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: September 30, 1994
NORTH FORK BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
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)
(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.
CLASSES OF COMMON STOCK NUMBER OF SHARES OUTSTANDING 11/13/94
$2.50 Par Value 14,420,937
<PAGE> INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (unaudited).
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
Not Applicable.
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
a) The Registrant held a special meeting of its
stockholder's on November 10, 1994 to approve the merger with Metro
Bancshares, Inc. The Registrant's Stockholders approved with
10,140,487 affirmative votes cast, 135,345 negative votes cast and
80,800 votes abstaining, the Registrant's Merger with Metro
Bancshares, Inc.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(11) Statement Re: Computation of per share earnings.
(b) Current Reports on Form 8-K: dated July 20, 1994.
Current Reports on Form 8-K: dated October 17, 1994.
Current Reports on Form 8-K: dated October 26, 1994.
Current Reports on Form 8-K: dated October 28, 1994.
<PAGE>
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1994 1993 1993
ASSETS (unaudited) (unaudited)
<S> <C> <C> <C>
Cash & Due from Banks $ 64,290 $ 75,070 $ 62,658
Interest Earning Deposits 585 290 290
Federal Funds Sold and Securities
Purchased under Agreements
to Resell - - 34,050
Securities Available for Sale(Market
Value of $201,489 at December 31,1993
and $207,063 at September 30, 1993) 202,772 200,219 205,041
Securities Held to Maturity 639,812 548,497 578,482
Loans: 999,361 1,029,763 1,012,245
Less:Unearned Income & Fees 10,597 12,679 13,595
Allowance for Loan Losses 41,176 46,625 49,040
Net Loans 947,588 970,459 949,610
Premises & Equipment, Net 31,784 33,277 33,348
Accrued Income Receivable 12,566 11,924 11,346
Other Real Estate 14,449 21,899 38,016
Other Assets 17,786 12,955 16,209
Excess of Cost over Fair Value
of Net Assets Acquired 8,764 9,291 9,466
Total Assets $ 1,940,396 $ 1,883,881 $ 1,938,516
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits $ 291,113 $ 257,447 $ 239,254
Savings, N.O.W. & Money Market
Deposits 862,277 866,808 867,985
Certificates of Deposits in Amounts
of $100,000 & Over 55,825 32,297 24,821
Other Time Deposits 269,917 285,718 296,840
Total Deposits 1,479,132 1,442,270 1,428,900
Federal Funds Purchased & Securities
Sold Under Agreements to Repurchase 200,217 255,643 325,779
Federal Home Loan Bank Advances 50,000 - -
Senior Note Payable 25,000 20,000 20,000
Mortgage Notes Payable - - 62
Accrued Taxes, Interest & Other
Expenses 10,857 9,439 7,003
Other Liabilities 2,114 2,057 495
Dividends Payable 1,435 - -
Purchased Security Liabilities 2,108 - 495
Total Liabilities $ 1,770,863 $ 1,729,409 $ 1,788,451
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 14,349,420,
14,109,554, and 14,088,768 shares
at the periods ending, respectively 35,874 35,274 35,222
Additional Paid-in Capital 96,040 94,487 94,299
Retained Earnings 40,640 25,140 21,025
Less:
Unrealized Loss on Securities
Available for Sale, Net of Taxes (2,649) - -
Restricted Stock Awards (354) (428) (396)
Treasury Stock, at cost: 1,253, 73,
and 8,073 shares at the periods
ending, respectively (18) (1) (85)
Total Stockholders' Equity 169,533 154,472 150,065
Total Liabilities and
Stockholders' Equity $ 1,940,396 $ 1,883,881 $ 1,938,516
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
as of September 30, 1994 1993 1994 1993
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans (including fee income) $ 21,138 $ 20,452 $ 62,588 $ 63,185
Mortgage-Backed Securities 9,728 8,406 27,447 22,275
U.S. Treasury & Government
Agency Securities 1,684 493 3,937 1,390
State & Municipal Obligations 590 317 1,521 777
Other Securities 175 13 413 73
Federal Funds Sold and Securities
Purchased under Agreements to Resell 85 197 347 717
Interest Earning Deposits 4 2 8 12
Total Interest Income 33,404 29,880 96,261 88,429
INTEREST EXPENSE
Savings, NOW & Money
Market Deposits 4,553 4,791 13,384 15,444
Certificates of Deposit, $100,000
and Over 544 274 1,260 819
Other Time Deposits 2,369 2,699 7,041 8,844
Federal Funds Purchased &
Securities Sold Under Agreements
to Repurchase 3,104 1,911 8,623 3,655
Federal Home Loan Bank Advances 209 - 422 -
Other Borrowings 475 549 1,490 2,052
Total Interest Expense 11,254 10,224 32,220 30,814
Net Interest Income 22,150 19,656 64,041 57,615
Provision for Loan Losses 750 1,000 2,500 5,500
Net Interest Income after
Provision for Loan Losses 21,400 18,656 61,541 52,115
NON-INTEREST INCOME
