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, 1995
NORTH FORK BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-315460
(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 11/13/95
$2.50 Par Value 24,817,564
<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.
<PAGE>
PART II. OTHER INFORMATION (continued)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are submitted herewith:
(a) Exhibit # Description
(11) Statement Re: Computation of per share earnings.
(27) Financial Data Schedule
(b) Current Reports on Form 8-K: dated September 19, 1995
Current Reports on Form 8-K: dated September 29,1995
<PAGE>
<TABLE>
Consolidated Balance Sheets
(in thousands, except per share amounts)
Sept. 30, 1995 Dec.31, 1994 Sept. 30, 1994
(unaudited) (unaudited)
<S> <C> <C> <C>
Assets
Cash & Due from Banks $100,625 $67,168 $75,502
Interest Earning Deposits 1,153 748 585
Federal Funds Sold & Securities
Purchased under Agreements to
Resell 8,000 - 8,275
Securities:
Held-to-Maturity 546,355 631,492 639,812
Available-for-Sale 463,081 141,805 333,057
Total Securities 1,009,436 773,297 972,869
Loans 1,938,259 1,831,466 1,810,381
Less: Unearned Income & Fees 18,251 17,429 18,177
Allowance for Loan Losses 51,222 50,069 50,643
Net Loans 1,868,786 1,763,968 1,741,561
Premises & Equipment, Net 42,699 39,168 39,083
Accrued Income Receivable 20,503 19,315 19,489
Other Real Estate 2,500 4,861 5,841
Other Assets 24,437 27,043 26,243
Excess of Cost over Fair
Value of Net Assets Acquired 26,896 22,208 22,576
Total Assets $3,105,035 $2,717,776 $2,912,024
Liabilities and
Stockholders' Equity
Demand Deposits $404,002 $331,245 $312,152
Savings, N.O.W. &
Money Market Deposits 1,149,825 1,325,628 1,361,908
Certificates of Deposits
in Amounts of $100,000 & Over 165,987 71,978 74,141
Other Time Deposits 784,305 614,036 598,972
Total Deposits 2,504,119 2,342,887 2,347,173
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase 175,938 20,000 201,614
Other Borrowings 10,000 50,000 60,257
Senior Notes Payable 25,000 25,000 25,000
Accrued Interest &
Other Expenses 23,798 19,770 14,266
Purchased Securities Liability 58,421 - 2,108
Other Liabilities 8,567 5,196 9,646
Total Liabilities $2,805,843 $2,462,853 $2,660,064
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
24,843,436, 23,049,187,
22,706,849 shares at the
periods ending, respectively 62,109 57,623 56,767
Additional Paid in Capital 101,713 94,526 93,270
Retained Earnings 134,948 106,186 107,521
Unrealized Gain/( Loss) on
Securities Available-for-Sale,
net of taxes 2,085 (2,871) (4,969)
Deferred Compensation (1,029) (514) (611)
Treasury Stock at cost; 36,024,
1,945, 1,253 shares at the
periods ending, respectively (634) (27) (18)
Total Stockholders' Equity 299,192 254,923 251,960
Total Liabilities and
Stockholders' Equity $3,105,035 $2,717,776 $2,912,024
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Income (Unaudited)
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
<S> <C> <C> <C> <C>
Sept.30, 1995 Sept.30, 1994 Sept.30, 1995 Sept.30, 1994
(in thousands, except per share amounts)
Interest Income
Loans (including fee income) $43,805 $37,391 $127,044 $109,302
Interest Earning Deposits 23 4 77 8
Federal Funds Sold & Securities Purchased
Under Agreements to Resell 212 551 755 1,572
Mortgage-Backed Securities 10,583 10,928 29,389 31,282
U.S. Treasury & Government
Agency Securities 1,771 2,484 4,156 7,041
State & Municipal Obligations 498 619 1,839 1,608
Other Securities 420 325 1,124 905
Total Interest Income 57,312 52,302 164,384 151,718
Interest Expense
Savings, N.O.W. & Money
Market Deposits 6,723 7,776 21,197 23,194
Certificates of Deposit,
$100,000 and Over 2,221 745 5,721 1,861
Other Time Deposits 11,045 5,704 29,402 17,091
Short-Term Borrowings 964 3,313 1,851 9,063
Long-Term Borrowings 728 728 2,175 2,244
Total Interest Expense 21,681 18,266 60,346 53,453
Net Interest Income 35,631 34,036 104,038 98,265
Provision for Loan Losses 2,000 (375) 6,000 2,525
Net Interest Income after
Provision for Loan Losses 33,631 34,411 98,038 95,740
Non-Interest Income
Fees & Service Charges
on Deposit Accounts 2,720 2,753 8,093 8,310
Trust & Investment Management Fees 404 427 1,306 1,278
Mortgage Banking Operations 673 490 1,944 1,744
Net Securities Gains/(Losses) 3,025 (1,940) 3,173 (1,994)
Other Operating Income 1,445 1,111 4,207 2,974
Total Non-Interest Income 8,267 2,841 18,723 12,312
Non-Interest Expense
Salaries & Employee Benefits 8,736 9,640 24,971 27,207
Occupancy 1,664 1,710 4,934 5,111
Equipment 1,046 1,312 3,341 4,004
FDIC Insurance Premiums 402 1,317 3,024 4,159
Other Real Estate (269) 948 41 4,795
Prepayment Charge Senior Note Retirement - - - 876
Amortization of Excess of Cost Over
Fair Value of Net Assets Acquired 466 368 1,200 1,104
Other Operating Expenses 3,801 4,749 12,373 13,269
Total Non-Interest Expense 15,846 20,044 49,884 60,525
Income Before Income Taxes 26,052 17,208 66,877 47,527
Provision for Income Taxes 11,100 6,772 28,195 18,830
Net Income $14,952 $10,436 $38,682 $28,697
Per Share:
Net Income $0.60 $0.44 $1.59 $1.20
Cash Dividends $0.150 $0.100 $0.400 $0.250
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of
Cash Flows (Unaudited)
<S> <C> <C>
Nine Months Ended September 30, 1995 1994
(in thousands)
Cash Flows from Operating Activities:
Net Income $38,682 $28,697
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 6,000 2,525
Provision for Losses on Real Estate Acquired in
Settlement of Loans 246 2,655
Depreciation and Amortization 3,298 3,327
Amortization of Excess of Cost Over Fair Value of
