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, 1996
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.)
275 BROAD HOLLOW ROAD, MELVILLE, NEW YORK 11747
(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 11/11/96
$2.50 Par Value 24,152,332
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
North Fork Bancorporation, Inc.
(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
Shortly following the announcement on July 15, 1996 that the
Registrant had entered into an Agreement and Plan of Merger with
North Side Savings Bank ("North Side") providing for the merger
of North Side and a wholly owned subsidiary of the Registrant
(the "Merger"), two alleged stockholders of North Side filed
purported class action lawsuits in the Supreme Court of the
State of New York County of New York (the "Court") against North
Side, the members of the North Side Board of Directors and the
Registrant. The plaintiffs allege, among other things, that the
Registrant has aided and abetted breaches of fiduciary duty by
the members of the North Side Board of Directors in connection
with the proposed Merger. The plaintiffs seek, among other
things, an order enjoining the defendants from taking any steps
to implement the proposed Merger, awarding purported unspecified
damages and to account for any profits realized by them. The
plaintiffs also seek the award of the costs and disbursements of
the actions, including reasonable attorneys' and experts' fees.
The Registrant believes the allegations contained in the
complaints are baseless, entirely without merit and intend to
contest them vigorously. The Registrant has moved to dismiss the
plaintiffs' complaints on the grounds that, among other reasons,
such complaints fail to state a cause of action.
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 Report on Form 8-K dated September 12, 1996
(reporting historical exchange act filings made with the
Federal Deposit Insurance Corporation by North Side).
Current Report on Form 8-K dated October 10, 1996
(reporting the Registrants Net Income for the 1996 Third
Quarter and the Net Income for the Year Ended September 30, 1996 for
North Side).
<PAGE>
<TABLE>
Consolidated Balance Sheets
<S> <C> <C> <C>
(in thousands, except per share amounts) Sept. 30, 1996 Dec.31, 1995 Sept. 30, 1995
Assets (unaudited) (unaudited)
Cash & Due from Banks $124,093 $106,476 $100,625
Interest Earning Deposits 1,710 1,347 1,153
Federal Funds Sold & Securities Purchased under
Agreements to Resell - - 8,000
Securities:
Available-for-Sale 1,060,885 814,485 463,081
Held-to-Maturity 369,853 342,143 546,355
Total Securities 1,430,738 1,156,628 1,009,436
Loans 2,423,531 1,985,028 1,938,259
Less: Unearned Income & Fees 23,914 18,588 18,251
Allowance for Loan Losses 48,912 50,210 51,222
Net Loans 2,350,705 1,916,230 1,868,786
Premises & Equipment, Net 53,417 45,169 42,699
Accrued Income Receivable 26,707 22,400 20,503
Intangibles 83,458 26,633 26,896
Other Real Estate 1,346 4,805 2,500
Other Assets 26,345 23,623 24,437
Total Assets $4,098,519 $3,303,311 $3,105,035
Liabilities and Stockholders' Equity
Demand Deposits $644,710 $451,802 $404,002
Savings, N.O.W. & Money Market Deposits 1,335,586 1,153,739 1,149,825
Other Time Deposits 964,627 753,809 784,305
Certificates of Deposits, $100,000 and Over 293,446 176,110 165,987
Total Deposits 3,238,369 2,535,460 2,504,119
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase 464,807 391,369 175,938
Other Borrowings 10,000 10,000 10,000
Senior Note Payable 25,000 25,000 25,000
Accrued Expenses & Other Liabilities 46,678 31,637 90,786
Total Liabilities $3,784,854 $2,993,466 $2,805,843
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 25,048,374, 24,879,196, 24,843,436
shares at the periods ending, respectively 62,621 62,198 62,109
Additional Paid in Capital 105,198 102,398 101,713
Retained Earnings 175,001 144,773 134,948
Treasury Stock at cost;
904,622, 36,187, 36,024 shares
at the periods ending, respectively (22,120) (653) (634)
Unrealized (Losses)/Gains on
Securities Available-for-Sale, net
of taxes (5,333) 2,149 2,085
Deferred Compensation (1,702) (1,020) (1,029)
Total Stockholders' Equity 313,665 309,845 299,192
Total Liabilities and Stockholders' Equity $4,098,519 $3,303,311 $3,105,035
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Income (Unaudited)
(in thousands, except per share amounts) Three Months Ended Nine Months Ended
Sept. 30, 1996 Sept. 30, 1995 Sept.30, 1996 Sept. 30, 1995
<S> <C> <C> <C> <C>
Interest Income
Loans $53,381 $43,805 $149,756 $127,044
Mortgage-Backed Securities 18,233 10,583 52,623 29,389
U.S. Treasury & Government Agency Securities 2,880 1,771 8,254 4,156
State & Municipal Obligations 1,373 498 3,375 1,839
Other Securities 891 420 1,558 1,124
Federal Funds Sold & Securities Purchased
Under Agreements to Resell 26 212 622 755
Interest Earning Deposits 20 23 60 77
Total Interest Income 76,804 57,312 216,248 164,384
Interest Expense
Savings, N.O.W. & Money Market Deposits 7,367 6,723 21,947 21,197
Other Time Deposits 12,846 11,045 36,600 29,402
Certificates of Deposit, $100,000 and Over 3,466 2,221 9,465 5,721
Short-Term Borrowings 5,780 964 15,376 1,851
Long-Term Borrowings 727 728 2,176 2,175
Total Interest Expense 30,186 21,681 85,564 60,346
Net Interest Income 46,618 35,631 130,684 104,038
Provision for Loan Losses 1,500 2,000 4,500 6,000
Net Interest Income after Provision
for Loan Losses 45,118 33,631 126,184 98,038
Non-Interest Income
Fees & Service Charges on Deposit Accounts 4,057 2,720 11,302 8,093
Investment Management & Trust Fees 1,423 921 4,246 2,605
Mortgage Banking Operations 493 673 1,636 1,944
Other Operating Income 1,174 928 3,399 2,908
Net Securities Gains 1,432 3,025 2,428 3,173
Total Non-Interest Income 8,579 8,267 23,011 18,723
Non-Interest Expense
