instituting a balance sheet leverage strategy during the
latter half of 1993 so as to stabilize the level of 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 invests in agency guaranteed mortgage-backed
securities. 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 three to four years. To mitigate interest
rate risk assumed in this strategy due to the differences in the
maturities of these assets and liabilities 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 <PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Net Interest Income (continued)
notional principal. The three month LIBOR was 3.88% at March 31, 1994.
The estimated market value of these off-balance sheet items exceeded the
carrying value by approximately $280 thousand at March 31, 1994. The
interest rate swap, cap and floor agreements outstanding as of March 31,
1994 mature September and December of 1995, respectively.
Average Demand Deposit balances increased $76.4 million or 41.5% to
$260.2 million for the first quarter of 1994 as compared to $183.8
million for the comparable prior year period. Together these factors,
partially offset by the lack of strength in quality loan demand within
the Registrant's marketplace, contributed to a $1.4 million increase in
net interest income, on a fully taxable equivalent basis, to $20.5
million for the first quarter of 1994 as compared with $19.1 million in
the first quarter of 1993. The components of this increase include a
$1.1 million increase in interest income, on a fully taxable equivalent
basis, and a $.3 million decrease in interest expense.
Interest expense declined to $10.1 million for the first quarter of
1994, equating to an effective cost of funds of 2.72%, as compared with
$10.4 million, or an effective cost of funds of 3.10% for the comparable
prior year period. Of the $.3 million decline in interest expense, $2.0
million is the result of the short term interest rate environment,
offset by an increase of $1.7 million due to the changing composition of
the Registrant's funding sources and liability structure. As
comparatively higher yielding mutual funds and annuities encouraged
certain depositors to reinvest funds from maturing certificates of
deposit into non-bank products, and the success of the conversion of the
Registrant's former savings bank subsidiary into a full service
commercial bank, the average balance of time deposits has declined $33.0
million or 9%, from the comparable prior year period levels. The
average balance of savings, NOW, and money market accounts during the
first quarter of 1994 aggregated $874.5 million, representing a decline
of $36.8 million or 4.0% from the comparable prior year period.
Conversely, average demand deposits increased $76.4 million in the first
quarter of 1994, when compared to the comparable period of the prior
year, 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 comprised 17.7% of total deposits at March 31, 1994 as compared
to 14.4% for the comparable period of the prior year.
Interest incurred on short-term borrowings increased $1.9 million to
$2.5 million in the first quarter of 1994 when compared to $0.6 million
during the comparable prior year period. The average balance of short-
term borrowings increased $229.5 million to $276.1 million in the first
quarter of 1994 when compared to $46.6 million during the comparable
prior year period, the result of the Registrant's balance sheet leverage
strategy.
<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Net Interest Income (continued)
Of the $1.9 million increase in interest on short-term borrowings,
$2.5 million is attributable to the growth in average short-term
borrowings, partially offset by $0.6 million due to the effects of lower
market interest rates.
Interest income, on a fully taxable equivalent basis, increased $1.2
million to $30.6 million for the 1994 first quarter, from $29.4 million
for the comparable prior year period. The yield on interest earning
assets, on a tax equivalent basis, declined to 6.83% for the 1994 first
quarter from 7.72% in the comparable prior year period. The increase in
interest income on a fully taxable equivalent basis is attributable to
the Registrant's balance sheet leverage strategy resulting in a higher
level of interest earning assets, primarily agency guaranteed mortgage-
backed securities, offset by lower market interest rates and the lack of
quality loan demand within the Registrant's marketplace. Interest
earned on the Registrant's loan portfolio declined $1.5 million, of
which $1.1 million is attributable to lower market interest rates and
their effects on the Registrant's adjustable earning assets and
refinances of maturing fixed rate earning assets, whereas, $0.4 million
of the decline is attributable to a reduction in loan origination
volume, and increased levels of loan repayments and satisfactions. The
yield on the Registrant's taxable loan portfolio declined to 8.10% for
the first quarter of 1994 compared to 8.58% for the comparable prior
year period.
Income earned on the Registrant's mortgage-backed securities portfolio
increased $2.2 million to $8.5 million in the first quarter of 1994,
when compared to $6.3 million in the comparable prior year period.
