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: June 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 7/26/94
$2.50 Par Value 14,277,038
<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
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's Annual Meeting of Stockholders was
held on April 26, 1994.
(b) At the Annual Meeting the following Nominees were
Elected to the Registrant's Board of Directors for a
period of three years:
FOR WITHHELD
Allan C. Dickerson 11,486,286 126,073
Lloyd A. Gerard 11,515,496 96,863
John Adam Kanas 11,498,247 114,112
<PAGE>
PART II. OTHER INFORMATION (continued)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(continued)
The following sets forth the names of those directors
whose term of office continued after the Registrants
annual meeting:
James F. Reeve
George H. Rowson
Raymond W. Terry, Jr.
John Bohlsen
Malcom J. Delaney
James H. Rich, Jr.
(c) The following matter was also voted upon at the
Registrants annual meeting:
1) The Registrant's Stockholders approved with 10,228,919
affirmative votes cast, 1,235,412 negative votes cast and 148,028
votes abstaining, the Registrant's 1994 Key Employee Stock Plan
(the "Plan"). The Plan is intended to replace the Registrant's
existing compensatory stock plans. Virtually all of the shares
authorized for issuance to management and other key employees under
these existing plans have either been issued or are subject to
outstanding but unexercised options. The Plan authorizes the
issuance of nonqualified stock options, incentive stock options and
restricted shares of common stock. The total number of shares
authorized for issuance under the Plan is 700,000 (subject to
adjustments) which can be divided up in any fashion among
nonqualified stock options, incentive stock options and restricted
stock, provided that no more than 200,000 of such shares may be
issued as restricted stock. No individual may receive under the
Plan in any one year options grants for more than 150,000 shares.
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 April 29, 1994.
Current Reports on Form 8-K: dated June 27, 1994.
Current Reports on Form 8-K: dated July 22, 1994.
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share amounts)
<CAPTION>
June 30, December 31, June 30,
1994 1993 1993
<S> <C> <C> <C>
ASSETS (unaudited)
(unaudited)
Cash & Due from Banks $ 71,241 $ 75,070 $ 75,355
Interest Earning Deposits 512 290 289
Federal Funds Sold and Securities
Purchased under Agreements
to Resell 40,000 - 27,150
Securities Held to Maturity 649,280 548,497 501,126
Securities Available for Sale(Market
Value of $201,489 at December 31,
1993 and $185,779 at June 30, 1993) 206,310 200,219 172,679
Loans: 1,022,225 1,029,763 1,007,677
Less:Unearned Income & Fees 11,139 12,679 14,396
Allowance for Loan Losses 44,353 46,625 55,538
Net Loans 966,733 970,459 937,743
Premises & Equipment, Net 32,299 33,277 34,304
Accrued Income Receivable 13,500 11,924 11,593
Other Real Estate 14,039 21,899 48,709
Other Assets 17,485 12,955 16,579
Excess of Cost over Fair Value
of Net Assets Acquired 8,939 9,291 9,642
Total Assets $ 2,020,338 $ 1,883,881 $ 1,835,169
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits $ 270,494 $ 257,447 $ 238,338
Savings, N.O.W. & Money Market
Deposits 868,078 866,808 878,272
Certificates of Deposits in Amounts
of $100,000 & Over 35,925 32,297 28,914
Other Time Deposits 269,024 285,718 311,635
Total Deposits 1,443,521 1,442,270 1,457,159
Federal Funds Purchased & Securities
Sold Under Agreements to Repurchase 324,285 255,643 173,440
Federal Home Loan Bank Advances 30,000 - -
Senior Note Payable 25,000 20,000 20,000
Mortgage Notes Payable - - 167
Accrued Taxes, Interest & Other
Expenses 10,877 9,439 7,016
Other Liabilities 3,435 2,057 5,302
Dividends Payable 1,069 - -