Compensation & Employee Benefits 11,308 8,736 32,266 24,971
Occupancy 2,570 1,664 7,028 4,934
Equipment 1,563 1,046 4,389 3,341
Amortization of Intangibles 1,881 466 4,248 1,200
Other Real Estate 119 (269) 1,052 41
Other Operating Expenses 6,224 4,203 17,201 15,397
SAIF Recapitalization Charge 8,350 - 8,350 -
Total Non-Interest Expense 32,015 15,846 74,534 49,884
Income Before Income Taxes 21,682 26,052 74,661 66,877
Provision for Income Taxes 8,407 11,100 29,825 28,195
Net Income $13,275 $14,952 $44,836 $38,682
Per Share:
Net Income $0.54 $0.60 $1.81 $1.59
Cash Dividends $0.20 $0.15 $0.60 $0.40
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Months Ended September 30, 1996 1995
(in thousands)
Cash Flows from Operating Activities:
<S> <C> <C>
Net Income $44,836 $38,682
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 4,500 6,000
Provision for Losses on Real Estate Acquired in
Settlement of Loans 571 246
Depreciation and Amortization 4,759 3,298
Amortization of Intangibles 4,248 1,200
Accretion of Discounts and Net Deferred Loan Fees (3,195) (2,922)
Amortization of Premiums 5,372 2,949
Purchases of Trading Account Securities - (40,853)
Proceeds from the Sale of Trading Account Securities - 40,920
Net Securities Gains (2,428) (3,173)
Other, Net 12,666 6,653
Net Cash Provided by Operating Activities 71,329 53,000
Cash Flows from Investing Activities:
Maturities, Calls and Principal Repayments on
Securities Held-to-Maturity 55,007 104,408
Purchases of Securities Held-to-Maturity (82,838) (20,445)
Maturities and Principal Repayments on
Securities Available-for-Sale 220,655 50,839
Purchases of Securities Available-for-Sale (438,874) (372,680)
Proceeds from Sales of
Securities Available-for-Sale 15,361 91,597
Loans Originated and Principal Repayments
on Loans and Other Real Estate Owned, Net (266,831) (75,213)
Proceeds from Sales of Real Estate Acquired
in Settlements of Loans 7,316 8,259
Proceeds from the Sale of Loans 25,965 10,150
Purchases of Premises and Equipment, Net (5,445) (6,639)
Net Cash & Cash Equivalents
Received in Acquisitions 595,650 10,868
Net Cash Provided by/(Used in)
Investing Activities 125,966 (198,856)
Cash Flows from Financing Activities:
Net (Decrease)/Increase in Deposits (214,371) 70,973
Net Increase in Short-Term and Other Borrowings 68,148 115,938
Treasury Stock Activity, Net (22,023) (1,312)
Common Stock Sold for Cash 2,441 10,622
Dividends Paid to Shareholders (13,510) (8,503)
Net Cash (Used in)/Provided by
Financing Activities (179,315) 187,718
Net Increase in Cash and Cash Equivalents 17,980 41,862
Cash and Cash Equivalents at Beginning of the Year 107,823 67,916
Cash and Cash Equivalents at End of the Quarter $125,803 $109,778
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows (Unaudited), Continued
For the Nine Months Ended September 30, 1996 1995
(in thousands)
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest Expense $89,419 $51,505
Income Taxes $8,361 $22,857
Supplemental Schedule of Noncash Investing and Financing Activities:
Real Estate Acquired in Settlement of Loans $3,275 $6,292
Loans to Facilitate the Sale of Other Real Estate $2,138 $6,426
During the period the Registrant purchased various investment
securities which settled in the subsequent month - $58,421
During the quarter ended March 31, 1996, North Fork Bank
purchased Extebank's domestic commercial
banking business for $47 million
and also acquired approximately $572 million of deposits and 10
Long Island branches of First Nationwide Bank.
Fair Value of Assets Acquired, Including Cash & Cash Equivalents $826,047
Intangible Assets 61,072
Cash Paid 47,000
Liabilities Assumed $934,119
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 Assets Acquired, Including Cash & Cash Equivalents $111,431
Cash Paid (8,512)
Other Non-Monetary Consideration (11,695)
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 Gains/(Losses) Comp. Stock Total
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 Activity, net (41,598 shares) - 64 - - (721) 705 48
Amortization of Other Deferred
Compensation Plans - - - - 206 - 206
Purchase of Treasury Stock (75,677 shares) - - - - - (1,312) (1,312)
Adjustment to Unrealized Gains/(Losses) 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
Balance, December 31, 1995 $62,198 $102,398 $144,773 $2,149 ($1,020) ($653) $309,845
Net Income - - 44,836 - - - 44,836
Cash Dividends ( $.60 per share) - - (14,608) - - - (14,608)
Sale of Common Stock (169,178 shares) 423 2,310 - - - - 2,733
Deferred Compensation Activity:
Restricted Stock Activity, net (34,305 shares) - 440 - - (682) 606 364
Purchase of Treasury Stock (922,900 shares) - - - - - (22,566) (22,566)
Sale of Treasury Stock (20,160 shares) - 50 - - - 493 543
Adjustment to Unrealized (Losses)/Gains on Securities
Available-for-Sale, Net of taxes - - - (7,482) - - (7,482)
Balance, September 30, 1996 $62,621 $105,198 $175,001 ($5,333) ($1,702) ($22,120) $313,665
</TABLE>
<PAGE>
North Fork Bancorporation, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
September 30, 1996 and 1995
General
The accounting and reporting policies of North Fork
Bancorporation, Inc. (the "Registrant"), and its banking
subsidiary, North Fork Bank (the "Bank") and non-bank
subsidiaries, are in conformity with generally accepted
accounting principles and prevailing practices within the
financial services industry. The preparation of financial
statements in conformity with generally accepted accounting
principles requires that management make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of income and expenses during the reporting period. Such
estimates are subject to change in the future as additional
information becomes available or previously existing
circumstances are modified. Actual results could differ from
those estimates.