Net Assets Acquired 1,200 1,104
Accretion of Discounts and Net Deferred Loan Fees (2,922) (754)
Amortization of Premiums 2,949 6,907
Purchases of Trading Account Securities (40,853) -
Proceeds from the Sales of Trading
Account Securities 40,920 -
Net Gains on Trading Account Securities (67) -
Net Securities (Gains)/Losses (3,106) 1,994
Other, Net 6,653 (4,394)
Net Cash Provided by Operating Activities 53,000 42,061
Cash Flows from Investing Activities:
Maturities, Calls and Principal Repayments on
Securities Held-to-Maturity 104,408 123,500
Purchases of Securities Held-to-Maturity (20,445) (264,311)
Proceeds from Sales of Securities
Available-for-Sale 91,597 64,739
Maturities, Calls and Principal Repayments on
Securities Available-for-Sale 50,839 144,480
Purchases of Securities Available-for-Sale (372,680) (74,735)
Loans Originated and Principal Repayments
on Loans and Other Real Estate Owned, Net (75,213) (96,421)
Proceeds from Sales of Real Estate Acquired
in Settlements of Loans 8,259 13,221
Proceeds from the Sale of Loans 10,150 27,808
Purchases of Premises and Equipment, Net (6,639) (1,081)
Purchase of Bank Subsidiary, Net of Cash Acquired 10,868 -
Net Cash Used in Investing Activities (198,856) (62,800)
Cash Flows from Financing Activities:
Net Increase/(Decrease) in Deposits 70,973 (6,606)
Net Increase/(Decrease) in
Short-Term and Other Borrowings 115,938 (8,940)
Proceeds from the Issuance of Senior Notes Payable - 25,000
Repayment of Senior Notes Payable - (20,000)
Purchase of Treasury Shares (1,312) (26)
Common Stock Issued for Cash 10,622 2,071
Dividends Paid to Shareholders (8,503) (4,675)
Net Cash Provided by/(Used in)
Financing Activities 187,718 (13,176)
Net Increase/(Decrease in Cash and
Cash Equivalents 41,862 (33,915)
Metro Activity for the Three Months
Ended December 31, 1993 - 356
Cash and Cash Equivalents at Beginning of the Year 67,916 117,921
Cash and Cash Equivalents at End of the Period $109,778 $84,362
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Cash Flows
(Unaudited), Continued
<S> <C> <C>
Nine Months Ended September 30, 1995 1994
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest Expense $51,505 $52,675
Income Taxes $22,857 $18,937
Supplemental Schedule of Noncash
Investing and Financing Activities:
Securities Transferred to Available-for-Sale
Upon Adoption of SFAS 115 - $275,200
Real Estate Acquired in Settlement of Loans $6,292 $6,841
Loans to Facilitate the Sale of Other Real Estate $6,426 $4,879
During the period the Registrant purchased
various investment securities
which settled in the subsequent month $58,421 $2,108
On July 3, 1995, the Registrant acquired all
the outstanding common stock of Great Neck
Bancorp for cash and other consideration.
In connection with this acquisition, the
following assets were acquired
and liabilities assumed:
Fair Value of Loans, Investments
and Other Assets Acquired $111,431
Cash Paid for Common Stock and Other
Acquisition Expenses (8,512)
Other Non-Monetary Consideration (11,695)
Deposits and Other Liabilities Assumed $91,224
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of
Changes in Stockholders' Equity
(UNAUDITED)
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Additional Unrealized
Common Paid in Retained Securities Deferred Treasury
Stock Capital Earnings Gain/(Loss) Compensation Stock Total
Balance, December 31, 1993 56,114 91,473 79,623 - (899) (1) 226,310
Unrealized Gain on Securities
Available-for-Sale,
net of taxes at January 1, 1994 - - - 2,241 - - 2,241
Net Income - - 28,697 - - - 28,697
Cash Dividends (The Registrant $0.25 per share) - - (3,572) - - - (3,572)
Cash Dividends ( Metro Pre-Merger
$0.81 per share) (1) - - (4,126) - - - (4,126)
Sale of Common Stock (141,866 shares) 408 1,292 - - - - 1,700
Exercise of Warrants (98,000 shares) 245 216 - - - - 461
Deferred Compensation Activity:
Restricted Stock Awards (10,000 shares) - 55 - - (122) 67 -
Removal of Restrictions Accelerated
Regarding Restricted Stock
Awards (1,000 shares) - - - - 4 - 4
Amortization of Restricted Stock Awards - - - - 163 - 163
Forfeiture of Restricted
Stock Awards (4,334 shares) - (12) - - 29 (58) (41)
Amortization of Other Deferred
Compensation Plans - 246 62 - 214 - 522
Purchase of Treasury Stock (1,846 shares) - - - - - (26) (26)
Metro Net Income for the Three Months Ended
December 31, 1993 - - 6,837 - - - 6,837
Adjustment to Unrealized Gain/(Loss)
on Securities Available-for-Sale,
net of taxes - - - (7,210) - - (7,210)
Balance, September 30, 1994 56,767 93,270 107,521 (4,969) (611) (18) 251,960
Balance, December 31, 1994 $57,623 $94,526 $106,186 ($2,871) ($514) ($27) $254,923
Net Income - - 38,682 - - - 38,682
Cash Dividends ($0.40 per share) - - (9,920) - - - (9,920)
Sale of Common Stock (806,392 shares) 2,016 3,985 - - - - 6,001
Exercise of Warrants (987,857 shares) 2,470 3,138 - - - - 5,608
Deferred Compensation Activity:
Restricted Stock Awards (53,600 shares) - 61 - - (940) 879 -
Amortization of Restricted Stock Awards - - - - 186 - 186
Forfeiture of Restricted Stock
Awards (12,002 shares) - 3 - - 33 (174) (138)
Amortization of Other Deferred
Compensation Plans - - - - 206 - 206
Purchase of Treasury Stock (75,677 shares) - - - - - (1,312) (1,312)
Adjustment to Unrealized Gain/(Loss)
on Securities Available-for-Sale,
net of taxes - - - 4,956 - - 4,956
Balance, September 30, 1995 $62,109 $101,713 $134,948 $2,085 ($1,029) ($634) $299,192
</TABLE>
(1) See "Note 2 - Business Combinations" of the Registrant's
1994 Annual Report on From 10-K for further discussion of this
transaction.