Purchased Security Liabilities 19,800 - 26,278
Total Liabilities $ 1,857,987 $ 1,729,409 $ 1,689,362
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 14,248,799,
14,109,554, and 14,036,336 shares
at the periods ending, respectively 35,622 35,274 35,091
Additional Paid-in Capital 95,259 94,487 94,077
Retained Earnings 34,594 25,140 17,154
Less:
Unrealized (Loss) on Securities
Available for Sale, Net of Taxes (2,715) - -
Restricted Stock Awards (402) (428) (465)
Treasury Stock, at cost: 487, 73,
and 4,986 shares at the periods
ending, respectively (7) (1) (50)
Total Stockholders' Equity 162,351 154,472 145,807
Total Liabilities and
Stockholders' Equity $ 2,020,338 $ 1,883,881 $ 1,835,169
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
1994 1993 1994 1993
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans (including fee income) $ 21,144 $ 20,992 $ 41,451 $ 42,733
Mortgage-Backed Securities 9,211 7,541 17,719 13,870
U.S. Treasury & Government
Agency Securities 1,485 452 2,253 897
State & Municipal Obligations 516 217 931 460
Other Securities 211 28 238 59
Federal Funds Sold and Securities
Purchased under Agreements to Resell 135 244 262 520
Interest Earning Deposits 2 8 4 10
Total Interest Income 32,704 29,482 62,858 58,549
INTEREST EXPENSE
Savings, NOW & Money
Market Deposits 4,414 5,202 8,830 10,654
Certificates of Deposit, $100,000
and Over 344 297 716 545
Other Time Deposits 2,294 2,895 4,673 6,144
Federal Funds Purchased &
Securities Sold Under Agreements
to Repurchase 3,126 1,256 5,519 1,744
Federal Home Loan Bank Advances 213 - 213 -
Other Borrowings 487 584 1,015 1,503
Total Interest Expense 10,878 10,234 20,966 20,590
Net Interest Income 21,826 19,248 41,892 37,959
Provision for Loan Losses 750 2,000 1,750 4,500
Net Interest Income after
Provision for Loan Losses 21,076 17,248 40,142 33,459
NON-INTEREST INCOME
Service Charges on Deposit
Accounts 2,364 1,857 4,592 3,644
Trust Income 416 388 850 810
Mortgage Banking Operations 469 1,137 1,068 2,042
Other Operating Income 726 843 1,816 2,101
Net Securities (Loss)/Gains 23 42 (54) 1,391
Total Non-Interest Income 3,998 4,267 8,272 9,988
NON-INTEREST EXPENSE
Salaries & Benefits 6,242 5,833 12,471 11,817
Net Occupancy 1,204 1,278 2,469 2,539
Equipment 982 1,250 1,962 2,525
Other Real Estate 1,717 3,361 3,739 6,401
FDIC Assessment 904 960 1,807 1,921
Prepayment Charge Senior Note
Retirement 876 - 876 -
Amortization of Excess of Cost Over
Fair Value of Net Assets Acquired 176 176 352 352
Other Operating Expenses 3,399 3,527 6,667 6,946
Total Non-Interest Expenses 15,500 16,385 30,343 32,501
Income Before Provision for Income
Taxes 9,574 5,131 18,071 10,946
Provision for Income Taxes 3,500 1,608 6,484 3,835
Net Income $ 6,074 $ 3,523 $ 11,587 $ 7,111
Earnings and Dividends Per Share:
Net Income $ 0.41 $ 0.24 $ 0.78 $ 0.51
Cash Dividends $ 0.075 - $ 0.150 -
Weighted Average Common and Equivalent
Shares Outstanding 14,960,262 14,686,678 14,904,035 14,016,007
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30,
(dollars in thousands)
<CAPTION>
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 11,587 $ 7,111
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Loan Losses 1,750 4,500
Depreciation and Amortization of Premises & Equipment 2,298 3,100
Provision for Losses on Real Estate Acquired in
Settlement of Loans 2,386 3,808
Amortization of Excess of Cost Over Fair Value of Net
Assets Acquired 352 352
Accretion of Discounts and Net Deferred Loan Fees (656) (350)
Amortization of Premiums 4,815 3,570
Net (Gains)\Losses on Securities Transactions 54 (1,391)
Other, Net (1,548) 98
Net Cash Provided by Operating Activities 21,038 20,798
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Securities Held to Maturity - 1,628
Proceeds from Sales of Securities Available For Sale 64,739 56,541
