SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
For the period ended: March 31, 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 RD. , MELVILLE, NEW YORK 11747
(Address of principal executive offices (Zip Code)
(516) 844-1004
(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 5/10/96
$2.50 Par Value 24,718,576
<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 Report on Form 8-K dated March 15, 1996
(Reporting the Registrant's completion of its two
previously announced acquisitions.)
<PAGE>
<TABLE>
Consolidated Balance Sheets
(in thousands, except per share amounts)
March 31, 1996 Dec. 31, 1995 March 31, 1995
(unaudited) (unaudited)
<S> <C> <C> <C>
Assets
Cash & Due from Banks $130,816 $106,476 $92,820
Interest Earning Deposits 1,877 1,347 1,454
Federal Funds Sold &
Securities Purchased under
Agreements to Resell 100,000 - 8,000
Securities:
Available-for-Sale 1,111,418 814,485 141,952
Held-to-Maturity 371,728 342,143 88,540
Total Securities 1,483,146 1,156,628 730,492
Loans 2,224,606 1,985,028 1,860,026
Less: Unearned Income & Fees 20,333 18,588 17,586
Allowance for Loan Losses 50,858 50,210 50,638
Net Loans 2,153,415 1,916,230 1,791,802
Premises & Equipment, Net 52,755 45,169 39,242
Accrued Income Receivable 27,381 22,400 18,978
Intangibles 84,702 26,586 21,840
Other Real Estate 6,945 4,805 5,081
Other Assets 28,078 23,670 29,645
Total Assets $4,069,115 $3,303,311 $2,739,354
Liabilities and Stockholders' Equity
Demand Deposits $609,314 $451,802 $369,941
Savings, N.O.W. &
Money Market Deposits 1,456,342 1,153,739 1,155,360
Other Time Deposits 1,069,820 753,809 720,753
Certificates of Deposits,
$100,000 and Over 269,108 176,110 126,968
Total Deposits 3,404,584 2,535,460 2,373,022
Federal Funds Purchased
& Securiteis Sold Under
Agreements to Repurchase 240,516 391,369 31,795
Other Borrowings 10,000 1 ,000 10,000
Senior Note Payable 5,000 25,000 25,000
Purchased Security Liabilities 34,081 - -
Accrued Expenses &
Other Liabilities 46,844 31,637 26,850
Total Liabilities 3,761,025 2,993,466 2,466,667
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 24,968,613,
24,879,196, 24,225,809 shares
at the periods ending,
respectively 62,422 62,198 60,565
Additional Paid in Capital 104,205 102,398 98,406
Retained Earnings 154,246 144,773 114,585
Unrealized (Losses)/Gains
on Securities Available-for-Sale,
net of taxes (4,715) 2,149 (498)
Deferred Compensation (1,945) (1,020) (289)
Treasury Stock at cost; 258,037,
36,187, 5,925 shares at the
periods ending, respectively (6,123) (653) (82)
Total Stockholders' Equity 308,090 309,845 272,687
Total Liabilities and
Stockholders' Equity $4,069,115 $3,303,311 2,739,354
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Income
(in thousands, except per share amounts)
Three Months Ended
March 31, 1996 March 31, 1995
(unaudited) (unaudited)
<S> <C> <C>
Interest Income
Loans $45,551 $40,456
Mortgage-Backed Securities 16,497 9,097
U.S. Treasury & Government
Agency Securities 2,117 1,251
State & Municipal Obligations 747 689
Other Securities 339 321
Federal Funds Sold & Securities Purchased
Under Agreements to Resell 509 157
Interest Earning Deposits 21 34
Total Interest Income 65,781 52,005
Interest Expense
Savings, N.O.W. & Money Market Deposits 6,734 7,454
Other Time Deposits 10,409 8,105
Certificates of Deposit,
$100,000 and Over 2,931 1,503
Short-Term Borrowings 6,246 369
Long-Term Borrowings 724 722
Total Interest Expense 27,044 18,153
Net Interest Income 38,737 33,852
Provision for Loan Losses 1,500 2,000
Net Interest Income after
Provision for Loan Losses 37,237 31,852
Non-Interest Income