Average mortgage-backed securities increased $248.2 million, or 58.1%,
to $675.9 million in the first quarter of 1994, when compared to $427.7
million during the comparable prior year period. The growth in the
average balance of mortgage-backed securities increased interest income
by $7.8 million. This increase was partially offset by a $5.6 million
decline in interest income due to the effects of lower market interest
rates and the short-term nature of the securities comprising the
Registrant's mortgage-backed portfolio. The yield on the Registrant's
mortgage-backed securities portfolio declined to 5.10% for the first
quarter of 1994 compared to 6.0% for the first quarter of 1993.<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Net Interest Income (continued)
The following table sets forth a summary analysis of the relative
impact on net interest income of changes in the volume of interest
earning assets and interest bearing liabilities and changes in rates
earned by the Registrant on such assets and liabilities. Because of
numerous simultaneous volume and rate changes during the period
analyzed, it is not possible to precisely allocate changes between
volumes and rates. For purposes of constructing 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 rates as they compare to each other. In
addition, average interest earning assets include non-performing loans.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1994 OVER MARCH 31, 1993
(dollars in thousands) ------------------------------------
Changes Due To Net
Volume Rate Change
<S> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Deposits $ (279) $ (75) $ (354)
Taxable Securities 331,477 (21,146) 310,331
Non-Taxable State and
Municipal Obligations* 1,139,477 (855,426) 284,051
Mortgage-Backed Securities 7,835,317 (5,656,899) 2,178,419
Taxable Loans including
Non-accrual Loans (140,532) (1,210,532) (1,351,064)
Non-Taxable Loans* (190,129) 69,838 (120,292)
Federal Funds Sold (194,185) 45,193 (148,992)
Total Interest Earning Assets 8,781,146 (7,629,046) 1,152,100
INTEREST BEARING LIABILITIES:
Savings, NOW, &
Money Market Deposits (212,907) (822,984) (1,035,891)
Other Time Deposits (298,176) (448,251) (746,428)
Short-Term Borrowings 2,501,066 (596,345) 1,904,722
Other Borrowings (316,559) ( 73,924) (390,482)
Total Interest Bearing Liabilities 1,673,424 (1,941,504) (268,080)
Net Change in Net Interest Income* $7,107,722 $(5,687,542) $ 1,420,179
* Taxable equivalent basis.
/TABLE
<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Net Interest Income (continued)
The Registrant's net interest margin on a tax equivalent basis, which
measures the rate of net interest income earned for each dollar of average
earning assets, declined to 4.57% in the 1994 first quarter, as compared with
5.0% for the comparable prior year period.
This decline is attributable to the adverse effect of the lower market
interest rates experienced during 1993 and the majority of the first quarter
of 1994, and the lack of quality loan demand have had on the yield on average
interest earning assets, reducing the proportion of higher yielding loans to
interest earning assets. In addition, 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 a rising interest rate environment. As the securities portfolio
has increased in proportion to the level of interest earning assets, the net
yield on interest earning assets has declined.
On March 24, 1994 and April 19, 1994, the Registrant's bank subsidiary
increased its prime rate of interest, to 6.25% and 6.75%, respectively. This
aggregate increase of 75 basis points should have a positive impact on its
loan portfolio yield, as approximately $340 million in prime based loans
which will reprice within three months.
The increase in market interest rates during the first quarter of 1994 has
not adversely affected the Registrant's bank subsidiary's core deposits, as
it has along with its competitors, been able to maintain its rates consistent
with 1993 year end levels. Conversely, the recent increases have negatively
impacted its short-term borrowings under repurchase agreements, when compared
to 1993 year end levels.
