SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
________________
September 12, 1996
Date of Report (Date of Earliest Event Reported)
NORTH FORK BANCORPORATION, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-1280 36-315468
(State or Other (Commission File (I.R.S. Employer
Jurisdiction Number) Identification No.)
of Incorporation)
275 Broad Hollow Road
Melville, New York
(Address of Principal Executive Offices)
11747
(Zip Code)
(516) 298-5000
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed
Since Last Report)
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of the Business Acquired.
Not applicable.
(b) Pro Forma Financial Information.
Not applicable.
(c) Exhibits. Unless otherwise included herein, exhibits to the
following documents are not included in, or made a part of, this
Current Report on Form 8-K.
99.1 North Side Savings Bank Annual Report on
Form F-2 for the fiscal year ended
September 30, 1995.
99.2 North Side Savings Bank Quarterly
Report on Form F-4 for the quarter ended
December 31, 1995.
99.3 North Side Savings Bank Quarterly Report
on Form F-4 for the quarter ended March
31, 1996.
99.4 North Side Savings Bank Quarterly Report
on Form F-4 for the quarter ended June
30, 1996.
99.5 North Side Savings Bank Current Report
on Form F-3 for the month of January
1996.
99.6 North Side Savings Bank Current Report
on Form F-3 for the month of March 1996.
99.7 North Side Savings Bank Current Report
on Form F-3 for the month of April 1996.
99.8 North Side Savings Bank Current Report
on Form F-3 for the month of July 1996.
99.9 North Side Savings Bank Proxy Statement,
dated December 22, 1995.
99.10 Description of North Side Capital Stock (as
included in North Side's Offering Circular dated
March 24, 1986)
99.11 North Side Savings Bank
Registration Statement on Form F-
10, dated April 23, 1996.
99.12 North Side Savings Bank Amendment
No. 1 to the Registration Statement
on Form F-10, dated as of
August 21, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.
NORTH FORK
BANCORPORATION, INC.
By: /s/ Daniel M. Healy
_____________________________
Name: Daniel M. Healy
Title: Executive Vice President
and Chief Financial Officer
Date: September 12, 1996
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C.
FORM F-2
ANNUAL REPORT UNDER SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: Federal Deposit Insurance Corporation
September 30, 1995 Certificate Number: 16007
NORTH SIDE SAVINGS BANK
------------------------------------------------------
(Exact name of bank as specified in its
New York 13-1723204
- ------------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
170 Tulip Avenue
Floral Park, New York 11001
------------------------ ----------
(Address of principal office) (Zip Code)
Bank's telephone number, including area code: (516) 488-6900
Securities Registered Under Section 12(g) of the Act:
Common Stock, $1.00 par value
(Title of Class)
Indicate by check mark if the bank, as a "small business issuer" as defined
under 17 CFR 240.12b-2, is providing alternative disclosures as permitted
for small business issuers in this Form F-2. [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to item
10 is not contained herein, and will not be contained, to the best of the
bank's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form F-2 or any amendment of
this Form F-2. [ ]
Indicate by check mark whether the bank (1) has filed all reports required
to be filed by Section 13 of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Bank was required
to file such reports) and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO
------ ------
As of December 22, 1995, the aggregate market value of the 4,570,950 shares
of Common Stock of the Registrant issued and outstanding on such date,
excluding 231,729 shares held by all directors and executive officers as a
group (which includes 38,331 shares held by the Registrant's Management
Development and Recognition Plan Trust and a 29.2% undivided interest of
principal officers in 47,143 shares (as of September 30, 1995) held by the
Registrant's 401(k) Savings Plan, but does not include 108,384 shares held
by the Registrant's Retirement Plan Trust II) was $128,007,020. This figure
is based on the last sale price of $29.50 per share of the Bank's Common
Stock on December 22, 1995.
Number of shares of Common Stock outstanding as of December 22, 1995: 4,802,679.
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the part of the Form F-2 into which the document is
incorporated:
(1) Portions of the Annual Report to Shareholders for the year ended
September 30, 1995 are incorporated by reference into Part II, Items 5, 6,
7, and 8 and Part IV, Item 11 of this Form F-2.
(2) Portions of the definitive Proxy Statement for the 1996 Annual Meeting
of Shareholders are incorporated by reference into Part I, Item 4 and Part
III, Items 9 and 10 of this Form F-2.
PART I.
ITEM 1. BUSINESS
GENERAL
North Side Savings Bank ("North Side" or the "Bank") is a New
York State chartered, stock savings bank which was chartered in 1905. North
Side is currently celebrating the 90th anniversary of its founding.
Deposits at the Bank are insured, up to the maximum legal limits, by the
Bank Insurance Fund ("BIF"), administered by the Federal Deposit Insurance
Corporation ("FDIC"). During fiscal 1995, the Bank completed the purchase
of two branches from Chemical Bank located in Co-op City, Bronx and East
Elmhurst, Queens. The Bank assumed approximately $48.6 million in deposits.
The Bank currently has a 17 full service branch retail network serving the
Bronx, Queens, Nassau and Suffolk Counties with average deposits of $70.5
million per branch at September 30, 1995. At September 30, 1995, the Bank
had total assets of $1.59 billion, deposits of $1.20 billion and
shareholders' equity of $116.3 million.
North Side Savings Bank had net income of $15.1 million or $3.15 per share
for the fiscal year ended September 30, 1995 as compared to $13.4 million
or $2.82 per share for the fiscal year ended September 30, 1994. The fiscal
1995 results represent the second consecutive year of record earnings for
the Bank. On a fully diluted basis, earnings per share were $3.06 for the
fiscal year ended September 30, 1995.
The Bank's fiscal 1995 financial performance was highlighted by increased
net interest income, which was achieved primarily through additional
leveraging of the Bank's capital base, continued improvements in asset
quality (which resulted in a substantially reduced provision for loan
losses and lower other real estate owned expense) and overall reduced
operating expenses, reflecting the Bank's continuing cost control
management efforts.
During fiscal 1995, the yield curve generally flattened, that is,
short-term rates generally were increasing over the course of the year
while intermediate and long-term rates generally were decreasing during the
same time period. This interest rate environment had a greater impact on
the Bank's overall cost of funds than on rates earned on interest-earning
assets, as average rates paid rose by 87 basis points (100 basis points
being equal to 1.0%) to 3.89%, while overall asset yields increased 64
basis points to 7.08% for fiscal 1995. Consequently, the Bank's interest
rate spread decreased to 3.19% for the year ended September 30, 1995 from
3.42% for the year ended September 30, 1994 and the net interest margin
(net interest income divided by average interest-earning assets) decreased
to 3.39% in fiscal 1995 as compared to 3.51% in fiscal 1994. However, a
strong capital base coupled with substantial improvement in credit quality
enabled the Bank to leverage its growth, primarily through the use of
collateralized financings as a source of funds for additional assets
yielding higher rates of return than the rates of interest charged on such
borrowings. During fiscal 1995, average earning assets increased by $80.8
million. This growth in earning assets more than offset the decrease in the
Bank's interest rate spreads and margins, and as a result net interest
income increased by $1.0 million during fiscal 1995.
Asset quality again improved significantly during fiscal 1995. This
improvement was accomplished primarily through the bulk sale of a
non-performing loan package, the sale of properties held as other real
estate owned ("OREO") and specific loan charge-offs related to other non-
performing loans.
Non-performing loans were $4.9 million at September 30, 1995, a decrease of
$9.0 million, or 64.6%, from the level at September 30, 1994. OREO also
reflected a significant decrease of $5.9 million, or 69.9%, during the
current fiscal year. As a result, management deemed it prudent to reduce
the provision for loan losses to $2.8 million during fiscal 1995 as
compared to $3.6 million during fiscal 1994. The allowance for loan losses
was $6.4 million or 130.83% of non-performing loans at September 30, 1995
as compared to $11.2 million or 80.65% of non-performing loans at September
30, 1994. In addition, because of the significant decrease in OREO, OREO
related expenses decreased by $750,000 for the current fiscal year. See
"ASSET QUALITY" and Note 8 of the Notes to Consolidated Financial
Statements.
Management continued to maintain strong control over operating expenses as
compensation and benefits, occupancy and equipment and other operating
expenses declined by $714,000 in fiscal 1995 as compared to fiscal 1994. In
addition, because of lower premiums which became effective on June 1, 1995,
the Bank's BIF deposit insurance expense decreased $1.2 million in fiscal
1995 and is expected to again decrease significantly in fiscal 1996. The
Bank's efficiency ratio (operating expense before OREO expense, net and
restructuring expenses as a percentage of net interest income, customer
service fees and other income, excluding gains and losses) was 43.59%,
47.56% and 45.65% for the fiscal years ended September 30, 1995, 1994 and
1993, respectively.
The Bank strives to maintain net interest spreads and margins within
relatively stable ranges in all types of interest rate environments. The
Bank uses its best efforts to reduce what it perceives as inordinate
interest rate risk in its asset mix. To accomplish this in fiscal 1995, the
Bank continued to purchase fixed-rate mortgage-backed securities and other
investments with relatively short (generally less than five years)
estimated average lives or with adjustable rate features as considered
appropriate. North Side has been able to maintain a significant core
deposit base over time despite changes in the interest rate environment.
Such core deposits help to limit interest rate risk by providing a fairly
stable, low cost funding base. Because of its strong liquidity levels and
cash flow, which continued during fiscal 1995, the Bank has been able to
invest in higher yielding investments or repay outstanding borrowings when
deemed appropriate by management. Also, because of its continuing
profitability and emphasis on improving overall asset quality, North Side
has utilized borrowings to a greater extent during the past several fiscal
years. This has provided the Bank with the ability to more effectively
leverage its capital base at incremental yields. In addition, during fiscal
1995, North Side became a member of the Federal Home Loan Bank of New York
("FHLBNY"). This membership will permit the Bank to access additional
alternative funding sources when it is deemed advantageous by management to
do so.
North Side is subject to examination and comprehensive
regulation by the Superintendent of Banks (the "Superintendent") of the
Department of Banking of the State of New York ("Banking Department"),
which is its primary regulator, and by the FDIC. The Bank is subject to
further regulation by the Federal Reserve Board governing reserves required
to be maintained against deposits and certain other matters.
At December 22, 1995, the Bank had 4,802,679 shares of Common
Stock issued and outstanding. North Side's Common Stock is traded over the
counter and is listed on the National Association of Securities Dealers
Automated Quotations ("NASDAQ") National Market under the symbol "NSBK".
LENDING ACTIVITIES
Loan Portfolio Composition. North Side's gross loans receivable
portfolio of $430.1 million at September 30, 1995 is primarily comprised of
loans secured by first mortgages on one-to four-family dwellings, and, to
a lesser extent, loans secured by commercial real estate, multi-family
dwellings and construction loans. The Bank's loans secured by residential
properties are primarily long-term, with adjustable or fixed rates of
interest, and are either conventional (not insured or guaranteed by a
Federal agency) or insured by the Federal Housing Administration ("FHA") or
partially guaranteed by the Veteran's Administration ("VA"). The remainder
of the loan portfolio consists of loans secured by commercial real estate,
commercial business loans, construction loans and other loans, which are
primarily consumer loans, including secured and unsecured personal loans.
Under New York law, there are no restrictions as to the percentage of
assets that may be invested in any loan category. The Bank has taken
extensive measures to improve the risk characteristics of its loan
portfolio over the past several fiscal years. These measures have consisted
of reducing exposure to loans generally deemed to be of higher risk than
single-family residential loans, including commercial real estate and
construction loans and, to a lesser extent, multi-family residential real
estate loans. The Bank's ratio of commercial real estate, multi-family and
construction loans as a percentage of total assets has declined steadily
from 11.7% at September 30, 1993 to 9.1% and 7.9% at September 30, 1994 and
1995, respectively.
During fiscal 1995, the gross loan portfolio decreased $57.0
million to $430.1 million at September 30, 1995. The primary reasons for
the decrease were $50.5 million of loan amortizations and satisfactions,
$7.9 million of loan charge-offs, $5.0 million of loans sold, and $.5
million of loans transferred to OREO. These decreases were partially offset
by loan purchases and originations of $6.9 million. During fiscal 1994, the
gross loan portfolio increased $97.0 million primarily as a result of the
purchase of $203.4 million of seasoned mortgage loans secured by one-to
four-family residences and co-op units, partially offset by $2.9 million of
loan sales and $113.3 million of loan amortizations, repayments and other
deductions.
The following table sets forth the composition of North Side's
loan portfolio by loan type and security type as of the years indicated.
<TABLE>
<CAPTION>
September 30,
1995 1994 1993
Amount Percent Amount Percent Amount Percent
(Dollars in Thousands)
LOANS BY TYPE OF LOAN:
Real estate
mortgage loans:
Conventional:
<S> <C> <C> <C> <C> <C> <C>
One-to four-family $285,161 66.30% $322,751 66.27% $200,051 51.27%
Commercial(1) 80,212 18.65 89,961 18.47 102,791 26.35
Multi-family 45,286 10.53 50,027 10.27 58,191 14.92
Construction loans 211 0.05 931 0.19 1,583 0.41
Insured or guaranteed:
FHA 8,071 1.88 9,998 2.05 10,124 2.60
VA 5,049 1.17 6,153 1.26 5,566 1.43
Other loans 6,090 1.42 7,269 1.49 11,794 3.02
------- ----- ------- ------ ------- ------
Gross loans receivable $430,080 100.00% $487,090 100.00% $390,100 100.00%
======= ======= ======= ====== ======= ======
LOANS BY TYPE OF SECURITY:
Secured:
One-to four-family $297,689 69.22% $338,445 69.47% $215,573 55.25%
Commercial real estate
and construction
loans 80,423 18.70 90,892 18.66 104,374 26.76
Other dwelling units 46,241 10.75 51,007 10.47 59,195 15.17
Commercial loans (2) 2,715 0.63 3,987 0.82 5,762 1.48
Guaranteed student 1,889 0.44 1,782 0.37 1,549 0.40
Taxi medallion 181 0.04 345 0.07 720 0.18
Collateralized
Personal loans 476 0.11 392 0.08 492 0.13
Automobile 52 0.01 6 0.01 46 0.01
Passbook 115 0.03 - - 7 0.01
Unsecured:
Personal loans 299 0.07 234 0.05 2,382 0.61
------- ------ ------- ------ ------- ------
Gross loans receivable $430,080 100.00% $487,090 100.00% $390,100 100.00%
======== ======= ======= ====== ======= ======
</TABLE>
- ---------------------------------------------------------------------------
(1) Includes loans secured by unimproved land (Land Loans).
(2) Generally secured by mortgages or liens on real property, accounts
receivable and/or other assets.
The level of lending activity of North Side is affected
principally by the demand for loans, competition and the supply of funds
available for lending purposes. These factors are in turn affected by
general economic conditions, monetary policies of the Federal government,
including the Federal Reserve Board, legislative tax policies and
governmental budgetary matters.
Origination, Purchase and Sale of Loans. Approximately $370
million of North Side's loan portfolio is secured by first mortgages on
real estate located in the New York metropolitan area and approximately $32
million of such loans are secured by properties located in California. The
policy of the Bank is primarily to originate and/or purchase residential
mortgage loans in its market area for the Bank's own portfolio.
Residential loan originations are generally attributable to
referrals from real estate brokers and builders, depositors and
walk-in-customers. Commercial real estate originations are obtained
primarily from real estate brokers, builders and mortgage bankers. Consumer
loan originations are attributable largely to depositors and
walk-in-customers. All loan applications are independently underwritten by
the Bank's staff in accordance with the Bank's and regulatory standards.
It is North Side's policy to obtain title insurance on all real
estate loans. Borrowers also must obtain hazard insurance and, if required,
flood insurance prior to closing. Borrowers may be required to advance
funds on a monthly basis together with each payment of principal and
interest to a mortgage escrow account from which North Side makes
disbursements for items such as real estate taxes, hazard insurance
premiums and private mortgage insurance premiums as they become due.
The directors of North Side have approved maximum lending limits
for the Bank's loan personnel. Commercial and multi-family mortgage loans
up to $1.0 million require the approval of two of the following: the
President and CEO, the Executive Vice President and CFO or the Senior Vice
President - Loan Origination. Residential mortgage loans can be approved
individually up to $600,000 by the President and CEO, up to $400,000 by
the Senior Vice President - Loan Origination and up to $250,000 by the
Second Vice President - Loan Origination. All loans in excess of these
limits must be approved by the Executive Committee of the Board of
Directors. All new loans are reviewed by the Executive Committee, generally
on a monthly basis.
The following table shows the loan origination, purchase and
sale activity of North Side on a consolidated basis during the periods
indicated.
<TABLE>
<CAPTION>
Years Ended September 30,
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Gross loans receivable at beginning of year $487,090 $390,100 $621,855
Loans purchased:
Real estate mortgage loans:
One-to four-family -- 203,439 --
Other loans 117 -- --
---- -------- -------
Total 117 203,439 --
---- -------- -------
Loans originated:
Real estate mortgage loans:
One-to four-family 762 1,199 2,714
Commercial 2,918 3,386 2,346
Multi-family 525 150 2,209
------ ----- -------
Total 4,205 4,735 7,269
------ ------- -------
Other Loans:
Guaranteed student 1,349 2,064 1,253
Other 1,211 2,973 6,210
------ ------- -------
Total 2,560 5,037 7,463
------ ------- -------
Total loans originated,
advanced or purchased 6,882 213,211 14,732
------ ------- -------
Whole loans sold:
Real estate mortgage loans:
One-to four-family 1,810 -- 90,224
Commercial real estate 1,470 -- 25,235
Multi-family 258 -- 19,247
Other Loans:
Guaranteed student 1,154 1,355 1,638
Other 282 1,592 --
---- -----
Total loans sold 4,974 2,947 136,344
------ ----- -------
Loan repayments and other deductions:
Real estate mortgage loans 56,498 106,659 98,910
All other loans 2,420 6,615 11,233
------- ------ -------
Total loan repayments and
other deductions 58,918 113,274 110,143
------- ------- -------
Total loans sold, loan repayments and
other deductions 63,892 116,221 246,487
------- ------- -------
Net loan activity (57,010) 96,990 (231,755)
-------- ------ --------
Gross loans receivable at end of year 430,080 487,090 390,100
Allowance for loan losses (1) (6,417) (11,178) (11,114)
Net unearned discounts and deferred fees (437) (690) (1,058)
Unamortized purchase premium (discount), net 2,537 3,483 (1,012)
------ ------ -------
Net loans receivable at end of year $425,763 $478,705 $376,916
========= ======= =======
</TABLE>
(1) See - "Allowance for Loan Losses."
Residential Real Estate Lending. At September 30, 1995, $285.2
million or 66.3% of North Side's total loan portfolio consisted of
conventional one-to four-family residential mortgage loans. Residential
loans are made on one-to four-family residential properties (including
individual units in co-operatives), generally for up to $400,000 (although
the largest loan in this portfolio is $443,000) and a maximum maturity of
30 years, and have been predominantly originated in amounts up to 80% of
appraised value for owner-occupied residences. The percentage of the
portfolio consisting of one-to four-family residential loans has remained
stable at 66.3% at September 30, 1995 and September 30, 1994. The Bank's
originations of one-to four-family residential mortgage loans decreased
from $1.2 million in fiscal 1994 to $.8 million in fiscal 1995.
North Side's conventional fixed-rate first mortgage loans
customarily include due-on-sale clauses giving North Side the right (if
applicable law permits) to declare a loan immediately due and payable in
the event, among other things, the borrower sells or otherwise disposes of
the property subject to the mortgage and the loan is not repaid. North Side
has enforced due-on-sale clauses in its mortgage contracts for the purpose
of increasing its loan portfolio yield, often through the authorization of
assumptions of existing loans at higher rates of interest and/or with the
imposition of assumption fees.
North Side currently offers one-year adjustable-rate residential
mortgage loans which have terms of up to 30 years and annual interest rate
adjustments limited to 2%, with the rate adjustments based upon the weekly
average yield on U.S. Treasury securities, annualized, plus 275 basis
points. North Side presently limits the amount by which the interest rate
can increase during the life of the loan to 7% above the initial interest
rate. The adjustable-rate loans offered by North Side (as is the case with
loans offered by many other institutions) may provide for initial rates of
interest below the market rates which are charged on fixed-rate loans.
However, the Bank underwrites all loans on the basis of the borrower's
ability to pay at the rate which would be in effect without the discount,
if any. The Bank also offers various fixed-rate mortgage loans with terms
ranging from 10 to 30 years.
At September 30, 1995, residential mortgage loans with an
aggregate principal balance of $2.3 million were more than 90 days
delinquent or had been placed in foreclosure, compared to $3.5 million at
September 30, 1994. See "-Allowance for Loan Losses."