Fees & Service Charges on Deposit Accounts 2,983 2,616
Investment Management & Trust Fees 1,169 853
Mortgage Banking Operations 652 629
Other Operating Income 996 957
Net Securities Gains 991 98
Total Non-Interest Income 6,791 5,153
Non-Interest Expense
Compensation & Employee Benefits 9,661 8,156
Occupancy 1,922 1,671
Equipment 1,296 1,180
Other Real Estate 629 247
Amortization of Intangibles 468 368
Other Operating Expenses 4,777 5,615
Total Non-Interest Expense 18,753 17,237
Income Before Income Taxes 25,275 19,768
Provision for Income Taxes 10,850 8,268
Net Income $14,425 $11,500
Per Share:
Net Income $0.58 $0.48
Cash Dividends $0.20 $0.125
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 1996 1995
(in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $14,425 $11,500
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 1,500 2,000
Provision for Losses on Real Estate Acquired
in Settlement of Loans 338 47
Depreciation and Amortization 1,419 1,137
Amortization of Intangibles 468 368
Accretion of Discounts and
Net Deferred Loan Fees (1,177) (752)
Amortization of Premiums 1,753 981
Net Securities Gains (991) (98)
Other, Net 5,862 (1,975)
Net Cash Provided by Operating Activities 23,597 13,208
Cash Flows from Investing Activities:
Maturities, Calls and Principal Repayments on
Securities Held-to-Maturity 11,934 42,336
Purchases of Securities Held-to-Maturity (31,045) (100)
Proceeds from Sales of Securities
Available-for-Sale 6,953 783
Maturities and Principal Repayments on
Securities Available-for-Sale 53,170 10,244
Purchases of Securities Available-for-Sale (287,367) (7,027)
Loans Originated and Principal Repayments
on Loans and Other Real Estate Owned,Net (49,419) (32,079)
Proceeds from Sales of Real Estate Acquired
in Settlements of Loans 1,329 1,426
Proceeds from the Sale of Loans 8,506 1,221
Purchases of Premises and Equipment, Net (1,682) (1,156)
Net Cash & Cash Equivalents Received
in Acquisitions 601,596 -
Net Cash Provided by
Investing Activities 313,975 15,648
Cash Flows from Financing Activities:
Net (Decrease)/Increase in Deposits (48,155) 30,135
Net (Decrease) in Short-Term and
Other Borrowings (156,143 (28,205)
Purchase of Treasury Shares (6,084) (2)
Common Stock Sold for Cash 1,417 5,951
Dividends Paid to Shareholders (3,737) (2,377)
Net Cash (Used in)/Provided by
Financing Activities (212,702) 5,502
Net Increase in Cash and
Cash Equivalents 124,870 34,358
Cash and Cash Equivalents at Beginning
of the Quarter 107,823 67,916
Cash and Cash Equivalents at End
of the Quarter $232,693 $102,274
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows (Unaudited), Continued
For the Three Months Ended March 31, 1996 1995
(in thousands)
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest Expense $29,440 $14,562
Income Taxes $839 $3,845
Supplemental Schedule of Noncash Investing and Financing
Activities:
Real Estate Acquired in Settlement of Loans $2,200 $1,841
Loans to Facilitate the Sale of Other Real Estate $1,007 $1,096
During the Period the Registrant Purchased Various
Securities which Settled in the Subsequent Month $34,081 -
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 $834,481
Intangible Assets 58,584
Cash Paid 47,000
Liabilities Assumed $940,065
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Changes in Stockholders' Equity (Unaudited)
(in thousands, except per share amounts)
Additional Unrealized
Common Paid in Retained Securities Deferred Treasury
Stock Capital Earnings Gains/(Losses) Comp. Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $57,623 $94,526 $106,186 ($2,871) ($514) ($27) $254,923
Net Income - - 11,500 - - - 11,500
Cash Dividends