These statements should be read in conjunction with the
Registrant's summary of significant accounting policies which
are incorporated herein by reference in its 1995 Annual Report
on Form 10-K.
Results of operations for the three and nine months ended
September 30, 1996 are not necessarily indicative of the results
of operations which may be expected for the full year 1996 or
any other interim periods.
Mergers and Acquisitions
A) Completed Acquisitions
On March 15, 1996, the Bank completed its purchase of the
domestic commercial banking business of Extebank ("Extebank").
Extebank had approximately $388 million in total assets, $200
million in net loans, $348 million in deposit liabilities, $30
million in capital, and operated through eight branch locations
in the metropolitan New York area.
On March 23, 1996, the Bank completed its acquisition of the ten
banking branches of First Nationwide Bank ("First Nationwide")
located on Long Island, and assumed $572 million of customer
deposit liabilities for which it paid a deposit premium of
6.35%. Assets acquired, consisting primarily of cash, totaled
$529 million.
These transactions have been accounted for under the purchase
method of accounting, and accordingly, the Registrant's
consolidated results of operations only reflect activity
subsequent to the acquisition dates. There was a minimal
effect on operating results from these transactions in the
quarter ended March 31, 1996.
The intangibles created from the aforementioned transactions
aggregated approximately $60 million, of which $23 million is
attributable to the First Nationwide core deposit intangible.
The intangible assets associated with these transactions are
currently being amortized using various methods over periods not
exceeding 15 years for financial reporting purposes. The
intangible assets created from the First Nationwide transaction
are being amortized on a straight line basis over 15 years for
tax purposes.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table sets forth the unaudited pro forma summary
results of operations for the nine months ended September 30,
1996 and 1995, and assumes that the foregoing completed purchase
transactions had been consummated as of January 1, 1996 and
1995, respectively. Although separate financial information had
historically been prepared for Extebank, such financial
information also included certain international operations.
Accordingly, since only the domestic commercial banking business
was acquired, certain estimates and assumptions have been
utilized in determining the pro forma adjustments applied to the
historical results of operations of Extebank. The First
Nationwide branch acquisition, which consisted principally of
cash and customer deposit liabilities, did not constitute a
distinct business entity for which separate financial
information had historically been prepared. Therefore,
subjective estimates have been utilized in determining the pro
forma adjustments applied to the historical results of
operations of the Registrant. These pro forma results are not
necessarily indicative of the results that would have been
achieved had these acquisitions occurred on the dates indicated
or that may occur in the future.
<TABLE>
Pro Forma Combined Condensed Statements of Income (Unaudited)
Nine Months Ended
(in thousands, except per share amounts) Sept. 30,1996 Sept. 30, 1995
<S> <C> <C>
Net Interest Income $135,964 $126,015
Provision for Loan Losses 4,721 7,700
Net Interest Income after Provision for Loan Losses 131,243 118,315
Non-Interest Income 24,422 24,924
Non-Interest Expense, exclusive of Amortization of
Intangibles 76,229 66,388
Amortization of Intangibles 5,667 5,464
Income before Income Taxes 73,769 71,387
Provision for Income Taxes 29,312 30,449
Net Income $44,457 $40,938
Earnings per Share $1.80 $1.68
</TABLE>
1) Extebank Domestic Commercial Banking Business
Specific assumptions utilized: 1) Extebank's historical
statement of operations for the nine month period ended
September 30, 1995 included certain international operations of
Extebank. The historical statement of operations for Extebank
was adjusted to reflect the elimination of the international
operations; 2) interest earning assets have been reduced by the
transaction purchase price and additional costs incurred in
connection with the consummation of the transaction. These cash
outlays are assumed to have been incurred as of January 1, 1995
at the Registrant's average federal funds sold rate in effect
during each of the periods presented (5.30% and 5.91% for the
nine months ended September 30, 1996 and 1995, respectively ; 3)
the intangible asset associated with this transaction is
currently being amortized for financial reporting purposes on a
straight line basis over fifteen years ; and 4) income taxes
have been provided using the Registrant's effective tax rate for
the pro forma adjustments. The pro forma adjustments do not
reflect any possible cost savings to be derived from the
elimination of redundant operations.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2) First Nationwide Long Island Banking Branches
Specific assumptions utilized: 1) the assets acquired,
principally cash, are assumed to be invested in certain
mortgage-backed securities at the beginning of each period
presented using the average rates in effect during such periods
(6.56% and 6.38% for the nine month periods ended September
30,1996 and 1995, respectively ) ; 2) the actual interest
bearing deposit liabilities acquired are assumed to have been
acquired at the beginning of each period using consummation date
fair values and are reflected during the periods using the
average rates in effect at the consummation date ( weighted
average cost of funds of 4.40% ) ; 3) non-interest income and
non-interest expense amounts are based upon an extrapolation of
actual operating results subsequent to consummation ; 4) the
intangible assets associated with this transaction are currently
being amortized over periods not exceeding fifteen years for
both financial reporting and tax purposes ; and 5) income taxes
have been provided using the Registrant's effective tax rate for
the pro forma periods. The pro forma adjustments do not reflect
any possible cost savings from branch operating efficiencies
which may be realized in the future.