<PAGE>
North Fork Bancorporation, Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1995 and 1994
General
The consolidated financial statements of North Fork
Bancorporation, Inc. (the "Registrant"), a bank holding company,
and its subsidiaries, have been prepared in conformity with
generally accepted accounting principles and prevailing
practices within the financial services industry.
On November 30, 1994, Metro Bancshares Inc. ("Metro"), the
Parent Company of Bayside Federal Savings Bank ("Bayside") was
merged with and into the Registrant. The merger was accounted
for as a pooling-of-interests and, as a result, the Registrant's
consolidated financial statements have been retroactively
restated for all reporting periods to include the consolidated
accounts of Metro.
The Registrant's previously reported components of consolidated
income and the amounts reflected in the accompanying
consolidated statements of income for the three and nine months
ended September 30,1994, are as follows:
<TABLE>
<S> <C> <C>
Three Months Nine Months
(in thousands) Ended Ended
Net Interest Income
As Previously Reported $22,150 $64,041
Metro 11,886 34,224
Combined $34,036 $98,265
Net Income
As Previously Reported $7,484 $19,070
Metro 2,952 9,627
Combined $10,436 $28,697
</TABLE>
Metro's reporting period had been as of and for the year ended
September 30, whereas the Registrant utilizes a calendar year
basis. Metro's results for 1994 have been conformed to the
calendar year reporting of the Registrant. See "Note 2 -
Business Combinations" of the Registrant's 1994 Annual Report to
Shareholders for further discussion of this transaction.
On July 3, 1995, the Registrant consummated its purchase of
Great Neck Bancorp, the parent company of Bank of Great Neck,
a Long Island based commercial bank. See the Consolidated
Statement of Cash Flows for a summary of the assets acquired and
liabilities assumed.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The excess cost over the fair value of net assets acquired of
approximately $5.9 million will be amortized over a fifteen year
period. The effect of this acquisition on the Registrant's
results for the third quarter ended September 30, 1995 was
immaterial.
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, results of operations
and cash flows of the Registrant for the interim periods have
been made. All such adjustments are of a normal and recurring
nature. These statements should be read in conjunction with the
Registrant's summary of significant accounting policies which
are incorporated herein by reference in its 1994 Annual Report
on Form 10-K.
Results of operations for the three and nine months ended
September 30, 1995 are not necessarily indicative of the results
of operations which may be expected for the full year 1995 or
any other interim periods.
RECENT ACCOUNTING DEVELOPMENTS:
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, "Accounting by Creditors for Impairment of a
Loan-Income Recognition and Disclosures" ("SFAS 118")
The Registrant adopted SFAS 114, as amended by SFAS 118
(collectively referred to as "the Statement"), effective January
1, 1995. The Statement requires that the measurement of
impaired loans be based on the present value of expected future
cash flows discounted at the loan's effective interest rate or,
at the loan's observable market price or the fair value of the
collateral, if the loan is collateral dependent.
A loan is considered to be impaired when, based upon current
information and events, it is probable that the Registrant will
be unable to collect all amounts due according to the
contractual terms of the loan. Impairment is primarily measured
based on the fair value of the loan's collateral. The Statement
does not apply to large groups of smaller-balance homogeneous
loans that are collectively evaluated for impairment
(residential mortgage and consumer loans) , except for those
loans restructured under a troubled debt restructuring.
The Registrant, had previously assessed the adequacy of its
allowance for loan losses, using a methodology consistent with
the procedures prescribed by the Statement. Accordingly,
adoption of the Statement did not have a material adverse effect
on the level of the Registrant's allowance for loan losses or on
its financial results for the three and nine month periods ended
September 30, 1995. Upon adoption of the Statement, the
Registrant was not required to change its interest income
recognition policy with regard to impaired loans.
Additionally, the Statement amended the accounting for loans
previously classified as in-substance foreclosures. Under
previous guidance, when a loan met the criteria of an
in-substance foreclosure, the creditor was required to account
for the loan and any future transactions as if they had received
the collateral in full satisfaction of the debt. However, the
Statement requires that a creditor shall measure impairment
based on the fair value of the collateral when a creditor
determines that foreclosure is probable. In these situations,
the creditor is required to continue to carry the asset as a
loan rather than reclassify it to Other Real Estate. As a
result, $8.2 million and $9.6 million of loans previously
reported as in-substance foreclosures at December 31, 1994 and
September 30, 1994, respectively, have been reclassified from
Other Real Estate to loans in the accompanying Balance Sheets.
All financial ratios contained within this document affected by
this reclassification have been restated for comparability
purposes.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
RECENT ACCOUNTING DEVELOPMENTS (continued):
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of : Financial Statement of
Accounting Standards No. 121, ("SFAS 121")
In March 1995, the Financial Accounting Standards Board issued
SFAS 121. This Statement establishes the accounting and
reporting standards for the recognition of impairment on
long-lived assets, certain identifiable intangibles, and
goodwill related to those assets.
SFAS 121 requires that an entity review long-lived assets and
certain unidentifiable intangibles for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. In these situations,
an entity is required to recognize an impairment loss if the sum
of the estimated future cash flows, on an undiscounted basis, is
less than the carrying amount of the asset.
SFAS 121 is effective for fiscal years beginning after
December 15, 1995 however, earlier application is encouraged.
The Registrant is currently assessing the financial implications
of implementing SFAS 121 and believes that the adoption will not
have a material adverse effect on its financial condition or
results of operations.
Accounting for Mortgage Servicing Rights :
Statement of Financial Accounting Standards No. 122, ("SFAS
122")
In May 1995, the Financial Accounting Standards Board issued
SFAS 122 . This Statement amends certain provisions of SFAS 65,
"Accounting for Certain Mortgage Banking Activities," requiring
an entity to capitalize the rights to service mortgage loans
for others, whether those rights are acquired through loan
origination activities or purchased from others. Additionally,
SFAS 122 requires an entity to assess its capitalized mortgage
servicing rights for impairment based on the fair value of those
rights.