($0.125 per share) - - (3,101) - - - (3,101)
Sale of Common Stock
(595,815 shares) 1,490 1,625 - - - - 3,115
Exercise of Warrants
(580,807 shares) 1,452 2,243 - - - - 3,695
Deferred Compensation Activity:
Restricted Stock Awards,
net (12,834 shares) - 12 - - 19 (53) (22)
Amortization of Other Deferred
Compensation Plans - - - - 206 - 206
Purchase of Treasury Stock
(146 shares) - - - - - (2) (2)
Adjustment to Unrealized Gains/(Losses)
on Securities Available-for-Sale,
net of taxes - - - 2,373 - - 2,373
Balance, March 31, 1995 $60,565 $98,406 $114,585 ($498) ($289) ($82) $272,687
Balance, December 31, 1995 $62,198 $102,398 $144,773 $2,149 ($1,020) ($653) $309,845
Net Income - - 14,425 - - - 14,425
Cash Dividends
($0.20 per share) - - (4,952) - - - (4,952)
Sale of Common Stock
(89,417 shares) 224 1,376 - - - - 1,600
Restricted Stock Activity,
net (34,650 shares) - 431 - - (925) 614 120
Purchase of Treasury Stock
(256,500 shares) - - - - - (6,084) (6,084)
Adjustment to Unrealized (Losses)/Gains
on Securities Available-for-Sale,
net of taxes - - - (6,864) - - (6,864)
Balance, March 31, 1996 $62,422 $104,205 $154,246 ($4,715) ($1,945) ($6,123) $308,090
</TABLE>
<PAGE>
North Fork Bancorporation, Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1996 and 1995
General
The accounting and reporting policies of North Fork
Bancorporation, Inc. (the "Registrant"), and its 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 quarter ended March 31, 1996 are
not necessarily indicative of the results of operations which
may be expected for the full year 1996 or any other interim
periods.
On March 15, 1996, the Bank completed its purchase of the
domestic commercial banking business of Extebank ("Extebank").
Extebank had approximately $387.4 million in total assets,
$200.0 million in net loans, $347.6 million in deposit
liabilities, $30.0 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. The Bank assumed $572
million of customer deposit liabilities for which it paid a
deposit premium of 6.35%. Assets acquired consisted primarily of
$529 million in cash.
The intangibles created from the aforementioned transactions
aggregated approximately $59 million, of which $23.1 million is
attributable to the First Nationwide core deposit intangible.
The intangible assets associated with these transactions are
currently being amortized in accordance with various methods
over periods not exceeding 20 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.
The impact of these recent acquisitions on the Registrant's
operating results for the quarter ended March 31, 1996 were
insignificant.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
RECENT ACCOUNTING DEVELOPMENTS:
Accounting for Mortgage Servicing Rights:
Statement of Financial Accounting Standards No. 122, ("SFAS
122").
The Registrant adopted SFAS 122 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 Registrant's financial
condition or results of operations.
Accounting for Stock Based Compensation:
Statement of Financial Accounting Standards No. 123, ("SFAS
123").
The Registrant adopted SFAS 123 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
North Fork Bancorporation, Inc. (the "Registrant") recognized
net income of $14.4 million, or $.58 per share, for the quarter
ended March 31, 1996, as compared with net income of $11.5
million, or $.48 per share earned in 1995. Return on average
total assets was 1.65% and the return on average stockholders'
equity was 18.63% for the quarter ended March 31, 1996. Return
on average total assets was 1.70% and the return on average
stockholders' equity was 17.76% for the comparable prior year
period.