Service Charges on Deposit
Accounts 2,293 1,843 6,885 5,487
Trust Income 427 393 1,277 1,204
Mortgage Banking Operations 397 869 1,465 2,911
Other Operating Income 945 1,075 2,761 3,176
Net Securities (Loss)/Gains - 51 (54) 1,442
Total Non-Interest Income 4,062 4,231 12,334 14,220
NON-INTEREST EXPENSE
Salaries & Benefits 6,405 5,966 18,876 17,783
Net Occupancy 1,232 1,232 3,701 3,771
Equipment 973 1,218 2,935 3,743
Other Real Estate 544 4,121 4,283 10,522
FDIC Assessment 801 914 2,608 2,835
Prepayment Charge Senior Note
Retirement - - 876 -
Amortization of Excess of Cost Over
Fair Value of Net Assets Acquired 176 176 527 528
Other Operating Expenses 3,564 3,528 10,231 10,475
Total Non-Interest Expenses 13,695 17,155 44,037 49,657
Income Before Provision for Income
Taxes 11,767 5,732 29,838 16,678
Provision for Income Taxes 4,283 1,861 10,766 5,696
Net Income $ 7,484 $ 3,871 $ 19,072 $ 10,982
Earnings and Dividends Per Share:
Net Income $ 0.50 $ 0.26 $ 1.28 $ 0.77
Cash Dividends $ 0.10 - $ 0.25 -
Weighted Average Common and Equivalent
Shares Outstanding 15,054,150 14,725,164 14,936,827 14,245,764
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR NINE MONTHS ENDED SEPTEMBER 30,
(dollars in thousands)
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 19,072 $ 10,982
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Loan Losses 2,500 5,500
Depreciation and Amortization 2,505 4,325
Provision for Losses on Real Estate Acquired in
Settlement of Loans 2,655 6,085
Amortization of Excess of Cost Over Fair Value of Net
Assets Acquired 527 528
Accretion of Discounts and Net Deferred Loan Fees (965) (568)
Amortization of Premiums 6,434 6,036
Net (Gains)\Losses on Securities Transactions 54 (1,442)
Other, Net 2,384 1,631
Net Cash Provided by Operating Activities 30,398 33,077
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Securities Held to Maturity - 1,628
Maturities, Calls and Principal Repayments on
Securities Held to Maturity 123,500 118,524
Purchases of Securities Held to Maturity (264,311) (383,836)
Proceeds from Sales of Securities Available for Sale 64,739 70,074
Maturities and Principal Repayments on
Securities Available for Sale 43,149 28,837
Purchases of Securities Available for Sale (69,609) (180,811)
Loans Originated and Principal Repayments on Loans
and Other Real Estate Owned, Net (8,827) (17,190)
Proceeds from Sales of Loans 25,034 50,079
Proceeds from Sales of Real Estate Acquired in
Settlements of Loans 9,640 16,453
Purchases of Premises and Equipment, Net (498) (1,378)
Net Cash Used in Investing Activities (77,183) (297,620)
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase\(Decrease) in Deposits $ 36,862 $ (71,034)
Net (Decrease)\Increase in Short-Term Borrowings (5,426) 297,579
Proceeds from the Issuance of Senior Note Payable 25,000 -
Repayments of Other Borrowings (20,000) (20,112)
Sale(Purchase) of Treasury Shares (26) (58)
Common Stock Sold for Cash 2,027 19,012
Dividends Paid on Common Stock (2,137) -
Net Cash Provided by Financing Activities 36,300 225,387
Net Decrease in Cash and Cash Equivalents (10,485) (39,156)
Cash and Cash Equivalents at Beginning of Year 75,360 136,154
Cash and Cash Equivalents at End of Period 64,875 97,998
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Period for:
Interest Expense $ 31,431 $ 31,931
Income Taxes $ 9,149 $ 2,900
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Real Estate Acquired in Settlement of Loans and
In-Substance Foreclosures $ 6,182 $15,476
Loans to facilitate the sale of Other
Real Estate $ 8,584 $ 7,968
Securities Transferred to Securities
Available for Sale $ 47,005 $ -
During the period the Registrant purchased
various investment securities which settled
in October $ 2,108 $ 495
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
<TABLE>
<CAPTION>
(dollars in thousands) 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) (675) (29) 119,823
Net Income - - 10,982 - - - 10,982
Sale of Common Stock
(1,569,245 shares) 3,991 11,024 - - - - 15,015
Exercise of Warrants
(646,975 shares) 1,617 2,390 - - - - 4,007
Amortization of Deferred
Compensation re: Restricted
Stock Awards - - - - 236 - 236
Removal of Restrictions
Accelerated re:
Restricted Stock Awards
(4,500 shares) - - - - 22 - 22
Forfeiture of Restricted
Stock Awards
(1,034 shares) - (10) - - 21 (11) 0
Purchase of Treasury
Stock (839 shares) - - - - - (45) (45)
Net Change in Unrealized
Depreciation on Certain
Marketable Equity
Securities - - - 25 - - 25
Bal. 9/30/93 $ 35,222 94,299 21,025 0 (396) (85) 150,065
Unrealized Loss
on Securities
Available
Common Retained for Restricted Treasury
Stock Surplus Earnings Sale Stock Awards Stock Total