Maturities, Calls and Principal Repayments on
Securities Held to Maturity 103,372 66,427
Purchases of Securities Held to Maturity (234,886) (226,598)
Maturities and Principal Repayments on
Securities Available for Sale 35,315 13,895
Purchases of Securities Available for Sale (65,041) (119,588)
Loans Originated and Principal Repayments on Loans
and Other Real Estate Owned, Net (17,086) 6,049
Proceeds from Sales of Loans 20,369 40,339
Proceeds from Sales of Real Estate Acquired in
Settlements of Loans 4,640 7,213
Purchases of Premises and Equipment, Net (959) (1,181)
Net Cash Used in Investing Activities (89,537) (155,275)
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR SIX MONTHS ENDED JUNE 30,
<CAPTION>
1994 1993
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase\(Decrease) in Deposits $ 1,252 $ (42,775)
Net Increase in Short-Term Borrowings 68,641 145,240
Net Increase in Federal Home Loan Bank Advances 30,000 -
Proceeds from the Issuance of Senior Note Payable 25,000 -
Repayments of Senior Note Payable (20,000) (20,007)
Common Stock Sold for Cash 1,077 18,659
Purchase of Treasury Shares (15) -
Dividends Paid on Common Stock (1,065) -
Net Cash Provided by Financing Activities 104,890 101,117
Net Increase\(Decrease) in Cash and Cash Equivalents 36,393 (33,360)
Cash and Cash Equivalents at Beginning of Year 75,360 136,154
Cash and Cash Equivalents at End of Period 111,753 102,794
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Period for:
Interest Expense $ 20,219 $ 20,939
Income Taxes $ 5,785 $2,561
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Real Estate Acquired in Settlement of Loans and
In-Substance Foreclosures $ 169 $12,985
Securities Transferred to Securities
Available for Sale $ 47,005 $ -
During the period the Registrant purchased
various investment securities which settled
in July $ 19,800 $26,279
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (unaudited)
(dollars in thousands)
<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) (675) (29) 119,823
Net Income - - 7,111 - - - 7,111
Sale of Common Stock
(1,568,813 shares) 3,922 10,857 - - - - 14,779
Exercise of Warrants
(621,975 shares) 1,555 2,335 - - - - 3,890
Amortization of Deferred
Compensation re: Restricted
Stock Awards - - - - 167 - 167
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) - - - - - (10) (10)
Net Change in Unrealized
Depreciation on Certain
Marketable Equity
Securities - - - 25 - - 25
Bal. 6/30/93 $ 35,091 94,077 17,154 0 (465) (50) 145,807
</TABLE>
<TABLE>
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>
Bal. 12/31/93 $ 35,274 94,487 25,140 - (428) (1) 154,472
Net Income - - 11,587 - - - 11,587
Cash Dividends Declared
($0.15 per share) - - (2,133) - - - (2,133)
Sale of Common Stock
(65,245 shares) 163 577 - - - - 740
Exercise of Warrants
(69,000 shares) 172 152 - - - - 324
Amortization of Deferred
Compensation re: Restricted
Stock Awards - - - - 115 - 115
Removal of Restrictions
Accelerated re:
Restricted Stock Awards
(1,000 shares) - - - - 4 - 4
Restricted Stock Awards
(10,000 shares) 13 55 - - (122) 67 13
Forfeiture of Restricted
Stock Awards
(4,334 shares) - (12) - - 29 (58) (41)
Purchase of Treasury Stock
(1,080 shares) - - - - - (15) (15)
Net Change in Fair Value
of Securities Available for
Sale, Net of Taxes - - - (2,715) - - (2,715)
Bal. 6/30/94 $ 35,622 95,259 34,594 (2,715) (402) (7) 162,351
</TABLE>
<PAGE>
North Fork Bancorporation, Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
June 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 are incorporated herein by reference.
Results of operations for the quarter and six months ended June 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 June 30, 1993, the Registrant
carried these securities at the lower of cost or market.