SFAS 122 is effective for fiscal years beginning after December
15, 1995 however, earlier application is encouraged. The
Registrant is currently assessing the financial implications of
implementing SFAS 122 and believes that it will not have a
material adverse effect on its financial condition or results of
operations.
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 $38.7 million, or $1.59 per share for the first
nine months of 1995, as compared with net income of $28.7
million, or $1.20 per share earned in 1994. Return on average
total assets was 1.82% and the return on average stockholders'
equity was 18.71% for the first nine months of 1995. Return on
average total assets was 1.29% and the return on average
stockholders' equity was 15.85% for the comparable prior year
period.
Net income for the quarter ended September 30, 1995 was $15.0
million, or $.60 per share, as compared with net income of $10.4
million, or $.44 per share earned in 1994 . Return on average
total assets was 2.01% and the return on average stockholders'
equity was 20.43% for the 1995 third quarter. Return on average
total assets was 1.40% and the return on average stockholders'
equity was 16.56% for the comparable prior year period.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Earnings Summary (continued)
The improvement in the Registrant's 1995 third quarter results,
when compared with the comparable prior year period, is
attributable to a $1.6 million increase in net interest income,
a $5.4 million increase in non-interest income, and a $4.2
million decrease in non-interest expense. This activity was
partially offset by a $2.4 million increase in the provision for
loan losses and a $4.3 million increase in the provision for
income taxes.
Net Interest Income
Net interest income, which represents the difference between
interest earned on interest earning assets and interest 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
incurred on interest bearing liabilities, as well as changes in
market interest rates.
Net interest income, on a fully taxable equivalent basis,
increased $1.5 million, or 4.4%, to $36.1 million for the third
quarter of 1995, when compared to $34.6 million for the
comparable prior year period. The components of this increase
include a $4.9 million increase in interest income, on a fully
taxable equivalent basis, partially offset by a $3.4 million
increase in interest expense. The net interest margin for the
third quarter of 1995 increased 33 basis points to 5.18% from
4.85% for the comparable prior year period. During these same
periods the Registrant's rate spread remained unchanged at 4.35%.
Interest income, on a fully taxable equivalent basis,
aggregated $57.8 million for the 1995 third quarter compared to
$52.8 million for the same period of 1994 . The yield on
interest earning assets, on a fully taxable equivalent basis,
increased to 8.29% in the 1995 third quarter as compared to
7.41% in the 1994 comparable period. This increase is
attributable to (a) multiple increases in the Registrant's prime
lending rate during the past year, (b) the impact of higher
market interest rates on the reinvestment of cash flows
generated from principal amortization on certain interest
earning assets during the past year and the restructure of the
investment portfolio, whereby lower yielding securities were
paired off against short term borrowings, during the fourth
quarter of 1994, (c) a change in composition of interest earning
assets to higher yielding loans, from lower yielding investment
securities. These factors were partially offset by a $66 million
decline in the level of interest earning assets to $2.76 billion
during the third quarter of 1995 when compared to $2.83 billion
for the comparable period of 1994.
Average loans increased $131.0 million to $1.91 billion for the
third quarter of 1995 when compared to $1.78 billion during the
same prior year period.
Average securities declined $156.7 million to $833.8 million
for the third quarter of 1995 when compared to $990.5 million
during the same prior year period.
Average federal funds sold and securities purchased under
agreements to resell declined $39.1 million to $14.6 million for
the third quarter of 1995 when compared to $53.7 million during
the same prior year period
The decline in the level of interest earning assets is a result
of the Registrant's strategy to reduce its reliance on
short-term borrowings, principally repurchase agreements and
short-term Federal Home Loan Bank advances, through the
liquidation of certain securities classified as
available-for-sale combined with maturities of certain
securities. This strategy, which was implemented during the
latter half of 1994, was in response to increases in short-term
interest rates and a flattening of the yield curve. In the most
recent quarter, as more fully described below, the Registrant
commenced a pre-investment program in connection with its
pending acquisition that will increase its level of interest
earning assets, primarily mortgage backed securities, with a
corresponding effect on average short term borrowings during the
fourth quarter.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Interest Income (continued)
Interest expense increased to $21.7 million for the 1995 third
quarter, reflecting an effective cost of funds of 3.94%, as
compared to $18.3 million, or an effective cost of funds of
3.05%, for the comparable prior year period. The increase in
interest expense period-over-period is attributable to the (a)
impact of higher market interest rates on the Registrant's
overall cost of funds and (b) shift in interest bearing
customer deposits to higher yielding time deposit accounts.
These factors were partially offset by a $189.5 million decline
in the level of average interest bearing liabilities resulting
from (a) the impact that the aforementioned strategy had on the
level of average short-term borrowings , (b) the successful
conversion of certain former Bayside accounts to non-interest
bearing demand deposit accounts.
Similarly, as a result of the aforementioned strategy, interest
incurred on short-term borrowings declined $2.3 million to $1.0
million in the third quarter of 1995 when compared to $3.3
million in the 1994 comparable period . The Registrant
reduced the level of average short term borrowings by $215.1
million to $58.9 million for the third quarter of 1995, as
compared to the amount outstanding during the comparable prior
year period.
The average interest rate paid on total interest bearing
deposits rose to 3.79% during the third quarter of 1995 from
2.73% during the third quarter of 1994. As a result, interest
incurred on total interest bearing deposits increased $5.8
million to $20.0 million in the third quarter of 1995 when
compared to the comparable period of 1994. Average Savings,
N.O.W. and Money Market deposits declined $244.2 million to
$1.145 billion for the 1995 third quarter as compared to $1.389
billion for the comparable prior year period, while, average
Time deposits increased $269.7 million to $945.0 million for the
1995 third quarter as compared to $675.3 million for the
comparable prior year period. This increase in deposit funding
costs during the above referenced periods was partially offset
by a reduction in the level of average interest bearing
deposits.
Conversely, average demand deposits increased $110.8 million or
36.5% to $414.2 million for the 1995 third quarter as compared
to $303.4 million for the comparable prior year period. Demand
deposits comprised 16.1% of total deposits at September 30, 1995
as compared to 13.3% at September 30, 1994. The increase in
demand deposits is reflective of the ongoing success in
converting the former Bayside thrift branches into full-service
commercial bank outlets and greater penetration in the markets
the Registrant serves.