Commercial and Multi-family Real Estate Lending. At September
30, 1995, North Side had $45.3 million, or 10.5% of its total loan
portfolio, secured by conventional multi-family residential properties
(over four units) and $80.2 million, or 18.7% of its total loans, secured
by non-residential commercial properties, such as retail office buildings
(hereinafter, such multi-family residential loans and commercial real
estate loans may be referred to collectively as "income producing
properties").
During the fiscal year ended September 30, 1995, the Bank
originated $3.4 million in loans secured by income producing properties,
compared to $3.5 million in fiscal 1994. The Bank's goal is to continue to
reduce its commercial and multi-family loan portfolio, generally through
loan amortization and repayments and limited new originations. Real estate
lending on income producing property entails significant additional risks
as compared with residential property lending. Loans secured by income
producing properties typically involve large loan balances to single
borrowers or groups of related borrowers. The payment experience on such
loans is typically dependent on the successful operation of the real estate
project. Supply and demand conditions in the market for office and retail
space can significantly impact these rates, and therefore these loans as
such may be subject to a greater extent to adverse conditions in the
economy generally. In dealing with these risk factors, North Side presently
limits its originations to a real estate market and/or to borrowers with
which it has substantial knowledge and experience. The Bank's current
policy is to limit commercial loan originations to properties in New York
City, Westchester and Rockland Counties, Long Island and northern New
Jersey. The Bank has not originated or purchased commercial real estate
loans secured by properties outside of these areas for at least the past
eight fiscal years.
At September 30, 1995, the commercial and multi-family real
estate loan portfolio consisted of 345 loans ranging in outstanding
principal amount from less than $2,000 to $2.7 million, with an average
principal balance of $367,000. North Side's loans on income producing
properties are secured primarily by apartment complexes, office buildings,
retail properties, unimproved land being held for development (short-term
loans) and, to a lesser extent, restaurants and shopping centers. At
September 30, 1995, seven commercial real estate, construction and land,
and multi-family loans, with an aggregate principal balance of $2.6
million, were delinquent for more than 90 days or in foreclosure
proceedings, compared to 15 loans, with an aggregate principal balance of
$9.6 million, at September 30, 1994. See "-Non-Performing Assets" for
discussion of collection procedures and remedies regarding delinquencies.
The majority of loans on income producing properties currently
offered by North Side are underwritten with a maximum term to maturity of
three to five years, typically with a maximum amortization period of 20
years. Generally, the Bank's loans for improved commercial real estate do
not exceed $5 million. The Bank's short-term (generally less than one year)
loans on land, which generally provide interim financing until the borrower
obtains construction or permanent financing, have typically not exceeded
$10 million on any one loan. In setting interest rates and origination fees
on new loans and loan extensions, management considers both current
economic and market conditions and the risk associated with the particular
project.
North Side's underwriting policies with respect to loans on
income producing properties are designed to ensure that a project's cash
flow will be sufficient to cover operating expenses and debt service
payments. A detailed analysis of the project is undertaken by North Side's
commercial real estate loan underwriters. Loan-to-value ratios on
commercial real estate loans made by North Side generally do not exceed 65%
at origination. All income producing property loans in excess of $1.0
million are inspected, generally on an annual basis, by an officer of North
Side's commercial real estate loan division or a third party contractor
specializing in such services, and, in addition, appraisals are made upon
origination and generally at least every three years thereafter on loans in
excess of $1.0 million, or sooner, if management deems it prudent, by an
approved M.A.I. (Member, Appraisal Institute) appraiser. North Side
requires that the borrower obtain title insurance and hazard insurance
(and, if required, flood insurance) in appropriate amounts, naming North
Side as loss payee. In addition, the Bank requires that the ratio of income
to debt service on income producing properties be 1.25 times or higher.
Construction Lending. Due to the higher degree of risk of
construction loans compared to permanent mortgage loans, North Side did not
originate any construction loans in the last four fiscal years and does not
intend to pursue this line of business. At September 30, 1995, the Bank had
two construction loans remaining in its portfolio with an aggregate
principal balance of $.2 million, or less than 1% of the gross loan
portfolio, with virtually no commitment for additional funding.
Commercial Business Loans. The Bank did not make any commercial
business loans in the last four fiscal years. At September 30, 1995, the
Bank had 35 commercial loans in its portfolio with an aggregate principal
balance of $2.7 million. The majority of the Bank's commercial loans are
secured, have maturities of five years or less (although generally with
amortization schedules exceeding five years) and have adjustable rates of
interest at a fixed percentage over the prime rate of a New York money
center bank. At September 30, 1995, approximately $2.6 million of the
Bank's commercial loans were secured by first or second mortgages on real
estate, primarily single-family residential units. In addition, a
substantial portion of the Bank's commercial loans are also secured by
personal guarantees of the principals of the borrower.
At September 30, 1995, there were no commercial business loans
90 days delinquent or in foreclosure, compared to eight loans with an
aggregate principal balance of $.7 million at September 30, 1994. See "-
Non-Performing Assets."
Consumer Lending. New York law permits North Side to engage in
virtually all types of consumer lending. As of September 30, 1995, a total
of $3.4 million, or .8% of the gross loans receivable portfolio, consisted
of consumer loans, compared to $3.3 million or .7% at September 30, 1994.
The Bank's consumer loans (with the exception of guaranteed student loans
and home improvement loans) have maturities of not greater than five years.
Home improvement loans may have a maturity of up to ten years and student
loans have a maturity which varies according to the student's tenure in
school. Student loans are guaranteed by the New York State Higher Education
Assistance Corporation and are routinely sold to the Student Loan Marketing
Association ("Sallie Mae") by the Bank as a student approaches graduation
and prior to the time any payments are required to be made to the Bank.
Generally, the Bank makes secured and unsecured consumer loans in amounts
ranging from $500 to $25,000 with rates ranging from 8.25% to 18.00%. A
0.5% discount is offered (except on guaranteed student loans) to depositors
who authorize automatic transfer of payments from deposit accounts.
Consumer loans generally involve more risk of collectibility than mortgage
loans because of the type and nature of the collateral and, in certain
cases, the absence of collateral. As a result, consumer lending collec-
tions are dependent on the borrower's continuing financial stability, and
are more likely to be adversely affected by job loss, divorce, illness,
personal bankruptcy and adverse economic conditions.
At September 30, 1995, the Bank's net consumer loans portfolio
was comprised of $.6 million in personal loans, of which $.2 million were
unsecured, with an average balance of $4,400, $1.9 million of student loans
(all of which were guaranteed as to principal), $52,000 of automobile
loans, $.2 million of loans secured by New York City taxi medallions, $.4
million of secured home improvement loans, $.1 million of loans secured by
passbook accounts, and $.1 million of other loans.
Loan Commitment Fees and Origination Fees. Loan origination fees
vary with the volume and type of loans made and with competitive conditions
in the market. Loan demand, new construction activity and availability of
money affect these market conditions.
The recognition of income from loan origination fees and certain
related direct loan origination costs is deferred and amortized over the
life of the related loans as an adjustment to the yield of such related
loans. In addition, commitment fees are offset against related direct costs
and the resulting net amount is generally recognized over the life of the
related loans as an adjustment of yield, if the commitment is exercised, or
if the commitment expires unexercised, recognized upon expiration of the
commitment. The Bank recognized $81,000 in loan commitment and
origination fees in fiscal 1995, compared to $166,000 in fiscal 1994. Under
certain circumstances the Bank may agree to extend the term of a loan
(generally on income producing property) which has reached maturity and
generally receives a fee for doing so. Mortgage extension fees are
generally deferred and recognized into income over the life of the
extension. During fiscal 1995 mortgage extension fees amounted to $146,000
compared to $171,000 in fiscal 1994.
Non-Performing Assets. When a borrower fails to make a scheduled
payment on a loan, North Side takes steps to have the borrower cure the
delinquency. Most loan delinquencies are cured within 90 days and no legal
action is required. The Bank stops accruing interest on delinquent loans
when payment is 90 days past due or sooner if management deems appropriate
or when a loan is placed in foreclosure and remains delinquent. If the
delinquency exceeds 90 days on a residential property or 30 days on an
income producing property and is not cured through North Side's normal
collection procedures, North Side will institute measures to enforce its
remedies resulting from the default, including, in the case of mortgage
loans, commencing a foreclosure action. In certain cases, North Side will
also consider accepting from the mortgagor a voluntary deed to the
mortgaged premises in lieu of foreclosure. Property acquired by North Side
as a result of foreclosure or by deed in lieu of foreclosure is classified
as OREO. OREO also includes loans deemed to be in-substance foreclosures,
which are loans considered foreclosed because the borrower has no equity in
the collateral at its current estimated fair value and proceeds for
repayment are expected to come only from the operation or sale of the
collateral. The borrower, in these cases, may or may not have abandoned
control of the collateral and it is generally doubtful that the borrower
will rebuild equity in the collateral or repay the loan.
Generally loan delinquencies are remedied by repossessing the
collateral and selling it to pay off the loan balance. In the case of
unsecured installment loans, North Side either commences legal action to
collect the balance or negotiates a "work-out" schedule.
The Bank's asset quality level continued to improve during
fiscal 1995 as non-performing assets decreased to $7.4 million or .47% of
total assets at September 30, 1995 from $22.2 million or 1.44% of total
assets at September 30, 1994. Non-performing assets were $26.1 million or
1.89% of total assets at September 30, 1993.
At September 30, 1995 non-performing assets consisted of $4.9
million of non-performing loans, of which $2.3 million were one-to
four-family residential mortgage loans, and $2.5 million of OREO. The
Bank's non-performing loan portfolio was significantly reduced during
fiscal 1995 to $4.9 million as compared to $13.9 million at September 30,
1994. Non-performing loans were $17.3 million at September 30, 1993. The
$9.0 million, or 64.6%, decrease in fiscal 1995 non-performing loans was
accomplished primarily through a $3.6 million bulk sale of non-performing
loans, of which $1.6 million was charged against the Bank's allowance for
loan losses, and a $4.4 million specific loan charge-off related to a
non-performing land loan. In addition, eleven loans with an aggregate
principal balance of $.5 million, net of $.2 million of charge-offs, were
transferred to OREO during fiscal 1995.
Total non-performing loans amounted to 0.31%, 0.90% and 1.25% of
total assets at September 30, 1995, 1994 and 1993, respectively, and 1.13%,
2.83% and 4.46% of total loans (net of premium, discount and deferred fees)
respectively at such dates.
OREO decreased $5.9 million from $8.4 million at September 30,
1994 to $2.5 million at September 30, 1995. The fiscal 1995 decrease was
primarily the result of the sale of 14 properties with a net carrying value
of $6.1 million, at a net pre-tax loss of $.5 million. These sales included
the disposition of the Bank's largest OREO property, which had a net
carrying value of $3.4 million, at a pre-tax loss of $.4 million. The
remaining activity in the OREO balance was due to a $.3 million provision
to the allowance for OREO, which was partially offset by approximately $.5
million in additions to OREO.
The following table sets forth information with respect to
non-accrual loans and other real estate owned at the dates indicated.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
September 30, 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Non-performing loans (1) Non-accrual mortgage loans:
<S> <C> <C> <C>
One-to four-family $ 2,319 $ 3,549 $ -
Commercial 13 2,303 3,245
Multi-family 546 739 2,142
Construction and Land 2,027 6,596 10,175
- -----------------------------------------------------------------------------------------------------------
Total non-performing mortgage loans (2) 4,905 13,187 15,562
Non-performing commercial business loans - 673 1,721
Non-performing other loans - - 32
- -----------------------------------------------------------------------------------------------------------
Total non-performing loans 4,905 13,860 17,315
Other real estate owned, net 2,515 8,369 8,789
- -----------------------------------------------------------------------------------------------------------
Total non-performing assets $ 7,420 $ 22,229 $ 26,104
===========================================================================================================
Total non-performing loans as a percentage of:
Total loans 1.13% 2.83% 4.46%
Total assets 0.31% 0.90% 1.25%
Total non-performing assets as a percentage of
total assets .47% 1.44% 1.89%
Allowance for loan losses as a percentage of
non-performing loans 130.83% 80.65% 64.16%
Total Loans $ 432,180 $ 489,883 $ 388,030
Allowance for loan losses 6,417 11,178 11,114
Total Assets 1,588,003 1,541,051 1,383,659
===========================================================================================================
</TABLE>
(1) Consists of loans more than 90 days delinquent and non-accruing loans.
(2) Includes loans in foreclosure.
Allowance for Loan Losses. The adequacy of the allowance for loan
losses is based on management's periodic review of the loan portfolio. Such
reviews are performed by a loan review committee of the Bank on a quarterly
basis. During this review, the committee classifies loans based upon its
evaluation of the risk elements of the Bank's loan portfolio. Considered in
this evaluation are such factors as a borrower's ability to repay, the
estimated value of collateral, general economic conditions, conditions in
the real estate market in the Bank's lending areas, past loss experience
and the level of non-performing loans. The results of such reviews form the
basis of management's determination of the amount of the allowance for loan
losses at that point in time. In the event that it is determined that the
allowance should be increased, such an increase is accomplished through a
provision for loan losses, which is charged to operations.
As a result of management's evaluation of the adequacy of the
allowance for loan losses, which considered, among other things, the
significant and continuing decline in the amount of the Bank's
non-performing loans, and because of management's conclusion that the
Bank's risk profile has been significantly improved, the Bank deemed it
appropriate to reduce the level of provisions for loan losses to $2.8
million for fiscal 1995 as compared to $3.6 million for fiscal 1994. The
Bank's provision for loan losses was $16.3 million in fiscal 1993. After
net charge-offs of $7.6 million during fiscal 1995 the allowance for loan
losses was $6.4 million at September 30, 1995.
The following summarizes transactions in the allowance for loan
losses for the years ended September 30, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
September 30,
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Balance, beginning of year $11,178 $11,114 $15,012
Provision charged to operations 2,825 3,550 16,308
Loans charged off (5,477) (2,144) (8,410)
Charge-off due to sale of loans (2,156) - (9,069)
Charge-off due to transfer of loans to
loans held for sale - - (1,894)
Charge-off due to transfer of loans to OREO (225) (1,846) (1,113)
Recoveries 272 504 280
------- ------ ------
Balance, end of year $ 6,417 $11,178 $11,114
======= ====== ======
</TABLE>
Management believes that the Bank's allowance for loan losses are
adequate and is committed to continuing to carefully assess the loan
portfolio in an effort to further reduce the level of non-performing
assets. Although it appears that the real estate market in the Bank's
primary lending areas has stabilized, given the cyclical nature of this
market no assurance can be given that future additional loan loss
provisions may not be required.
INVESTMENT ACTIVITIES
North Side's investment strategy is set by an Investment Committee
composed of the Bank's two most senior officers and the Treasurer. The
Investment Committee also reviews and sets objectives as to liquidity and
funds management on a quarterly basis. The Committee's actions are reviewed
monthly by the Executive Committee of the Board of Directors, which also
reviews investment policies on an annual basis. Over the past several
fiscal years the strategy has been to maintain net interest margins within
relatively stable ranges while reducing credit risk. During this period the
Bank has allocated most of its investment funds to the purchase of
mortgage-backed securities.
Effective October 1, 1994, the Bank adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
No. 115"), which requires classification of securities as either held to
maturity or available for sale. At the time of adoption, the Bank
classified as held for sale those securities it intends to use as part of
its asset/liability management strategy and that may be sold in response to
changes in interest rates and/or resultant prepayment risk changes or other
factors related to interest rates and prepayment risk changes. As a result
of the adoption of SFAS No. 115, the Bank reclassified $180.6 million of
mortgage-backed securities and $22.0 million of investment securities as
available for sale. Securities purchased subsequent to October 1, 1994 have
been designated either as available for sale using this same criteria or,
if appropriate, as held to maturity.
During fiscal 1995, the Bank purchased $222.7 million of
mortgage-backed securities, of which $174.4 million were backed by
fixed-rate loans and $48.3 million were backed by one year adjustable-rate
loans. As in previous fiscal years, the fixed-rate purchases were generally
concentrated on higher coupon investment grade securities with relatively
short estimated average lives. In fiscal 1995 the Bank also invested, to a
lesser extent, in par and discount securities as the yield curve leveled
during the latter part of the fiscal year. The Bank's fixed-rate
mortgage-backed securities portfolio provided higher yields in fiscal 1995
compared to fiscal 1994 due to slower premium amortization as a result of
the continued decrease in fiscal 1995 in prepayment levels.
Mortgage-backed securities available for sale, a portfolio
comprised entirely of fixed-rate securities, were $300.0 million at
September 30, 1995 and had an estimated average life of approximately 3.8
years.
At September 30, 1995, the held to maturity mortgage-backed
securities portfolio amounted to $651.2 million, of which $493.9 million,
or 75.9%, was backed by fixed-rate loans and $157.3 million, or 24.1%, was
backed by adjustable-rate loans. At such date this portfolio had an
estimated average life of approximately 5.4 years and a fair market value
of $642.9 million, or $8.3 million less than the book value.
At September 30, 1995 the Bank's mortgage-backed securities (both
available for sale and held to maturity) amounted to $951.2 million. At
September 30, 1995, 66.6% of these securities were insured or guaranteed by
the Government National Mortgage Association ("GNMA"), the Federal Home
Loan Mortgage Corporation ("FHLMC"), the Federal National Mortgage
Association ("FNMA") or Federal Agency Guaranteed Collateralized Mortgage
Obligations. The remaining balance is comprised of investment grade,
privately insured, participation certificates and collateralized mortgage
obligations.
The following table sets forth the amortized cost and estimated
market value of North Side's mortgage-backed securities available for sale
portfolio at September 30, 1995.
<TABLE>
<CAPTION>
Amortized Market
Cost Value
(In Thousands)
Mortgage backed securities available for sale:
<S> <C> <C>
FHLMC and FNMA $ 273,811 $ 275,438
CMOs 24,593 24,584
------ ------
Total mortgage-backed securities available for sale 298,404 300,022
======= =======
</TABLE>
The following table summarizes the activity in the mortgage-backed
securities available for sale portfolio for the year ended September 30,
1995.
September 30, 1995
(In Thousands)
Balance, beginning of year, net $ -
Transferred from held to maturity 180,642
Purchases 174,408
Principal repayments (54,532)
Net unrealized appreciation, net of taxes 1,618
Other - net (2,114)
--------
Balance, end of year, net $ 300,022
=======
The following table sets forth the carrying value and estimated
market value of North Side's mortgage-backed securities held to maturity
portfolio at September 30, 1995, 1994 and 1993.
<TABLE>
<CAPTION>
September 30,
1995 (1) 1994 1993
Estimated Estimated Estimated
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
(In Thousands)
Government National
<S> <C> <C> <C> <C> <C> <C>
Mortgage Association $ 8,130 $ 8,265 $ 9,125 $ 9,042 $ 10,821 $ 11,401
Federal Home Loan
Mortgage Corporation 63,842 63,577 230,283 226,660 294,072 299,609
Federal National
Mortgage Association 252,094 250,263 286,003 275,996 146,252 147,139
Other 327,087 320,759 333,289 314,968 298,917 299,387
------- ------- ------- ------- ------- -------
Total mortgage-backed
securities $ 651,153 $ 642,864 $ 858,700 $ 826,666 $ 750,062 $ 757,536
========= ======== ======= ======= ======= =======
</TABLE>
(1) Included in mortgage-backed securities at September 30, 1995 were
$157.3 million of adjustable rate mortgage-backed securities with an
estimated market value of $156.8 million and $493.9 million of fixed rate
mortgage-backed securities with an estimated market value of $486.0
million.
The following table summarizes the activity in the mortgage-backed
securities held to maturity portfolio for the periods indicated:
<TABLE>
<CAPTION>
September 30,
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Balance, beginning of year, net $858,700 $750,062 $720,494
Purchases 48,320 466,886 454,399
Transferred to available for sale (180,642) - -
Principal repayments (72,951) (348,194) (414,332)
Sales - - (596)
Other - net (2,274) (10,054) (9,903)
-------- --------- ---------
Balance, end of year, net $651,153 $858,700 $750,062
======== ======= =======
</TABLE>
North Side has authority to purchase a wide range of investment
securities deemed to be prudent by management, subject to various
regulatory restrictions on investments including certain restrictions on
equity investments imposed by the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA"), none of which have been material to
North Side's investment activities. See "Regulation." The Bank seeks to
maintain a varied investment portfolio, consistent with its overall
objectives concerning asset/liability management. At September 30, 1995,
$26.5 million of this portfolio was classified as available for sale, of
which $26.3 million, or 99.1%, consisted of various equity securities such
as an adjustable rate mortgage mutual fund, common stock and adjustable
rate preferred stock. Also at September 30, 1995, $93.3 million of the
investment portfolio was classified as held to maturity, consisting of
Federal Agency and other bonds and preferred stocks. During the past two
fiscal years, including fiscal 1995, purchases for this segment of the
portfolio have consisted primarily of various federal agency multiple
step-up callable notes. These notes are rated to be of the highest
investment grade and have varying final maturities of between ten and
fifteen years. These notes are callable each year at the option of the
issuer but, if not called, have a predetermined upward adjustment of the
interest rate. As of September 30, 1995, the Bank had $60.0 million of such
notes, all of which were called subsequent to the end of fiscal 1995. All
of the investment portfolio is investment grade and management estimates
the average weighted maturity of the investment portfolio, excluding equity
securities, was approximately 10.3 years at September 30, 1995, compared to
approximately 8.8 years at September 30, 1994.