Bal. 12/31/93 $ 35,274 94,487 25,140 - (428) (1) 154,472
Net Income - - 19,072 - - - 19,072
Cash Dividends Declared
($0.25 per share) - - (3,572) - - - (3,572)
Sale of Common Stock
(141,866 shares) 355 1,294 - - - - 1,649
Exercise of Warrants
(98,000 shares) 245 216 - - - - 461
Amortization of Deferred
Compensation re: Restricted
Stock Awards - - - - 163 - 163
Removal of Restrictions
Accelerated re:
Restricted Stock Awards
(1,000 shares) - - - - 4 - 4
Restricted Stock Awards
(10,000 shares) - 55 - - (122) 67 0
Forfeiture of Restricted
Stock Awards
(4,334 shares) - (12) - - 29 (58) (41)
Purchase of Treasury Stock
(1,846 shares) - - - - - (26) (26)
Net Change in Fair Value
of Securities Available for
Sale, Net of Taxes - - - (2,649) - - (2,649)
Bal. 9/30/94 $ 35,874 96,040 40,640 (2,649) (354) (18) 169,533
</TABLE>
<PAGE> North Fork Bancorporation, Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 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 contained in its 1993 Annual Report
on Form 10-K which is incorporated herein by reference.
Results of operations for the quarter and nine months ended
September 30, 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 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:
* 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 September 30, 1993, the Registrant
carried these securities at the lower of cost or market.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
RECENT ACCOUNTING DEVELOPMENTS: (continued)
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 or
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")
As amended by Statement of Financial Accounting Standards No. 118
("SFAS 118")
SFAS 114, as amended by SFAS 118, which amends the income
recognition and disclosure requirement of SFAS 114, 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.
SFAS 114, as amended requires that impaired loans that are
within its scope 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
of the fair value of the collateral if the loan is collateral
dependent.
SFAS 114 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 affect on
its financial condition or its results of operations.
Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments:
Statement of Financial Accounting Standards No. 119 ("SFAS 119")
SFAS 119 expands current financial instrument disclosure
requirements by mandating similar disclosures regarding derivative
instruments such as futures, forward, swap, and options contracts.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
RECENT ACCOUNTING DEVELOPMENTS: (continued)
Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments:
Statement of Financial Accounting Standards No. 119 ("SFAS 119")
(continued)
SFAS 119 applies to all fiscal years ending after December 15,
1994. The Registrant is currently assessing the financial
disclosure implications of the implementation of SFAS 119 and
believes it will not have a material effect as its current
financial instruments disclosure already contains a significant
amount of disclosure regarding such derivative instruments.
<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 $7.5 million, or $.50 per share, for the quarter ended
September 30, 1994, as compared with net income, of $3.9 million, or
$.26 per share, for the comparable prior year period. Per share results
are based on weighted average common and equivalent shares outstanding
of 15,054,150 and 14,725,164 for the quarters ended September 30, 1994
and 1993, respectively.
The increase in the Registrant's 1994 third quarter earnings, when
compared with the prior year period, is primarily attributable to a $2.5
million increase in net interest income, a $.3 million decrease in the
provision for loan losses, and a $3.5 million decrease in non-interest
expense, partially offset by a $.2 million decrease in non-interest
income.
Net Interest Income
Net interest income, which represents the difference between interest
earned on interest earning assets and interest incurred on interest
bearing liabilities, is the Registrant's primary source of earnings.
Net interest income is affected by the level and composition of interest
earning assets and interest bearing liabilities, as well as changes in
market interest rates.
Net interest income, on a fully taxable equivalent basis, increased
$2.7 million, or 13.5%, to $22.7 million for the 1994 third quarter, as
compared to $20.0 million for the comparable prior year period. The
components of this increase include a $3.7 million increase in interest
income, on a fully taxable equivalent basis, partially offset by a $1.0
million increase in interest expense.