The improvement in the Registrant's 1996 first quarter results,
when compared with the comparable prior year period, is
attributable to a $4.9 million increase in net interest income,
a $1.6 million increase in non-interest income, and a $.5
million decrease in the provision for loan losses. This
activity was partially offset by a $1.5 million increase in
non-interest expense and a $2.6 million increase in the
provision for income taxes.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
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 assets, liabilities and equity, as well
as changes in market interest rates.
Net interest income increased $4.9 million to $38.7 million in
the first quarter of 1996, as compared to $33.9 million in 1995.
The components of this increase include a $13.8 million
increase in interest income partially offset by a $8.9 million
increase in interest expense. The net interest margin, on a
taxable equivalent basis, declined to 4.79% in 1996 from 5.36%
in 1995.
Interest income improved to $65.8 million in the first quarter
of 1996 from $52.0 million in 1995. This improvement was
principally attributable to a $696.8 million or a 26.8% increase
in the level of interest earning assets to $3.3 billion during
the 1996 first quarter as compared with $2.6 billion during the
comparable prior year period and to a lesser extent the impact
of higher market interest rates.
Average mortgage-backed securities increased $431.6 million or
74.6% to $1.01 billion during 1996 as compared with $578.9
million during the comparable prior year period. This increase
resulted from management initiating a pre-investment program
during the fourth quarter of 1995, in anticipation of the
pending acquisitions. At the time of completing the two
acquisitions, management had invested $654.9 million of the
transaction proceeds by purchasing mortgage-backed securities
with a weighted average life of 3.5 years. These purchases,
which were funded through short-term borrowings at a positive
spread of approximately 120 basis points, negatively impacted
the Registrant's net interest margin during the first quarter.
Average net loans increased $180.7 million or 9.8% to $2.02
billion for the 1996 first quarter when compared to $1.84
billion for the comparable prior year period, resulting from
continued growth in multi-family mortgages and consumer loans
and leases, additional loans acquired in the July 1995
acquisition of Great Neck Bank and approximately $200 million in
loans acquired in the Extebank transaction which closed on March
15, 1996. This increase was partially offset by a decline in
residential mortgages.
Interest expense increased to $27.0 million in the first
quarter of 1996, reflecting a 4.06% cost of funds, as compared
with $18.2 million or 3.49% in 1995. The $8.8 million increase
is primarily attributable to a $572.9 million increase in the
level of average interest bearing liabilities to $2.68 billion
during the 1996 first quarter as compared to $2.1 billion during
the comparable prior year period. Average short-term borrowings
increased as a result of the aforementioned pre-investment
program to $452.7 million during the 1996 first quarter as
compared to $27.1 million during the comparable prior year
period. Subsequent to completing these acquisitions the
Registrant reduced the level of its short-term borrowings with
the cash proceeds received. Average Savings and Time deposits
increased $147.3 million to $2.2 billion during the 1996 first
quarter as compared to $2.0 billion during the comparable prior
year period. This increase was primarily attributable to the
acquisition of Extebank and the First Nationwide branches near
the end of the quarter.
Additionally, the Registrant's overall cost of funds was
negatively affected by the impact of higher short-term market
interest rates and the change in the relative composition of the
Registrant's funding sources. Interest bearing deposits
remained relatively stable; however, in response to market
interest rates, customers shifted balances from lower yielding
savings accounts to higher yielding time deposits.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Net Interest Income (continued)
Average demand deposit increased $111.4 million or 32.6% to
$459.8 million during the first quarter of 1996 as compared to
$341.3 million from 1995. Demand deposits represented 17.9% of
total deposits at March 31, 1996 as compared to 15.6% at March
31, 1995.