The following table sets forth the amortized cost and estimated
market value of North Side's available for sale investment portfolio at
September 30, 1995.
<TABLE>
<CAPTION>
Weighted
Estimated Average Weighted
Amortized Market Life Average
Cost Value (In Years) Yield
(Dollars in Thousands)
Investment securities available for sale:
<S> <C> <C> <C> <C>
United States Government Securities $ 230 $ 229 .3 5.38%
Equity securities 23,626 26,291 - 5.03
------- ------- ----
Total investment securities available for sale $ 23,856 $ 26,520 5.03
======= =======
</TABLE>
The following table sets forth North Side's investment securities
held to maturity portfolio, at carrying value except as otherwise indicated
at the dates indicated.
<TABLE>
<CAPTION>
September 30,
1995 1994 1993
---- ---- ----
(In Thousands)
Bonds and other debt securities:
<S> <C> <C> <C>
U.S. Government and Federal Agencies $ 62,837 $ 76,663 $ 3,375
State and municipal 1,663 1,758 1,846
Corporate and other:
Public utility - 200 200
Railroad 14 22 29
Other:
Financial institutions - - 2,000
Captive finance companies - - 5,182
Other (1) (2) 22,682 35,110 28,168
------ ------ ------
Total bonds and other debt securities 87,196 113,753 40,800
------ ------- ------
Equity securities 6,105 22,219 19,542
----- ------- -------
Total investment securities, net $93,301 $ 135,972 $ 60,342
====== ========= =======
(1) Includes $1.5 million, $1.7 million and $1.9 million of floating-rate debt securities at Septembe
30, 1995, 1994 and 1993 respectively.
(2) Includes debt securities which are insured as to principal and
interest by private insurers or backed by letters of credit.
</TABLE>
The following table sets forth the carrying value, estimated market
value, weighted average maturity and weighted average yield of North Side's
investment securities held to maturity portfolio at September 30, 1995.
<TABLE>
<CAPTION>
September 30, 1995
Weighted
Estimated Average Weighted
Carrying Market Maturity Average
Value Value (In Years) Yield
(Dollars in Thousands)
Bonds and other debt securities:
<S> <C> <C> <C> <C>
U.S. Government and
federal agencies $ 62,837 $ 62,586 10.3 7.48%
State and municipal 1,663 1,663 18.9 8.61
Corporate and other 22,696 22,106 9.4 6.90
-------- ------
Total bonds and other
debt securities 87,196 86,355 10.3 7.35
------- ------
Equity securities(1): 6,105 6,105 - 5.13
------ -----
Total investment securities, net $ 93,301 $92,460 - 7.20
======== ======
</TABLE>
(1) Carried at lower of cost or market value.
The following table presents the average maturities of North Side's
investment securities held to maturity portfolio at September 30, 1995.
<TABLE>
<CAPTION>
Maturing
After After
One Five
Year Years
In One Through Through After
Year Five Ten Ten Total
Or Less Years Years Years Amount
(Dollars in Thousands)
Bonds and other debt securities:
<S> <C> <C> <C> <C> <C>
U.S. government and
federal agencies (1) $ - $ - $ 37,837 $ 25,000 $ 62,837
State and municipal - 483 - 1,180 1,663
Corporate and other(2) 6,106 13,333 2,007 1,250 22,696
----- ------ ----- ----- ------
Total bonds and
other debt securities $ 6,106 $ 13,816 $ 39,844 $ 27,430 $ 87,196
======= ======== ========= ======== ========
Equity securities 6,105
-----
Total investment securities, net $ 93,301
========
</TABLE>
(1) Includes $60.0 million Federal Home Loan Bank notes which were called
subsequent to September 30, 1995.
(2) Includes $1.5 million of floating-rate debt securities.
DEPOSITS
North Side has a number of programs designed to attract both
short-term and long-term deposits from the general public by providing a
wide assortment of accounts bearing interest rates consistent with market
and economic conditions and applicable regulations. Included among these
programs are savings accounts, checking accounts, Negotiable Order of
Withdrawal ("NOW") accounts, money market accounts, fixed-rate time
deposits, individual retirement accounts and Keogh accounts. North Side has
no brokered deposits and has no intention to solicit or to accept deposits
outside of its primary market area.
The Bank emphasizes customer service and traditionally has been
able to maintain a relatively high level of core deposits, which management
believes helps to limit interest rate risk by providing a relatively
stable, low cost, long-term funding base. Savings accounts represented
48.1% of total deposits at September 30, 1995. In fiscal 1995, the Bank
bought two branches, one in the Bronx and the other in Queens, to
complement its existing branches in these boroughs of New York City. These
acquisitions added $48.6 million in deposits and added to the Bank's
established customer base. Generally the Bank prices its deposit products
substantially consistent with the average rates offered in the competitive
market area in which it operates. However, the Bank's strategy, which was
included as a part of its overall asset/liability management strategy in
fiscal 1995, was to be more competitive in pricing (by offering higher
rates) when it believes there is an opportunity to increase long-term
deposits at favorable terms. As a result, time deposits increased by $66.2
million or 15.0% during fiscal 1995. At September 30, 1995, $74.0 million
or 14.6% of time deposits are scheduled to mature in more than three years,
compared to $47.4 million or 11% at September 30, 1994. Of the Bank's time
deposits outstanding on September 30, 1995 of $508.3 million, only a
relatively small amount and percentage ($30.5 million and 6.0%
respectively) were in denominations of $100,000 or more.
As of September 30, 1995, the Bank had $576.6 million of savings
accounts, or 48.1% of total deposits at such date. The Bank's savings
accounts are variable-rate accounts, allowing the Bank to change the
interest rate as it deems appropriate. The Bank generally reviews interest
rates paid on savings accounts on a weekly basis and, pursuant to such
reviews, the rates on savings accounts were revised upward from 2.20% at
September 30, 1994 to the September 30, 1995 rate of 2.50%. Interest on
passbook savings accounts is compounded daily and credited quarterly, while
interest on statement savings accounts is compounded and credited monthly.
The Bank will continue to monitor rates and adjust them in accordance with
the Bank's overall asset/liability and funds management and liquidity
objectives.
North Side offers time deposits with maturities ranging from 91
days to five years. As of September 30, 1995, the Bank had a total of
$508.3 million of time deposits, which constituted 42.39% of total deposits
at such date. Interest rates offered on new or renewing time deposits,
which are fixed for the term of the deposit, are established by the Bank on
a periodic, generally weekly, basis after consideration of the Bank's cash
flow requirements, rates offered by competitors and income objectives.
Interest is compounded daily on time deposits and credited monthly.
North Side also offers money market accounts and NOW accounts. The
Bank currently requires minimum deposits to open its savings, money market
and NOW accounts and the money market account requires the maintenance of a
specified minimum daily balance in order to earn interest. As of September
30, 1995, the Bank had $55.8 million in money market accounts, or 4.65% of
all deposits at such date. Interest on money market accounts is compounded
daily and credited monthly. NOW accounts, which accounted for $19.9 million
or approximately 1.7% of the Bank's total deposits at September 30, 1995,
provide for interest which is compounded daily and credited monthly.
In addition, at September 30, 1995, the Bank had $35.8 million, or
approximately 3.0% of total deposits, in non-interest bearing checking
accounts.
Deposit accounts, exclusive of time deposits, in North Side at
September 30, 1995 were as follows:
Weighted
Average
Percentage of Nominal
Type of Account Amount Total Deposits Rate
(Dollars in Thousands)
Passbook and Statement
Savings accounts $576,593 48.09% 2.50%
NOW accounts 19,869 1.66 1.50
Money market accounts 55,806 4.65 2.85
Checking accounts 35,759 2.98 -
Other 2,787 .23 2.48
------- ------- ----
Total $690,814 57.61% 2.37%
======= ======= =====
The following table presents, by the weighted average interest
rate being paid on such deposits, the amount of time deposit accounts at
September 30, 1995 which mature during the periods indicated.
<TABLE>
<CAPTION>
Amounts at September 30, 1995
Maturing
Less Than More Than One More Than Two More Than
One But Less Than But Less Than Three
Total Year Two Years Three Years Years
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Total Maturities $508,263 $309,907 $ 91,231 $ 33,158 $ 73,967
========== ========== ========== ========== ========
Weighted Average Rate 5.61% 5.30% 5.76% 5.73% 6.67%
===== ===== ===== ===== =====
</TABLE>
The following table sets forth the deposits and the changes in
dollar amount of deposits in the various accounts offered by North Side for
the periods indicated. The net decrease in deposits during the period is
inclusive of the effects of interest credited. See Note 9 of the Notes to
Consolidated Financial Statements incorporated by reference into Item 8
hereof.
<TABLE>
<CAPTION>
Years Ended September 30,
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Deposits at beginning of year $ 1,191,509 $ 1,280,288 $ 1,340,570
Deposits acquired by acquisitions 48,652 (1) -- --
Deposits sold -- (22,457)(2) (5,108)(3)
Mortgagors' escrow accounts at beginning of year 4,372 4,779 8,102
------ ----- -----
1,244,533 1,262,610 1,343,564
---------- --------- ---------
Increases (decreases) in:
Passbook and statement savings accounts (77,512) (30,680) (17,476)
NOW accounts (1,916) (1,110) (3,177)
Money market accounts (11,623) (9,552) (11,548)
Time deposits 51,842 (23,958) (26,670)
Other (1,875) (1,022) 3,697
Mortgagors' escrow accounts 235 (407) (3,323)
-------- ------- ---------
Net decrease in deposits and
mortgage escrow during the year (40,849) (66,729) (58,497)
--------- --------- --------
Deposits at end of year 1,199,077 1,191,509 1,280,288
Unamortized acquisition discount -- -- 7
------------ ------------ -----------
Deposits at end of year, net 1,199,077 1,191,509 1,280,295
Mortgagors' escrow accounts at end of year 4,607 4,372 4,779
---------- --------- ---------
$1,203,684 $1,195,881 $1,285,074
========== ========= =========
(1) Purchase of deposits from Chemical Bank during fiscal 1995.
(2) Sale of deposits of the Cortlandt Branch during fiscal 1994.
(3) Sale of deposits of the Third Avenue Bronx County Branch during fiscal 1993.
</TABLE>
The following table sets forth deposit activity for the periods
indicated:
<TABLE>
<CAPTION>
Years Ended September 30,
1995 1994 1993
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Net decrease before interest credited $ (32,604) $ (124,381) $ (102,379)
Interest credited 40,172 35,602 42,097
-------- -------- -------
Net deposit increase (decrease) $ 7,568 $ (88,779) $ (60,282)
======== ========= =========
</TABLE>
The net decreases in North Side's deposit balances before interest
crediting for fiscal 1995, fiscal 1994 and fiscal 1993 are primarily due to
customer withdrawals, which the Bank generally attributes to customers
seeking other higher yielding investment opportunities. Management believes
that the withdrawals noted above are consistent with that of the industry
generally and with the experience of other financial institutions in its
service area.
North Side's deposits are insured by BIF, which is administered by
the FDIC. North Side must therefore meet the FDIC's standards of safety and
soundness. Adherence to these standards is determined through regular bank
examinations. In general, individual accounts of the same depositor are
added together and insured up to $100,000 in the aggregate. Subject to
certain exceptions, deposits maintained in different capacities are
separately insured.
BORROWINGS
As part of its asset/liability management strategy, the Bank uses
wholesale funding sources when deemed appropriate by management to
supplement its retail deposit base. These wholesale funding sources, which
are generally collateralized financings, provide the Bank with the
opportunity to increase the level of interest-earning assets at incremental
yields through the investment of proceeds from such borrowings. Because of
continued capital growth through earnings, as well as continued improvement
in asset quality, the Bank utilized borrowed funds to a greater extent
during the past fiscal year as the average balance of borrowed funds
increased by $115.4 million to $248.9 million in fiscal 1995 compared to
$133.5 million in fiscal 1994. Taking advantage of the level yield curve,
the Bank also extended the maturities of certain borrowings. At September
30, 1995, $111.0 million of the Bank's borrowings mature within one year
while $140.0 million mature within three years. These borrowings are
accounted for as financing transactions. Accordingly, the collateral
securities continue to be carried as an asset, and a liability is
established for the transaction proceeds. The Bank anticipates continued
use of these borrowings in fiscal 1996. The average interest rate of such
borrowings during the fiscal year was 6.05%. The maximum month-end balance
during fiscal 1995 was $339.0 million. The Bank was active in the market
during fiscal 1994 and had borrowings outstanding of $226.9 million at
September 30, 1994.
The Bank believes it has access to, and sufficient assets to
secure, borrowings in amounts adequate to fund unexpected deposit outflows.
SAVINGS BANKS LIFE INSURANCE
North Side offers savings banks life insurance ("SBLI") to its
customers, up to a maximum of $50,000 per insured, or $350,000 under a
group life plan. North Side also offers certain annuity programs as part of
its SBLI business. North Side's SBLI department is separate and distinct
from North Side's operations, is controlled by New York law, is operated on
a break-even basis, and does not contribute to the earnings of North Side.
The assets, liabilities and operating results of North Side's SBLI
Department are not reflected in the Bank's financial statements. At
September 30, 1995, North Side's SBLI department had $44.3 million of
insurance in force. Subsequent to September 30, 1995, the SBLI Department
of Republic Bank for Savings was transferred to North Side's SBLI
Department, adding $908.8 million of insurance in force. North Side
believes that offering SBLI is beneficial to its relations with its
depositors and the public.
INVESTMENT IN SUBSIDIARIES
North Side Capital Corporation ("NSCC") is a limited purpose
finance subsidiary of the Bank. NSCC was organized for the purpose of
acquiring, owning, holding, assigning, pledging or dealing in
mortgage-backed securities issued and guaranteed by GNMA, FNMA or FHLMC;
and issuing, selling, and delivering Collateralized Mortgage Obligations
that are collateralized by the mortgage-backed securities.
In February 1988, NSCC issued $100.1 million of its Collateralized
Mortgage Obligations, Series 1 ("CMO's"), all but $49,000 principal
amount of which was sold to the public. The balance was sold by NSCC to
North Side. Net proceeds to NSCC were $106,128,027. Such proceeds were used
to purchase $100,018,251 outstanding principal balance of GNMA 11%
mortgage-backed securities which collateralized the offering. During fiscal
1993, the Bank sold its investment in NSCC residual interest. While North
Side owns 100% of the outstanding common stock of NSCC, it does not own any
portion of the residual bond, and the financial results of NSCC are not
consolidated for financial reporting purposes with the Bank's financial
reports.
The Bank also owns several wholly-owned nominee corporations whose
sole purpose is to hold title on foreclosed real estate. Once such real
estate is disposed of, such nominee corporations are normally dissolved.
PERSONNEL
As of September 30, 1995, North Side had 288 full-time and 72
part-time employees. The employees are not represented by any collective
bargaining unit, and North Side considers its relationship with its
employees to be good.
DATA PROCESSING SERVICES
North Side's data processing needs were handled during fiscal 1995
by Institutional Group Information Corp., which operates out of Great Neck,
New York. The entire system is subject to audit by the Bank's regulators
and independent auditors.
COMPETITION
North Side faces significant competition in attracting deposits.
Its most direct competition for deposits historically has come from
commercial banks and other thrift institutions located in its market area.
North Side also faces additional significant competition for investors'
funds from various mutual funds. North Side competes for deposits
principally by offering depositors a wide variety of deposit programs,
convenient branch locations and hours, tax deferred retirement programs,
and other services. North Side does not rely upon any individual group or
entity for a material portion of its deposits.
North Side's competition for real estate loans comes principally
from other savings institutions, mortgage banking companies and commercial
banks. North Side competes for loan originations primarily through the
interest rates and loan fees it charges, and the efficiency and quality of
services it provides borrowers, real estate brokers and builders. Factors
which affect competition include the general availability of lendable funds
and credit, general and local economic conditions, current interest rate
levels and volatility in the lending markets.
Legislation enacted in New York provides that, upon prior approval
of the Superintendent, insured institutions, including savings banks, and
insured institution holding companies can acquire or be acquired by insured
institutions or holding companies on a national basis. The acquiror must be
located in a state which has reciprocal legislation in effect on
substantially the same terms and conditions as provided by New York law. In
addition, the laws of the acquiror's state cannot affect the powers or
privileges of the New York banking institution. The Superintendent
reviews each state law on a case-by-case basis to determine whether a
particular state's law complies with the requirements of New York law.
Recent federal legislation will also permit interstate banking under
certain circumstances. See "Regulation -Recent Regulatory Developments -
Interstate Banking and Branching."
North Side is unable to predict what impact, if any, New York's
law or the recently-nacted federal law will have on it. These regulatory
provisions and changes may increase the opportunities of the Bank to expand
into additional markets. However, they also may increase the number and the
size of financial institutions competing in the Bank's general market area.
REGULATION
North Side is a stock savings bank chartered under the laws of the
State of New York, and its deposits are insured up to applicable limits by
the FDIC through the BIF. The Bank derives its lending, investment, and
other powers from the applicable provisions of New York law and the
regulations of the New York State Banking Board, subject to limitation or
modification under applicable federal laws and regulations of such federal
agencies as the FDIC and the Federal Reserve Board. The Bank is subject to
the supervision and periodic examination of the FDIC and the Banking
Department and is required to file annual and periodic reports and such
other information as the FDIC and the Banking Department may require. The
Banking Department and the FDIC have substantial enforcement powers with
respect to violations of laws or regulations or practices deemed to be
unsafe or unsound. Acquisitions of control, as defined, of the Bank are
subject to prior approval under New York and federal banking laws and
regulations.
Recent Regulatory Developments
Interstate Banking and Branching In the past, interstate banking
has been limited under the Bank Holding Company Act (the "BHCA") to those
states that permitted interstate banking by statute. New York was one of a
number of states that, subject to the reciprocity conditions of the New
York Banking Law (the "Banking Law"), permitted out-of-state bank holding
companies to acquire New York banks. By 1994, most states had adopted
statutes permitting multistate bank holding companies. The Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 ("Interstate
Banking Act") was enacted on September 29, 1994. The Interstate Banking Act
now permits approval under the BHCA of the acquisition by a bank holding
company that is well capitalized and managed of a bank outside the holding
company's home state regardless of whether the acquisition is permitted
under the law of the state of the acquired bank. The Federal Reserve Board
may not approve an acquisition under the BHCA that would result in the
acquiring holding company controlling more than 10% of the deposits in the
United States or more than 30% of the deposits in any particular state.
In the past, branching across state lines was not generally
available to a state bank, such as the Bank. Out-of-state branches are
authorized under the Banking Law, but similar authority does not exist
generally under the laws of most other states. The Interstate Banking Act,
beginning June 1, 1997, permits the responsible banking agencies to approve
merger transactions between banks located in different states, regardless
of whether the merger would be prohibited under state law. Accordingly, the
Interstate Banking Act will permit a bank to have branches in more than one
state. A state may "opt in" to the provisions of the Interstate Banking Act
prior to June 1, 1997, and a state may "opt out" of the provisions of the
Interstate Banking Act by adopting appropriate legislation before that
date.
The Interstate Banking Act will facilitate the consolidation of
the banking industry that has taken place over recent years and will allow
the creation of larger, presumably more efficient, banking networks, which
may affect the competition the Bank faces in the future. The effect of the
Interstate Banking Act on the Bank, if any, is likely to occur as banking
institutions, state legislators and bank regulators respond to the new
federal regulatory structure. The states will have to establish appropriate
corporate law, tax and regulatory structures to adjust to the growth of new
interstate banks.
FDICIA FDICIA, which was enacted on December 19, 1991, and the
regulations adopted pursuant thereto, continued the increased regulation
and supervision of federally insured depository institutions. FDICIA limits
the powers of such institutions, and it makes major revisions in the
supervision, examination and audit processes for insured depository
institutions. Management believes that no element of FDICIA has or will
have a material adverse effect on the Bank.