The Registrant has initiated a pre-investment program in
anticipation of approximately $540 million in additional
liquidity that will result from the consummation of the First
Nationwide branch acquisition (See the "Other Matters" section
of this report). The Registrant is currently pre-investing the
transaction proceeds by purchasing approximately $300 million in
mortgage backed securities. These purchases will be funded
through the use short-term borrowings at a projected positive
spread of approximately 100 basis points. Upon consummation of
the transaction, these short-term borrowings will be replaced
with the lower costing core deposits acquired.
The following table sets forth a summary analysis of the
relative impact on net interest income of changes in the average
volume of interest earning assets and interest bearing
liabilities and changes in average rates on such assets and
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Interest Income (continued)
liabilities. Due to the 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 nonaccrual
loans.
<TABLE>
Nine Months Ended Three Months Ended
For the Periods Ended September 30, 1995 vs. 1994 1995 vs. 1994
<S> <C> <C> <C> <C> <C> <C>
(in thousands ) Change in Change in
Average Average Net Interest Average Average Net Interest
Volume Rate Income Volume Rate Income
INTEREST INCOME FROM EARNING ASSETS:
Interest Earning Deposits $10 $59 $69 $12 $7 $19
Taxable Securities (3,934) 1,328 (2,606) (1,048) 432 (616)
Non-Taxable Municipals (23) 372 349 (269) 110 (159)
Mortgage-Backed Securities (5,488) 3,594 (1,894) (1,150) 805 (345)
Taxable Loans, including
non-accrual loans 6,736 11,141 17,877 2,850 3,617 6,467
Non-Taxable Loans (159) (60) (219) (53) (32) (85)
Federal Funds Sold and Securities
Purchased Under Agreements to Resell (1,503) 687 (816) (508) 169 (339)
Total Interest Earning Assets (4,361) 17,121 12,760 (166) 5,108 4,942
INTEREST EXPENSE ON LIABILITIES:
Total Savings and Time Deposits 2,525 11,649 14,174 1,713 4,051 5,764
Short-Term Borrowings (9,687) 2,475 (7,212) (3,234) 885 (2,349)
Long-Term Borrowings 131 (200) (69) - - -
Total Interest Expense (7,031) 13,924 6,893 (1,521) 4,936 3,415
Net Change in Interest Income $2,670 $3,197 $5,867 $1,355 $172 $1,527
The above table has been prepared on a taxable equivalent basis.
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Interest Income (continued)
The following tables present an analysis of net interest income
by each major category of interest earning assets and interest
bearing liabilities for the nine and three month periods ended
September 30, 1995 and 1994, respectively:
<TABLE>
ANALYSIS OF NET INTEREST INCOME
Nine Months Ended
Sept. 30, 1995 Sept. 30, 1994
<S> <C> <C> <C> <C> <C> <C>
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(dollars in thousands )
INTEREST EARNING ASSETS:
Interest Earning Deposits $1,437 $77 7.16% $829 $8 1.29%
Taxable Securities 119,377 5,486 6.14% 209,358 8,092 5.17%
Non-Taxable Municipals 52,984 2,820 7.12% 53,485 2,471 6.18%
Mortgage-Backed Securities 615,930 29,389 6.38% 736,654 31,283 5.68%
Taxable Loans, net of unearned income & fees 1,865,085 126,523 9.07% 1,759,884 108,646 8.25%
Non-Taxable Loans 8,056 822 13.64% 9,588 1,041 14.52%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 17,078 755 5.91% 59,245 1,571 3.55%
Total Interest Earning Assets 2,679,947 165,872 8.28% 2,829,043 153,112 7.24%
Allowance for Loan Losses (51,921) (56,174)
Cash and Due from Banks 85,809 80,839
Other Non-Interest Earning Assets 124,512 119,049
Total Assets $2,838,347 $2,972,757
INTEREST BEARING LIABILITIES:
Savings, N.O.W & Money Market Deposits 1,174,750 21,197 2.41% 1,390,392 23,194 2.23%
Time Deposits 882,015 35,123 5.32% 686,911 18,952 3.69%
Total Savings and Time Deposits 2,056,765 56,320 3.66% 2,077,303 42,146 2.71%
Short-Term Borrowings 43,765 1,851 5.65% 292,986 9,063 4.14%
Long-Term Borrowings 35,000 2,175 8.31% 33,003 2,244 9.09%
Total Interest Bearing Liabilities 2,135,530 60,346 3.78% 2,403,292 53,453 2.97%
Rate Spread 4.50% 4.26%
Non-Interest Bearing Deposits 385,044 291,094
Other Non-Interest Bearing Liabilities 41,334 36,258
Total Liabilities 2,561,908 2,730,644
Stockholders' Equity 276,439 242,113
Total Liabilities and Stockholders' Equity $2,838,347 $2,972,757
Net Interest Income and Net Interest Margin 105,526 5.26% 99,659 4.71%
Less: Tax Equivalent Basis Adjustment (1,488) (1,394)
Net Interest Income $104,038 $98,265
The above table has been prepared on a taxable equivalent basis.