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")
SFAS 114 addresses the accounting by creditors for impairment of
certain loans. SFAS 114 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 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.
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 $6.1 million, or $.41 per share, for the quarter ended June
30, 1994, as compared with net income, of $3.5 million, or $.24 per
share, for the comparable prior year period. Per share results are
based on weighted average common and equivalent shares outstanding of
14,960,262 and 14,686,678 for the quarters ended June 30, 1994 and 1993,
respectively.
The increase in the Registrant's 1994 second quarter earnings, when
compared with the prior year period, is primarily attributable to a $2.6
million increase in net interest income, a $1.3 million decrease in the
provision for loan losses, and a $.9 million decrease in non-interest
expense, partially offset by a $.3 million decrease in non-interest
income. Included in the Registrant's second quarter 1994 results, was
a nonrecurring charge of $.9 million, or $.03 per share (after taxes),
associated with the early retirement of the Registrant's $20 million,
10.08% Senior Note due March 1995.
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 13.8%, to $22.3 million for the 1994 second quarter, as
compared to $19.6 million for the comparable prior year period. The
components of this increase include a $3.3 million increase in interest
income, on a fully taxable equivalent basis, partially offset by a $.6
million increase in interest expense.
Average interest earning assets increased $217.4 million, or 13.2%, to
$1.87 billion for the second quarter of 1994, as compared to $1.65
billion for the comparable prior year period. Average interest bearing
liabilities increased $138.2 million, or 9.9%, to $1.54 billion for the
second quarter of 1994, as compared to $1.4 billion for the comparable
prior year period. Average Demand Deposit balances increased $42.9
million, or 19%, to $268.4 million for the second quarter of 1994, as
compared to $225.5 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 existing steepness in the yield curve,
and enhance operating results. Utilizing funds obtained through short-
term repurchase agreements, the Registrant invests primarily in agency
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Interest Income (continued)
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 original weighted average lives 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. The
estimated market value of these off-balance sheet items exceeded
the carrying value by approximately $0.6 million at June 30, 1994.
The interest rate swap, cap and floor agreements outstanding as of
June 30, 1994 mature in September and December of 1995,
respectively.
Interest income, on a fully taxable equivalent basis, increased
$3.3 million to $33.1 million for the 1994 second quarter, from
$29.8 million for the comparable prior year period, while the yield
on earning assets, on a tax equivalent basis, declined to 7.12% for
the 1994 second quarter from 7.25% 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 six 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 $1.7
million to $9.2 million for the second quarter of 1994 as compared
to $7.5 million for the comparable prior year period. Of this
increase, $1.3 million is due to an increase in average mortgage-
backed securities of $92 million, or 16.2%, to $659.3 million in
the second quarter of 1994 as compared to $567.3 million in the
comparable prior year period, while $.4 million of the increase is
due to an increase in the yield on mortgage-backed securities to
5.60% during the second quarter of 1994 as compared to 5.33% during
the comparable prior year period. The yield increase is the result
of higher market interest rates and a corresponding slowdown of
prepayments on premium securities contained in the portfolio.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Interest Income (continued)
Interest earned on the Registrant's taxable securities increased
$1.2 million to $1.7 million in the second quarter of 1994 when
compared to $.5 million in the comparable prior year period. Average
taxable securities increased $86.6 million or 243.3% to $122.2 million
for the second quarter of 1994 as compared to $35.6 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. This growth increased interest
income by $1.2 million, on a fully taxable equivalent basis. Interest
earned on the Registrant's loan portfolio, on a fully taxable
equivalent basis, of $21.3 million during the second quarter of 1994,
remained virtually unchanged as compared to $21.2 million during the
comparable period of the prior year.
Interest expense increased $0.7 million to $10.9 million for the
1994 second quarter, an effective cost of funds of 2.84%, as compared
with $10.2 million, or an effective cost of funds of 2.93%, for the
comparable prior year period.