Investments and Other Activities FDICIA imposes or authorizes
significant limitations on the powers of insured banks and savings banks
chartered under state law to make equity investments and to engage as
principal in other activities otherwise authorized under state law. FDICIA
prohibits insured state banks from engaging as principal in any type of
activity, or from acquiring or retaining any equity investment, not
permissible for a national bank. FDICIA makes certain exceptions to these
general rules, and the act authorizes the FDIC to permit other exceptions
for institutions that are and continue to be in compliance with applicable
regulatory capital standards. These restrictions became wholly effective on
December 19, 1993. FDICIA establishes transition periods in which an
institution may divest its non-conforming equity investments. Under these
provisions of FDICIA, state-chartered institutions need the permission of
the FDIC to continue certain equity investment activities. FDICIA does not
affect the Bank's ability to continue its SBLI activities as such
activities are currently conducted. In addition, FDIC regulations adopted
pursuant to FDICIA permit investments in common and preferred stocks listed
on a national securities exchange or the shares of registered investment
companies, generally up to an aggregate amount equal to the institution's
Tier 1 capital, if, (1) the bank held such types of investments during the
14-month period from September 30, 1990 through November 26, 1991, (2) the
state in which the bank is chartered permitted such investments as of
September 30, 1991, and (3) the bank notifies the FDIC and obtains approval
from the FDIC to make or retain such investments. The Bank applied for, and
received, such FDIC approval.
Examination and Audit Requirements FDICIA requires closer
supervision by the FDIC and other federal banking regulators of insured
depository institutions. Beginning on December 19, 1993, the Bank became
subject to an annual full-scale, on-site examination by the FDIC. The FDIC
may accept an examination by the Banking Department in alternate years. On
June 2, 1993, the FDIC adopted a final rule and related guidelines
implementing the external audit, audit committee and management reporting
requirements of FDICIA. Under the FDIC rule, which became effective on July
2, 1993, each insured depository institution with $500 million or more in
total assets as of the beginning of each fiscal year beginning after
December 31, 1994 must have an annual audit of its financial statements by
an independent accountant in accordance with generally accepted accounting
principles ("GAAP") and file an annual report with the FDIC, its federal
regulator and any appropriate state banking agency. The annual report
required by the rule must contain financial statements audited by an
independent public accountant; a statement of management's
responsibilities for preparing the annual financial statements,
establishing and maintaining adequate internal controls and procedures for
financial reporting, and complying with laws and regulations relating to
safety and soundness designated by the FDIC; a separate assessment by
management of effectiveness of the internal controls and procedures and the
institution's compliance with the designated safety and soundness laws and
regulations; and the independent public accountant's report on management's
assertions concerning the internal controls and procedures. In addition,
insured depository institutions with total assets of $500 million or more
are required to establish an audit committee comprised entirely of
independent outside directors to review the annual audit findings and
reports with management and the independent public accountant. The Bank has
an audit committee in place which complies with this requirement.
Capital Requirements The Bank is subject to the FDIC's minimum
capital requirements. Insofar as applicable to state-chartered, nonmember
banks, the FDIC requires the most highly rated banks to have a leverage
ratio to assets of at least 3% and other banking organizations are required
to maintain higher levels (100 to 200 basis points), based on their
particular circumstances, as defined in the regulation. At September 30,
1995, the Bank's leverage ratio, calculated in accordance with the FDIC
requirement, was 7.02%.
Effective December 31, 1992, the Bank was required to meet certain
capital to risk-weighted asset ratios. Generally, the Bank is required to
maintain a total capital to risk-based asset ratio of 8% and a Tier I
risk-based asset ratio of 4%, as more fully defined in the regulations.
At September 30, 1995, the Bank's total capital to risk-based asset ratio
and Tier I risk-based asset ratio was 16.89% and 15.98%, respectively.
FDICIA requires the federal banking agencies to revise their
risk-based capital guidelines to, among other things, take adequate account
of interest rate risk. The federal banking agencies continue to consider
modifications of the capital requirements applicable to banking
organizations. In August 1995, the Federal banking agencies amended their
risk-based capital guidelines to provide that the banking agencies will
include in their evaluations of a bank's capital adequacy an assessment of
the bank's exposure to declines in the economic value of the bank's capital
due to changes in interest rates. The agencies also issued a proposed
policy statement that describes the process that the agencies will use to
measure and assess the exposure of a bank's capital to changes in interest
rates. The agencies stated that after they and the banking industry gain
sufficient experience with the measurement process, the agencies would
issue proposed regulations for establishing explicit charges against
capital to account for interest rate risk.
Standards for Safety and Soundness The FDI Act, as amended by
FDICIA and the Riegle Community Development and Regulatory Improvement Act
of 1994 ("Community Development Act"), requires the FDIC, together with the
other federal bank regulatory agencies, to prescribe standards, by
regulations or guidelines, relating to internal controls, information
systems and internal audit systems, loan documentation, credit
underwriting, interest rate risk exposure, asset growth, asset quality,
earnings, stock valuation, and compensation, fees and benefits and such
other operational and managerial standards as the agencies deem
appropriate. The FDIC and the federal bank regulatory agencies have
adopted, effective August 9, 1995, a set of guidelines prescribing safety
and soundness standards pursuant to FDICIA as amended. The guidelines
establish general standards relating to internal controls and information
systems, internal audit systems, loan documentation, credit underwriting,
interest rate exposure, asset growth, and compensation, fees and benefits.
In general, the guidelines require, among other things, appropriate systems
and practices to identify and manage the risks and exposures specified in
the guidelines. The guidelines prohibit excessive compensation as an unsafe
and unsound practice and describe compensation as excessive when the
amounts paid are unreasonable or disproportionate to the services performed
by an executive officer, employee, director or principal shareholder. The
FDIC and the other agencies determined that stock valuation standards were
not appropriate. In addition, the FDIC adopted regulations that authorize,
but do not require, the FDIC to order an institution that has been given
notice by the FDIC that it is not satisfying any of such safety and
soundness standards to submit a compliance plan. If, after being so
notified, an institution fails to submit an acceptable compliance plan or
fails in any material respect to implement an accepted compliance plan, the
FDIC must issue an order directing action to correct the deficiency and may
issue an order directing other actions of the types to which an undercapi-
talized association is subject under the "prompt corrective action"
provisions of FDICIA. If an institution fails to comply with such an order,
the FDIC may seek to enforce such order in judicial proceedings and to
impose civil money penalties. The FDIC and the federal bank regulatory
agencies also proposed guidelines for asset quality and earnings standards.
Deposit Insurance Assessments On June 17, 1993, the FDIC adopted a
final rule establishing a new risk-based deposit insurance premium system
that was implemented beginning with the semi-annual assessment period
commencing on January 1, 1994, as required under FDICIA. Except for limited
changes, the structure of the new risk-based system is substantially the
same as the structure of the transitional system it replaced, in which the
FDIC assigned an institution to one of three capital categories
(well-capitalized, adequately capitalized or undercapitalized) and one of
three supervisory categories. An institution's assessment rate under this
system depends on the capital and supervisory categories to which it is
assigned. Under the transitional system, there were nine assessment risk
classifications (i.e., combinations of capital categories and supervisory
subgroups within each capital group) to which differing assessment rates
were applied. Under the FDIC rule implementing the new risk-based system,
an institution's deposit insurance assessment rate is determined by
assigning the institution to a capital category and a supervisory subgroup
to determine which of the nine risk classification categories is
applicable, in substantially the same manner as for the transitional
system.
The FDI Act requires that the BIF, which insures the Bank and
other savings and commercial banks, and the SAIF, which insures state and
federal savings associations, each be recapitalized until reserves are at
least 1.25% of the deposits insured by that fund. After a fund has reached
the 1.25% reserve ratio, the assessment rates for that fund could be
reduced. The FDIC has announced that the BIF reached the required reserve
ratio during May 1995. As a result of the recapitalization of the BIF, the
FDIC reduced BIF assessment rates. Beginning in 1993, the assessment rates
for the BIF and the SAIF had ranged from 0.23% of deposits for an
institution in the highest category (i.e., well-capitalized and financially
sound, with no more than a few minor weaknesses) to 0.31% of deposits for
an institution in the lowest category (i.e., undercapitalized and
substantial supervisory concern). Effective June 1, 1995, the FDIC reduced
the BIF assessment rates to a range of 0.04% to 0.27% of deposits for such
institutions. The Bank's assessment rates for 1995 were 0.23% of deposits
through May 31, 1995 and were 0.04% of deposits beginning on June 1, 1995.
On November 14, 1995, the FDIC again decided to reduce the BIF
assessments. Having determined that the BIF had sufficient reserves in
excess of the required 1.25% ratio, the FDIC decided that "well
capitalized" institutions without any significant supervisory concerns
should begin paying assessments at the statutory minimum of $2,000
annually. Beginning with the first quarter of 1996, the BIF assessment
rates for other institutions will range from 0.03% to 0.27% of deposits.
Effective January 1, 1996, the Bank's assessment rate will be reduced to
$2,000 per year.
Certain proposed new legislation will provide that the BIF cannot
assess regular insurance assessments unless required to maintain or achieve
the designated reserve ratio of 1.25%, or such higher ratio found by the
FDIC to be justified because of a significant risk of losses to the BIF,
except on those of its member institutions that have been found to have
"moderately severe" or "unsatisfactory" financial, operational or
compliance weaknesses. The Bank has not been so classified by the FDIC.
Accordingly, assuming that the legislation is adopted as described above
and the BIF maintains the designated reserve ratio, the Bank would continue
to pay substantially reduced regular BIF deposit assessments as long as the
Bank maintained its regulatory status.
Bad Debt Reserves. See "Taxation - Federal Taxation -
Proposed Legislation."
------------------
Extensions of Credit Under FDICIA, the federal banking agencies
are required to adopt uniform regulations prescribing standards for
extensions of credit that are secured by liens on interests in real estate
or made for the purpose of financing the construction of a building or
other improvements to real estate. Under joint regulations adopted by the
banking agencies, which became effective March 19, 1993, all financial
institutions must adopt and maintain written policies that establish
appropriate limits and standards for extensions of credit that are secured
by liens or interests in real estate or are made for the purpose of
financing permanent improvements to real estate. These policies must
establish loan portfolio diversification standards, prudent underwriting
standards (including loan-to-value limits) that are clear and measurable,
loan administration procedures, and documentation, approval and reporting
requirements. The real estate lending policies must reflect consideration
of the interagency Guidelines for Real Estate Lending Policies that have
been adopted by the federal bank regulators.
Prompt Corrective Action FDICIA requires the federal banking
regulators to take prompt corrective action if a bank fails to satisfy
certain minimum capital requirements. As implemented by the FDIC's
regulations for insured state nonmember banks, the capital requirements
include a leverage limit and risk-based capital requirements that are used
to define five categories of banks ("well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized"). All institutions, regardless of their
capital levels, are restricted from making any capital distribution or
paying any management fees that would cause the institution to fail to
satisfy the minimum levels for any of its capital requirements. Any
institution that fails to meet the minimum level for any relevant capital
measure (any of the three "undercapitalized" categories) will be subject to
a wide range of limitations on its activities and operations and
requirements as to remedial actions.
Community Reinvestment Act Under the Community Reinvestment Act
("CRA"), as implemented by the FDIC's regulations, a savings bank has a
continuing and affirmative obligation consistent with its safe and sound
operation to help meet the credit needs of its entire community, including
low and moderate income neighborhoods. The CRA does not establish specific
lending requirements or programs for financial institutions nor does it
limit an institution's discretion to develop the types of products and
services that it believes are best suited to its particular community,
consistent with the CRA. The CRA requires the FDIC, in connection with its
examination of a savings bank, to assess the bank's record of meeting the
credit needs of its community and to take such record into account in its
evaluation of certain applications by such association. The CRA also
requires all institutions to make public disclosure of their CRA ratings.
The Bank received a "Satisfactory" CRA rating in its most recent
examination.
In April 1995, the FDIC and the other federal banking agencies
adopted amendments revising their CRA regulations. Among other things, the
amended CRA regulations substitute for the prior process-based assessment
factors a new evaluation system that would rate an institution based on its
actual performance in meeting community needs. In particular, the proposed
system would focus on three tests: (a) a lending test, to evaluate the
institution's record of making loans in its service areas; (b) an
investment test, to evaluate the institution's record of investing in
community development projects, affordable housing, and programs benefiting
low or moderate income individuals and businesses; and (c) a service test,
to evaluate the institution's delivery of services through its branches,
ATMs, and other offices. The amended CRA regulations also clarify how an
institution's CRA performance would be considered in the application
process.
Dividend Restrictions New York law imposes certain restrictions on
the payment of dividends, including a provision that, without regulatory
approval, the Bank cannot declare and pay dividends in any calendar year in
excess of its "net profits" for such year combined with its "retained net
profits" of the two preceding years, less any required transfer to surplus.
TAXATION
Federal Taxation. For Federal income tax purposes, North Side
reports its income and expenses on the accrual method of accounting and
files its federal income tax returns on a fiscal year basis.
General. The Bank is subject to federal income taxation under the
Internal Revenue Code ("Code") in the same general manner as other
corporations, with some exceptions, including particularly the reserve for
bad debts discussed below. The Tax Reform Act of 1986, as amended, ("1986
Act") made major changes in the provisions of the Code which are applicable
to insured institutions. The Revenue Act of 1987 (the "1987 Act") made
certain further changes to the Code which affect insured institutions and
their borrowers. The following discussion of federal taxation is a summary
of certain pertinent federal income tax matters as affected by the 1986 Act
and the 1987 Act.
Statement of Financial Accounting Standards No. 109 During fiscal
1994, the Bank adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" ("SFAS No. 109,"). SFAS No. 109 requires the
Bank to change its method of accounting for deferred income taxes to the
asset and liability method. SFAS No. 109 requires that a deferred tax asset
or liability be recorded for all differences between book and tax bases of
assets. The realization of any deferred tax assets set up is to be assessed
and a valuation allowance provided for that portion of the asset for which
it is more likely than not that it will not be realized. The adoption
resulted in a cumulative effect credit to earnings and an increase in
deferred tax assets of $5.3 million.
Bad Debt Reserves. Savings institutions such as the Bank, which
meet certain definitional tests primarily relating to their assets and the
nature of their businesses, are permitted to establish a reserve for bad
debts and to make annual additions to the reserve. These additions may,
within specified formula limits, be deducted in arriving at the Bank's
Federal taxable income. For purposes of computing the deductible addition
to its bad debt reserve, the Bank's loans are separated into "qualifying
real property loans" (i.e., generally those loans secured by interests in
real property) and all other loans ("non-qualifying loans"). The deduction
with respect to non-qualifying loans must be computed under the experience
method. For taxable years beginning on or after January 1, 1987, the
following formulas could be used to compute the bad debt deduction with
respect to qualifying real property loans; (i) actual loss experience or
(ii) a percentage of taxable income. Reasonable additions to the reserve
for losses on non-qualifying loans must be based upon actual loss
experience and would reduce the current year's addition to the reserve for
losses on qualifying real property loans, unless that addition is also
determined under the experience method. The sum of the additions to each
reserve for each year is the Bank's annual bad debt deduction.
Under the experience method, the deductible annual addition to the
Bank's bad debt reserves is the amount necessary to increase the balance of
the reserve at the close of the taxable year to the greater of (a) the
amount which bears the same ratio to loans outstanding at the close of the
taxable year as the total net bad debts sustained during the current and
five preceding taxable years bear to the sum of the loans outstanding at
the close of those six years or (b) the lower of (i) the balance in the
reserve account at the close of the base year which is the last taxable
year beginning before 1988, or (ii) if the amount of loans outstanding at
the close of the taxable year is less than the amount of loans outstanding
at the close of the base year, the amount which bears the same ratio to
loans outstanding at the close of the taxable year as the balance of the
reserve at the close of the base year bears to the amount of loans
outstanding at the close of the base year.
Under the percentage of taxable income method, for taxable years
beginning after December 31, 1986, the bad debt deduction equals 8% of
taxable income determined without regard to that deduction and with certain
adjustments. The availability of the percentage of taxable income method
has permitted a qualifying savings institution to be taxed at a lower
maximum effective marginal federal income tax rate rather than that
applicable to corporations in general. Generally, the maximum effective
marginal federal income tax rate payable by a qualifying savings
institution fully able to use the maximum deduction permitted under the
percentage of taxable income method, in the absence of other factors
affecting taxable income, was 32.20% exclusive of any minimum tax or
environmental tax (as compared to 35% for corporations generally). Any
savings institution at least 60% of whose assets are qualifying assets as
described in Section 7701 (a) (19) (C) of the Code will generally be
eligible for the full deduction of 8% of taxable income. As of September
30, 1995, at least 60% of the Bank's assets were "qualifying assets," as
described in Section 7701(a)(19)(C) of the Code, and the Bank anticipates
that at least 60% of its assets will continue to be qualifying assets in
the immediate future. If this ceases to be the case, the Bank may be
required to restore some portions of its bad debt reserve to taxable income
in the future.
Under the percentage of taxable income method, the bad debt
deduction for an addition to the reserve for qualifying real property loans
cannot exceed the amount necessary to increase the balance in this reserve
to an amount equal to 6% of such loans outstanding at the end of the
taxable year. The bad debt deduction is also limited to the amount which
when added to the addition to the reserve for losses on non-qualifying
loans, equals the amount by which 12% of deposits at the close of the year
exceeds the sum of surplus, undivided profits and reserves at the beginning
of the year. Based on experience, it is not expected that this restriction
will be a limiting factor in the immediate future. In addition, the
deduction for qualifying real property loans is reduced by an amount equal
to the deduction for non-qualifying loans.
The Bank has used the experience method in determining the
provision for income taxes in fiscal 1993 and 1994 and expects to use such
method in fiscal 1995. In future years, the Bank intends to elect to
utilize whatever available method provides the maximum tax benefits.
Distributions. If the Bank makes a distribution to stockholders,
and the distribution is treated as being from its accumulated bad debt
reserves, the distribution will cause the Bank to have additional taxable
income. A distribution to stockholders is deemed to have been made from
accumulated bad debt reserves to the extent that (a) the reserves exceed
the amount that would have been accumulated on the basis of actual loss
experience, and (b) the distribution is a "non-dividend distribution." A
distribution in respect of stock is a non-dividend distribution to the
extent that, for federal income tax purposes, (i) it is in redemption of
shares, (ii) it is pursuant to a liquidation of the institution, or (iii)
in the case of a current distribution, together with all other such
distributions during the taxable year, exceeds the Bank's current and
post-1951 accumulated earnings and profits. The amount of additional
taxable income created by a non-dividend distribution is an amount that
when reduced by the tax attributable to the inclusion of such amount in
gross income is equal to the amount of the distribution.
Minimum Tax. For taxable years beginning after December 31, 1986,
the Code imposes an alternative minimum tax at a rate of 20%. The
alternative minimum tax generally will apply to a base of regular taxable
income plus certain tax preferences ("alternative minimum taxable income"
or "AMTI") less an exemption amount and will be payable to the extent such
alternative minimum tax is in excess of the regular tax for the taxable
year. The Code provides that an item of tax preference is the excess of the
bad debt deduction allowable for a taxable year pursuant to the percentage
of taxable income method over the amount allowable under the experience
method. The other items of tax preference that constitute AMTI include (a)
tax-exempt interest on newly-issued (generally, issued on or after August
8, 1986) private activity bonds other than certain qualified bonds and (b)
for taxable years including 1987 through 1989, 50% of the excess of (i) the
taxpayer's pre-tax adjusted net book income over (ii) AMTI (determined
without regard to this latter preference and prior to reduction by net
operating losses). For taxable years beginning after 1989, this latter
preference will be replaced by 75% of the excess (if any) of (i) adjusted
current earnings as defined in the Code, over (ii) AMTI (determined without
regard to this preference and prior to reduction by net operating losses).
For any taxable year beginning after 1986, net operating losses can offset
no more than 90% of AMTI. Certain payments of alternative minimum tax may
be used as credits against regular tax liabilities in future years. The
Bank has not been subject to the alternative minimum tax and has no such
amounts available as credits for carryover. In addition, for taxable years
after 1986, corporations, including thrift institutions, are also subject
to an environmental tax equal to 0.12% of the excess of AMTI for the
taxable year (determined without regard to net operating losses and the
deduction for the environmental tax) over $2.0 million.
Net Operating Loss Carryovers. Under the 1986 Act, a financial
institution may carry back net operating losses to the preceding three
taxable years and forward to the succeeding 15 taxable years. This
provision applies to losses incurred in taxable years beginning after 1986.
The 1986 Act permits losses incurred by savings institutions in years
beginning after 1981 and before 1986 to be carried back 10 years and
forward eight years. Losses attributable to the 1986 taxable year and to
years before 1982 may be carried back 10 years and forward five years. As
of September 30, 1995, the Bank and its subsidiaries had no net operating
loss carryforwards for federal income tax purposes. See Note 11 of Notes to
Consolidated Financial Statements on page 36 of the 1995 Annual Report.