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Interest Income (continued)
<TABLE>
ANALYSIS OF NET INTEREST INCOME
Three Months Ended
Sept. 30, 1995 Sept. 30, 1994
<S> <C> <C> <C> <C> <C> <C>
Average Average Average Average
Balance Interest Rate Balance Interest Rate
(dollars in thousands )
INTEREST EARNING ASSETS:
Interest Earning Deposits $1,311 $23 6.96% $465 $4 3.41%
Taxable Securities 141,914 2,258 6.31% 211,196 2,874 5.40%
Non-Taxable Municipals 40,469 788 7.73% 54,821 947 6.85%
Mortgage-Backed Securities 651,371 10,583 6.45% 724,443 10,928 5.98%
Taxable Loans, net of unearned income & fees 1,906,189 43,636 9.08% 1,775,456 37,169 8.31%
Non-Taxable Loans 7,567 267 14.00% 9,013 352 15.49%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 14,570 212 5.77% 53,688 551 4.07%
Total Interest Earning Assets 2,763,391 57,767 8.29% 2,829,082 52,825 7.41%
Allowance for Loan Losses (53,412) (55,218)
Cash and Due from Banks 89,221 76,647
Other Non-Interest Earning Assets 146,602 112,218
Total Assets $2,945,802 $2,962,729
INTEREST BEARING LIABILITIES:
Savings, N.O.W & Money Market Deposits 1,144,961 6,723 2.33% 1,389,159 7,776 2.22%
Time Deposits 945,041 13,266 5.57% 675,315 6,449 3.79%
Total Savings and Time Deposits 2,090,002 19,989 3.79% 2,064,474 14,225 2.73%
Short-Term Borrowings 58,924 964 6.49% 273,977 3,313 4.80%
Long-Term Borrowings 35,000 728 8.25% 35,000 728 8.25%
Total Interest Bearing Liabilities 2,183,926 21,681 3.94% 2,373,451 18,266 3.05%
Rate Spread 4.35% 4.35%
Non-Interest Bearing Deposits 414,174 303,417
Other Non-Interest Bearing Liabilities 57,285 35,865
Total Liabilities 2,655,385 2,712,733
Stockholders' Equity 290,417 249,996
Total Liabilities and Stockholders' Equity $2,945,802 $2,962,729
Net Interest Income and Net Interest Margin 36,086 5.18% 34,559 4.85%
Less: Tax Equivalent Basis Adjustment (455) (523)
Net Interest Income $35,631 $34,036
The above table has been prepared on a taxable equivalent basis.
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Non-Interest Income
Non-interest income, exclusive of net securities gains, was
$5.2 million for the 1995 third quarter reflecting no material
change when compared with $4.8 million for the comparable prior
year period. Net securities gains increased $ 4.9 million to
$3.0 million during the 1995 third quarter when compared to net
securities losses of $ 1.9 million during the comparable prior
year period. This increase is due primarily to the Registrant
recognizing a $2.5 million gain, during the 1995 third quarter,
on the liquidation of its interest in Sunrise Bancorp. The net
securities loss recorded during the 1994 third quarter resulted
from the Registrant recording a write-down of $1.9 million on an
impaired collateralized mortgage obligation received by Metro as
partial satisfaction in a troubled debt loan restructuring
entered into in 1991.
Non-Interest Expense
Non-interest expense declined $4.2 million, or 20.9%, to $15.8
million during the 1995 third quarter when compared to $20.0
million during the comparable prior year period. This reduction
is attributable to a $1.2 million decrease in other real estate
expenses, a $.9 million reduction in FDIC insurance premiums
(approximately $862 million of the Registrant's deposits are
insured under the Savings Association Insurance Fund "SAIF"), a
$.9 million reduction in salaries & employee benefits, a $1.2
million reduction in general & administrative expenses,
resulting from the post-merger integration of operations and the
achievement of other efficiencies associated with the
combination of certain product lines.
The Registrant's core efficiency ratio, which represents the
ratio of non-interest expense, net of other real estate expenses
and other nonrecurring charges, to net interest income, on a tax
equivalent basis, and non-interest income net of securities
gains and losses, improved to 39.0% for the three months ended
September 30, 1995 compared with 48.54% for the comparable
prior year period. The core efficiency ratio for the first nine
months of 1995 was 41.17% compared with 48.90% for the
comparable prior year period. This achievement occurred as core
operating expense levels declined while net interest income and
non-interest income improved.
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 42.6% for the third
quarter of 1995, as compared to 39.4% for the comparable prior
year period. The effective tax rate for the first nine months
of 1995 was 42.2% compared with 39.6% for the comparable prior
year period. The increase in the effective tax rate during the
three and nine month periods is primarily attributable to the
Registrant recognizing a decrease in the deferred tax valuation
allowance during 1994.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Loans and Leases
Loans and leases, net of unearned income, increased 5.8% to
$1.94 billion at September 30, 1995 as compared with $1.83
billion at December 31, 1994. This increase is due primarily to
the acquisition of Bank of Great Neck which added $49.4 million,
of principally commercial real estate loans, coupled with steady
growth in multi-family and consumer loan and Lease portfolios,
partially offset by a decline in residential mortgage loans.
The portfolio is concentrated principally in loans secured by
real estate in the metropolitan New York area. Real estate
related loans, which include multi-family, residential, and
commercial mortgages and to a lesser extent construction and
land development loans, aggregated 82.4% of the total loan
portfolio at September 30, 1995. Multi-family mortgage loans,
which rely principally on their underlying cash flows to service
the related debt, comprise the largest real estate concentration
within the Registrant's loan portfolio, aggregating $604.4
million and representing 31.2% of the total loan portfolio at
September 30, 1995. Residential mortgages, consists principally
of owner occupied residents, aggregated $568.7 million or 29.3%
of the total loan portfolio at September 30, 1995. Commercial
mortgages, comprised of both owner occupied and income producing
rental properties, aggregated $372.8 million or 19.2% of the
total loan portfolio at September 30, 1995. This diversity
ameliorates the risks typically associated with real estate
concentrations. The following table delineates the composition
of the Registrant's loan portfolio for the period indicated (in
thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
% of % of % of
Sept 30, 1995 Total Dec 30, 1994 Total Sept 30, 1994 Total
Mortgage Loans-Multi-Family $604,432 31.18% $524,167 28.62% $506,826 28.00%
Mortgage Loans-Residential 568,654 29.34% 598,711 32.69% 601,423 33.20%
Mortgage Loans-Commercial 372,805 19.23% 340,157 18.57% 344,607 19.04%
Commercial & Industrial 237,870 12.27% 241,544 13.19% 234,307 12.94%
Consumer Loans 66,861 3.45% 51,291 2.80% 46,088 2.55%
Construction & Land Development
Loans 51,853 2.68% 54,789 2.99% 60,197 3.33%
Leases, net 35,784 1.85% 20,807 1.14% 16,933 0.94%
TOTAL $1,938,259 100.00% $1,831,466 100.00% $1,810,381 100.00%
</TABLE>
Non-performing assets, which include loans ninety days past due
and still accruing, nonaccrual loans and other real estate,
declined $2.5 million to $44.5 million at September 30, 1995
when compared to $47.0 million at December 31, 1994 and
declined $12.3 million when compared to $56.8 at September 30,
1994. Non-performing assets represent 1.43% of total assets at
September 30, 1995 comparing favorably to 1.73% at December 31,
1994 and 1.95% at September 30, 1994.