Average interest earning assets increased $134.4 million, or 7.8%, to
$1.86 billion for the third quarter of 1994, as compared to $1.73
billion for the comparable prior year period. Average interest bearing
liabilities increased $37.2 million, or 2.6%, to $1.5 billion for the
third quarter of 1994, as compared to $1.46 billion for the comparable
prior year period. Average Demand Deposit balances increased $45.8
million, or 19%, to $287.2 million for the third quarter of 1994, as
compared to $241.4 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 to effectively
utilize capital, benefit from the steepness in the yield curve that
existed, and enhance operating results. Utilizing funds obtained
through short-term repurchase agreements, the Registrant invested
primarily in agency guaranteed mortgage-backed securities. The
repurchase agreement borrowings were usually for a period of ninety
days, whereas the funds were invested primarily in seven and fifteen
year mortgage-backed securities with original weighted average lives of
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Interest Income (continued)
approximately three to four years. Due to the increase in short
term interest rates and a flattening of the yield curve during the
latter half of 1994. The Registrant established a formal plan to
reduce its current level of holdings of certain low yielding
securities available for sale and utilize current cash flows to
reduce its level of short term borrowings. The result of the
strategy will be to reduce the Registrants exposure to future
increases in interest rates, improve its net yield on interest
earning assets and its capital ratios which is not expected to have
a material impact on net interest income. To mitigate interest
rate risk assumed in the initial leverage 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. The estimated fair market value of these
off-balance sheet items was $.9 million, or an excess over the
carrying value of $0.6 million at September 30, 1994. This
compares to a market value of $1.1 million and $.7 million at June
30, 1994 and December 31, 1993, respectively. The decline in
market value from June 30, 1994, to September 30, 1994 is primarily
due to the shortening in remaining lives of these instruments. The
interest rate swap, cap and floor agreements outstanding as of
September 30, 1994 mature in September and December of 1995,
respectively. The financial statement impact of this hedge strategy for the
periods presented is not considered material.
Interest income, on a fully taxable equivalent basis, increased
$3.7 million to $33.9 million for the 1994 third quarter, from
$30.2 million for the comparable prior year period. The yield on
earning assets, on a tax equivalent basis, increased to 7.24% for
the 1994 third quarter from 6.95% in the comparable prior year
period. The increase in interest income, on a fully taxable
equivalent basis, is attributable to (i) the Registrant's balance
sheet leverage strategy, which has resulted in a higher level of
interest earning assets, primarily agency guaranteed mortgage-
backed securities, (ii) increases in the prime rate of interest
during the first nine months of 1994, and (iii) the resultant
impact of higher market interest rates on the Registrant's
securities portfolio. The balance sheet leverage strategy while
increasing net interest income has negatively impacted the yield on
interest earning assets as proceeds are invested primarily in lower
yielding mortgage backed and taxable securities. Interest earned
on the Registrant's mortgage-backed securities portfolio increased
$1.3 million to $9.7 million for the third quarter of 1994 as
compared to $8.4 million for the comparable prior year period. Of
this increase, $.2 million is due to an increase in average
mortgage-backed securities of $14.9 million, or 2.3%, to $656.4
million in the third quarter of 1994 as compared to $641.5 million
in the comparable prior year period, while $1.1 million of the
increase is due to an increase in the yield on mortgage-backed
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Net Interest Income (continued)
securities to 5.88% during the third quarter of 1994 as compared to 5.20%
during the comparable prior year period. The yield increase is the result of
higher market interest rates and a corresponding slowdown of prepayments on
certain securities contained in the portfolio.
Interest earned on the Registrant's taxable securities increased $1.4
million to $1.9 million in the third quarter of 1994 when compared to $.5
million in the comparable prior year period. Average taxable securities
increased $101.0 million or 256.0% to $140.5 million for the third quarter of
1994 as compared to $39.5 million for the comparable prior year period. The
growth in average taxable securities consists primarily of short-term U.S.
Treasury and certain U.S. Government Agency Obligations. Interest earned on
the Registrant's loan portfolio, on a fully taxable equivalent basis,
increased $.7 million to $21.3 million in the third quarter of 1994, when
compared to $20.6 million during the comparable period of the prior year.
Interest expense increased $1.0 million to $11.2 million for the 1994 third
quarter, reflecting an effective cost of funds of 2.98%, as compared with
$10.2 million, or an effective cost of funds of 2.78%, for the comparable
prior year period.
The increase in interest expense is attributable to the impact the
Registrant's balance leverage strategy has had on the level of short-term
borrowings, partially offset by a change in the composition of the
Registrant's core deposits. Core deposits are defined as Demand Deposits,
Savings, N.O.W. and Money Market Deposits, and other time deposits exclusive
of Certificates of Deposits greater than $100,000.
Interest incurred on short-term borrowings increased $1.4 million to $3.3
million in the third quarter of 1994 as compared to $1.9 million during the
comparable prior year period. The average balance of short-term borrowings
increased $52.0 million to $272.6 million for the third quarter of 1994, as
compared to $220.6 million during the comparable prior year period. Of the
$1.4 million increase in interest incurred on short-term borrowings, $.5
million is attributable to the growth in average short-term borrowings, and
$.9 million is due to the effects of higher market interest rates.
Interest incurred on Savings, NOW and Money Market deposit accounts
declined $.2 million to $4.6 million in the third quarter of 1994 as compared
to $4.8 million during the comparable prior year period. The average balance
of these deposits declined $7.9 million, or .9%, from the comparable prior
year period levels. The average balance of other Time Deposits declined
$11.8 million to $327.4 million, or 3.5%, during the third quarter of 1994
as compared to $339.2 million for the comparable prior year period.