Capital Gains and Corporate Dividends-Received Deduction. The
capital gains tax which was previously imposed at a rate of 28% on a
corporation's net long-term capital gains was repealed effective December
31, 1986. Consequently, corporate net capital gains would be taxed at a
maximum rate of 34% after December 31, 1986. Subsequently, the Omnibus
Budget Reconciliation Act of 1994 increased the maximum corporate capital
gains tax rate to 35% effective January 1, 1994. The 1986 Act reduced the
corporate dividends-received deduction from 85% to 80%, in case of
dividends received from corporations with which a corporate recipient does
not file a consolidated tax return. The 1987 Act further amended the
dividends received deduction provisions of the Code to provide that
corporations which own less than 20% of the stock of a corporation
distributing a dividend may deduct only 70% of the dividends received or
accrued on their behalf. However, the 1986 Act and the 1987 Act preserved
prior law which allows a corporation to deduct 100% of dividends from a
member of the same affiliated group of corporations.
Other Matters. In addition to the changes in the income tax laws
that affect the Bank's federal income tax liability, the 1986 Act
instituted other changes in the system of federal income taxation that
could significantly affect the Bank's business. The most significant of
these changes include the denial of any interest deduction to individuals
with respect to interest incurred for consumer loans, such as car loans and
education loans. Interest would continue to be deductible, subject to
certain limitations, for loans secured by the principal or secondary
residence of the taxpayer.
The Bank's federal income tax returns for tax years beginning in
October 1991 are open under the statute of limitations and are subject to
review by the Internal Revenue Service ("IRS").
Proposed Legislation. Legislation recently has been introduced
which would repeal Section 593 of the Internal Revenue Code of 1986, as
amended, which provides for the methods of accounting for bad debts. Under
the proposal, effective for taxable years beginning after December 31,
1995, thrift institutions which are treated as large banks (with total
assets in excess of $500 million), such as the Bank, would generally be
required to take into income the balance of their post-1987 bad debt
reserves. If enacted into law, the pending legislation could require the
Bank to realize an increased tax liability over a six year period beginning
in 1996. Management of the Bank does not believe that any such increase
would be material.
New York State Taxation. North Side is subject to an annual New
York State franchise tax equal to the greater of a minimum basic tax (the
"State Basic Tax"), or an alternative minimum tax (the "State Alternative
Minimum Tax") and to a New York City financial corporation tax. These taxes
are currently deductible for federal income tax purposes.
The State Basic Tax is computed at the rate of 9% on North Side's
entire net income (which is substantially similar to taxable income under
the Code, with certain modifications) allocable to New York State during
North Side's taxable year.
The State Alternative Minimum Tax is the greater of the following:
(1) A tax computed at the rate of 3% on North Side's alternative
entire net income allocable to New York State for the taxable year. North
Side's alternative entire net income consists of its entire net income,
increased by the amount of certain deductions taken in computing entire
taxable income that are not allowed in computing alternative entire taxable
income.
(2) A tax computed annually on North Side's taxable assets
allocated to the State of New York. Such taxable assets consist of the
average total value of North Side's statement of condition assets, with
certain modifications. The tax is generally computed at the rate of 1/10 of
a mil per dollar of taxable assets, but lower rates apply for banks with at
least 33% of their assets in mortgages or that have a "net worth ratio" of
less than 5% determined under June 1, 1984 regulations of the Federal Home
Loan Bank Board used to determine net worth assistance.
(3) $250.
Because of the State Alternative Minimum Tax, North Side may incur
tax liability under New York State law even though it has no taxable income
or a loss for the year under federal law.
In addition to the foregoing, the New York State tax law also
imposes a temporary surcharge equal to 17% of that portion of the franchise
tax otherwise payable which is attributable to a savings bank's activities
in New York City and in several other New York counties in the New York
City metropolitan area. For tax years ending after June 30, 1989, an
additional surcharge at the rate of 15% on income tax before applicable
credits, if any, has been imposed on financial institutions. This surcharge
has been reduced to 10% effective July 1, 1995. For the taxable year ended
September 30, 1995 the blended surcharge rate is 12.5%. Further reductions
become effective July 1, 1995 to 5% and July 1, 1996 to zero. The blended
rate for the tax years end September 30, 1995 and 1996 will be 7.5% and
2.5% respectively.
The New York State and New York City tax laws provide for a bad
debt deduction of four times the federal amount when the federal amount is
determined under the percentage of taxable income method, subject to
separate limitation calculations.
The New York City banking corporation tax is imposed in an annual
amount equal to the greater of: (1) 9% of a savings bank's "Entire Net
Income" allocable to New York City during the taxable year, or (2) the City
Alternative Minimum Tax. This City Alternative Minimum Tax is equal to the
greater of: (a) .01% of the value of a bank's assets allocable to New York
City during the taxable year; (b) 3% of a bank's "Alternative Entire Net
Income" allocable to New York City; or (c) $125.
ITEM 2. PROPERTIES
North Side currently conducts its business from 17 full service
offices and one public accommodation office located in New York City,
Nassau and Suffolk Counties. All such offices are owned by the Bank without
any material encumbrances, except the offices located at Co-op City and
Marine Air Terminal (77-22 21st Avenue), which are leased. The lease for
the Co-Op City branch expires on May 31, 1997 and contains five 5-year
renewal options. The lease for Marine Air Terminal expires on May 31, 1996,
and the Bank expects to enter into a new or renewal lease for such branch.
The following table sets forth certain information relating to each of
North Side's offices as of September 30, 1995.
Net
Book
Value at
Own or September 30,
Lease 1995
Office Location
(In Thousands)
Bronx County:
Main Office
185 West 231st Street
Bronx, New York 10463 Own $ 244
4201 White Plains Road
Bronx, New York 10466 Own $ 483
3159 Bainbridge Avenue
Bronx, New York 10467 Own $ 391
5977 Riverdale Avenue
Bronx, New York 10471 Own $ 333
1941 Williamsbridge Road
Bronx, New York 10461 Own $ 1,808
3030 Buhre Avenue
Bronx, New York 10461 Own $ 888
725 Co-Op City
Bronx, New York 10475 Lease $ 11
Queens County:
115-20 Jamaica Avenue
Richmond Hill, New York 11418 Own $ 1,117
114-19 Liberty Avenue
Richmond Hill, New York 11419 Own $ 699
257-03 Hillside Avenue
Floral Park, New York 11004 Own $ 772
103-42 Lefferts Boulevard
Richmond Hill, New York 11419 Own $ 938
77-22 21st Avenue
East Elmhurst, New York 11370 Lease $ 9
Public Accommodation Office
115-02 Jamaica Avenue
Richmond Hill, New York 11418 Own $ 319
Nassau County:
Administrative Office
170 Tulip Avenue
Floral Park, New York 11001 Own $ 3,033
1800 Grand Avenue
Baldwin, New York 11510 Own $ 693
550 Franklin Avenue
Franklin Square, New York 11010 Own $ 675
2303 Grand Avenue
Baldwin, New York 11510 Own $ 715
Suffolk County:
150 North Main Street
Sayville, New York 11782 Own $ 408
---------
$ 13,536
ITEM 3. LEGAL PROCEEDINGS
North Side is not involved in any legal proceeding that it
believes is material to its financial condition.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference to pages 2 through 4 of the definitive
Proxy Statement filed with the FDIC on December 26, 1995 pursuant to
Section 335.204 of the FDIC Rules and Regulations ("Proxy Statement").
PART II.
ITEM 5. MARKET FOR THE BANK'S COMMON STOCK
AND RELATED SHAREHOLDER MATTERS
The information contained in Note 18 of Notes to Consolidated
Financial Statements and in the section captioned "Shareholder Information
- - Price Range of Stock" in the Bank's Annual Report to Shareholders for the
year ended September 30, 1995 ("1995 Annual Report") is incorporated herein
by reference. As of December 18, 1995 there were 643 shareholders of
record.
ITEM 6. SELECTED FINANCIAL DATA
The information contained in the table captioned "Selected
Financial and Operating Data" on page 3 of the Bank's 1995 Annual Report is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information contained in the section captioned "Management's
Discussion and Analysis" in the Bank's 1995 Annual Report is incorporated
herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data required are
contained in the Bank's 1995 Annual Report and are incorporated herein by
reference.
PART III.
ITEM 9. DIRECTORS AND PRINCIPAL OFFICERS OF THE BANK
Incorporated by reference to pages 6 and 7 of the definitive Proxy
Statement. The principal officers of the Bank, all of whom are subject to
election annually by the Board of Directors, are:
Thomas M. O'Brien - Mr. O'Brien, age 45, has been Chairman of the Board,
President and Chief Executive Officer of the Bank since October 1, 1987.
Donald C. Fleming - Mr. Fleming, age 46, has been the Executive Vice
President and Chief Financial Officer of the Bank since October 1989.
Marie Alleva - Ms. Alleva, age 53, has been a Senior Vice President of the
Bank since June of 1991. Previously, from 1983 through November 1990, she
served as a First Senior Vice President of the Dime Savings Bank of New
York, with responsibilities at various times in the areas of branch
operations, mortgage originations and asset recovery.
Martin J. Brady - Mr. Brady, age 42, has been a Senior Vice President of
the Bank since September 1990. Previously, Mr. Brady was a Vice President
of the Bank in the mortgage area.
Alissa E. Ballot - Ms. Ballot, age 40, has been the General Counsel of the
Bank since March 30, 1992. Previously, Ms. Ballot served as Associate
General Counsel and then as Deputy General Counsel of American Savings Bank
from June 1985 through March 1992.
Joseph R. Kwasnik - Mr. Kwasnik, age 44, has served as Vice President and
Comptroller of the Bank since March 1986.
Felix G. Gonzalez - Mr. Gonzalez, age 60, has been a Senior Vice President
- - Loan Servicing of the Bank since January 1994 and had served as the
Bank's Auditor since March 1989.
Kathleen Mallon - Ms. Mallon, age 51, has been the Treasurer of the Bank
since 1989. Previously, she was Vice President/Investment Officer of
Richmond Hill Savings Bank, which merged with North Side in late 1988.
Judith A. MacGregor - Ms. MacGregor, age 43, has served as Corporate
Secretary of the Bank since October 1, 1990. Previously, she was the
executive secretary to the Bank's Chairman of the Board.
Samy F. Sapek - Mr. Sapek, age 47, has served as the Bank's Auditor since
March 1994. Previously, Mr. Sapek served as Assistant Vice President and
Deputy Auditor of The Peoples Westchester Savings Bank from 1988 through
March 1994.
ITEM 10. MANAGEMENT COMPENSATION AND TRANSACTIONS
Incorporated by reference to page 13 through the section entitled
"Certain Transactions" on page 18, and the section entitled "Compliance
with Section 16(a) of the Exchange Act" on page 19, of the definitive Proxy
Statement.
PART IV.
ITEM 11. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM F-3
(a) (1) The following financial statements are contained in the
Bank's 1995 Annual Report to Shareholders attached hereto as
Exhibit 6 and are incorporated herein by reference.
Consolidated Statements of Condition as of September 30, 1995
and 1994
Consolidated Statements of Operations for the Years Ended
September 30, 1995, 1994 and 1993
Consolidated Statements of Changes in Shareholders' Equity for
the Years Ended September 30, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended
September 30, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
Independent Auditors' Report
(a) (2) Financial Statement Schedules - Financial Statement Schedules
are omitted due to inapplicability or because required
information is shown in the Consolidated Financial Statements or
the Notes thereto.
(b) Reports on Form F-3 filed during the last quarter of the period
covered by this report: No reports on Form F-3 were filed during
the last quarter of the period covered by this report. However, a
Current Report on Form F-3 for the month of September, 1995, was
filed on October 3, 1995. Such Current Report on Form F-3
reported the acquisition of two branches from Chemical Bank in
September 1995.
(c) Exhibits. The following exhibits are either filed as part of this
report or are incorporated herein by reference:
No. Exhibit
1a (1) Restated Organization Certificate.
1b (2) Bylaws, as amended.
1c (3) Amendment to Article III, Section 12 of the Bylaws.
3(i)a (4) Material Contract - Purchase and Assumption
Agreement dated as of March 13, 1995 by and between
the Bank and Chemical Bank
3(i)b (4) Material Contract - Real Property Agreement dated
as of March 13, 1995 between the Bank and Chemical
Bank, as amended by side letter amendment dated
March 14, 1995.
3(ii)a (5) Material Contract - Amended and Restated Long-Term
Incentive and Capital Accumulation Plan.
3(ii)b (2) Material Contract - Employment Contract dated
February 1, 1989 between the Bank and Thomas M.
O'Brien.
3(ii)c (2) Material Contract - Amendment to Employment
Contract between the Bank and Thomas M. O'Brien.
3(ii)d (6) Material Contract - Management Development and
Recognition Plan, as amended.
3(ii)e (7) Material Contract - North Side Savings Bank Board
of Directors Deferred Compensation Plan.
3(ii)f (8) Material Contract - Amendment No. 1 to North Side
Savings Bank Board of Directors Deferred
Compensation Plan.
3(ii)g (7) Material Contract - North Side Savings Bank Benefit
Preservation Plan.
6 Annual Report to Shareholders for the Year Ended
September 30, 1995.
9 List of Registrant's Subsidiaries.
(1) Incorporated herein by reference to the Form F-1 Registration
Statement filed by the Bank on June 23, 1986.
(2) Incorporated herein by reference to the Bank's Annual Report on
Form F-2 for the year ended September 30, 1989.
(3) Incorporated herein by reference to the Bank's Current Report on
Form F-3 for the month of November, 1993, filed on December 2,
1993.
(4) Incorporated by reference to the Bank's Current Report on Form
F-3 for the month of March, 1995, filed on April 4, 1995.
(5) Incorporated herein by reference to Exhibit A to the Bank's
definitive Proxy Statement for the 1994 Annual Meeting of
Shareholders.
(6) Incorporated herein by reference to the Bank's Annual Report on
Form F-2 for the year ended September 30, 1987.
(7) Incorporated herein by reference to the Bank's Annual Report on
Form F-2 for the year ended September 30, 1993.
(8) Incorporated herein by reference to the Bank's Annual Report on
Form F-2 for the year ended September 30, 1994.
EXHIBIT 9
List of Subsidiaries
Subsidiary State of Incorporation
North Side Capital Corporation Delaware
North Ski Holding Corporation New York
Kent Road Development Corp. New York
BSSN, Inc. New Jersey
NS 138 Holding Corp. New York
NS 160 Holding Corp. New York
NS Hilltop Holding Corp. New York
NS Sprout Brook Holding Corp. New York
NS 30 Holding Corp. New York
NS MIR Holding Corp. New York
NS 43 Holding Corp. New York
North Front Street Holding Corp. New Jersey
NS 10 Holding Corp. New York
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Bank has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NORTH SIDE SAVINGS BANK
Bank
By: /s/ Thomas M. O'Brien Date: December 26, 1995
-------------------------------- ---------------------
Thomas M. O'Brien
Chairman of the Board,
President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Irvin L. Cherashore Date: December 26, 1995
-------------------------------- ----------------------
Irvin L. Cherashore
Director
-------------------------------- -----------------------
Greg L. Collins
Director
/s/ Richard D. Gidron Date: December 26, 1995
-------------------------------- ----------------------
Richard D. Gidron
Director
/s/ Margaret M. Healy Date: December 26, 1995
-------------------------------- -----------------------
Margaret M. Healy
Director
/s/ Ralph J. Marino Date: December 26, 1995
-------------------------------- -----------------------
Ralph J. Marino
Director
/s/ John J. Murphy Date: December 26, 1995
------------------------------- ----------------------
John J. Murphy
Director
/s/ Stephen J. Schildwachter Date: December 26, 1995
-------------------------------- ---------------------
Stephen J. Schildwachter
Director
/s/ Thomas M. O'Brien Date: December 26, 1995
-------------------------------- -----------------------
Thomas M. O'Brien
Chairman of the Board,
President and
Chief Executive Officer
/s/ Donald C. Fleming Date: December 26, 1995
-------------------------------- -----------------------
Donald C. Fleming
Director,
Executive Vice President
and Chief Financial Officer
/s/ Joseph R. Kwasnik Date: December 26, 1995
-------------------------------- -----------------------
Joseph R. Kwasnik
Vice President and
Comptroller
EXHIBIT 6 - ANNUAL REPORT
TABLE OF CONTENTS
SELECTED FINANCIAL AND OPERATING DATA 1
LETTER TO SHAREHOLDERS 2
MANAGEMENT'S DISCUSSION AND ANALYSIS 4
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CONDITION 25
CONSOLIDATED STATEMENTS OF OPERATIONS 26
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY 27
CONSOLIDATED STATEMENTS OF CASH FLOWS 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 29
SHAREHOLDER INFORMATION 51
CORPORATE DIRECTORY 52
BRANCH LOCATIONS 53
<TABLE>
<CAPTION>
NORTH SIDE SAVINGS BANK AND SUBSIDIARIES
NORTH SIDE SAVINGS BANK ANNUAL REPORT 1995
Selected Financial and Operating Data
_______________________________________________________________________________________________
SEPTEMBER 30, 1995 1994 1993 1992 1991
_______________________________________________________________________________________________
(Dollars in Thousands)
FINANCIAL CONDITION DATA:
<S> <C> <C> <C> <C> <C>
Total Assets $1,588,003 $1,541,051 $1,383,659 $1,487,218 $1,508,072
Loans 432,180 489,883 388,030 611,988 652,144
Allowance for loan losses 6,417 11,178 11,114 15,012 12,600
Total securities available
for sale 326,542 - - - -
Investment securities, net 93,301 135,972 60,342 75,614 123,240
Mortgage-backed securities, net 651,153 858,700 750,062 720,494 514,176
Money market investments 29,456 1,200 113,400 5,449 102,101
Deposits 1,199,077 1,191,509 1,280,295 1,340,584 1,364,404
Borrowed funds 251,000 226,875 - 22,276 25,646
Shareholders' equity 116,284 100,998 87,953 99,739 95,628
Full service banking offices 17 15 16 18 21
SELECTED ANNUAL RATIOS:
Return (loss) on average assets 0.98% 0.90% (0.85%) 0.32% 0.35%
Return (loss) on average equity 14.24% 14.21% (13.60%) 5.12% 4.91%
Tier I regulatory capital
to average assets 7.02% 6.52% 5.90% 5.87% 6.14%
================================================================================================
YEARS ENDED SEPTEMBER 30, 1995 1994 1993 1992 1991
________________________________________________________________________________________________
(Dollars in Thousands, Except Per Share Amounts and Stock Prices)
OPERATIONS DATA:
________________________________________________________________________________________________
Total interest income $ 105,775 $ 90,931 $ 97,415 $ 118,874 $ 112,200
Total interest expense 55,230 41,349 43,984 70,223 76,305
Net interest income 50,545 49,582 53,431 48,651 35,895
Provision for loan losses 2,825 3,550 16,308 10,837 6,162
Gain (loss) on redemptions
and sales of securities 355 - (136) 564 -
Loss on disposition of assets - - (11,063) - -
(Loss)gain on sales of bank
building, mortgages and
other real estate owned (520) 180 (273) (950) (298)
Other operating income 2,461 2,928 2,930 3,301 3,252
Amortization of excess cost
over fair value of net
assets acquired - - 10,192 920 920
OREO expense, net 475 1,225 11,002 388 765
Other operating expenses 23,063 24,972 27,128 28,581 22,047
_______________________________________________________________________________________________
Income (loss) before provision
(benefit) for income taxes
and cumulative effect of
accounting changes 26,478 22,943 (19,741) 10,840 8,955
Provision (benefit) for income
taxes 11,371 9,576 (3,961) 5,769 4,288
Income (loss) before cumulative
effect of accounting changes 15,107 13,367 (15,780) 5,071 4,667
_______________________________________________________________________________________________
Cumulative effect of accounting
changes
Postretirement benefits cost - - (2,300) - -
Income taxes - - 5,329 - -
Net income (loss) $ 15,107 $ 13,367 $(12,751) $ 5,071 $ 4,667
===============================================================================================
Primary earnings (loss) per
common share before
cumulative effect of
accounting changes (1) $ 3.15 $ 2.82 $ (3.35) $ 1.08 $ 1.00
Primary earnings (loss)
per common share (1) 3.15 2.82 (2.71) 1.08 1.00
Fully diluted earnings
per common share 3.06 N/A N/A N/A N/A
Cash dividends paid per
common share .675 .125 .20 .40 .40
Book value per share (1) 24.24 21.18 18.63 21.25 20.39
Tangible book value per share (1) 23.97 21.18 18.63 19.09 18.02
Common stock price range (1)
High 31 1/2 24 3/4 20 10 3/8 9 7/8
Low 16 16 3/4 8 3/4 6 3 1/4
Common shares outstanding (1) 4,798,022 4,768,121 4,720,781 4,693,081 4,690,269
================================================================================================
(1) Prior years are restated to reflect the 5% stock dividends paid during
fiscal 1993,1994 and 1995.