The components of non-performing assets are delineated in the
table below (in thousands):
<TABLE>
<S> <C> <C> <C>
Sept. 30, 1995 Dec. 31, 1994 Sept. 30, 1994
Loans 90 days past due & still accruing $2,447 $1,597 $2,318
Non-accrual Loans 39,599 40,516 48,623
Non-performing Loans 42,046 42,113 50,941
Other Real Estate Owned 2,500 4,861 5,841
Non-performing assets 44,546 46,974 56,782
Restructured, Accruing loans $33,416 $37,044 $31,800
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Loans and Leases (continued)
The adoption of SFAS 114 did not affect the level of
non-performing assets as loans previously classified as
in-substance foreclosures, and contained within the other real
estate caption, are now classified within the nonaccrual loans
caption. For a further discussion, refer to the Recent
Accounting Developments section of this report. Additionally,
as of September 30, 1995, the weighted average yield on
restructured , accruing loans was 6.92%.
The provision for loan losses increased $2.4 million to $2.0
million for the 1995 third quarter, from a negative provision of
$.4 million in the comparable prior year period. The negative
provision recorded during the comparable prior year period was
attributable to Metro reducing the level of its allowance for
loan losses by $1.1 million, partially offset by the Registrant
recording a provision of $.7 million during this period. Net
charge-offs aggregated $3.3 million, or .68% of average loans,
net of unearned income, on an annualized basis, for the 1995
third quarter, as compared with $4.0 million, or .90% of average
loans, net of unearned income, on an annualized basis, for the
1994 third quarter. The allowance for loan losses at September
30, 1995 was $51.2 million, or 121.8% of non-performing loans,
and 2.67% of loans, net of unearned income. The allowance for
loan losses at December 31, 1994 was $50.1 million, or 118.9% of
non-performing loans, and 2.76% of loans, net of unearned
income. The allowance for loan losses at September 30, 1994 was
$50.6 million, or 99.42% of non-performing loans and 2.83% 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 and trends in the loan portfolio. Management
considers, among other things, concentrations within segments of
the loan portfolio, delinquency trends, as well as recent
charge-off experience and third party evidentiary matter (such
as appraisals) when assessing the degree of credit risk in the
portfolio. Various appraisals and estimates of current value
influence the estimation of the required allowance at any point
in time. 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 judgment 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, 1995 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
Securities
A) Held-to-Maturity Securities
Held-to-maturity securities are debt securities that the
Registrant has the positive intent and ability to hold to
maturity and are stated at amortized cost. At September 30,
1995, securities held-to-maturity consisted of the following (in
thousands):
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
U.S. Government Agencies Obligations $49,257 $8 ($691) $48,574
State and Municipal Obligations 53,195 367 (444) 53,118
Mortgage-Backed Securities 443,903 1,389 (6,850) 438,442
TOTAL $546,355 $1,764 ($7,985) $540,134
</TABLE>
B) Available-for-Sale Securities
Available-for-Sale Securities 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, 1995,
available-for-sale securities consisted of the following
(in thousands):
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
U.S. Treasury $19,986 $34 $- $20,020
U.S. Government Agencies Obligations 9,459 18 - 9,477
Mortgage-Backed Securities 369,747 922 (609) 370,060
S.B.A. Securities 29,938 201 - 30,139
Equity Securities 30,310 3,075 - 33,385
TOTAL $459,440 $4,250 ($609) $463,081
</TABLE>
The amortized cost of mortgage-backed securities ("MBS")
included in both the available-for-sale and held-to-maturity
categories was $813.7 million at September 30, 1995, with an
aggregate fair value of $808.5 million, or a net pre-tax
unrealized loss of $5.1 million. This compares to securities
with an amortized cost of $640.0 million and an aggregate fair
value of $636.6 million or a net pre-tax unrealized loss of
$6.4 million at June 30,995 and securities with an amortized
cost of $586.6 million and an aggregate fair value of $549.6
million or a net pre-tax unrealized loss of $37.0 million, at
December 31, 1994. The increase in fair value reflects the
favorable impact of lower market interest rates during the first
nine months of 1995. The Registrant's mortgage-backed
securities are principally fixed rate and the value of these
instruments moves in an inverse relationship to interest rates.
Mortgage-backed securities classified as held-to-maturity
included $85.4 million in collateralized mortgage obligations at
September 30, 1995. Mortgage-backed securities classified as
available-for-sale included $31.9 million in collateralized
mortgage obligations at September 30, 1995.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Securities (continued)
The prepayment of mortgage-backed securities, including
collateralized mortgage obligations, is actively monitored
through the Registrant's portfolio management function. The
Registrant typically invests in MBS's with stable cash flows and
relatively short duration, thereby limiting the impact of
interest rate fluctuations on the portfolio. Management
regularly performs simulation testing to assess the impact that
interest and market rate changes would have on its MBS's
portfolio.
At September 30, 1995, securities carried at $312.5 million
were pledged for various purposes as required by law and to
secure securities sold under agreements to repurchase and other
borrowings.
On July 31, 1995, the Registrant sold its interest in Sunrise
Bancorp. for $7.3 million or $30.00 per share, resulting in a
gain of $2.5 million, adding approximately $.05 per share to
earnings during the third quarter.
The Registrant is currently evaluating the allocation of its
securities portfolio between held-to-maturity and
available-for-sale in light of the recent announcement by the
Financial Accounting Standards Board ("FASB") that Companies
will be given an opportunity to transfer securities from the
held-to-maturity category without undergoing a mandatory
reevaluation of other securities in this category to determine
whether they should be reclassified. This opportunity will exist
from mid November ( when FASB plans to issue its implementation
guide on SFAS 115 ) and year end.
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, 1995 under the rules applicable at
such date. At such date the Registrant was in compliance with
all applicable regulatory requirements.