Conversely, average demand deposits increased $45.8 million for the third
quarter of 1994, as compared to the comparable period of the prior year,
further evidence of the success of the Registrant's conversion of its former
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Net Interest Income (continued)
savings bank subsidiary to a full service commercial bank and the
Registrant's continued efforts to expand its small and medium sized
commercial client base. Demand deposits comprised 19.7% of total deposits at
September 30, 1994, as compared to 16.7% for the comparable period of the
prior year.
The following tables set 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 presentation purposes,
changes which are not solely due to volume changes or rate changes have been
allocated to these categories based on the respective percentage changes in
average volume and average rates as they compare to each other. In addition,
average interest earning assets include non-performing loans.
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994 OVER SEPTEMBER 30, 1993
(dollars in thousands) Changes Due To Net
Volume Rate Change
INTEREST EARNING ASSETS:
Interest Earning Deposits $ 2 0 2
Taxable Securities 1,384 ( 10) 1,374
Non-Taxable State and Municipal
Obligations* 371 73 444
Mortgage-Backed Securities 199 1,123 1,322
Taxable Loans including Non-accrual Loans 391 366 757
Non-Taxable Loans* (146) 45 (101)
Federal Funds Sold (181) 69 (112)
Total Interest Earning Assets 2,020 1,666 3,686
INTEREST BEARING LIABILITIES
Savings, NOW, & Money Market Deposits (43) (195) (238)
Other Time Deposits (104) 44 (60)
Short-Term Borrowings 518 884 1,402
Other Borrowings 115 (189) (74)
Total Interest Bearing Liabilities 486 544 1,030
Net Change in Net Interest Income* 1,534 1,122 2,656
* Taxable equivalent basis.
<PAGE>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 OVER SEPTEMBER 30, 1993
(dollars in thousands)
Changes Due To Net
Volume Rate Change
INTEREST EARNING ASSETS:
Interest Earning Deposits $ 3 (7) (4)
Taxable Securities 2,935 (50) 2,885
Non-Taxable State and Municipal
Obligations* 1,447 (211) 1,236
Mortgage-Backed Securities 4,855 316 5,171
Taxable Loans including Non-accrual Loans 700 (1,002) (302)
Non-Taxable Loans* (439) (4) (443)
Federal Funds Sold (513) 143 (370)
Total Interest Earning Assets 8,988 (815) 8,173
INTEREST BEARING LIABILITIES
Savings, NOW, & Money Market Deposits (258) (1,802) (2,060)
Other Time Deposits (720) (642) (1,362)
Short-Term Borrowings 4,577 812 5,389
Other Borrowings (81) (480) (561)
Total Interest Bearing Liabilities 3,518 (2,112) 1,406
Net Change in Net Interest Income* 5,470 1,297 6,767
* Taxable equivalent basis.
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 interest
earning asset, increased to 4.83% in the 1994 third quarter, as compared with
4.60% for the comparable prior year period.
The Registrant's net interest margin on a tax equivalent basis decreased to
4.73%, for the nine months ended September 30, 1994, as compared with 4.78% for
the comparable prior year period.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following table presents and analysis of net interest income by each major
category of interest earning assets and interest bearing liabilities for the
three month and nine month periods ended September 30, 1994 and 1993,
respectively:
<TABLE>
<CAPTION>
ANALYSIS OF NET INTEREST INCOME
(unaudited) THREE MONTHS ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
Average Average Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
(dollars in thousands)
Interest Earning Assets
Interest Earning Deposits $ 465 3.50% $ 289 3.15%
Taxable Securities 140,510 5.43% 39,474 5.53%
Non-Taxable Municipals 52,596 6.83% 30,568 5.98%
Mortgage-Backed Securities 656,387 5.88% 641,465 5.20%
Taxable Loans 992,931 8.36% 974,219 8.21%
Non-Taxable Loans 9,013 15.47% 12,870 13.95%
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell 7,571 4.46% 26,191 2.99%
Total Int. Earning Assets $1,859,473 7.24% $ 1,725,076 6.95%
Interest and Non-Interest
Bearing Liabilities Savings,
N.O.W and Money Market
Deposits $ 871,137 2.07% $ 879,000 2.16%
Time Deposits 327,406 3.53% 339,200 3.48%
Total Savings &
Time Deposits $1,198,543 2.47% $ 1,218,200 2.53%
Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase 272,624 4.82% 220,590 3.44%
Other Borrowed Funds 25,000 7.54% 20,131 10.83%
Total Int. Bearing
Liabilities $1,496,167 2.98% $ 1,458,921 2.78%
Other Liabilities &
Stockholders' Equity
(Net of Non-Interest
Earning Assets) 475,084 419,377
Total Liabilities &
Stockholders' Equity (Net
of Non-Interest
Earning Assets) $1,971,251 $ 1,878,298
Rate Spread 4.25% 4.17%
Net Yield on
Interest-Earning Assets
(Tax Equivalent Basis) 4.83% 4.60%
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
<TABLE>
<CAPTION>
ANALYSIS OF NET INTEREST INCOME
(unaudited)
NINE MONTHS ENDED
SEPTEMBER 30, 1994 SEPTEMBER 30, 1993
Average Average Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
(dollars in thousands)
Interest Earning Assets
Interest Earning Deposits $ 829 1.29% $ 608 2.65%
Taxable Securities 107,764 5.58% 37,461 5.75%
Non-Taxable Municipals 51,269 6.12% 20,242 7.33%
Mortgage-Backed Securities 663,776 5.53% 546,264 5.45%
Taxable Loans 1,002,109 8.26% 990,888 8.40%
Non-Taxable Loans 9,588 14.51% 13,628 14.55%
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell 12,346 3.76% 31,663 3.03%