Weighted average shares outstanding utilized in the calculation
of pro forma earnings per share were 24,759,215 and 24,391,249,
which represented the Registrant's actual weighted average
shares outstanding for the nine month periods ended September
30, 1996 and 1995, respectively.
B) Pending Acquisition
On July 15, 1996, the Registrant entered into an agreement and
plan of merger with North Side Savings Bank ("North Side"),
whereby it would acquire North Side in a stock-for-stock
exchange valued at approximately $210 million. Under the terms
of the agreement, each share of North Side common stock will be
converted into the Registrant's common stock at a fixed exchange
ratio of 1.556. The agreement permits North Side to terminate
the transaction if the average closing price of the Registrant's
shares falls below $24 for the ten trading days ending on the
fifth business day prior to the date on which the Federal
Deposit Insurance Corporation ("FDIC") approval is received,
unless the Registrant elects to increase the exchange ratio so
that the value of the Registrant's common stock to be received
in respect to each North Side common share is not less than
$37.34. The Registrant also received an option to acquire up to
19.9% of North Side's outstanding shares at $34.75 per share
should certain events occur as set forth in the stock option
agreement.
The transaction is expected to be treated as a tax-free
reorganization and accounted for using the pooling-of-interests
method. The merger is expected to close in December 1996,
following receipt of required regulatory approvals and approval
by shareholders of both companies and certain other customary
closing conditions. Both the Registrant's and North Side's
Special Meeting of Stockholders, regarding this transaction,
will be held on November 18, 1996.
North Side had total assets of $1.6 billion, deposits of $1.2
billion and stockholders equity of $127.5 million at September
30, 1996. It operates seventeen banking offices in Queens,
Bronx, Nassau and Suffolk counties.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
RECENT ACCOUNTING DEVELOPMENTS:
Accounting for Mortgage Servicing Rights:
Statement of Financial Accounting Standards No. 122 ("SFAS 122").
SFAS 122 was adopted effective January 1, 1996. This Statement
amends certain provisions of Statement of Financial Accounting
Standards No. 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. Adoption of SFAS 122 did not
have an effect on the financial condition or results of
operations.
Accounting for Stock Based Compensation:
Statement of Financial Accounting Standards No. 123, ("SFAS
123").
SFAS 123 was adopted effective January 1, 1996. This Statement
establishes the financial accounting and reporting standards for
employee stock-based compensation plans in which an employer
grants shares of its stock or other equity instruments to
employees except for employee stock ownership plans. SFAS 123
permits a company to choose either a new fair value based method
or continue to follow the current arrangements under Accounting
Principles Board Opinion No. 25 ("Opinion No. 25") practice in
accounting for its stock-based compensation. The Registrant
will continue to follow the current practice in accounting for
such arrangements under Opinion No. 25.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Earnings Summary
The Registrant recognized net income of $44.8 million, or $1.81
per share for the first nine months of 1996, which includes a
nonrecurring, after tax charge of $5 million, or $.20 cents per
share, associated with the recapitalization of the Savings
Association Insurance Fund ("SAIF"). This compares to net income
of $38.7 million, or $1.59 per share earned in the comparable
1995 period. Return on average total assets and return on
average stockholders' equity, exclusive of the nonrecurring SAIF
charge, was 1.72% and 21.66%, respectively, for the first nine
months of 1996 as compared to 1.82% and 18.71% ,respectively,
for the prior year period.
Net income for the quarter ended September 30, 1996 was $13.3
million, or $.54 per share, as compared with net income of $15.0
million, or $.60 per share in 1995. Net income for the quarter
ended September 30, 1996, excluding the nonrecurring SAIF
charge, would have been $18.3 million, or $.75 per share.
Return on average total assets and return on average
stockholders' equity, excluding the SAIF charge, was 1.77% and
23.95%, respectively, for the 1996 third quarter as compared to
2.01% and 20.43%, respectively, for the comparable prior year
period.
The improvement in the 1996 third quarter results, exclusive of
the nonrecurring SAIF charge, when compared with the prior year
period, is due in part to the aforementioned acquisitions, an
$11.0 million increase in net interest income, a $.5 million
decline in the provision for loan losses and a $.3 million
increase in non-interest income. This activity was partially
offset by a $7.8 million increase in non-interest expense
(primarily from the acquired businesses) and a $.8 million
increase in the provision for income taxes.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
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 primary source of
earnings. Net interest income is affected by the level and
composition of assets, liabilities and equity, as well as
changes in market interest rates.
Net interest income increased $11.0 million to $46.6 million for
the third quarter of 1996, from $35.6 million for the comparable
prior year period. The net interest margin, on a taxable
equivalent basis, declined to 4.98% during the third quarter of
1996 from 5.18% in the 1995 comparable period.