<TABLE>
<S> <C> <C>
Amount Ratio
Tier 1 Capital $270,159 15.83%
Regulatory Requirement 68,272 4.00%
Excess 201,887 11.83%
Total Risk Adjusted Capital 291,863 17.10%
Regulatory Requirement 136,543 8.00%
Excess $155,320 9.10%
Risk Weighted Assets $1,706,793
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital (Continued)
The Registrant's leverage ratio at September 30, 1995 was
9.26%. The Tier I, total risk based and leverage capital ratios
of the Registrant's bank subsidiary, were 16.30%, 17.58%, and
9.49%, respectively, at September 30, 1995.
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 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 bank subsidiary are
considered well capitalized.
On April 20, 1995 the Registrant's Board of Directors approved
the repurchase of up to 1.2 million shares or approximately 5%
of the Registrant's common shares outstanding. To date, the
Registrant has purchased 74,592 shares.
Consistent with the Registrant's intended purpose for the Stock
Repurchase Program, 49,100 of these shares were used to fund
deferred compensation plans during 1995.
On September 26, 1995, the Registrant's Board of Directors
declared a 20% increase in its quarterly cash dividend to 15.0
cents per share. The dividend will be payable November 15, 1995
to shareholders of record at the close of business October 26,
1995.
Liquidity
The objective of the Registrant's liquidity management is to
ensure the availability of sufficient resources to meet all
financial commitments and to capitalize on opportunities for
business expansion. Liquidity management addresses the
Registrant's ability to meet deposit withdrawals either on
demand or contractual maturity, to repay other borrowings as
they mature and to make new loans and investments as
opportunities arise.
The Registrant's sources of liquidity include dividends from
its subsidiaries, borrowings, and funds available through the
capital markets. Dividends from the Registrant's bank
subsidiary are limited by New York State Banking Department
regulations to the current year's earnings plus the prior two
years' retained net profits. According to the parameters of
this regulation, the Bank had $93.1 million of retained earnings
available for dividends to the Registrant as of September 30,
1995.
The Bank has numerous sources of liquidity including loan and
security principal repayments and maturities, lines of credit
with other financial institutions, the ability to borrow under
repurchase agreements utilizing its unpledged securities
portfolio, the sale of securities from its available for sale
portfolio, the securitization of loans within the portfolio,
whole loan sales and growth in its core deposit base.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity (continued)
In addition, the Bank has the ability, as a member of the
Federal Home Loan Bank ("FHLB") system, to borrow approximately
$320 million on a secured basis, utilizing mortgage related
loans and securities as collateral, for a term
ranging from one day to ten years at both fixed and variable
rates. As of September 30, 1995, the Bank had $10 million in
such advances, with an original maturity of greater than one
year.
The Registrant's liquidity position is monitored on a daily
basis 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.
Pending Acquisitions
Extebank Domestic Banking Business
On September 18,1995, the Registrant and Banco Exterior de
Espana, S.A., Spain ("BEX") entered into an agreement whereby
the Registrant will acquire the domestic commercial banking
business of Extebank ("Extebank"), a wholly owned subsidiary of
BEX, for $47.0 million in cash, which represents approximately
157 % of book value. Extebank has approximately $442 million in
total assets, including net loans of $252 million, and deposits
of $396 million. The Registrant will merge Extebank into its
banking subsidiary, North Fork Bank. The transaction is subject
to regulatory approval and is expected to be completed during
the first quarter of 1996.
First Nationwide Bank Long Island Branches
On September 29, 1995, the Registrant announced that
North Fork Bank had entered into an agreement with First
Nationwide Bank to acquire its ten Long Island branches with
approximately $590 million in deposits for $37.5 million in
cash, or a deposit premium of 6.35%. The transaction is subject
to regulatory approval and is expected to be completed during
the first quarter of 1996.
<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 13, 1995 /s/ Daniel M. Healy
Daniel M. Healy
Executive Vice President &
Chief Financial Officer
<PAGE>
[EXHIBIT 11]
North Fork Bancorporation, Inc.
COMPUTATION OF NET INCOME PER COMMON EQUIVALENT SHARE
September 30, 1995
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
<S> <C> <C> <C> <C>
Sept.30, 1995 Sept.30, 1994 Sept.30, 1995 Sept.30, 1994
Net Income $14,952,119 $10,436,173 $38,682,234 $28,697,026
Common Equivalent Shares:
Weighted Average Common
Shares Outstanding 24,751,446 22,654,635 24,271,687 22,554,953
Weighted Average Common
Equivalent Shares (a) 150,013 1,355,336 119,562 1,324,452
Weighted Average Common and
Common Equivalent Shares 24,901,459 24,009,971 24,391,249 23,879,405
Net Income per Common
Equivalent Share $0.60 $0.44 $1.59 $1.20
(a) Consists of warrants and options
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 100625
<INT-BEARING-DEPOSITS> 1153
<FED-FUNDS-SOLD> 8000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 463081
<INVESTMENTS-CARRYING> 546355
<INVESTMENTS-MARKET> 540134
<LOANS> 1938259
<ALLOWANCE> 51222
<TOTAL-ASSETS> 3105035
<DEPOSITS> 2504119
<SHORT-TERM> 175938
<LIABILITIES-OTHER> 66988
<LONG-TERM> 35000
<COMMON> 62109
0
0
<OTHER-SE> 237083
<TOTAL-LIABILITIES-AND-EQUITY> 3105035
<INTEREST-LOAN> 127044
<INTEREST-INVEST> 36508
<INTEREST-OTHER> 832
<INTEREST-TOTAL> 164384
<INTEREST-DEPOSIT> 56320
<INTEREST-EXPENSE> 60346
<INTEREST-INCOME-NET> 104038
<LOAN-LOSSES> 6000
<SECURITIES-GAINS> 3173
<EXPENSE-OTHER> 49884
<INCOME-PRETAX> 66877
<INCOME-PRE-EXTRAORDINARY> 66877
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 38682
<EPS-PRIMARY> 1.59
<EPS-DILUTED> 1.59
<YIELD-ACTUAL> 5.26
<LOANS-NON> 39599
<LOANS-PAST> 2447
<LOANS-TROUBLED> 33416
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 50069
<CHARGE-OFFS> 7494
<RECOVERIES> 2155
<ALLOWANCE-CLOSE> 51222
<ALLOWANCE-DOMESTIC> 51222
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