Total Int. Earning Assets $ 1,847,681 7.06% $1,640,754 7.29%
Interest and Non-Interest
Bearing Liabilities Savings,
N.O.W and Money Market Deposits $ 873,139 2.05% $ 888,232 2.32%
Time Deposits 325,690 3.41% 352,972 3.66%
Total Savings &
Time Deposits $ 1,198,829 2.42% 1,241,204 2.70%
Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase 290,748 4.16% 139,966 3.49%
Other Borrowed Funds 23,003 8.66% 23,985 11.44%
Total Int. Bearing Liabilities $ 1,512,580 2.85% 1,405,155 2.93%
Other Liabilities and Stockholders'
Equity (Net of Non-Interest
Earning Assets) 456,595 375,446
Total Liabilities and Stockholders'
Equity (Net of Non-Interest
Earning Assets) $ 1,969,175 $ 1,780,601
Rate Spread 4.22% 4.36%
Net Yield on Interest-Earning Assets
(Tax Equivalent Basis) 4.73% 4.78%
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Non Interest Income
Non interest income declined $.2 million, or 4.0%, to $4.0 million
during the 1994 third quarter as compared to $4.2 million during the
comparable prior year period. The decline is primarily attributable
to a $.5 million decrease in income from mortgage banking operations,
due to higher mortgage interest rates and a corresponding decrease in
the level of refinancing activity, and a $.1 million decrease in other
operating income. These declines were partially offset by a $.5
million increase in service charges on deposit accounts resulting from
the growth in the Registrant's demand deposit base, increases in per
item charges and the introduction of new products and services.
Non Interest Expense
Non interest expense declined $3.5 million, or 20.2%, to $13.7
million during the 1994 third quarter when compared to $17.2 million
during the comparable prior year period. The decline is attributable
to a $3.6 million decrease in other real estate related expenses, a
$.2 million decrease in equipment expense, and a $.1 million decrease
in FDIC assessment. These improvements were partially offset by an
increase of $0.4 million 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 gains
improved to 49.2% for the 1994 third quarter as compared to 53.9% for
the 1993 third quarter. This improvement in the Registrant's core
efficiency ratio reflects management's continued emphasis on efficient
deployment of its resources.
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 36.4% for the third quarter
of 1994, as compared to 32.5% for the comparable prior year period.
The increase in the effective tax rate for the third quarter of 1994,
when compared to the comparable prior year period, is primarily
attributable to the Registrant's recognizing a decrease in its New
York State deferred tax valuation allowance during the third quarter
of 1993, resulting from tax charge-offs in excess of book. The
Registrant's effective tax rate for the nine months ended September
30, 1994, was 36.1% as compared 34.2% for the comparable prior year
period.
<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 in New York
and to a lesser extent in Westchester and Rockland Counties in 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 period indicated:
(in thousands)
September 30, December 31, September 30,
1994 1993 1993
Commercial, Financial &
Agricultural $ 233,214 $ 257,151 $ 254,304
Commercial Mortgages 296,946 292,157 289,429
Residential Mortgages 350,199 363,644 351,332
Construction 18,017 19,828 18,322
Land 39,129 37,160 40,179
Consumer 61,856 59,823 58,679
TOTAL $ 999,361 $ 1,029,763 $ 1,012,245
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
insubstance foreclosures, decreased to $50.3 million at September
30, 1994, as compared with $57.2 million at December 31, 1993 and
$77.6 million at September 30, 1993. Non-performing assets now
comprise 2.6% of total assets, as compared with 3.0% at December
31, 1993 and 4.0% at September 30, 1993. The components of
non-performing assets are delineated in the table below (in
thousands):
September 30, December 31, September 30,
1994 1993 1993
Loans 90 days past due &
still accruing $ 1,422 $ 1,811 $ 2,726
Non-accrual Loans 34,393 33,484 36,866
Non-performing Loans 35,815 35,295 39,592
Other Real Estate Owned 6,965 7,426 16,248
In-Substance Foreclosure 7,484 14,473 21,768
Non-performing assets 50,264 57,194 77,608
Restructured,
accruing loans $ 4,817 $ 15,237 $ 13,312
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Asset Quality (continued)
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 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 $.75 million for the 1994 third quarter, from $1.0 million
in the comparable prior year period. Net charge offs aggregated $3.9
million, or 1.56% of average net loans on an annualized basis, for the
1994 third quarter, as compared with $7.5 million, or 1.57% of average
net loans on an annualized basis, for the 1993 third quarter. The
allowance for loan losses at September 30, 1994 was $41.2 million, or
114.98% of non-performing loans, and 4.16% 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 September 30, 1993
was $49.0 million, or 123.9% of non-performing loans and 4.91% 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
September 30, 1994 adequate to cover the possible risk of loss in the
loan portfolio.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Asset Quality (continued)
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 borrowers to continue to comply with the present repayment
terms, aggregated $11.1 million at September 30, 1994.