Interest income improved $19.5 million to $76.8 million during
the third quarter of 1996 when compared to $57.3 million during
the comparable prior year period. This increase resulted from a
$1.0 billion increase in the level of interest earning assets to
$3.8 billion during the third quarter of 1996, when compared to
$2.8 billion during the prior year period. The rise in interest
earning assets was due principally to the Extebank and First
Nationwide acquisitions, and the reinvestment of the liquidity
generated through the increase in average short term borrowings.
The decline in yield on interest earning assets to 8.11% from
8.29% during the period is primarily attributable to lower
yielding investment securities comprising 38.4% of average total
interest earning assets as of September 30, 1996 as compared to
only 30.2% during the prior year period.
Average taxable securities increased $96.6 million to $238.5
million during the third quarter of 1996 as compared with $141.9
million during the comparable prior year period.
Average mortgage-backed securities increased $453.8 million or
69.7% to $1.11 billion during the third quarter of 1996 as
compared with $651.4 million during the comparable prior year
period. This increase resulted from the investment of the cash
proceeds received in the aforementioned acquisitions, and
liquidity generated from entering into short-term borrowing
arrangements to finance purchases of mortgage-backed securities.
Average net loans increased $446.5 million or 23.3% to $2.36
billion for the 1996 third quarter when compared to $1.91
billion, for the comparable prior year period. This level of
growth was achieved through a combination of strong loan demand
in all loan categories, and the acquisition of approximately
$200 million loans from Extebank. As of September 30, 1996,
average net loans represented 61.7% of total interest earning
assets as compared to 69.3% during the prior year period.
Interest expense increased to $30.2 million in the third quarter
of 1996, reflecting a 3.87% cost of funds, as compared with
$21.7 million or 3.94% in 1995. The $8.5 million increase is
substantially due to a $916.6 million increase in average
interest bearing liabilities to $3.10 billion during the 1996
third quarter as compared to $2.18 billion during the prior year
period, partially offset by a reduction in the Registrant's
overall cost of funds during this time period. The rise in the
level of interest bearing liabilities was due principally to the
Extebank and First Nationwide acquisitions, and the
aforementioned increase in short term borrowings. Average short
term borrowings increased to $425.3 million during the 1996
third quarter as compared to $58.9 million during the prior year
period
Average demand deposits increased $244.8 million or 59.1% to
$659.0 million during the third quarter of 1996 as compared to
$414.2 million during 1995. Demand deposits acquired from
Extebank were approximately $105 million. Demand deposits
represented 20% of total deposits at September 30, 1996 as
compared to 16.1% at September 30, 1995.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
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
liabilities. Because of the numerous simultaneous volume and
rate changes during the period analyzed, it is not possible to
precisely allocate changes between volume or rate. 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-accrual
loans.
<TABLE>
Nine Months Ended Three Months Ended
For the Periods Ended September 30, 1996 vs. 1995 1996 vs. 1995
(in thousands ) Change in Change in
Average Average Net Interest Average Average Net Interest
Volume Rate Income Volume Rate Income
<S> <C> <C> <C> <C> <C> <C>
Interest Income from Earning Assets:
Interest Earning Deposits 5 (22) (17) 4 (7) (3)
Taxable Securities 4,694 106 4,800 1,634 187 1,821
Non-Taxable Municipals 2,420 (27) 2,393 1,412 (64) 1,348
Mortgage-Backed Securities 22,370 864 23,234 7,455 195 7,650
Loans, including non-accrual loans 22,932 (131) 22,801 10,061 (412) 9,649
Federal Funds Sold and Securities
Purchased Under Agreements to Resell (58) (75) (133) (159) (27) (186)
Total Interest Income 52,363 715 53,078 20,407 (128) 20,279
Interest Expense on Liabilities:
Total Savings and Time Deposits 14,462 (2,770) 11,692 5,468 (1,778) 3,690
Short-Term Borrowings 13,619 (94) 13,525 5,003 (187) 4,816
Long-Term Borrowings - 1 1 - (1) (1)
Total Interest Expense 28,081 (2,863) 25,218 10,471 (1,966) 8,505
Net Change in Net Interest Income 24,282 3,578 27,860 9,936 1,838 11,774
</TABLE>
The above table has been prepared on a Taxable Equivalent Basis.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (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, 1996 and 1995, respectively:
<TABLE>
For the Nine Months Ended September 30, 1996 1995
<S> <C> <C> <C> <C> <C> <C>
(dollars in thousands ) Average Average Average Average
Balance Interest Rate Balance Interest Rate
Interest Earning Assets:
Interest Earning Deposits $1,536 $60 5.22% $1,437 $77 7.16%
Taxable Securities 219,457 10,286 6.26% 119,377 5,486 6.14%
Non-Taxable Municipals 98,811 5,213 7.05% 52,984 2,820 7.12%
Mortgage-Backed Securities 1,071,258 52,623 6.56% 615,930 29,389 6.38%
Loans, net of unearned income & fees 2,207,681 150,146 9.08% 1,873,141 127,345 9.09%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 15,675 622 5.30% 17,078 755 5.91%
Total Interest Earning Assets 3,614,418 218,950 8.09% 2,679,947 165,872 8.28%
Allowance for Loan Losses (51,387) (51,921)
Cash and Due from Banks 125,863 85,809
Other Non-Interest Earning Assets 189,363 124,512
Total Assets $3,878,257 $2,838,347
Interest Bearing Liabilities:
Savings, N.O.W & Money Market Deposits 1,333,426 21,947 2.20% 1,174,750 21,197 2.41%
Time Deposits 1,181,996 46,065 5.21% 882,015 35,123 5.32%
Total Savings and Time Deposits 2,515,422 68,012 3.61% 2,056,765 56,320 3.66%
Short-Term Borrowings 381,673 15,376 5.38% 43,765 1,851 5.65%
Long-Term Borrowings 35,000 2,176 8.30% 35,000 2,175 8.31%
Total Interest Bearing Liabilities 2,932,095 85,564 3.90% 2,135,530 60,346 3.78%
Rate Spread 4.19% 4.50%
Non-Interest Bearing Deposits 586,654 385,044
Other Non-Interest Bearing Liabilities 52,106 41,334
Total Liabilities 3,570,855 2,561,908
Stockholders' Equity 307,402 276,439
Total Liabilities and Stockholders' Equity $3,878,257 $2,838,347
Net Interest Income and Net Interest Margin 133,386 4.93% 105,526 5.26%
Less: Tax Equivalent Basis Adjustment (2,702) (1,488)
Net Interest Income $130,684 $104,038
</TABLE>
(1) The above table has been prepared on a taxable equivalent
basis.