</TABLE>
NORTH SIDE SAVINGS BANK
TO OUR SHAREHOLDERS
The fruits of our labor were enjoyed again during fiscal
1995. North Side Savings Bank reached several significant
milestones during the year marking the 90th anniversary of its
founding. Perhaps the most readily apparent evidence of this
success was the market value appreciation in the Bank's common
stock. Fueled by a favorable market for banking and thrift
stocks in general, North Side's consistent quarterly financial
performance directed investors' attention to its value. Not
unlike the results reported in 1994, North Side continued to
report impressive net income throughout 1995. For the year North
Side is reporting net income of $15.1 million or $3.15 per share
compared to $13.4 million or $2.82 per share in 1994. The 13%
increase in net income accompanied continued improvement in
credit quality and resulting reduction in the quarterly provision
for loan losses. At the end of 1995, North Side's non-performing
assets were a low $7.4 million or .47% of total assets. Reserve
coverage improved to 130.8% of non-performing loans. North
Side's Return on Equity for the year was an impressive 14.24%.
As these favorable results were reported, the Board of
Directors continued to provide for shareholders tangible
participation in the Bank's success. Consequently, over the
course of the year the Board declared a 5% stock dividend and
increased the cash dividend on three occasions. As a result of
these actions the current quarterly cash dividend of $.25 per
share represents an effective 110% increase from the rate of just
one year ago.
The Bank continues to be managed prudently be resisting the
temptations to compromise on credit quality or terms.
Competition for quality loans is intense in the metropolitan New
York market and elsewhere. North Side has resisted the trend to
growing market share through unhealthy loan pricing. At this
point in the business cycle, loan growth at concessionary terms
would appear to be a Pyrrhic victory and certainly an
accomplishment that we prefer to avoid. North Side's credit
exposure is carefully monitored with the fragility of the current
economy prudently considered. It is expected that this
disciplined approach will best serve the long term interests of
the Bank and its shareholders.
During 1995, North Side produced modest asset growth, and
net interest margins were under some pressure due to the
flattening of the yield curve. Despite these challenges, North
Side's financial performance ratios are at or near the high end
of the thrift industry. Net interest income increased to $50.5
million while operating expenses were reduced to $23.1 million.
Management of operating expenses continues to be critical during
periods of limited profitable growth opportunities. As a BIF-
insured bank, North Side benefitted from the reduction in deposit
insurance premiums announced by the FDIC. Furthermore, the FDIC
has indicated a further reduction in such premiums beginning in
January 1996. In addition, current trends suggest a further
reduction in credit costs for the year ahead.
This Annual Report contains a few nostalgic reminders from
the past 90 years. The efforts of our dedicated predecessors
form the solid foundation on which North Side rests today. On
behalf of all of us at North Side, I extend my heartfelt thanks
for their hard work. North Side Savings Bank is positioned for a
bright and successful future because of the commitment and talent
of its people. My sincere thanks go to the staff, officers and
directors for their dedication to the prosperity of the Bank. It
is an honor to be the Chief Executive Officer of North Side and
my job is made easier through their contributions. Finally, I am
delighted to be issuing this report to the Bank's shareholders
and am most grateful for their continued interest and support.
Sincerely,
Thomas M. O'Brien
Chairman of the Board,
President and Chief executive Officer
DECEMBER 15, 1995
NORTH SIDE SAVINGS BANK
MANAGEMENT'S DISCUSSION AND ANALYSIS
North Side Savings Bank ("North Side" or the "Bank") is a stock
savings bank founded in 1905 and chartered by New York State.
North Side is currently celebrating the 90th anniversary of its
founding. Deposits at the Bank are insured, up to the maximum
legal limits, by the Bank Insurance Fund ("BIF") administered by
the Federal Deposit Insurance Corporation ("FDIC").
During fiscal 1995, the Bank completed the purchase of two
branches from Chemical Bank located in Co-op City, Bronx and East
Elmhurst, Queens. The Bank assumed approximately $48.6 million
in deposits. The Bank currently has a 17 full service branch
retail network serving the Bronx, Queens, Nassau and Suffolk
Counties with average deposits of $70.5 million per branch at
September 30, 1995.
During the second quarter of fiscal 1995, the Board of Directors
declared, and the Bank paid, a 5% stock dividend. At the regular
meeting of the Bank's Board of Directors held on October 24,
1995, the Board declared a $.25 per share quarterly cash dividend
payable on November 24, 1995 to shareholders of record on
November 10, 1995. This was the sixth such cash dividend
declared since the Board reinstated and increased the regular
quarterly dividend in the fourth quarter of fiscal 1994. The
increased cash dividend coupled with the stock dividend
distributed in fiscal 1995 resulted in a cumulative dividend
increase of 110% since the end of fiscal 1994.
GENERAL
North Side Savings Bank had net income of $15.1 million or $3.15
per share for the fiscal year ended September 30, 1995 as
compared to $13.4 million or $2.82 per share for the fiscal year
ended September 30, 1994. The fiscal 1995 results represent the
second consecutive year of record earnings for the Bank. On a
fully diluted basis, earnings per share were $3.06 for the fiscal
year ended September 30, 1995.
The Bank's fiscal 1995 financial performance was highlighted by
increased net interest income, which was achieved primarily
through additional leveraging of the Bank's capital base,
continued improvements in asset quality (which resulted in a
substantially reduced provision for loan losses and lower other
real estate owned expense) and overall reduced operating
expenses, reflecting the Bank's continuing cost control
management efforts.
During fiscal 1995, the yield curve generally flattened, that is,
short-term rates generally were increasing over the course of the
year while intermediate and long-term rates generally were
decreasing during the same time period. This interest rate
environment had a greater impact on the Bank's overall cost of
funds than on rates earned on interest-earning assets, as average
rates paid rose by 87 basis points (100 basis points being equal
to 1.0%) to 3.89%, while overall asset yields increased 64 basis
points to 7.08% for fiscal 1995. Consequently, the Bank's
interest rate spread decreased to 3.19% for the year ended
September 30, 1995 from 3.42% for the year ended September 30,
1994 and the net interest margin (net interest income divided by
average interest-earning assets) decreased to 3.39% in fiscal
1995 as compared to 3.51% in fiscal 1994. However, a strong
capital base coupled with substantial improvement in credit
quality enabled the Bank to leverage its growth, primarily
through the use of collateralized financings as a source of
funds for additional assets yielding higher rates of return than
the rates of interest charged on such borrowings. During fiscal
1995, average earning assets increased by $80.8 million. This
growth in earning assets more than offset the decrease in the
Bank's interest rate spreads and margins, and as a result net
interest income increased by $1.0 million during fiscal 1995.
Asset quality again improved significantly during fiscal 1995.
This was accomplished primarily through the bulk sale of a non-
performing loan package, the sale of properties held as other
real estate owned ("OREO") and specific loan charge-offs related
to other non-performing loans.
Non-performing loans were $4.9 million at September 30, 1995, a
decrease of $9.0 million, or 64.6%, from the level at September
30, 1994. OREO also reflected a significant decrease of $5.9
million, or 69.9%, during the current fiscal year. As a result,
management deemed it prudent to reduce the provision for loan
losses to $2.8 million during fiscal 1995 as compared to $3.6
million during fiscal 1994. The allowance for loan losses was
$6.4 million or 130.83% of non-performing loans at September 30,
1995 as compared to $11.2 million or 80.65% of non-performing
loans at September 30, 1994. In addition, because of the
significant decrease in OREO, OREO related expenses decreased by
$750,000 for the current fiscal year. See "ASSET QUALITY" and
Note 8 of the Notes to Consolidated Financial Statements.
Management continued to maintain strong control over operating
expenses as compensation and benefits, occupancy and equipment
and other operating expenses declined by $714,000 in fiscal 1995
as compared to fiscal 1994. In addition, because of lower
premiums which became effective on June 1, 1995, the Bank's BIF
deposit insurance expense decreased $1.2 million in fiscal 1995
and is expected to again decrease significantly in fiscal 1996.
The Bank's efficiency ratio (operating expense before OREO
expense, net and restructuring expenses as a percentage of net
interest income, customer service fees and other income,
excluding gains and losses) was 43.59%, 47.56% and 45.65% for the
fiscal years ended September 30, 1995, 1994 and 1993,
respectively.
ASSET AND LIABILITY MANAGEMENT
The Bank strives to maintain net interest spreads and margins
within relatively stable ranges in all types of interest rate
environments. The Bank uses its best efforts to reduce what it
perceives as inordinate interest rate risk in its asset mix. To
accomplish this in fiscal 1995, the Bank continued to purchase
fixed-rate mortgage-backed securities and other investments with
relatively short (generally less than five years) estimated
average lives or with adjustable rate features as considered
appropriate. North Side has been able to maintain a significant
core deposit base over time despite changes in the interest rate
environment. Because of its strong liquidity levels and cash
flow, which continued during fiscal 1995, the Bank has been able
to invest in higher yielding investments or repay outstanding
borrowings when deemed appropriate by management. Also, because
of its continuing profitability and emphasis on improving overall
asset quality, North Side has utilized borrowings to a greater
extent during the past several fiscal years. This has provided
the Bank with the ability to more effectively leverage its
capital base at incremental yields. In addition, during fiscal
1995, North Side became a member of the Federal Home Loan Bank of
New York ("FHLBNY"). This membership will permit the Bank to
access additional alternative funding sources when it is deemed
advantageous by management to do so.
During fiscal 1995, the Bank purchased $222.7 million of
mortgage-backed securities, of which $174.4 million were backed
by fixed-rate loans and $48.3 million were backed by one year
adjustable-rate loans. As in previous fiscal years, the fixed-
rate purchases were generally concentrated on higher coupon
premium securities with relatively short estimated average lives.
In fiscal 1995 the Bank also invested, to a lesser extent, in par
and discount securities as the yield curve leveled during the
latter part of the fiscal year. The Bank's fixed-rate mortgage-
backed securities portfolio provided higher yields in fiscal 1995
compared to fiscal 1994 due to slower premium amortization as a
result of the continued decrease in fiscal 1995 in prepayment
levels.
Effective October 1, 1994, the Bank adopted SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"), which requires classification of
securities as either held to maturity or available for sale. At
the time of adoption, the Bank classified as held for sale those
securities it intends to use as part of its asset/liability
management strategy and that may be sold in response to changes
in interest rates and/or resultant prepayment risk changes or
other factors related to interest rates and prepayment risk
changes. As a result of the adoption of SFAS No. 115, the Bank
reclassified $180.6 million of mortgage-backed securities and
$22.0 million of investment securities as available for sale.
Securities purchased subsequent to October 1, 1994 have been
designated either as available for sale using this same criteria
or, if appropriate, as held to maturity.
Mortgage-backed securities available for sale, a portfolio
comprised of entirely of fixed rate securities, were $300.0
million at September 30, 1995 and had an estimated average life
of approximately 3.8 years.
At September 30, 1995, the held to maturity mortgage-backed
securities portfolio amounted to $651.2 million, of which $493.9
million, or 75.9%, was backed by fixed-rate loans and $157.3
million, or 24.1%, was backed by adjustable-rate loans. At such
date this portfolio had an estimated average life of
approximately 5.4 years and a fair market value of $642.9
million, or $8.3 million less than the book value.
At September 30, 1995 the Bank's mortgage-backed securities (both
available for sale and held to maturity) amounted to $951.2
million. As of September 30, 1995, 66.6% of these securities
were insured or guaranteed by the Government National Mortgage
Association ("GNMA"), Federal Home Loan Mortgage Corporation
("FHLMC"), the Federal National Mortgage Association ("FNMA") or
Federal Agency Guaranteed Collateralized Mortgage Obligations.
The remaining balance is comprised of high grade, privately
insured, participation certificates and collateralized mortgage
obligations.
The Bank seeks to maintain a varied investment portfolio,
consistent with its overall objectives concerning
asset/liability management. At September 30, 1995, $26.5 million
of this portfolio was classified as available for sale, of which
$26.3 million, or 99.1%, consisted of various equity securities
such as an adjustable rate mortgage mutual fund, common stock and
adjustable rate preferred stock. Also at September 30, 1995,
$93.3 million of the investment portfolio was classified as held
to maturity, consisting of federal agency and other bonds and
preferred stocks. During the past two fiscal years, including
fiscal 1995, purchases for this segment of the portfolio have
consisted primarily of various federal agency multiple step-up
callable notes. These notes are rated to be of the highest
investment quality and have varying final maturities of between
ten and fifteen years. These notes are callable each year at the
option of the issuer but, if not called, have a predetermined
upward adjustment of the interest rate. As of September 30,
1995, the Bank had $60.0 million of such notes, all of which were
called subsequent to the end of fiscal 1995. Substantially all of
the investment portfolio is investment grade and management
estimates the average weighted maturity of the investment
portfolio, excluding equity securities, was approximately 10.3
years at September 30, 1995, compared to approximately 8.8 years
at September 30, 1994.
The Bank continued in fiscal 1995 to improve its risk profile by
reducing its exposure to loans generally deemed to be of higher
risk than single-family residential loans, including commercial
real estate and construction loans and, to a lesser extent,
multi-family residential real estate loans. Commercial real
estate loans are generally underwritten with terms that provide
for maturity or repricing after either three or five years. The
percentage of higher risk loans to total assets has steadily
decreased from 11.7% at September 30, 1993 to 9.1% at September
30, 1994 and 7.9% at September 30, 1995. The percentage of the
loan portfolio consisting of one-to four-family residential
loans, including FHA insured and VA guaranteed loans, has
remained stable (70.0% of mortgage loans, net, at September 30,
1995, compared to 70.2% at September 30, 1994). Also at
September 30, 1995, $197.1 million or 69.3% of the one-to four-
family residential loan portfolio was comprised of adjustable-
rate loans, a slight increase from 67.1% at September 30, 1994.
During the past fiscal year the Bank originated $4.2 million of
mortgage loans, primarily commercial mortgage loans.
Because of the Bank's continued strong liquidity position and
positive cash flow, management has reduced the average balance of
money market investments over the past several fiscal years.
This strategy, has enabled the Bank to invest in alternative
investments yielding higher rates or to repay outstanding
borrowings when deemed appropriate by management.
The Bank emphasizes customer service and traditionally has been
able to maintain a relatively high level of core deposits, which
management believes helps to limit interest rate risk by
providing a relatively stable, low cost, long-term funding base.
Savings accounts represented 48.1% of total deposits at September
30, 1995. In fiscal 1995, the Bank bought two branches, one in
the Bronx and the other in Queens, to complement its existing
branches in these boroughs of New York City. These acquisitions
added $48.6 million in deposits and added to the Bank's
established customer base. Generally the Bank prices its deposit
products substantially consistent with the average rates offered
in the competitive market area in which it operates. However,
the Bank's strategy, which was included as a part of its overall
asset/liability management strategy in fiscal 1995, is to be
more competitive in pricing (by offering higher rates) when it
believes there is an opportunity to increase long-term deposits
at favorable terms. As a result, time deposits increased by
$66.2 million or 15.0% during fiscal 1995. At September 30,
1995, $74.0 million or 14.6% of time deposits are scheduled to
mature in more than three years, compared to $47.4 million or 11%
at September 30, 1994. Of the Bank's time deposits outstanding
on September 30, 1995 of $508.3 million, only a relatively small
amount and percentage ($30.5 million and 6.0% respectively) were
in denominations of $100,000 or more.
As part of its asset/liability management strategy, the Bank uses
wholesale funding sources when deemed appropriate by management
to supplement its retail deposit base. These wholesale funding
sources, which are generally collateralized financings, provide
the Bank with the opportunity to increase the level of interest-
earning assets at incremental yields through the investment of
proceeds from such borrowings. Because of continued capital
growth through earnings, as well as its continued improvement in
asset quality, the Bank utilized borrowed funds to a greater
extent during the past fiscal year as the average balance of
borrowed funds increased by $115.4 million to $248.9 million in
fiscal 1995 compared to $133.5 million in fiscal 1994. Taking
advantage of the level yield curve described earlier, the Bank
also extended the maturities of certain borrowings. At September
30, 1995 $111.0 million of the Bank's borrowings mature within
one year while $140.0 million mature within three years.
INTEREST-SENSITIVITY ANALYSIS
During the past fiscal year, the Bank established an Interest
Rate Risk Committee comprised of several members of senior
management and one outside director. This committee meets on a
quarterly basis or on a more frequent basis if considered
appropriate. The purpose of this committee is to monitor and
assess the Bank's level of interest rate risk and to make
recommendations as to the proper management of this risk.
One of the methods used to measure this sensitivity is GAP
analysis. An asset or liability is said to be interest rate
sensitive within a specific time period if it will mature or
reprice within that time period. The interest rate sensitivity
GAP is defined as the difference between the amount of interest-
earning assets maturing or repricing within a specified time and
the amount of interest-bearing liabilities maturing or repricing
within that same time period. A GAP is considered positive when
the amount of interest-sensitive assets exceeds the amount of
interest-sensitive liabilities. Conversely, a GAP is considered
negative when the amount of interest-sensitive liabilities
exceeds the amount of interest-sensitive assets. During a period
of rising interest rates a negative GAP would tend to adversely
affect net interest income. During a period of falling interest
rates, a negative GAP would tend to increase net interest income,
while a positive GAP would tend to adversely affect net interest
income.
ASSET MIX DEPOSIT MIX
SEPTEMBER 30, 1995 SEPTEMBER 30, 1995
| | __| |
Investment Cash and Due | Money Market
Securities from banks (2.6%) | Demand accounts
(6.5) | | (4.7%)
| | | |
| Securities Time |
__| Available accounts |
| for Sale (42.4%) |
Loans, net (20.6%) | |
(26.8%) | | Savings
| | | accounts
| | | (48.1%)
Other Assets | Now accounts |
(2.5%) | (1.7%) |
| | |___________________|
| Mortage-Backed |
|________________Securities (41.0%) Checking accounts
(3.1%)
The following table sets forth, as of the dates shown,
information regarding the interest-sensitive assets and
liabilities of the Bank. For purposes of this table, assets and
liabilities are deemed to be interest-sensitive if they reprice
or mature within one year or less. Certain shortcomings are
inherent in the "GAP" method of analysis of interest rate
sensitivity. This table is presented for the purpose of
illustrating interest rate sensitivity and does not necessarily
indicate the impact of general interest rate movements on the
Bank's net interest income. For example, it does not take into
consideration the fact that repricing of various assets and
liabilities may vary and that repayments are also subject to
competitive and other pressures. As a result, assets and
liabilities indicated as repricing within the same period may in
fact reprice at different times and at different rate levels.
This is particularly true in the presentation of passbook
accounts in the table. The Bank considers these accounts as
interest-sensitive, however, changes in interest rates with
respect to these accounts in either increasing or decreasing rate
environments generally lag behind the shift in general market
rates of interest. In addition, the interest sensitivity of
passbook, NOW and money market accounts can be measured by
several different methods. One common method utilizes national
deposit withdrawal pattern assumptions previously published by
the Office of Thrift Supervision ("OTS"). Using the OTS
assumptions as of December 31, 1993 which contemplate withdrawal
or "decay" rates within the first year of 14%, 17% and 31%,
respectively, for passbook accounts, NOW accounts and money
market accounts, the Bank would report a positive one-year GAP of
7.29% at September 30, 1995. Actual experience may differ
substantially from the assumptions used in preparing the table.
Because of these inherent limitations in utilizing GAP analysis,
the Bank has emphasized financial modeling techniques in order to
more fully assess and manage its exposure to interest rate risk.
Financial modeling is much more flexible in approach and permits
income simulation in various interest rate scenarios and within
different time horizons.