<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net Interest Income (continued)
The following tables present an analysis of net interest income by each
major category of interest earning assets and interest bearing liabilities
for the three month periods ended March 31, 1994 and 1993, respectively:
<TABLE>
<CAPTION>
ANALYSIS OF NET INTEREST INCOME
(unaudited) THREE MONTHS ENDED
MARCH 31, 1994 MARCH 31, 1993
Average Average Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
(dollars in thousands)
Interest Earning Assets
Interest Earning Deposits $ 291 2.17% $ 343 2.26%
Taxable Securities 59,636 5.68% 37,290 5.72%
Non-Taxable Municipals 46,094 5.63% 16,011 9.01%
Mortgage-Backed Securities 675,886 5.10% 427,651 6.00%
Taxable Loans 1,005,735 8.10% 1,012,415 8.58%
Non-Taxable Loans 10,494 14.23% 14,224 13.93%
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell 16,324 3.16% 36,316 3.08%
Total Int. Earning Assets $1,814,461 6.83% $ 1,544,250 7.72%
Interest and Non-Interest
Bearing Liabilities Savings,
N.O.W and Money Market
Deposits $ 874,503 2.05% $ 911,266 2.43%
Time Deposits 333,066 3.35% 366,061 3.87%
Total Savings &
Time Deposits $1,207,569 2.41% $ 1,277,327 2.84%
Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase 276,139 3.51% 46,612 4.25%
Other Borrowed Funds 20,000 10.70% 31,784 11.72%
Total Int. Bearing
Liabilities $1,503,708 2.72% $ 1,355,723 3.10%
Other Liabilities &
Stockholders' Equity
(Net of Non-Interest
Earning Assets) 310,754 188,527
Total Liabilities &
Stockholders' Equity
(Net of Non-Interest
Earning Assets) $1,814,461 $ 1,544,250
Rate Spread 4.11% 4.62%
Net Yield on
Interest-Earning Assets
(Tax Equivalent Basis) 4.57% 5.00%
/TABLE
<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Non-Interest Income
Total non-interest income net of security (losses)/gains of $4.4
million remained virtually unchanged when compared to the comparable
period of the prior year. Net security losses during the first quarter
of 1994 were $0.1 million, as compared to net security gains of $1.3
million during the first quarter of 1993.
Service charges on deposit accounts increased $0.4 million, or 24.6%,
to $2.2 million during the first quarter of 1994 as compared to $1.8
million during the first quarter of 1993, primarily the result of growth
in the Registrant's demand deposit base, increases in per item fees and
the introduction of new products and services. This increase was offset
by a decline of $0.3 million in mortgage banking operations income, due
to higher mortgage interest rates and a corresponding decrease in the
level of refinances, and a slight decline in other operating income.
Non-Interest Expense
Non-interest expense declined $1.3 million, or 7.91%, to $14.8
million during the 1994 first quarter when compared to $16.1 million
during the comparable prior year period. The decline is primarily
attributable to a $1.0 million decrease in other real estate related
expenses and a decrease of $0.2 million in other operating expenses.
These improvements were partially offset by a $0.2 million, or 4.1%
increase in salaries and benefits.
The Registrant's core efficiency ratio, which represents the ratio of
non-interest expense, net of other real estate related costs and other
non-recurring charges, to net interest income on a tax equivalent basis
and non-interest income net of security (losses)/gains improved to
51.64% for the 1994 first quarter as compared to 56.67% for the 1993
first quarter.
Income Taxes
The Registrant provides for income taxes under the asset and liability
method. 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 Registrant's effective tax rate was 35.12% for the first quarter
of 1994, as compared to 38.29% for the comparable prior year period.<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Asset Quality
The Registrant's loan portfolio concentrated primarily in loans
secured by real estate in Suffolk and Nassau counties, and to a lesser
extent Westchester and Rockland Counties, New York, has been and will
continue to be affected by market trends in real estate values.