(2) Unrealized gains/(losses) on available-for-sale securities
are recorded in other non-interest earning assets.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
<TABLE>
For the Three Months Ended September 30, 1996 1995
(dollars in thousands )
<S> <C> <C> <C> <C> <C> <C>
Average Average Average Average
Balance Interest Rate Balance Interest Rate
Interest Earning Assets:
Interest Earning Deposits $1,575 $20 5.05% $1,311 $23 6.96%
Taxable Securities 238,476 4,079 6.80% 141,914 2,258 6.31%
Non-Taxable Municipals 119,137 2,136 7.13% 40,469 788 7.73%
Mortgage-Backed Securities 1,105,190 18,233 6.56% 651,371 10,583 6.45%
Loans, net of unearned income & fees 2,360,284 53,552 9.03% 1,913,756 43,903 9.10%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 2,098 26 4.93% 14,570 212 5.77%
Total Interest Earning Assets 3,826,760 78,046 8.11% 2,763,391 57,767 8.29%
Allowance for Loan Losses (51,031) (53,412)
Cash and Due from Banks 142,207 89,221
Other Non-Interest Earning Assets 183,837 146,602
Total Assets $4,101,773 $2,945,802
Interest Bearing Liabilities:
Savings, N.O.W & Money Market Deposits 1,366,565 7,367 2.14% 1,144,961 6,723 2.33%
Time Deposits 1,273,661 16,312 5.10% 945,041 13,266 5.57%
Total Savings and Time Deposits 2,640,226 23,679 3.57% 2,090,002 19,989 3.79%
Short-Term Borrowings 425,274 5,780 5.41% 58,924 964 6.49%
Long-Term Borrowings 35,000 727 8.26% 35,000 728 8.25%
Total Interest Bearing Liabilities 3,100,500 30,186 3.87% 2,183,926 21,681 3.94%
Rate Spread 4.24% 4.35%
Non-Interest Bearing Deposits 658,996 414,174
Other Non-Interest Bearing Liabilities 38,592 57,285
Total Liabilities 3,798,088 2,655,385
Stockholders' Equity 303,685 290,417
Total Liabilities and Stockholders' Equity $4,101,77 $2,945,802
Net Interest Income and Net Interest Margin 47,860 4.98% 36,086 5.18%
Less: Tax Equivalent Basis Adjustment (1,242) (455)
Net Interest Income $46,618 $35,631
</TABLE>
(1) The above table has been prepared on a taxable equivalent
basis.
(2) Unrealized gains/(losses) on available-for-sale securities
are recorded in other non-interest earning assets.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Non-Interest Income
Non-interest income, exclusive of net securities gains was $7.1
million in the 1996 third quarter, compared to $5.2 million in
the comparable prior year period.
Fees and Service Charges on deposit accounts improved 52% to
$4.1 million during the 1996 third quarter when compared to $2.7
million in the comparable prior year period. This improvement
is primarily due to the recent acquisitions and the
corresponding growth in demand deposits.
Investment management and trust fees improved to $1.4 million
during the 1996 third quarter when compared to $.9 million in
the comparable prior year period, reflecting continued growth at
the Registrant's broker/dealer subsidiary (Compass Investment
Services Corp.).
Net securities gains recognized during the 1996 third quarter
were $1.4 million and $3.0 million during the comparable 1995
period. These gains were realized through the sale of certain
equity investments.
Non-Interest Expense
Non-interest expense increased $7.9 million, exclusive of the
nonrecurring SAIF charge of $8.4 million, to $23.7 million
during the 1996 third quarter when compared to $15.8 million
during the comparable prior year period.
Compensation and Employee Benefits increased $2.6 million to
$11.3 million during the 1996 third quarter as compared to $8.7
million during the 1995 comparable period. Occupancy and
equipment expense increased $1.4 million to $4.1 million during
the quarter when compared to $2.7 million during the prior year
period. Amortization of intangibles increased $1.4 million to
$1.9 million during the quarter when compared to $.5 million
during the prior year period, reflecting the addition of
intangible assets associated with the recent acquisitions. Other
operating expense increased $2.0 million to $6.2 million during
the third quarter when compared to $4.2 million during the prior
year period. It is anticipated that the Registrant will benefit
from reduced FDIC insurance premiums during 1997 due to the SAIF
recapitalization plan, as approximately 45% of its deposits are
insured under the SAIF.
Other Real Estate expense increased $.4 million during the 1996
third quarter when compared to the comparable prior year period
due to the costs associated with liquidation of certain
properties.
The rise in non-interest expense was expected due to the
acquisitions. However, the Registrant's core efficiency ratio
remained at 42.8% in the third quarter and 42.3% for the nine
months in 1996. Consequently, non-interest expense levels are
commensurate with expectations.