_____________________________________________________________________
SEPTEMBER 30, 1995 1994 1993
____________________________________________________________________
(Dollars in Thousands)
INTEREST-SENSITIVE ASSETS:
Loans, net (1) $ 256,760 $ 277,019 $ 176,015
Investment securities 81,433 106,789 13,007
Money market investments 29,356 1,200 113,400
Mortgage-backed securities (2) 270,890 287,294 433,500
TOTAL INTEREST-SENSITIVE ASSETS $ 638,439 $ 672,302 $ 735,922
INTEREST-SENSITIVE LIABILITIES:
Passbook accounts (3) $ 579,362 $ 633,442 $ 672,890
Negotiable Order of Withdrawal
("NOW") accounts (3) 19,869 19,072 20,984
Money market accounts 55,806 64,747 75,778
Certificates of deposit due
within one year 309,907 269,945 290,889
Borrowed Funds 111,000 226,875 -
TOTAL INTEREST-SENSITIVE
LIABILITIES $1,075,944 $1,214,081 $1,060,541
(Deficiency) of interest-
sensitive assets
over interest-sensitive
liabilities (GAP) $ (437,505) $ (541,779) $ (324,619)
Ratio of interest-sensitive
assets to total assets 40.20% 43.63% 53.19%
Ratio of interest-sensitive
liabilities to total liabilities 73.11% 84.31% 81.85%
Ratio of interest-sensitive assets to
interest-sensitive liabilities 59.34% 55.38% 69.39%
Ratio of (negative) GAP to
total assets (27.55%) (35.16%) (23.46%)
(1) Includes total prepayments and repayments of mortgage loans based
upon the timing of certain loans repricing and the Bank's
estimate of loan prepayments.
(2) Includes Bank estimates of prepayments and repayments of principal
based on actual experience.
(3) Passbook (which includes lease security and club accounts), and
NOW accounts are considered to be interest-sensitive.
The following table summarizes the estimated aggregate
maturity/repricing structure of North Side's assets and
liabilities at September 30, 1995.
<TABLE>
<CAPTION>
__________________________________________________________________________________________
SEPTEMBER 30, 1995 ASSETS(1) LIABILITIES AND NET WORTH (2)
__________________________________________________________________________________________
CUMULATIVE CUMULATIVE
AMOUNT PERCENT PERCENT AMOUNT PERCENT PERCENT
__________________________________________________________________________________________
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
180 DAYS OR LESS $ 319,272 20.10% 20.10% $ 898,939 56.61% 56.61%
181 DAYS TO 1 YEAR 319,167 20.10 40.20 177,005 11.15 67.76
OVER 1 YEAR TO 3 YEARS 439,819 27.70 67.90 264,389 16.65 84.41
OVER 3 YEARS TO 5 YEARS 353,536 22.26 90.16 73,436 4.62 89.03
OVER 5 YEARS TO 10 YEARS 79,975 5.04 95.20 531 0.03 89.06
OVER 10 YEARS 28,422 1.79 96.99 31,954 2.01 91.07
NON-INTEREST-BEARING 47,812 3.01 100.00 141,749(3) 8.93 100.00
TOTAL $1,588,003 100.00% $1,588,003 100.00%
</TABLE>
(1) Assumes prepayments and repayments of mortgage loans and
mortgage-backed securities based upon actual experience and the
timing of certain loans repricing in the future along with the
Bank's estimate of loan prepayments.
(2) Assumes that passbook (which includes lease security and club
accounts), and NOW accounts are considered to be interest-
sensitive and, accordingly, 100% of such amounts are included in
"180 days or less."
(3) Includes $116.3 million of shareholders' equity.
ASSET QUALITY
The Bank's asset quality level continued to be enhanced during
fiscal 1995 as non-performing assets decreased to $7.4 million or
.47% of total assets at September 30, 1995 from $22.2 million or
1.44% of total assets at September 30, 1994. Non-performing
assets were $26.1 million or 1.89% of total assets at September
30, 1993.
At September 30, 1995 non-performing assets consisted of $4.9
million of non-performing loans, of which $2.3 million were one-
to four-family residential mortgage loans, and $2.5 million of
OREO.
The Bank's non-performing loan portfolio consists of loans on
which the Bank is no longer accruing interest because such loans
are more than 90 days overdue or because the Bank has initiated
legal proceedings to foreclose on the collateral securing such
loans. The Bank's non-performing loan portfolio was
significantly reduced during fiscal 1995 to $4.9 million as
compared to $13.9 million at September 30, 1994. Non-performing
loans were $17.3 million at September 30, 1993. The $9.0
million, or 64.6%, decrease in fiscal 1995 non-performing loans
was accomplished primarily through a $3.6 million bulk sale of
non-performing loans, of which $1.6 million was charged against
the Bank's allowance for loan losses, and a $4.4 million specific
loan charge-off related to a non-performing land loan. In
addition, eleven loans with an aggregate principal balance of
$.5 million, net of $.2 million of charge-offs, were transferred
to OREO during fiscal 1995.
Total non-performing loans amounted to 0.31%, 0.90% and 1.25% of
total assets at September 30, 1995, 1994 and 1993, respectively,
and 1.13%, 2.83% and 4.46% of total loans (net of premium,
discount and deferred fees) respectively at such dates.
The adequacy of the allowance for loan losses is based on
management's periodic review of the loan portfolio. Such reviews
are performed by a loan review committee of the Bank on a
quarterly basis. During this review, the committee classifies
loans based upon its evaluation of the risk elements of the
Bank's loan portfolio. Considered in this evaluation are such
factors as a borrower's ability to repay, the estimated value of
collateral, general economic conditions, conditions in the real
estate market in the Bank's lending areas, past loss experience
and the level of non-performing loans. The results of such
reviews form the basis of management's determination of the
amount of the allowance for loan losses at that point in time.
In the event that it is determined that the allowance should be
increased, such an increase is accomplished through a provision
for loan losses, which is charged to operations.
As a result of management's evaluation of the adequacy of the
allowance for loan losses, which considered, among other things,
the significant and continuing decline in the amount of the
Bank's non-performing loans, and because of management's
conclusion that the Bank's risk profile has been significantly
improved, the Bank deemed it appropriate to reduce the level of
provisions for loan losses to $2.8 million for fiscal 1995 as
compared to $3.6 million for fiscal 1994. The Bank's provision
for loan losses was $16.3 million in fiscal 1993. After net
charge-offs of $7.6 million during fiscal 1995 the allowance for
loan losses was $6.4 million at September 30, 1995.
As a result of the decrease in the non-performing loan portfolio,
the allowance for loan losses as a percentage of non-performing
loans has continued to increase to 130.83% at September 30, 1995,
compared to 80.65% at September 30, 1994 and 64.16% at September
30, 1993.
Continued loan amortizations and satisfactions, along with the
$4.4 million specific loan charge-off related to a non-performing
land loan and $1.2 million of higher risk loans sold as part of
the fiscal 1995 bulk sale of non-performing loans, have reduced
the balance of higher risk commercial real estate, construction
and, to a lesser extent, multi-family loans in the Bank's
portfolio by $15.2 million from $140.9 million at September 30,
1994 to $125.7 million at September 30, 1995. The balance of
these loans at September 30, 1993 was $162.6 million. The ratio
of these loans to total assets was also reduced from 11.7% at
September 30, 1993 to 9.1% and 7.9% at September 30, 1994 and
1995, respectively.
NON-PERFORMING ASSETS AS ALLOWANCE FOR LOAN LOSSES AS
A % OF TOTAL ASSETS A % OF NON-PERFORMING LOANS
SEPTEMBER, 30, SEPTEMBER 30,
3.00%_________________________ 150%_____________________________
| | | |
| | 130%|____________________130.83% |
| | | | |
| | 110%|______________________| |
2.00%|_______________________| | | |
| 1.89% | 90%|______________________|_____|
| | 1.44% | | 80.85% | |
| | | | 70%|___64.16%_____|_______|_____|
1.00%|______|______|_________| | | | | |
| | | | 50%|_____|________|_______|_____|
| | | | | | | | |
| | | | 30%|_____|________|_______|_____|
| | | .47% | | | | | |
| | | | | 10%|_____|________|_______|_____|
0.00%|______|______|____|____| 0%|_____|________|_______|_____|
1993 1994 1995 1993 1994 1995
Management believes that the Bank's loan loss reserves are
adequate and is committed to continuing to carefully assess the
loan portfolio in an effort to further reduce the level of non-
performing assets. Although it appears that the real estate
market in the Bank's primary lending areas has stabilized, given
the cyclical nature of this market no assurance can be given that
future additional loan loss provisions may not be required.
OREO includes properties on which the Bank has secured legal
title, either through foreclosure or by accepting a deed from the
borrower in lieu of foreclosure, as well as loans deemed to be
in-substance foreclosures. In-substance foreclosed loans are
loans considered foreclosed because (i) the borrower has no
equity in the collateral at its current estimated fair value;
(ii) proceeds for repayment are expected to come only from the
operation or sale of the collateral; and (iii) the borrower may
or may not have abandoned control of the collateral and it is
doubtful the borrower will rebuild equity in the collateral or
repay the loan.
OREO decreased $5.9 million from $8.4 million at September 30,
1994 to $2.5 million at September 30, 1995. The fiscal 1995
decrease was primarily the result of the sale of 14 properties
with a net carrying value of $6.1 million, at a net pre-tax loss
of $.5 million. These sales included the disposition of the
Bank's largest OREO property, which had a net carrying value of
$3.4 million, at a pre-tax loss of $.4 million. The remaining
activity in the OREO balance was due to a $.3 million provision
to the allowance for OREO, which was partially offset by
approximately $.5 million in additions to OREO.
The following is a summary of non-performing assets by type:
SEPTEMBER 30, 1995 1994 1993
(Dollars in Thousands)
Non-performing loans (1) :
Non-performing
mortgage loans
One-to four-family $ 2,319 $ 3,549 $ -
Commercial 13 2,303 3,245
Multi-family 546 739 2,142
Construction and Land 2,027 6,596 10,175
Total non-performing
mortgage loans (2) 4,905 13,187 15,562
Non-performing
commercial business
loans - 673 1,721
Non-performing other
loans - - 32
Total non-performing loans 4,905 13,860 17,315
Other real estate owned 2,515 8,369 8,789
Total non-performing
assets $ 7,420 $ 22,229 $ 26,104
Total non-performing loans
as a percentage of:
Total loans 1.13% 2.83% 4.46%
Total assets 0.31% 0.90% 1.25%
Total non-performing assets
as a percentage of total
assets 0.47% 1.44% 1.89%
Allowance for loan losses
as a percentage of
non-performing loans 130.83% 80.65% 64.16%
Total Loans $432,180 $ 489,883 $388,030
Allowance for loan losses 6,417 11,178 11,114
Total Assets 1,588,000 1,541,051 1,383,659
(1) Consists of loans more than 90 days delinquent and non-
accruing loans.
(2) Includes loans under foreclosure.
FINANCIAL CONDITION
The Bank's total assets were $1.6 billion at September 30, 1995,
of which mortgage-backed securities totaled $651.2 million, or
41.0%, loans, net totaled $425.8 million, or 26.8%, securities
available for sale totaled $326.5 million, or 20.6%, and
investment securities (including FHLBNY Stock) totaled $102.7
million, or 6.5%. Total deposits were $1,199.1 million, borrowed
funds totaled $251.0 million and shareholders' equity totaled
$116.3 million, or 7.32% of total assets. Tangible book value
per share was $23.97 at September 30, 1995.
The $47.0 million increase in total assets during fiscal 1995 was
achieved primarily through the use of borrowings to leverage the
Bank's Statement of Condition, and net deposit inflows
(principally as a result of the acquisition of two branches
during the latter part of the fiscal year) and earnings.
Mortgage-backed securities available for sale increased to $300.0
million at September 30, 1995 due to $180.6 million of securities
transferred from mortgage-backed securities held to maturity as a
result of the Bank's adoption of SFAS No. 115 on October 1, 1994
and subsequent purchases of $174.4 million of fixed-rate
mortgage-backed securities. Partially offsetting this was $54.5
million of principal repayments received during fiscal 1995. At
September 30, 1995 there was $1.6 million of unrealized
appreciation, net of taxes, in the Bank's portfolio of mortgage-
backed securities available for sale.
The mortgage-backed securities held to maturity balance decreased
$207.5 million primarily due to the $180.6 million that was
transferred to available for sale as described above along with
$73.0 million of principal repayments, which were partially
offset by the purchase of $48.3 million of adjustable rate
mortgage-backed securities during the first quarter of fiscal
1995.
Money market investments, which consist of Federal Home Loan Bank
overnight deposits, Federal Home Loan Bank balances, Federal
funds sold and certificates of deposit in other institutions,
amounted to $29.5 million, or 1.9% of total assets at September
30, 1995 as compared to $1.2 million or 0.08% of total assets at
September 30, 1994. The $28.3 million increase is considered
temporary as it was primarily due to the funds received in
connection with the purchase of the two Chemical Bank branches
during the last month of fiscal 1995.
Investment securities available for sale increased to $26.5
million at September 30, 1995, primarily due to the $22.0 million
of securities transferred from held to maturity as a result of
the adoption of SFAS No. 115. During the remainder of the year,
the Bank purchased $8.0 million of securities designated as
available for sale, which was partially offset by bond maturities
and redemptions totaling $6.6 million. At September 30, 1995,
the portfolio had $2.7 million of net unrealized appreciation,
net of taxes.
Investment securities held to maturity decreased $42.7 million
during fiscal 1995. This was due to the transfer of $22.0
million of securities to available for sale as described above,
$5.2 million of principal repayments and $25.5 million of
maturities and redemptions. These decreases were partially offset
by $10.3 million of purchases, primarily a $10.0 million Federal
Home Loan Bank note which was called subsequent to September 30,
1995.
In the past fiscal year, the Bank became a member of the FHLBNY
and, in connection with this membership, purchased $9.4 million
of FHLBNY stock.
The Bank's loans receivable portfolio was $432.2 million at
September 30, 1995, which is a decrease of $57.7 million from
$489.9 million at September 30, 1994. The primary reasons for
the decrease were $50.5 million of loan amortizations and
satisfactions, $7.9 million of loan charge-offs, $5.0 million of
loans sold, $.5 million of loans transferred to OREO and a
decrease of $.7 million in loan premiums. These decreases were
partially offset by loan originations of $6.9 million.
The allowance for loan losses decreased $4.8 million during
fiscal 1995 to $6.4 million at September 30, 1995 from $11.2
million at September 30, 1994. Management deems the allowance
for loan losses to be adequate based on its review of the status
of the loan portfolio. See "ASSET QUALITY."
OREO decreased $5.9 million from $8.4 million at September 30,
1994 to $2.5 million at September 30, 1995. The decrease was due
to the sale of 14 properties with a net carrying value of $6.1
million and $.3 million of provisions to the allowance for OREO,
which was partially offset by approximately $.5 million in
additions to OREO.
The decrease of $7.8 million in other assets during fiscal 1995
was primarily due to a $7.4 million decrease in net deferred tax
assets and a $1.3 million decrease in prepaid expenses and other
miscellaneous investments offset partially by the premium on
acquired deposits of $1.3 million due to the purchase of the two
branches from Chemical Bank.
Total liabilities increased by $31.7 million during fiscal 1995
mainly due to an increase in borrowings of $24.1 million and a
$7.6 million increase in deposits, which increase in deposits was
due primarily to the acquisition of two branch offices.
Shareholders' equity increased 15.1% or $15.3 million to $116.3
million at September 30, 1995 from $101.0 million at September
30, 1994. Tangible book value per common share outstanding was
$23.97 at September 30, 1995, an increase of $2.79 from $21.18 in
the prior year. These increases were primarily due to the net
income for the fiscal year and the net unrealized appreciation on
securities available for sale, net of taxes at September 30,
1995, reduced by cash dividends paid during the fiscal year. The
Bank's leverage ratio of Tier 1 or core capital to average assets
was 7.02% at September 30, 1995 and 6.52% at September 30, 1994.
See "REGULATORY CAPITAL" and Note 14 of the Notes to Consolidated
Financial Statements.
RESULTS OF OPERATIONS
The operating results of the Bank depend primarily on its net
interest income, which is the difference between interest income
on interest-earning assets, primarily investments, loans and
mortgage-backed securities, and interest expense on interest-
bearing liabilities, primarily deposits and borrowings. North
Side's operating results also are affected by the level of its
other operating income, including customer service and other
fees, its other operating expenses and the amount of the
provision required for loan losses.
The Bank realized record earnings growth from fiscal 1993 through
fiscal 1995, with net income increasing to $15.1 million in
fiscal 1995 from $13.4 million in fiscal 1994 and a loss of $12.8
million in fiscal 1993.
North Side's earnings increased $1.7 million, or 13%, for the
fiscal year ended September 30, 1995 compared to the fiscal year
ended September 30, 1994. This increase is attributable to a
rise of $1.0 million in net interest income, a reduction of $.7
million in the provision for loan losses and a $2.7 million
reduction in other operating expenses. Offsetting these
increases to income were a $1.8 million increase in the provision
for income taxes and an $.8 million decrease in other income.
The following table sets forth for and at the periods indicated,
information regarding (i) the total dollar amounts of interest
income from interest-earning assets and the resulting average
yields; (ii) the total dollar amounts of interest expense on
interest-bearing liabilities and the resulting average costs;
(iii) net interest income; (iv) the interest rate spread; (v) the
ratio of total interest-earning assets to total interest-bearing
liabilities, and (vi) the net interest margin. Average balances
are calculated on a daily basis.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
Average Yield/ Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Mortgage loans $ 456,414 $ 35,610 7.80% $ 522,667 $ 38,631 7.39% $ 539,182 $ 42,566 7.89%
Mortgage-backed
securities 881,892 59,604 6.76 772,473 44,682 5.78 741,522 47,911 6.46
Investment securities (1) 136,737 9,271 6.78 91,485 6,164 6.74 64,269 4,745 7.38
Money market investments 11,006 642 5.83 15,905 534 3.36 29,941 894 2.99
Other loans 7,134 648 9.08 9,810 920 9.38 14,408 1,299 9.02
Total interest-earning
assets $1,493,183 105,775 7.08 $1,412,340 90,931 6.44 $1,389,322 97,415 7.01
Interest-bearing liabilities:
Deposits and mortgagors'
escrow payments $1,169,319 40,172 3.44 $1,236,660 35,602 2.88 $1,307,684 42,097 3.22
Borrowed funds 248,897 15,058 6.05 133,509 5,747 4.30 43,601 1,887 4.33
Total interest-bearing
liabilities $1,418,216 55,230 3.89 $1,370,169 41,349 3.02 $1,351,285 43,984 3.25
Net interest income $ 50,545 $ 49,582 $ 53,431
Interest rate spread 3.19% 3.42% 3.76%
Ratio of interest-earning
assets to interest-bearing
liabilities 1.05X 1.03x 1.03x
Net interest margin 3.39% 3.51% 3.85%
(1) Includes investment in FHLBNY stock in the year ended September 30,
1995.
</TABLE>
The following table presents changes in interest income and
interest expense attributable to (i) changes in volume (change in
volume multiplied by prior year rate), and (ii) changes in rate
(change in rate multiplied by prior year volume). The net change
attributable to the combined impact of volume and rate has been
allocated proportionately to the change due to volume and the
change due to rate.
<TABLE>
<CAPTION>
FISCAL 1995 COMPARED FISCAL 1994 COMPARED
TO FISCAL 1994 TO FISCAL 1993
INCREASE (DECREASE) INCREASE (DECREASE)
VOLUME RATE NET VOLUME RATE NET
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income on interest-earning
assets:
Mortgage loans $ (5,082) $ 2,061 $ (3,021) $ (1,282) $ (2,653) $ (3,935)
Mortgage-backed securities 6,792 8,130 14,922 1,946 (5,175) (3,229)
Investment securities (1) 3,070 37 3,107 1,860 (441) 1,419
Money market investments (200) 308 108 (460) 100 (360)
Other loans (244) (28) (272) (429) 50 (379)
Total 4,336 10,508 14,844 1,635 (8,119) (6,484)
Interest expense on interest-bearing liabilities:
Deposits and mortgagors' escrow
payments (2,030) 6,600 4,570 (2,206) (4,289) (6,495)
Borrowed funds 6,331 2,980 9,311 3,873 (13) 3,860
Total 4,301 9,580 13,881 1,667 (4,302) (2,635)
Net interest income $ 35 $ 928 $ 963 $ (32) $ (3,817) $ (3,849)
(1) Includes investment in FHLBNY stock in the year ended September 30, 1995.
</TABLE>
NET INTEREST INCOME
Net interest income depends primarily upon the volume,
distribution and repricing characteristics of interest-earning
assets and interest-bearing liabilities along with the associated
movements in interest rates earned or paid. Net interest income
for fiscal 1995 rose $1.0 million to $50.5 million due to an
improvement in the Bank's ratio of average interest-earning
assets to average interest-bearing liabilities. This ratio
increased from 1.03 at September 30, 1994 to 1.05 at September
30, 1995.
During fiscal 1995, average interest-earning assets increased
$80.8 million, which exceeded the increase of $48.0 million in
average interest-bearing liabilities. This was offset to some
extent by the decrease in the Bank's interest rate spread to
3.19% for fiscal 1995 from 3.42% for fiscal 1994. This decrease
in interest rate spread was the result of the upward trend in
short-term rates for most of fiscal 1995, which had a more
dramatic impact on the Bank's average cost of interest-bearing
liabilities than on its average earnings on interest-earning
assets.