The following table delineates the composition of the Registrant's
loan portfolio for the periods indicated (in thousands):
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
Commercial, Financial &
Agricultural $ 250,264 $ 257,151 $ 265,978
Commercial Mortgages 290,751 292,157 287,801
Residential Mortgages 363,505 363,644 338,574
Construction 20,593 19,828 22,044
Land 39,309 37,160 44,197
Consumer 59,713 59,823 64,795
TOTAL $1,024,135 $ 1,029,763 $ 1,023,389
</TABLE>
The Registrant's non-performing assets, which include loans past due
ninety days and still accruing interest, non-accrual loans and other
real estate owned and loans classified as in-substance foreclosure,
decreased to $50.8 million at March 31, 1994, as compared with $57.2
million at December 31, 1993 and $110.7 million at March 31, 1993. Non-
performing assets now comprise 2.61% of total assets, as compared with
3.04% at December 31, 1993, and 6.19% at March 31, 1993. The components
of non-performing assets are delineated in the table below (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1994 1993 1993
<S> <C> <C> <C>
Loans 90 days past due &
still accruing $ 3,313 $ 1,811 $ 3,757
Non-accrual Loans 29,148 33,484 50,511
Non-performing Loans 32,461 35,295 54,268
Other Real Estate Owned 8,131 7,426 10,172
In-Substance Foreclosure 10,228 14,473 46,300
Non-performing assets 50,820 57,194 110,740
Restructured,
accruing loans $ 15,936 $ 15,237 $ 13,364
</TABLE>
Loans are classified as restructured when the Registrant has granted,
for economic or legal reasons related to the borrowers financial
difficulties, a concession to the customer that the Registrant would not
otherwise consider. Restructured, accruing loans, are defined as loans
whose repayment terms and/or interest rate have been modified by
agreement with the respective borrowers. Generally this occurs when the<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Asset Quality (continued)
cash flow of the borrower is insufficient to service the loan under its
original terms.
As a result of the continued and consistent decline in the
Registrant's non-performing loans, the provision for loan losses
declined to $1.0 million for the 1994 first quarter, from $2.5 million
in the comparable prior year period. Net charge offs aggregated $2.0
million, or 0.79% of average net loans on an annualized basis, for the
1994 first quarter, as compared with $4.1 million, or 1.60% of average
net loans on an annualized basis, for the 1993 first quarter. The
allowance for loan losses at March 31, 1994 was $45.6 million, or 140.6%
of non-performing loans, and 4.51% of loans, net of unearned income.
The allowance for loan losses at December 31, 1993 was $46.6 million, or
132.1% of non-performing loans, and 4.58% of loans, net of unearned
income. The allowance for loan losses at March 31, 1993 was $56.9
million, or 104.8% of non-performing loans and 5.65% of loans, net of
unearned income.
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 market value influence the calculation of the
required allowance at any point in time. 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 bank subsidiary's allowance for loan losses. Such agencies
may require the Registrant to recognize additions to the allowance based
on their judgement of information available to them at the time of their
examinations which may not be available now. Based on current economic
conditions, management considers the allowance at March 31, 1994
adequate to cover the possible risk of loss in the loan portfolio.
Potential problems 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 borrowers to continue to
comply with the present repayment terms, aggregated $20.2 million at
March 31, 1994.
Other real estate owned, which includes other real estate and
in-substance foreclosures, declined to $18.4 million at March 31, 1994,
from $21.9 million at December 31, 1993 and $56.5 million at March 31,
1993.
<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Securities
The Registrant's adopted SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities", as of January 1, 1994.
Securities Held to Maturity are debt securities that the Registrant has the
positive intent and ability to hold to maturity and are stated at amortized
cost. At March 31, 1994 Securities Held to Maturity consisted of the following:
<TABLE>
<CAPTION>
Securities Held to Maturity
Gross Gross
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury 26,837 244 - 27,081
U.S. Government Agencies
Obligations 50,324 26 1,577 48,773
State and Municipal
Obligations 57,831 461 377 57,915
Mortgage-backed
Securities 481,678 610 12,303 469,985
TOTAL $ 616,670 $ 1,341 $ 14,257 $ 603,754
</TABLE>
Securities Available for Sale are debt and equity securities not classified as
either securities held to maturity or trading securities and are stated at fair
value. At March 31, 1994, Securities Available for Sale consisted of the
following:
<TABLE>
<CAPTION>
Securities Available for Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury 29,892 - 92 29,800
Mortgage-backed
Securities 172,250 3 3,058 169,195
Equity Securities 10,688 34 59 10,663
TOTAL $ 212,830 $ 37 $ 3,209 $ 209,658
</TABLE>
Consistent with SFAS 115, the net unrealized loss of $3.2 million was reported
as a separate component of stockholders' equity, on a net of tax basis. The net
of tax effect reduced stockholders' equity by $1.8 million.