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.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
The Registrant's effective tax rate was 38.8% for the third
quarter of 1996, as compared to 42.6% for the comparable prior
year period. The decline in the effective tax rate is
primarily attributable to the Registrant's implementation of
certain tax
planning strategies. The Registrant's effective tax rate was
40.0% for the nine months ended September 30, 1996, as compared
to 42.2% for the comparable prior year period.
Loan Portfolio
The Registrant's loan portfolio is concentrated primarily in
loans secured by real estate in metropolitan New York. The risk
inherent in this portfolio is dependent not only upon regional
and general economic stability which affects property values,
but also the financial well-being and creditworthiness of the
borrowers.
Loans outstanding totaled $2.42 billion at September 30, 1996,
an increase of $438.5 million or 22% when compared to $1.99
billion at December 31, 1995, of which approximately $200
million was acquired in the Extebank acquisition. Aggregate
loan growth during the first nine months of 1996 was achieved
through strong demand in all loan categories.
The following table represents the components of the loan
portfolio for the periods indicated (dollars in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
% of % of % of
Sept. 30, 1996 Total Dec. 31, 1995 Total Sept. 30, 1995 Total
Mortgage Loans-Multi-Family $777,212 32.07% $662,329 33.37% $604,432 31.18%
Mortgage Loans-Residential 568,219 23.45% 552,681 27.84% 568,654 29.34%
Mortgage Loans-Commercial 496,897 20.50% 367,158 18.50% 372,805 19.23%
Commercial & Industrial 337,196 13.91% 245,956 12.39% 237,870 12.27%
Consumer Loans and Leases 193,540 7.99% 111,475 5.61% 102,645 5.30%
Land and Construction Loans 50,467 2.08% 45,429 2.29% 51,853 2.68%
Total $2,423,531 100.00% $1,985,028 100.00% $1,938,259 100.00%
Less:
Unearned Income & Fees 23,914 18,588 18,251
Allowance for Loan Losses 48,912 50,210 51,222
Net Loans $2,350,705 $1,916,230 $1,868,786
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Asset Quality
At September 30, 1996, non-performing assets, which include
loans past due 90 days and still accruing interest, non accrual
loans and other real estate, declined $15.6 million to $21.8
million, in comparison to $37.4 million at December 31, 1995.
This reduction was achieved principally through the Registrant's
sale of approximately $16 million in non-performing assets for
cash. The overall reduction in the level of non-performing
assets by loan category is as follows; $6.0 million in
residential mortgages, $5.8 million in commercial mortgages, $.8
million in land and construction loans, and $3.5 million in
other real estate
Non- performing loans at September 30, 1996 consisted of $8.2
million in commercial loans, $6.2 million in commercial
mortgages, $2.9 million in residential mortgages, $2.7 million
in land and construction loans, and $.4 million in consumer
loans and leases.
The components of non-performing assets and restructured,
accruing loans are detailed below (in thousands):
<TABLE>
<S> <C> <C> <C>
Sept. 30, 1996 Dec. 31, 1995 Sept. 30, 1995
Loans Ninety Days Past Due and Still Accruing $3,169 $1,088 $2,447
Non-Accrual Loans 17,246 31,506 39,599
Non-Performing Loans 20,415 32,594 42,046
Other Real Estate 1,346 4,805 2,500
Non-Performing Assets 21,761 37,399 44,546
Restructured, Accruing Loans $13,783 $31,875 $33,416
</TABLE>
Loans are classified as restructured loans when management has
granted, for economic or legal reasons related to the borrower's
financial difficulties, concessions to the customer that would
not otherwise be considered. Generally, this occurs when the
cash flow of the borrower is insufficient to service the loan
under its original terms. The $18.1 million decline in
restructured, accruing loans to $13.8 million at September 30,
1996, when compared to December 31, 1995 levels, is primarily
attributable to the repayment of three multi-family mortgages,
previously acquired by the Registrant in its 1994 merger with
Metro Bancshares Inc.
Management determines what it deems to be the appropriate level
of the allowance for loan losses on an ongoing basis by
reviewing individual loans, 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.
During the 1996 third quarter, the provision for loan losses was
$1.5 million as compared to $2.0 million in the 1995 comparable
period. Net charge-offs aggregated $3.0 million, or .50% of
average net loans, as compared with $3.3 million or .68% of
average net loans during 1995. The charge-offs recognized
during the quarter resulted primarily from the bulk sale of
nonperforming loans. The allowance for loan losses at September
30, 1996 was $48.9 million, or 240% of non-performing loans and
2.04% of net loans. This compares to an allowance for loan
losses of $50.2 million, or 154.1% of non-performing loans, and
2.55% of net loans at December 31, 1995. While management uses
available information in estimating 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
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
allowance for loan losses. Such agencies may require the
Registrant to recognize additions to the allowance based on
their judgment of information available to them at the time of
their examinations. Based on current economic conditions,
management considers the allowance at September 30, 1996
adequate to cover the possible credit losses inherent in the
loan portfolio.