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>
Three Months Ended March 31, 1996 vs. 1995
(in thousands ) Change in
Average Average Net Interest
Volume Rate Income
<S> <C> <C> <C>
Interest Income from Earning Assets:
Interest Earning Deposits $5 ($18) ($13)
Taxable Securities 804 83 887
Non-Taxable Municipals 109 (8) 101
Mortgage-Backed Securities 7,111 289 7,400
Loans, including non-accrual loans 4,333 716 5,049
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 466 (114) 352
Total Interest Income 12,828 948 13,776
Interest Expense on Liabilities:
Total Savings and Time Deposits 2,335 677 3,012
Short-Term Borrowings 5,875 2 5,877
Long-Term Borrowings - 2 2
Total Interest Expense 8,210 681 8,891
Net Change in Net Interest Income $4,618 $267 $4,885
</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
Net Interest Income (continued)
The following tables present an analysis of net interest income
by each major category of interest earning assets and interest
bearing liabilities for the three month periods ended March 31,
1996 and 1995, respectively:
<TABLE>
For the Three Months Ended March 31, 1996 1995
(dollars in thousands)
Average Average Average Average
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Earning Deposits $1,586 $21 5.33% $1,552 $34 8.96%
Taxable Securities 163,572 2,531 6.22% 112,238 1,644 5.94%
Non-Taxable Municipals 66,310 1,142 6.93% 60,850 1,041 6.94%
Mortgage-Backed Securities 1,010,401 16,497 6.57% 578,850 9,097 6.37%
Loans, net of unearned income
& fees 2,016,584 45,607 9.10% 1,835,922 40,558 8.96%
Federal Funds Sold and Securities
Purchased Under Agreements
to Resell 38,506 509 5.32% 10,700 157 5.94%
Total Interest Earning Assets 3,296,959 66,307 8.09% 2,600,112 52,531 8.19%
Allowance for Loan Losses (51,804) (51,009)
Cash and Due from Banks 99,132 81,324
Other Non-Interest Earning Assets 174,330 106,693
Total Assets $3,518,617 $2,737,120
Interest Bearing Liabilities:
Savings, N.O.W & Money
Market Deposits 1,196,599 6,734 2.26% 1,244,665 7,454 2.43%
Time Deposits 995,851 13,340 5.39% 800,509 9,608 4.87%
Total Savings and Time Deposits 2,192,450 20,074 3.68% 2,045,174 17,062 3.38%
Short-Term Borrowings 452,676 6,246 5.55% 27,091 369 5.52%
Long-Term Borrowings 35,000 724 8.32% 35,000 722 8.37%
Total Interest Bearing
Liabilities 2,680,126 27,044 4.06% 2,107,265 18,153 3.49%
Rate Spread 4.03% 4.70%
Non-Interest Bearing Deposits 459,820 341,332
Other Non-Interest Bearing
Liabilities 67,169 25,897
Total Liabilities 3,207,115 2,474,494
Stockholders' Equity 311,502 262,625
Total Liabilities and
Stockholders' Equity $3,518,617 $2,737,119
Net Interest Income and
Net Interest Margin 39,263 4.79% 34,378 5.36%
Less: Tax Equivalent Basis
Adjustment (526) (526)
Net Interest Income $38,737 $33,852
</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
Non-Interest Income
Non-interest income, exclusive of net securities gains was $5.8
million in the 1996 first quarter, compared with $5.1 million in
the comparable prior year period. Net securities gains were
$1.0 million during the current period, as compared with $98
thousand for the comparable prior year period. Net securities
gains recognized during 1996 were due to the Registrant selling
certain equity investments which were held in its
available-for-sale portfolio.
Fees and Service Charges on deposit accounts increased 14% to
$3.0 million during the 1996 first quarter when compared to $2.6
million in the comparable prior year period. The increase is
primarily due to the growth in the Registrant's demand deposits.
Investment management and trust fees increased 37% to $1.2
million during the 1996 first 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.)
Non-Interest Expense
Non-interest expense increased $1.5 million to $18.7 million
during the 1996 first quarter when compared to $17.2 million
during the comparable prior year period.