The value of the Registrant's securities portfolio, particularly its
mortgage-backed securities, is directly impacted by changes in market interest
rates.<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Capital
The Federal Reserve Board has formal capital guidelines which bank holding
companies are required to meet. The risk based capital guidelines are
designed to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding companies to
account for off-balance sheet exposure and to minimize disincentives for
holding liquid assets. Under these guidelines, assets and off-balance sheet
items are assigned to broad risk categories, each with appropriate weights.
The resulting capital ratios represent capital as a percentage of total risk
weighted assets and off balance sheet items. The guidelines currently require
all bank holding companies to maintain a minimum ratio of total risk based
capital to total risk weighted assets of 8.00%, including a minimum ratio of
Tier I capital to risk weighted assets of 4.00%.
The Federal Deposit Insurance Corporation has adopted comparable guidelines
for state banks which are not members of the Federal Reserve System.
The following table sets forth the Registrant's regulatory capital as of
March 31, 1994 under the rules applicable at such date. At such date the
Registrant was in compliance with all applicable regulatory requirements.
<TABLE>
<CAPTION>
(dollars in thousands) Amount Ratio
<S> <C> <C>
Tier I Capital $ 149,961 13.81%
Regulatory Requirement 43,423 4.00
Excess 106,538 9.81
Total Risk Adjusted Capital $ 163,927 15.10%
Regulatory Requirement 86,846 8.00
Excess 77,081 7.10
Risk weighted assets $1,085,570
</TABLE>
The Registrant's leverage ratio for the quarter ended March 31, 1994 was
7.73%. Tier 1, total risk based and leverage capital ratios of North Fork
Bank, the Registrant's bank subsidiary, were 14.77%, 16.06%, and 8.26%,
respectively, at March 31, 1994.
The Federal Deposit Insurance Corporation 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 risk based 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.
<PAGE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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 sources of liquidity include dividends from its bank
subsidiary, borrowings, and funds available through the capital markets.
Dividends from the Registrant's bank subsidiary are limited by the
regulations of the New York State Banking Department to current years
earnings plus the prior two years retained net profits. According to the
parameters of this regulation, the Registrant's bank subsidiary has $29.8
million of retained earnings available for dividends to the holding company
as of March 31, 1994.
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.
On March 23, 1994, the Registrant's bank subsidiary further enhanced its
borrowing capabilities by becoming a member of the Federal Home Loan Bank
("FHLB") system. In order to become a member, the bank purchased $9.5
million of FHLB stock, resulting in the ability to borrow an additional $190
million on a secured basis, utilizing mortgage related loans and securities
for a term ranging from one day to ten years at both fixed and variable
rates. As of March 31, 1994, the Registrant's bank subsidiary had not
utilized such borrowing capabilities.
Subsequent to March 31, 1994, the Registrant issued in a private placement
a $25 million 7.56% senior note maturing April 20, 1999 (the "Note"). The
proceeds were used to retire, prior to maturity, its $20 million 10.08%
senior note, which was due March 31, 1995. The remainder of the proceeds,
less expenses associated with the retirement of the 10.08% senior note, will
be used for general corporate purposes. The Note contains certain covenants
relating to, among other things, the maintenance of certain tangible net
worth and total risk based capital levels, limitations on the payment of
dividends and the repurchase of common stock and the maintenance of certain
non-performing asset levels. The Registrant's liquidity position is
monitored to ensure the maintenance of an optimum level and the most cost
efficient use of available funds. Management believes that the Registrant
has liquidity sufficient to meet its operating requirements.<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: May 6, 1994 /s/Daniel M. Healy
----------------------------
Daniel M. Healy
Executive Vice President &
Chief Financial Officer
<PAGE>
EXHIBIT 11
North Fork Bancorporation, Inc.
COMPUTATION OF NET INCOME PER COMMON EQUIVALENT SHARE
March 31, 1994
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
MARCH 31,
1994 1993
<S> <C> <C>
Net Income $ 5,512,814 3,588,791
Common Equivalent Shares:
Weighted average common
shares outstanding 14,116,857 12,742,661
Weighted average common
equivalent shares(a) 781,415 569,236
Weighted average common and
common equivalent shares 14,898,272 13,338,897
Net Income per common
equivalent share $ 0.37 0.27
</TABLE>