Interest incurred on short-term borrowings increased $2.1 million
to $3.3 million in the second quarter of 1994 as compared to $1.2
million during the comparable prior year period. The average balance
of short-term borrowings increased $172.7 million to $323.5 million
for the second quarter of 1994, as compared to $150.8 million during
the comparable prior year period. Of the $2.1 million increase in
interest incurred on short-term borrowings, $1.7 million is
attributable to the growth in average short-term borrowings, and $.4
million is due to the effects of higher market interest rates.
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 other time deposits declined $.6 million to
$2.6 million in the second quarter of 1994 as compared to $3.2 million
during the comparable prior year period. The average balance of time
deposits has declined $37.3 million, or 10.5%, from the comparable
prior year period levels. The average balance of savings, N.O.W., and
money market accounts during the second quarter of 1994 aggregated
$873.7 million and remained virtually unchanged as compared to $874.8
million for the comparable prior year period. Conversely, average
demand deposits increased $42.8 million for the second 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
savings bank subsidiary to a full service commercial bank and the
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Net Interest Income (continued)
Registrant's continued efforts to expand its small and medium sized
commercial client base. Demand deposits comprised 18.7% of total deposits at
June 30, 1994, as compared to 16.4% for the comparable period of the prior
year. The increase in interest expense was partially offset by a $0.9
million decline in the Registrant's overall cost of funds. This decline is
attributable to a $1.0 decrease in the Registrant's core deposit funding cost
and a reduction in its other borrowing cost resulting from the refinancing of
its Senior Note Payable, partially offset by the impact the rise in market
interest rates have had on its short-term borrowings.
During the quarter the Registrant retired, prior to maturity, its $20
million, 10.08% Senior Note due March 1995 through the proceeds received from
the issuance of a $25 million, 7.56% Senior Note due April 1999, positively
impacting the Registrant's cost of funds.
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.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 1994 OVER JUNE 30, 1993
(dollars in thousands) Changes Due To Net
Volume Rate Change
<S> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Deposits $ 1 (7) (6)
Taxable Securities 1,231 ( 23) 1,208
Non-Taxable State and Municipal
Obligations* 634 (152) 482
Mortgage-Backed Securities 1,270 400 1,670
Taxable Loans including Non-accrual Loans 445 (145) 300
Non-Taxable Loans* (164) ( 65) (229)
Federal Funds Sold (177) 69 (108)
Total Interest Earning Assets 3,240 77 3,317
INTEREST BEARING LIABILITIES
Savings, NOW, & Money Market Deposits (6) (781) (787)
Other Time Deposits (322) (233) (555)
Short-Term Borrowings 1,723 359 2,082
Other Borrowings 97 (194) (97)
Total Interest Bearing Liabilities 1,493 (849) 644
Net Change in Net Interest Income* 1,747 926 2,673
</TABLE>
* Taxable equivalent basis.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1994 OVER JUNE 30, 1993
(dollars in thousands)
Changes Due To Net
Volume Rate Change
<S> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Deposits $ 2 ( 8) (6)
Taxable Securities 1,544 (25) 1,518
Non-Taxable State and Municipal
Obligations* 1,092 (326) 766
Mortgage-Backed Securities 4,530 (682) 3,848
Taxable Loans including Non-accrual Loans 310 (1,361) (1,051)
Non-Taxable Loans* (291) (58) (349)
Federal Funds Sold (337) 79 (258)
Total Interest Earning Assets 6,850 (2,381) 4,469
INTEREST BEARING LIABILITIES
Savings, NOW, & Money Market Deposits (220) (1,603) (1,823)
Other Time Deposits (620) (681) (1,301)
Short-Term Borrowings 3,828 159 3,987
Other Borrowings (209) (278) (487)
Total Interest Bearing Liabilities 2,779 (2,403) 376
Net Change in Net Interest Income* 4,071 ( 22) 4,093
</TABLE>
* 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 4.78% in the 1994 second quarter, as compared with
4.76% for the comparable prior year period.
The Registrant's net interest margin on a tax equivalent basis decreased to
4.68%, for the six months ended June 30, 1994, as compared with 4.88% for the
comparable prior year period.