Compensation and Employee Benefits increased $1.5 million to
$9.7 million during the 1996 first quarter as compared to $8.2
million during the 1995 comparable period. Occupancy and
equipment expense increased $.4 million during the 1996 first
quarter when compared to the 1995 comparable prior period.
These increases reflect the Registrant's acquisition of Great
Neck Bank, the opening of two new branches, the opening of the
Registrant's administrative headquarters during 1995, and the
acquisition of Extebank and the First Nationwide branches.
Other Real Estate expense increased $.4 million during the 1996
first quarter when compared to the comparable prior year period
due to the costs associated with liquidation of certain
properties.
Other operating expense declined 15% to $4.8 million during the
1996 first quarter as compared to $5.6 million during the
comparable prior year period. This reduction is attributable to
a $.8 million reduction in FDIC insurance premiums (as of March
31, 1996 approximately 43% of the Registrants deposits were
insured under the Savings Association Insurance Fund ("SAIF").
The Registrant's core efficiency ratio, which represents the
ratio of non-interest expense, net of other real estate expenses
and other non-recurring charges, to net interest income, on a
tax equivalent basis, and non-interest income net of securities
gains and losses, improved to 40.22% for the 1996 first quarter
when compared to 43.09% for the comparable prior year period.
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
Income Taxes (continued)
The Registrant's effective tax rate was 42.9% for the first
quarter of 1996, as compared to 41.8% 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 $2.22 billion at March 31, 1996, an
increase of $239.6 million or 12.1% when compared to $1.99
billion at December 31, 1995, of which $198.2 million were principally
acquired in the Extebank acquisition. The former Extebank loan
portfolio at March 31, 1996 was comprised of $100.6 million of
commercial loans, $55.3 million of commercial mortgage loans,
$21.6 million in consumer loans, $12.5 million in residential
loans, $7.7 million in construction and land loans and $.4
million in multi-family mortgages. Loan growth, exclusive of
loans acquired from Extebank, consisted of a 3.9% increase in
multi-family mortgage loans to $687.9 million, a 4.3% increase
in commercial mortgage loans to $383.0 million, a 13.9% increase
in consumer loans and leases to $127 million as well as a modest
increase in construction and land loans. This increase was
partially offset by a 2.7% decline in residential mortgage loans
to $537.8 million and a modest decline in commercial loans.
The following table represents the components of the loan
portfolio for the periods indicated (dollars in thousands):
<TABLE>
% of % of % of
March 31, 1996 Total December 31, 1995 Total March 31, 1995 Total
<S> <C> <C> <C> <C> <C> <C>
Mortgage Loans-Multi-Family $688,308 30.94% $662,329 33.37% $559,695 30.09%
Mortgage Loans-Residential 550,382 24.74% 552,681 27.84% 588,717 31.65%
Mortgage Loans-Commercial 438,288 19.70% 367,158 18.50% 347,110 18.66%
Commercial & Industrial 343,359 15.44% 245,956 12.39% 236,076 12.69%
Consumer Loans and Leases 148,625 6.68% 111,475 5.61% 78,378 4.22%
Land and Construction Loans 55,644 2.50% 45,429 2.29% 50,050 2.69%
Total $2,224,606 100.00% $1,985,028 100.00% $1,860,026 100.00%
Less:
Unearned Income & Fees 20,333 18,588 17,586
Allowance for Loan Losses 50,858 50,210 50,638
Net Loans $2,153,415 $1,916,230 $1,791,802
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Asset Quality
At March 31, 1996, non-performing assets, which include loans
past due 90 days and still accruing interest, non accrual loans
and other real estate, declined $.3 million to $37.1 million, in
comparison to $37.4 million at December 31, 1995. This modest
decline consisted principally of a $5.7 million decline in
residential mortgages, which resulted from the bulk sale of
approximately $6.0 million in non-performing loans, and a $1.1
million decline in commercial mortgage loans. These declines
were partially offset by $3.6 million in non-performing assets
($1.1 million of which was other real estate) acquired from
Extebank, a $1.9 million increase in commercial loans and a $1.0
million increase in other real estate.