Other real estate owned, which includes other real estate and in-substance
foreclosures, declined to $14.5 million at September 30, 1994 from $21.9
million at December 31, 1993, and $38.0 million at September 30, 1993.
Securities
The Registrant 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 intend and ability to hold to maturity and are stated at amortized
cost. At September 30, 1994, Securities Held to Maturity consisted of the
following:
Securities Held to Maturity
Gross Gross
Carrying Unrealized Unrealized Fair
Value Gains Losses Value
U.S. Treasury 26,531 0 9 26,522
U.S. Government Agency
Obligations 54,964 0 3,916 51,048
State and Municipal
Obligations 60,746 341 972 60,115
Mortgage-backed Securities 497,571 62 23,463 474,170
TOTAL $ 639,812 $ 403 $ 28,360 $ 611,855
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 September 30, 1994, Securities Available for Sale consisted of the
following:
Securities Available for Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Value Gains Losses Value
U.S. Treasury 39,905 - 574 39,331
Mortgage-backed Securities 147,951 5 5,628 142,328
Equity Securities 19,540 1,637 64 21,113
TOTAL $ 207,396 $ 1,642 $ 6,266 $ 202,772
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Securities (continued)
Consistent with SFAS 115, the net unrealized loss of $4.6 million
was reported as a $2.6 million separate component of stockholders'
equity, on a net of tax basis at September 30, 1994.
The Registrant's total mortgage-backed security holdings included in
both the available for sale and held to maturity portfolios was $645.5
million at September 30, 1994 with an aggregate fair market vlaue of
$616.5 million, or a net pre-tax unrealized loss of $29.0 million.
This compares to holdings of $665.5 million with a fair market value of
$667.6 million, at year end December 31, 1993. The decline in value is
the result of previously identified increases in market interest rates
throughout 1994. The securities holdings are principally fixed rate
and the value of these instruments moves in an inverse relationship to
interest rates.
The unrealized losses on these mortgage backe securities, exclusive
of its impact on equity pursuant to SFAS 115, will affect the results
of operations to the extent that the below market yields on the assets
create a potential for compression of net interest margin. The
liquidity of securities with unrealized losses will be limited, for
pledging purposes to the fair market value of the instruments.
<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 following table sets forth the Registrant's regulatory
capital as of September 30, 1994, under the rules applicable at
such date. At such date, the Registrant was in compliance with all
applicable regulatory requirements.
(dollars in thousands) Amount Ratio
Tier I Capital 163,347 15.29%
Regulatory Requirement 42,733 4.00%
Excess 120,614 11.29%
Total Risk Adjusted Capital $ 177,045 16.57%
Regulatory Requirement 85,466 8.00%
Excess 91,579 8.57%
Risk weighted assets $1,068,322
The Registrant's leverage ratio for the quarter ended September
30, 1994 was 8.32%. The Tier I, total risk based and leverage
capital ratios of North Fork Bank, the Registrant's primary banking
subsidiary, were 16.61%, 17.90%, and 8.99%, respectively, at
September 30, 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 on depository
institutions that do not meet minimum capital requirements. FDICIA
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Capital (continued)
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.
The Registrant and its banking subsidiary are considered well
capitalized.
Liquidity
Liquidity is defined as the Registrant's ability to generate
sufficient cash flows 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 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 had $45 million of retained earnings available for dividends
to the holding company as of September 30, 1994. On October 25, 1994,
the Bank's board of directors approved the distribution of a $5.2
million cash dividend to the Registrant to be used for general
corporate purposes.
The Registrant's bank subsidiary has numerous sources of liquidity
including loan and investment principal repayments and maturities,
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.
During 1994, the Registrant's bank subsidiary further enhanced its
borrowing capabilities by becoming a member of the Federal Home Loan
Bank ("FHLB") system. To become a member, the bank purchased $9.5
million of FHLB stock; as a member the Bank has the ability to borrow
$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 September 30, 1994, the Registrant's bank
subsidiary had $50 million in short-term advances outstanding.
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
sufficient liquidity to meet its operating requirements.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Other Matters
Metro Bancshares, Inc. Acquisitions
On November 10, 1994, the Registrant's shareholders approved the
acquisition of Metro Bancshares Inc. ("Metro"), the parent company of
Bayside Federal Savings Bank. Similarly, on this date, Metro
shareholders approved the merger of Metro into the Registrant.