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 six month periods ended June 30, 1994 and 1993, respectively:
<TABLE>
ANALYSIS OF NET INTEREST INCOME
<CAPTION>
(unaudited) THREE MONTHS ENDED
JUNE 30, 1994 JUNE 30, 1993
Average Average Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
(dollars in thousands)
Interest Earning Assets
Interest Earning Deposits $ 1,561 0.60% $ 1,191 2.64%
Taxable Securities 122,247 5.70% 35,612 5.94%
Non-Taxable Municipals 55,045 5.83% 13,988 9.13%
Mortgage-Backed Securities 659,270 5.60% 567,325 5.33%
Taxable Loans 1,007,802 8.33% 986,450 8.39%
Non-Taxable Loans 9,273 13.89% 13,807 15.97%
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell 13,240 4.09% 32,593 3.00%
Total Int. Earning Assets $1,868,438 7.12% $ 1,650,966 7.25%
Interest and Non-Interest
Bearing Liabilities Savings,
N.O.W and Money Market
Deposits $ 873,714 2.03% $ 874,784 2.38%
Time Deposits 316,659 3.34% 353,950 3.62%
Total Savings &
Time Deposits $1,190,373 2.38% $ 1,228,734 2.74%
Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase 323,520 4.14% 150,784 3.34%
Other Borrowed Funds 23,956 8.16% 20,169 11.62%
Total Int. Bearing
Liabilities $1,537,849 2.84% $ 1,399,687 2.93%
Other Liabilities &
Stockholders' Equity
(Net of Non-Interest
Earning Assets) 330,589 251,279
Total Liabilities &
Stockholders' Equity (Net
of Non-Interest
Earning Assets) $1,868,438 $ 1,650,966
Rate Spread 4.28% 4.32%
Net Yield on
Interest-Earning Assets
(Tax Equivalent Basis) 4.78% 4.76%
</TABLE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
<TABLE>
ANALYSIS OF NET INTEREST INCOME
(unaudited)
SIX MONTHS ENDED
JUNE 30, 1994 JUNE 30, 1993
Average Average Average Average
Balance Rate Balance Rate
<S> <C> <C> <C> <C>
(dollars in thousands)
Interest Earning Assets
Interest Earning Deposits $ 1,012 0.78% $ 770 2.56%
Taxable Securities 91,114 5.69% 36,443 5.83%
Non-Taxable Municipals 50,594 5.74% 14,994 9.07%
Mortgage-Backed Securities 667,532 5.35% 497,874 5.62%
Taxable Loans 1,006,775 8.22% 999,361 8.49%
Non-Taxable Loans 9,880 14.07% 14,014 14.94%
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell 14,771 3.58% 34,444 3.04%
Total Int. Earning Assets $ 1,841,678 6.98% $1,597,899 7.48%
Interest and Non-Interest
Bearing Liabilities Savings,
N.O.W and Money Market Deposits $ 874,157 2.04% $ 892,924 2.41%
Time Deposits 324,817 3.35% 359,972 3.75%
Total Savings &
Time Deposits $ 1,198,974 2.39% 1,252,896 2.79%
Federal Funds Purchased
and Securities Sold Under
Agreements to Repurchase 299,960 3.85% 98,986 3.55%
Other Borrowed Funds 21,989 9.31% 25,944 11.68%
Total Int. Bearing Liabilities $ 1,520,923 2.78% 1,377,826 3.01%
Other Liabilities and Stockholders'
Equity (Net of Non-Interest
Earning Assets) 320,755 220,073
Total Liabilities and Stockholders'
Equity (Net of Non-Interest
Earning Assets) $ 1,841,678 $ 1,597,899
Rate Spread 4.20% 4.47%
Net Yield on Interest-Earning Assets
(Tax Equivalent Basis) 4.68% 4.88%
</TABLE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Non Interest Income
Non interest income declined $.3 million, or 6.3%, to $4.0 million
during the 1994 second quarter as compared to $4.3 million during the
comparable prior year period. The decline is primarily attributable
to a $.7 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 $.9 million, or 5.5%, to $15.5 million
during the 1994 second quarter when compared to $16.4 million during
the comparable prior year period. The decline is attributable to a
$1.7 million decrease in other real estate related expenses, a $.3
million decrease in occupancy and equipment expense, and a $.2 million
decrease in recurring other operating expenses. These improvements
were partially offset by a $0.9 million nonrecurring charge associated
with the early retirement of the Registrant's $20.0 million, 10.08%,
Senior Note and 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 second quarter as compared to 54.7% for
the 1993 second 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 36.56% for the second
quarter of 1994, as compared to 31.34% for the comparable prior year
period. The increase in the effective tax rate for the second 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 second
quarter of 1993, resulting from tax charge-offs in excess of book.