Non- performing loans at March 31, 1996 consisted of $11.7
million in commercial mortgages, $11.3 million commercial loans,
$3.6 million in construction and land loans, $3.3 million in
residential mortgages and $.3 million in consumer loans and
leases.
The components of non-performing assets and restructured,
accruing loans are detailed below (in thousands):
<TABLE>
March 31, 1996 December 31, 1995 March 31, 1995
<S> <C> <C> <C>
Loans Ninety Days Past Due
and Still Accruing $855 $1,088 $2,362
Non-Accrual Loans 29,344 31,506 39,475
Non-Performing Loans 30,199 32,594 41,837
Other Real Estate 6,945 4,805 5,081
Non-Performing Assets 37,144 37,399 46,918
Restructured, Accruing Loans $34,081 $31,875 $38,980
</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. At March 31, 1996, the portfolio of
restructured, accruing loans is comprised primarily of loans
which have demonstrated performance in accordance with the terms
of their restructure agreements for at least two years, and are
currently yielding 6.57%.
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 first quarter, the provision for loan losses
declined to $1.5 million as compared to $2.0 million in the 1995
comparable period. Net charge-offs aggregated $3.9 million, or
.79% of average net loans, as compared with $1.4 million or .32%
of average net loans during 1995. The increase in net
charge-offs during the period was primarily attributable to the
non-recurring bulk sale of non-performing residential mortgages.
The allowance for loan losses at March 31, 1996 was $50.8
million, or 168.4% of non-performing loans and 2.31% 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. Extebank's allowance for loan
losses at acquisition date was $3.1 million. While management
uses available information in estimating possible loan losses,
future additions to the
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Asset Quality (continued)
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 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 March 31, 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 March 31, 1996 (in thousands):
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
Mortgage-Backed Securities $270,278 $1,049 ($4,825) $266,502
State and Municipal Obligations 101,450 502 (1,087) 100,865
$371,728 $1,551 ($5,912) $367,367
</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 March 31, 1996 (in thousands):
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
Mortgage-Backed Securities $859,842 $992 ($7,960) $852,874
U.S. Treasury Securities 146,064 45 (1,676) 144,433
U.S. Government Agencies'
Obligations 58,671 178 (333) 58,516
SBA Securities 29,324 407 - 29,731
Equity Securities 25,788 176 (100) 25,864
$1,119,689 $1,798 ($10,069) $1,111,418
</TABLE>
Mortgage-backed securities classified as held-to-maturity
included $.9 million in collateralized mortgage obligations
("CMO") at March 31, 1996. Mortgage-backed securities ("MBS")
classified as available-for-sale included $318.8 million in
collateralized mortgage obligations at March 31, 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 3.5 years.
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 March 31, 1996, held-to-maturity securities and
available-for-sale securities carried at $502.6 million were
pledged for various purposes as required by law and to secure
securities sold under agreements to repurchase and other
borrowings.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital
The Federal Reserve Board has formal capital guidelines which
bank holding companies are required to meet. The risk based
capital guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profiles
among banks and bank holding companies to account for
off-balance sheet exposure and to minimize disincentives for
holding liquid assets. Under these guidelines, assets and
off-balance sheet items are assigned to broad risk categories,
each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk weighted assets
and off balance sheet items. The guidelines currently require
all bank holding companies to maintain a minimum ratio of total
risk based capital to total risk weighted assets of 8.00%,
including a minimum ratio of Tier I capital to risk weighted
assets of 4.00%.
The following table sets forth the Registrant's regulatory
capital under the rules applicable as of the following dates.
At such dates the Registrant was in compliance with all
applicable regulatory requirements.