Previously, the Registrant had received all of the required regulatory
approvals from the Federal Reserve Bank of New York, Federal Deposit
Insurance Corporation, New York State Banking Department and the office
of Thrift Supervision. The transaction will be treated as a tax free
reorganization and a pooling of interests. It is anticipated that the
closing will take place on November 30, 1994.
Based upon the exchange ratio formula contained in the merger
agreement, the Registrant will issue 1.645 common shares for each share
of Metro outstanding at the closing date. At September 30, 1994, Metro
had 5,080,504 common shares outstanding (which equates to 8,357,429
common shares of the Registrant based upon the exchange ratio of
1.645). Upon completion of the transaction, Bayside Federal Savings
Bank will be merged into the Registrant's bank subsidiary, North Fork
Bank.
The Registrant will reflect, in its fourth quarter results of
operations, a one-time charge related to merger expenses and
restructuring costs of approximately $13.2 million, after taxes.
The following table delineates a summary of selected financial
information of Metro as of September 30, 1994, its fiscal year end.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Other Matters (continued)
Metro Bancshares, Inc.
Summary Financial Highlights
(dollars in thousands, except per share amount)
For the fiscal year ended September 30, 1994 (Unaudited):
Net Interest Income 44,563
Provision for Loan Losses 525
Non-Interest Income 600
Non-Interest Expense 21,205
Income before provision for income taxes
and cumulative effect of accounting
change 23,433
Provision for Income Taxes 10,670
Income before cumulative effect of
accounting change 12,763
Cumulative effect of change in
accounting for Income Taxes 3,700
Net Income 16,463
Return on average assets (1) 1.27%
Return on average equity (1) 15.85%
Net Interest Margin 4.64%
(1) Does not reflect the impact of the cumulative change
in accounting for income taxes.
PER SHARE:
Income before cumulative change $ 2.35
Cumulative effect of change in accounting
for Income Taxes $ .68
Net Income $ 3.03
Book Value $16.68
Average equivalent shares outstanding 5,472,165
Actual shares outstanding 5,080,504
AT SEPTEMBER 30, 1994:
Loans, net of unearned income 793,799
Securities 134,152
Assets 975,735
Deposits 868,041
Stockholders' Equity 84,747
Total Risk Based Capital Ratio 14.94%
Leverage Ratio 7.65%
<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: November 14, 1994 /s/Daniel M. Healy
-------------------
Daniel M. Healy
Executive Vice President &
Chief Financial Officer
<PAGE>
Ex.11.1
EPS CALCULATION
<PAGE>
EXHIBIT 11
North Fork Bancorporation, Inc.
COMPUTATION OF NET INCOME PER COMMON EQUIVALENT SHARE
September 30, 1994
(Unaudited)
THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
Net Income $ 7,484,424 $ 3,870,904
Common Equivalent Shares:
Weighted average common shares outstanding 14,303,786 14,051,516
Weighted average common equivalent shares(a) 750,364 673,648
Weighted average common and common
equivalent shares 15,054,150 14,725,164
Income per common equivalent share $ 0.50 $ 0.26
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1994 1993
Net Income $ 19,071,484 $ 10,981,765
Common Equivalent Shares:
Weighted average common shares outstanding 14,208,171 13,608,866
Weighted average common equivalent shares(a) 728,656 636,898
Weighted average common and common
equivalent shares 14,936,827 14,245,764
Income per common equivalent share $ 1.28 $ 0.77
(a) consists of warrants and options
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q and is qualified in its entirity by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 64,290
<INT-BEARING-DEPOSITS> 585
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 202,772
<INVESTMENTS-CARRYING> 639,812
<INVESTMENTS-MARKET> 611,855
<LOANS> 999,361
<ALLOWANCE> 41,176
<TOTAL-ASSETS> 1,940,396
<DEPOSITS> 1,479,132
<SHORT-TERM> 250,217
<LIABILITIES-OTHER> 2,114
<LONG-TERM> 25,000
<COMMON> 35,874
0
0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 1,940,396
<INTEREST-LOAN> 62,588
<INTEREST-INVEST> 95,906
<INTEREST-OTHER> 355
<INTEREST-TOTAL> 96,261
<INTEREST-DEPOSIT> 21,685
<INTEREST-EXPENSE> 32,220
<INTEREST-INCOME-NET> 64,041
<LOAN-LOSSES> 2,500
<SECURITIES-GAINS> (54)
<EXPENSE-OTHER> 44,037
<INCOME-PRETAX> 29,838
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,072
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2,114
<LOANS-NON> 34,393
<LOANS-PAST> 1,422
<LOANS-TROUBLED> 4,817
<LOANS-PROBLEM> 11,100
<ALLOWANCE-OPEN> 46,625
<CHARGE-OFFS> 10,567
<RECOVERIES> 2,617
<ALLOWANCE-CLOSE> 41,175
<ALLOWANCE-DOMESTIC> 41,175
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