The Registrant's effective tax rate for the six months ended June 30,
1994, was 35.88% as compared 35.04% for the comparable prior year
period.
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)
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1994 1993 1993
<S> <C> <C> <C>
Commercial, Financial &
Agricultural $ 240,256 $ 257,151 $ 260,356
Commercial Mortgages 295,253 292,157 285,852
Residential Mortgages 362,043 363,644 337,582
Construction 19,817 19,828 23,789
Land 40,608 37,160 41,497
Consumer 64,248 59,823 58,601
TOTAL $ 1,022,225 $ 1,029,763 $ 1,007,677
</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
insubstance foreclosures, decreased to $46.6 million at June 30,
1994, as compared with $57.2 million at December 31, 1993 and
$97.1 million at June 30, 1993. Non-performing assets now comprise
2.31% of total assets, as compared with 3.04% at December 31, 1993
and 5.29% at June 30, 1993. The components of non-performing
assets are delineated in the table below (in thousands):
<TABLE>
<CAPTION>
June 30, December 31, June 30,
1994 1993 1993
<S> <C> <C> <C>
Loans 90 days past due &
still accruing $ 1,933 $ 1,811 $ 2,114
Non-accrual Loans 30,671 33,484 46,298
Non-performing Loans 32,604 35,295 48,412
Other Real Estate Owned 5,661 7,426 12,741
In-Substance Foreclosure 8,378 14,473 35,968
Non-performing assets 46,643 57,194 97,121
Restructured,
accruing loans $ 10,727 $ 15,237 $ 16,090
</TABLE>
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 second quarter, from $2.0
million in the comparable prior year period. Net charge offs
aggregated $2.0 million, or 0.8% of average net loans on an
annualized basis, for the 1994 second quarter, as compared with
$3.4 million, or 1.60% of average net loans on an annualized basis,
for the 1993 second quarter. The allowance for loan losses at June
30, 1994 was $44.4 million, or 136.04% of non-performing loans, and
4.39% 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 June 30, 1993 was $55.5 million, or
114.72% of non-performing loans and 5.59% 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
June 30, 1994 adequate to cover the possible risk of loss in the
loan portfolio.
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 $24 million at June 30, 1994.
Other real estate owned, which includes other real estate and
in-substance foreclosures, declined to $14.0 million at June 30,
1994 from $21.9 million at December 31, 1993, and $48.7 million at
June 30, 1993.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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 June 30, 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 26,684 2 8 26,678
U.S. Government Agency
Obligations 55,151 0 3,085 52,066
State and Municipal
Obligations 50,698 361 664 50,395
Mortgage-backed Securities 516,747 107 19,284 497,570
TOTAL $ 649,280 $ 470 $ 23,041 $ 626,709
</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 June 30, 1994, Securities Available
for Sale consisted of the following:
<TABLE>
<CAPTION>
Securities Available for Sale
Gross Gross
Amortized Unrealized Unrealized Fair
Value Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury 39,889 - 495 39,394
Mortgage-backed Securities 156,244 - 4,553 151,691
Equity Securities 14,916 394 85 15,225
TOTAL $ 211,049 $ 394 $ 5,133 $ 206,310
</TABLE>
Consistent with SFAS 115, the net unrealized loss of $4.7 million
was reported as a $2.7 million separate component of stockholders'
equity, on a net of tax basis at June 30, 1994.
The value of the Registrant's Fixed Income securities portfolio is
directly impacted by changes in market interest rates.