<TABLE>
March 31, 1996 December 31, 1995
(dollars in thousands) Amount Ratio Amount Ratio
<S> <C> <C> <C> <C>
Tier 1 Capital $228,060 10.59% $281,063 15.50%
Regulatory Requirement 86,154 4.00% 72,521 4.00%
Excess 141,906 6.59% $208,542 11.50%
Total Risk Adjusted Capital 255,279 11.85% $304,066 16.77%
Regulatory Requirement 172,308 8.00% 145,042 8.00%
Excess $82,971 3.85% $159,024 8.77%
Risk Weighted Assets $2,153,848 $1,813,029
</TABLE>
The Registrant's leverage ratio at March 31, 1996 was 6.64% as
compared to 8.86% at December 31, 1995. The Tier I, total risk
based and leverage capital ratios of the Registrant's bank
subsidiary, were 11.40%, 12.66%, and 7.14%, respectively, at
March 31, 1996 as compared to 16.00%, 17.26% and 9.14%,
respectively, at December 31, 1995. The decline in the
Registrant's and Bank's Capital Ratios resulted from the
recently completed purchase acquisitions which achieved the
Registrant's goal to effectively utilize its excess capital.
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 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. As of March 31,
1996, the Registrant had
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Capital (continued)
repurchased 331,092 shares. Consistent with the intended
purpose of the Stock Repurchase Program, 91,250 of these shares
have been used, with the remainder available, to fund employee
common stock based compensation and award plans.
On March 26, 1996, the Registrant's Board of Directors declared
a quarterly cash dividend of 20.0 cents per share, a 33%
increase over the 15.0 cents declared in the previous quarter.
The dividend is payable May 15, 1996 to shareholders of record
at the close of business April 26, 1996.
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 $89.1 million of
retained earnings available for dividends to the Company as of
March 31, 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 March 31, 1996, the Bank
had $10 million in such advances with an original maturity of
greater than one year.
The Registrant's 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: May 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
March 31, 1996
(Unaudited)
<TABLE>
March 31, 1996 March 31, 1995
<S> <C> <C>
Net Income $14,425,242 $11,499,834
Common Equivalent Shares:
Weighted Average Common
Shares Outstanding 24,853,508 23,754,513
Weighted Average Common
Equivalent Shares 237,751 397,518
Weighted Average Common
and Common Equivalent Shares 25,091,259 24,152,031
Net Income per Common Equivalent Share $0.58 $0.48
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> QTR-1
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 130816
<INT-BEARING-DEPOSITS> 1877
<FED-FUNDS-SOLD> 100000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1111418
<INVESTMENTS-CARRYING> 371728
<INVESTMENTS-MARKET> 367367
<LOANS> 2224606
<ALLOWANCE> 50858
<TOTAL-ASSETS> 4069115
<DEPOSITS> 3404584
<SHORT-TERM> 240516
<LIABILITIES-OTHER> 46844
<LONG-TERM> 35000
<COMMON> 62422
0
0
<OTHER-SE> 245668
<TOTAL-LIABILITIES-AND-EQUITY> 4069115
<INTEREST-LOAN> 45551
<INTEREST-INVEST> 19700
<INTEREST-OTHER> 530
<INTEREST-TOTAL> 65781
<INTEREST-DEPOSIT> 20074
<INTEREST-EXPENSE> 27044
<INTEREST-INCOME-NET> 38737
<LOAN-LOSSES> 1500
<SECURITIES-GAINS> 991
<EXPENSE-OTHER> 18753
<INCOME-PRETAX> 25275
<INCOME-PRE-EXTRAORDINARY> 25275
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14425
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
<YIELD-ACTUAL> 479
<LOANS-NON> 29344
<LOANS-PAST> 855
<LOANS-TROUBLED> 34081
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 50210
<CHARGE-OFFS> 4187
<RECOVERIES> 243
<ALLOWANCE-CLOSE> 50858
<ALLOWANCE-DOMESTIC> 50858
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