Securities
A) Held-to-Maturity Securities
The amortized cost, gross unrealized gains, gross unrealized
losses, and estimated fair values of Held-to-Maturity Securities
were as follows at September 30, 1996 (in thousands):
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
Mortgage-Backed Securities $246,722 $615 ($6,336) $241,001
State and Municipal Obligations 122,631 299 (1,969) 120,961
Other Securities 500 - - 500
$369,853 $914 ($8,305) $362,462
</TABLE>
B) Available-for-Sale Securities
The amortized cost, gross unrealized gains, gross unrealized
losses and estimated fair values of Available-for-Sale
Securities were as follows at September 30, 1996 (in thousands):
<TABLE>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
Mortgage-Backed Securities $841,885 $734 ($9,658) $832,961
U.S. Treasury Securities 118,358 14 (3,382) 114,990
U.S. Government Agencies' Obligations 43,595 - (490) 43,105
SBA Securities 26,823 110 (8) 26,925
Equity Securities 39,580 3,445 (121) 42,904
$1,070,241 $4,303 ($13,659) $1,060,885
</TABLE>
Mortgage-backed securities classified as held-to-maturity
included $.8 million in collateralized mortgage obligations
("CMO") at September 30, 1996. Mortgage-backed securities
("MBS") classified as available-for-sale included $319.1 million
in collateralized mortgage obligations at September 30, 1996.
These CMO securities, collateralized by either U.S. Government
Agency MBS's or whole loans, are principally conservative
current pay sequential or PAC structures with a current weighted
average life of 3.1 years.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
The prepayment of MBS's, including CMO's, is actively monitored
through the 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 portfolio.
At September 30, 1996, held-to-maturity securities and
available-for-sale securities carried at $636.9 million were
pledged for various purposes as required by law and to secure
securities sold under agreements to repurchase and other
borrowings.
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 under the rules applicable as of September 30, 1996. At
such dates the Registrant was in compliance with all applicable
regulatory requirements.
<TABLE>
<S> <C> <C>
(dollars in thousands) Amount Ratio
Tier 1 Capital $235,540 10.13%
Regulatory Requirement 93,000 4.00%
Excess 142,540 6.13%
Total Risk Adjusted Capital 264,848 11.39%
Regulatory Requirement 186,000 8.00%
Excess $78,848 3.39%
Risk Weighted Assets $2,324,994
</TABLE>
The Registrant's leverage ratio at September 30, 1996 was 5.86%.
The Tier I, total risk based and leverage capital ratios of the
Bank, were 10.0%, 11.26%, and 5.77%, respectively, at September
30, 1996.
The Federal Deposit Insurance Corporation Improvement Act
("FDICIA") became effective December 19, 1991. FDICIA
substantially revised the depository institution regulatory and
funding provisions of the Federal Deposit Insurance Act and
makes revisions to several other banking statutes. Among other
things, FDICIA requires the federal banking regulators to take
prompt corrective action 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 the Bank are
considered well capitalized.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Liquidity
The objective of 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 ability to meet
deposit withdrawals either on demand or by 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 Bank are limited by New
York Sate Banking Department regulations to the current year's
earnings plus the prior two years' retained net profits.
Pursuant to this regulation, the Bank had $73.9 million of
retained earnings available for dividends to the Registrant as
of September 30, 1996.
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.
In addition, the Bank has the ability, as a member of the
Federal Home Loan Bank system, to borrow $390.6 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, 1996, the
Bank had $10 million in such advances with an original maturity
of greater than one year.
The liquidity positions are monitored daily to ensure the
maintenance of an optimum level and efficient use of available
funds. Management believes that the Registrant and Bank have
sufficient liquidity to meet their operating requirements.
On September 24, 1996, the Board of Directors declared a
quarterly cash dividend of 20.0 cents per share. The dividend
is payable November 15, 1996 to shareholders of record at the
close of business October 24, 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 14, 1996 /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, 1996
(Unaudited)
<TABLE>
Three Months Ended Nine Months Ended
<S> <C> <C> <C> <C>
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
Net Income $13,274,466 $14,952,119 $44,836,136 $38,682,234
Common Equivalent Shares:
Weighted Average Common Shares Outstanding 24,132,603 24,751,446 24,537,631 24,271,687
Weighted Average Common Equivalent Shares 265,060 150,013 221,584 119,562
Weighted Average Common and
Common Equivalent Shares 24,397,663 24,901,459 24,759,215 24,391,249
Net Income per Common Equivalent Share $0.54 $0.60 $1.81 $1.59
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 124093
<INT-BEARING-DEPOSITS> 1710
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1060885
<INVESTMENTS-CARRYING> 369853
<INVESTMENTS-MARKET> 362462
<LOANS> 2423531
<ALLOWANCE> 48912
<TOTAL-ASSETS> 4098519
<DEPOSITS> 3238369
<SHORT-TERM> 464807
<LIABILITIES-OTHER> 46678
<LONG-TERM> 35000
0
0
<COMMON> 62621
<OTHER-SE> 251044
<TOTAL-LIABILITIES-AND-EQUITY> 4098519
<INTEREST-LOAN> 149756
<INTEREST-INVEST> 65810
<INTEREST-OTHER> 682
<INTEREST-TOTAL> 216248
<INTEREST-DEPOSIT> 68012
<INTEREST-EXPENSE> 85564
<INTEREST-INCOME-NET> 130684
<LOAN-LOSSES> 4500
<SECURITIES-GAINS> 2428
<EXPENSE-OTHER> 74534
<INCOME-PRETAX> 74661
<INCOME-PRE-EXTRAORDINARY> 74661
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44836
<EPS-PRIMARY> 1.81
<EPS-DILUTED> 1.81
<YIELD-ACTUAL> 4.93
<LOANS-NON> 17246
<LOANS-PAST> 3169
<LOANS-TROUBLED> 13783
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 50210
<CHARGE-OFFS> 9920
<RECOVERIES> 1031
<ALLOWANCE-CLOSE> 48912
<ALLOWANCE-DOMESTIC> 48912
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