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 June 30, 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 156,050 14.21%
Regulatory Requirement 43,928 4.00%
Excess 112,122 10.21%
Total Risk Adjusted Capital $ 170,156 15.49%
Regulatory Requirement 87,856 8.00%
Excess 82,300 7.49%
Risk weighted assets $1,098,203
</TABLE>
The Registrant's leverage ratio for the quarter ended June 30,
1994 was 7.89%. The Tier I, total risk based and leverage capital
ratios of North Fork Bank, the Registrant's primary banking
subsidiary, were 15.35%, 16.64%, and 8.48%, respectively, at June
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
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 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 has $37 million of retained earnings available for dividends
to the holding company as of June 30, 1994.
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 June 30, 1994, the Registrant's bank
subsidiary has borrowed $30 million for ninety days due August 4, 1994,
at an interest rate of 4.56%.
On April 21, 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
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity (continued)
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
sufficient liquidity to meet its operating requirements.
Other Matters
On June 27, 1994, the Registrant entered into an Agreement and
Plan of Merger with Metro Bancshares, Inc. ("Metro"), whereby the
Registrant would acquire Metro in a stock for stock exchange valued
at approximately $142 million.
Under the agreement, each share of Metro common stock will be
exchanged for a minimum of 1.645 shares (except as otherwise noted
below) or a maximum of 1.759 shares of the Registrant's. The
actual exchange ratio will, within this range, depend upon the
average closing share price of the Registrant in the 20 trading
days ending on the fifth business day prior to the date on which
the last of all required regulatory approvals for the transaction
are received. If the average closing price of the Registrant
during this period is between $14.50 and $15.50, each share of
Metro common stock will be converted into the number of the
Registrant's shares equal to $25.50 divided by such average closing
price. The agreement permits Metro to terminate the transaction if
the average closing price of the Registrant's shares during that
period falls below $12.50 unless the Registrant elects to increase
the exchange ratio so that the number of shares of the Registrant's
stock issued foreach share of Metro common stock has a value (at
such average closing price) of $21.99. The Registrant also
received an option to acquire up to 9.9% of Metro's outstanding
shares at a price of $21 per share should certain events occur as
defined in the Stock Option Agreement.
Metro, the parent company of Bayside Federal Savings Bank, has
total assets of $1 billion, deposits of $.9 billion and
stockholders' equity of $80.6 million. It operates thirteen
banking offices in Queens, Nassau and Suffolk counties of New York.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Other Matters (continued)
The purchase price is 171% of fully diluted book value and 207%
of tangible book value. The transaction will be treated as a tax
free reorganization and a pooling of interests. It is subject to
approval by the regulatory agencies, shareholders of both
companies, certain other customary closing conditions, and a 30 day
period for Metro to finalize due diligence. Metro has completed
its due diligence and has determined to proceed with the merger.
Upon completion of the transaction, which is expected in the
fourth quarter of 1994, Bayside Federal Savings Bank will be merged
into the Registrant's bank subsidiary, North Fork Bank.
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: July 27, 1994 /s/Daniel M. Healy
-------------------
Daniel M. Healy
Executive Vice President &
Chief Financial Officer
Ex.11.1
EPS CALCULATION
EXHIBIT 11
North Fork Bancorporation, Inc.
COMPUTATION OF NET INCOME PER COMMON EQUIVALENT SHARE
June 30, 1994
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993
<S> <C> <C>
Net Income $ 6,074,246 $ 3,522,069
Common Equivalent Shares:
Weighted average common shares outstanding 14,201,816 14,018,037
Weighted average common equivalent shares(a) 758,446 668,641
Weighted average common and common
equivalent shares 14,960,262 14,686,678
Income per common equivalent share $ 0.41 $ 0.24
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, JUNE 30,
1994 1993
<S> <C> <C>
Net Income $ 11,587,060 $ 7,110,861
Common Equivalent Shares:
Weighted average common shares outstanding 14,159,571 13,383,872
Weighted average common equivalent shares(a) 744,464 632,135
Weighted average common and common
equivalent shares 14,904,035 14,016,007
Income per common equivalent share $ 0.78 $ 0.51
</TABLE>
(a) consists of warrants and options