Net interest income decreased $3.8 million to $49.6 million
during fiscal 1994 compared to fiscal 1993. The decrease was
primarily due to the decrease in the average yield earned on
total interest-earning assets exceeding the decrease in the rate
paid on total interest-bearing liabilities. During fiscal 1994,
compared to fiscal 1993, the average yield earned on total
interest-earning assets declined by 57 basis points, while the
average rate paid on interest-bearing liabilities declined by
only 23 basis points. The Bank's interest rate spread decreased
from 3.76% in fiscal 1993 to 3.42% in fiscal 1994.
<TABLE>
<CAPTION>
INTEREST RATE SPREAD/NET INTEREST MARGIN
SEPTEMBER 30,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
_
|*| _____________________________________________________________________________
Yield on Interest 10%|_________________________|_________________________|_________________________|
Earnings Assets 9%|_________________________|_________________________|_________________________|
_ 8%|_________________________|_________________________|_________________________|
|_| 7%|_7.01%___________________|_________________________|_7.08%___________________|
Cost of Funds 6%|__*______________________|_6.44%___________________|__*______________________|
_ 5%|__*______________________|__*______________________|__*______________________|
|#| 4%|__*__________3.76%_3.85%_|__*__________3.42%_3.51%_|__*____3.89%_____________|
Interest Rate 3%|__*____3.25%__#_____/____|__*____3.02%__#_____/____|__*_____|____3.19%_3.39%_|
Spread 2%|__*______|____#_____/____|__*_____|_____#_____/____|__*_____|_____#_____/____|
_ 1%|__*______|____#_____/____|__*_____|_____#_____/____|__*_____|_____#_____/____|
|/| 0%|__*______|____#_____/____|__*_____|_____#_____/____|__*_____|_____#_____/____|
Net Interest 1993 1994 1995
Margin
</TABLE>
INTEREST INCOME
Interest income amounted to $105.8 million for the fiscal year
ended September 30, 1995 compared to $90.9 million for the fiscal
year ended September 30, 1994. The $14.9 million, or 16.3%,
increase was the result, in part, of the increase in the average
balance of interest-earning assets of $80.8 million during fiscal
1995. In addition, the increase in income was aided by a 64
basis point increase in the average yield earned on interest-
earning assets to 7.08% for fiscal 1995 compared to 6.44% for
fiscal 1994.
Interest income on mortgage loans decreased by $3.0 million or
7.8% in fiscal 1995 and by $3.9 million or 9.2% in fiscal 1994.
The decrease in fiscal 1995 was primarily the result of a $66.3
million decrease in the average balance of mortgage loans, which
was partially offset by a 41 basis point increase in the average
yield earned. The decrease in average balance was primarily the
result of loan amortizations and satisfactions while the increase
in the average yield earned reflects the continuation of the
upward trend in rates that continued through the first half of
fiscal 1995. The decrease in fiscal 1994 was primarily due to a
decrease of 50 basis points in the average yield earned combined
with a $16.5 million decrease in the average balance of mortgage
loans. Such decrease in the average yield was primarily the
result of the general decline in market rates of interest in
fiscal 1993 and the first half of fiscal 1994.
The decrease in mortgage loan income in fiscal 1995 was more than
offset by the $14.9 million increase in mortgage-backed
securities interest income to $59.6 million. Such interest
income decreased $3.2 million in fiscal 1994 to $44.7 million
from $47.9 million in fiscal 1993. The fiscal 1995 increase was
the result of the combined effects of a $109.4 million, or 14.2%,
increase in the average balance of mortgage-backed securities
along with a 98 basis point increase in the average yield earned
from 5.78% in fiscal 1994 to 6.76% in fiscal 1995. The increase
in yield in fiscal 1995 was generally the result of higher rates
earned on investments made in the beginning of the fiscal year as
well as decreased premium amortization because of lower
prepayment rates. The decrease in fiscal 1994 was attributable
to a decrease of 68 basis points in the average yield earned from
6.46% in fiscal 1993 to 5.78% in fiscal 1994, which was partially
offset by a $31.0 million increase in the average balance of
mortgage-backed securities from the prior year.
Interest income on investment securities (including FHLBNY stock)
increased by $3.1 million, or 50.4%, to $9.3 million in fiscal
1995. Such interest income in fiscal 1994 represented a $1.4
million, or 29.9%, increase compared to $4.7 million in fiscal
1993. The fiscal 1995 increase was the result of a $45.3 million
increase in the average balance of such securities during the
fiscal year along with a slight increase in the average yield
earned on the securities to 6.78% during fiscal 1995 from 6.74%
during fiscal 1994. The fiscal 1994 increase was the result of a
$27.2 million, or 42.3%, increase in the average balance of such
securities during the fiscal year, which was partially offset by
a 64 basis point decrease in the average yield earned on such
securities to 6.74%.
INTEREST EXPENSE
Total interest expense increased by $13.9 million from $41.3
million in fiscal 1994 to $55.2 million in fiscal 1995. During
fiscal 1994 interest expense decreased by $2.7 million from $44.0
million in fiscal 1993. The fiscal 1995 increase was due to the
combination of a $48.0 million, or 3.5%, increase in the average
balance of interest-bearing liabilities along with an 87 basis
point increase to 3.89% in the average cost of funds for fiscal
1995 compared to fiscal 1994. The average rate paid on interest-
bearing liabilities decreased 23 basis points from 3.25% in
fiscal 1993 to 3.02% in fiscal 1994. The decrease in average
rates paid in fiscal 1994 was partially offset by an $18.9
million increase in the average balance of interest-bearing
liabilities.
Interest expense on deposits increased by $4.6 million to $40.2
million for fiscal 1995. This increase reflects a 56 basis point
increase in the average rate paid on such deposits to 3.44% in
fiscal 1995 from 2.88% for fiscal 1994. The increase in average
rates reflects the higher rates paid on time deposits for the
fiscal year because of the overall upward trend in short-term
interest rates for the period as well as a shift to some extent
from lower cost savings accounts to higher rate time deposits.
This was partially offset by a $67.3 million decrease in the
average balance of deposits for fiscal 1995. Interest expense on
deposits decreased by $6.5 million, or 15.4%, in fiscal 1994 to
$35.6 million, due to a decrease of $71.0 million in the average
deposit balance and a decrease in the average rates paid of 34
basis points. The decrease in the average balances was due in
part to the effects of the sale during fiscal 1994 of an
aggregate of $22.5 million in deposits as well as deposit
outflow, which the Bank attributes to customers seeking other
higher-yielding investment opportunities.
Interest expense on borrowings increased $9.3 million to $15.1
million in fiscal 1995, primarily due to an increase of $115.4
million in the average balance of borrowings, which reflects the
Bank's overall asset/liability strategy during fiscal 1995 to
provide growth through alternative funding sources. In addition,
the average rate paid on these borrowings increased 175 basis
points to 6.05% for fiscal 1995 from 4.30% for fiscal 1994.
Interest expense on borrowings increased $3.9 million to $5.7
million in fiscal 1994, primarily due to an increase of $89.9
million in the average balance of borrowings, which was offset by
a 3 basis point decrease in the average rate paid to 4.30%.
PROVISION FOR LOAN LOSSES
As a result of management's evaluation of the adequacy of the
allowance for loan losses and in view of the decline in the
Bank's non-performing loan portfolio to $4.9 million at September
30, 1995 compared to $13.9 million at September 30, 1994 the Bank
deemed it appropriate to reduce the level of provisions for loan
losses to $2.8 million for fiscal 1995 as compared to $3.6
million for fiscal 1994. The Bank's non-performing loans were
$17.3 million at September 30, 1993 and the fiscal 1993 provision
for loan losses was $16.3 million, of which $6.4 million was due
to the fiscal 1993 Statement of Condition restructuring. See
discussion above regarding "ASSET QUALITY".
OTHER OPERATING INCOME (LOSS)
Total other operating income decreased by $.8 million during
fiscal 1995 to $2.3 million from $3.1 million in fiscal 1994. In
fiscal 1993 there was an other operating loss of $8.5 million.
The primary reason for the decrease in other operating income in
fiscal 1995 was the $.5 million loss incurred on the disposition
of fourteen OREO properties compared to the $.2 million loss on
the disposition of OREO properties in fiscal 1994. The Bank also
recognized a $.4 million gain on redemptions of securities during
fiscal 1995 which was offset by the absence of the $.4 million
gain on the sale of bank-owned property recognized in fiscal
1994. Customer service fees also decreased by $.3 million in
fiscal 1995, which was attributable to lower loan and deposit
fees.
The primary reason for the increase in other operating income in
fiscal 1994 was the absence of a fiscal 1993 $11.1 million loss
on the disposition of assets in connection with the restructuring
of the Bank's Statement of Condition.
OTHER OPERATING EXPENSES
The Bank's other operating expenses consist of non-interest
expense items, including general and administrative expenses and
costs associated with the operation and disposition of OREO
properties. The Bank has closely monitored and continues its
efforts to reduce operating expenses.
The following is a summary of other operating expenses:
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
(In Thousands)
Employee compensation $ 7,709 $ 8,029 $ 8,244
Employee benefits 3,073 2,938 2,787
Occupancy expense 2,451 2,630 2,723
Equipment expense 953 882 994
Postage, stationery and
supplies 322 318 380
Telecommunications 209 223 293
Professional services 1,613 2,052 2,087
BIF deposit insurance
premiums 2,054 3,249 3,355
Insurance 682 761 718
Computer costs 1,763 1,447 1,909
Entrance and exit fees 596 585 565
Mortgage service fees 144 221 306
Other 1,494 1,637 1,367
Operating expense before
OREO expense and
restructuring expenses 23,063 24,972 25,728
OREO expense, net before
restructuring expenses 475 1,225 1,502
Restructuring expenses - - 21,092
Total $ 23,538 $26,197 $48,322
Efficiency Ratio (1) 43.59% 47.56% 45.65%
(1) Operating expense before OREO expense, net and restructuring
expenses as a percentage of net interest income, customer service
fees and other income, excluding gains and losses.
The major component of the decrease in total other operating
expenses in fiscal 1995 was a $1.2 million reduction in BIF
insurance premiums primarily due to lower assessment rates. The
Bank had lower net OREO expenses of $.8 million in fiscal 1995 as
a result of the $5.9 million decrease in other real estate owned
during such year. The remaining decrease in other operating
expenses was in large part the result of the Bank's continuing
effort to maintain strong control over and reduce other operating
costs.
Fiscal 1994 total other operating expenses declined $22.1 million
to $26.2 million from $48.3 million in fiscal 1993. The primary
reason for the significant decrease was the absence of certain
fiscal 1993 expenses resulting from the restructuring of the
Bank's Statement of Condition. The major components affecting the
restructuring and other operating expenses included the $10.2
million write-off of goodwill, the establishment of a $9.5
million allowance for OREO, a charge of $.7 million relating to
the elimination of investments and borrowings in connection with
two unit investment trusts and a charge of $.7 million regarding
advances made in connection with certain non-performing loans.
INCOME TAXES
The provision for income taxes increased by $1.8 million from
$9.6 million in fiscal 1994 to $11.4 million in fiscal 1995,
primarily due to the increase in income before the provision for
income taxes of $3.5 million. See Note 11 of Notes to
Consolidated Financial Statements.
In fiscal 1994, the provision for income taxes increased by $13.6
million to a provision of $9.6 million from a benefit of $4.0
million in fiscal 1993, primarily due to an increase in income
before the provision (benefit) for income taxes of $42.7 million.
Legislation recently has been introduced which would repeal
Section 593 of the Internal Revenue Code of 1986, as amended (the
"Code"), which provides for the methods of accounting for bad
debts. Under the proposal, effective for taxable years beginning
after 1995, thrift institutions which are treated as large banks
(one with total assets in excess of $500 million), such as the
Bank, would generally be required to take into income the balance
of their post-bad debt reserves. If enacted into law, the
pending legislation could require the Bank to realize an
increased tax liability over a six year period beginning in 1996,
however, management of the Bank does not believe that any such
increase would be material.
NET INCOME
Net income increased $1.7 million in fiscal 1995 to $15.1 million
from $13.4 million for the year ended September 30, 1994. Fiscal
1994 net income increased $26.2 million to $13.4 million from a
net loss of $12.8 million for the year ended September 30, 1993.
The following table summarizes the dollar increases (decreases)
in key components of the Bank's Statement of Operations:
FISCAL 1995 FISCAL 1994
COMPARED TO COMPARED TO
INCREASE (DECREASE) IN: FISCAL 1994 FISCAL 1993
(In Thousands)
Total interest income $ 14,844 $ (6,484)
Total interest expense 13,881 (2,635)
Net interest income 963 (3,849)
Provision for loan losses (725) (12,758)
Net gain (loss) on redemptions
and sales of securities,
mortgages and OREO (345) 589
Loss on disposition of assets - (11,063)
Other operating income (467) (2)
Amortization of excess cost
over fair value of net assets
acquired - (10,192)
OREO expenses, net (750) (9,777)
Other operating expenses
(except OREO expenses, net
and amortization expense) (1,909) (2,156)
Income before provision for
income taxes and cumulative
effect of accounting change 3,535 42,684
Provision for income taxes 1,795 13,537
Income before cumulative effect of
accounting changes 1,740 29,147
Cumulative effect of changes:
Postretirement benefits cost - 2,300
Income taxes - (5,329)
Net income (loss) $ 1,740 $ 26,118
LIQUIDITY AND CAPITAL RESOURCES
Liquidity refers to the ability of the Bank to generate
sufficient cash to meet cash funding needs, depositor withdrawals
and operating expenses. Liquidity is measured by the ratio of
cash and cash equivalents (not committed, pledged or required to
liquidate specific liabilities) to the sum of net withdrawable
deposits and borrowings payable within one year. Managing
liquidity is a component of the Bank's asset/liability strategy,
with the most liquid assets being cash and due from banks and
money market investments. The balance of these assets are a
result of the Bank's operating, financing, lending and investing
activities. The Bank's average liquidity ratio was 2.66% in
fiscal 1995, 3.91% in fiscal 1994 and 6.03% in fiscal 1993.
North Side's primary sources of funds have consisted of deposits,
amortization and prepayments of outstanding loans and mortgage-
backed securities, bond maturities and other sources. In
addition, as previously discussed the Bank increased its
borrowings, all of which were collateralized financings, during
fiscal 1995 to invest in attractive loan or investment
opportunities at favorable spreads. While maturities and
scheduled amortizations of loans and investments are a
predictable source of funds, deposit flows and mortgage
prepayments are substantially influenced by general interest
rates, economic conditions and competition from other financial
institutions.
As shown in the Consolidated Statement of Cash Flows, cash and
cash equivalents increased $27.4 million during fiscal 1995 to
$40.7 million at September 30, 1995. The increase reflected
$30.5 million provided by operating activities and $28.9 million
provided by financing activities, which was partially offset by
$32.0 million used in investing activities. The cash provided by
financing activities was due to increased borrowings, and cash
generated by operating activities which reflected $15.1 million
of net income. The cash used in investing activities was
primarily used for purchases of mortgage-backed securities.
At September 30, 1995, total approved loan commitments were $3.4
million and the amount of time deposits scheduled to mature
during fiscal 1996 is $309.9 million. Management expects that a
substantial portion of these maturing deposits will be
redeposited in North Side.
IMPACT OF INFLATION
The financial statements and related data presented herein have
been prepared in accordance with generally accepted accounting
principles which require the measurement of financial position
and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money
over time due to inflation.
Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature.
As a result, interest rates have a more significant impact on a
financial institution's performance than the effects of general
levels of inflation. Interest rates do not necessarily move in
the same direction or in the same magnitude as the price of goods
and services. In the current interest rate environment,
liquidity and the maturity structure of North Side's assets and
liabilities are critical to the maintenance of acceptable
performance levels.
REGULATORY CAPITAL
In March 1989, the FDIC adopted a risk-based capital rule which
applies to all BIF-insured state-chartered banks that are not
members of the Federal Reserve System ("state nonmember banks"),
such as the Bank. The guidelines call for a minimum total
capital ratio of 8% of risk-weighted assets and off-balance sheet
items. At least one-half of that amount must be Tier I or core
capital and up to one-half of total capital can consist of Tier
II or supplementary capital. Commencing December 31, 1990, the
FDIC also required state non-member banks to maintain minimum
leverage ratios.
For risk-based purposes, Tier I capital for state nonmember
banks consists mainly of equity stock and, to a lesser extent,
perpetual preferred stock that is non-cumulative with regard to
payment of dividends. All intangible assets, other than mortgage
servicing rights, are deducted from Tier I capital. Tier II
capital consists primarily of hybrid capital instruments, term
subordinated debt and intermediate-term preferred stock (limited
to fifty percent of Tier I capital), cumulative perpetual
preferred stock and, subject to limitations, general allowances
for loan losses. Assets are adjusted to take into account
different risk characteristics, with the categories ranging from
0% (requiring no additional capital) for assets such as cash and
GNMA mortgage-backed securities to 100% for the bulk of assets
which are typically found in a financial institution's portfolio,
including multi-family residential and commercial real estate
loans, commercial business loans and consumer loans. Mortgage-
backed securities insured or guaranteed by the FHLMC and FNMA
are assigned to the 20% risk category. Single-family
residential loans are placed in the 50% category if they are
performing and have a loan-to-value ratio of 80% or less. Off-
balance sheet items also are adjusted to take into account
certain risk characteristics. See Note 14 of the Notes to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
CAPTIAL RATIOS
SEPTEMBER 30, 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
__________________________________________________________________
18% |______________________|_______________16.89%_|____________________|
_ 17% |______________________|_________________#____|____________________|
|*| 16% |_______________15.96%_|_________________#____|____________________|
FDIC 15% |_________________#____|_________________#____|____________________|
Minimum 14% |_________________#____|_________________#____|____________________|
Requirement 13% |_________________#____|_________________#____|____________________|
12% |_________________#____|_________________#____|____________________|
_ 11% |_________________#____|_________________#____|____________________|
|_| 10% |_________________#____|________10.00%___#____|____________________|
FDIC Well 9% |_________________#____|__________|______#____|____________________|
Capitalized 8% |_________________#____|__8.00%___|______#____|____________________|
Requirement 7% |_________________#____|___*______|______#____|______________7.02%_|
6% |_________6.00%___#____|___*______|______#____|_______________#____|
_ 5% |___________|_____#____|___*______|______#____|________5.00%__#____|
|#| 4% |__4.00%____|_____#____|___*______|______#____|_________|_____#____|
North Side 3% |____*______|_____#____|___*______|______#____|__3.00%__|_____#____|
Actual 2% |____*______|_____#____|___*______|______#____|___*_____|_____#____|
1% |____*______|_____#____|___*______|______#____|___*_____|_____#____|
0% |____*______|_____#____|___*______|______#____|___*_____|_____#____|
</TABLE>
The Bank's risk-based capital ratios continued to improve and
have consistently exceeded minimum regulatory levels of capital.
Tier I capital has increased to 15.98% at September 30, 1995 from
13.39% at September 30, 1994. Total risk-based capital also
increased during fiscal 1995 to 16.89% at September 30, 1995 from
14.64% at September 30, 1994. Tier I leverage capital increased
during fiscal 1995 to 7.02% at September 30, 1995 from 6.52% at
September 30, 1994.
The Bank's risk-based capital and leverage requirements and
ratios at September 30, 1995 are as follows:
<TABLE>
<CAPTION>
FDIC MINIMUM NORTH SIDE'S CAPITAL IN EXCESS
CAPITAL REQUIREMENTS ACTUAL CAPITAL OF MINIMUM REQUIREMENTS
% OF ADJUSTED % OF ADJUSTED % OF ADJUSTED
AMOUNT TOTAL ASSETS AMOUNT TOTAL ASSETS AMOUNT TOTAL ASSETS
(Dollars in Millions)
<S> <C> <C> <C> <C> <C> <C>
Risk-based Capital:
Tier 1 Capital $28.2 4.00% $112.7 15.98% $84.5 11.98%
Total Capital 56.4 8.00 119.1 16.89 62.7 8.89
Tier 1 Leverage Capital(1) 48.1 3.00 112.7 7.02 64.6 4.02
(1) The FDIC has issued regulations that require insured banks, such as
North Side, to maintain minimum levels of capital. In general, current
regulations require leverage ratios of core capital of 3.0% of assets for
the most highly rated banks and other banking organizations are required to
maintain higher levels (100 to 200 basis points) based on their particular
circumstances as defined in the regulations. As of September 30, 1995,
North Side complied with all capital levels required by the FDIC.
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 17 of Notes to Consolidated Financial Statements.
INDEPENDENT AUDITORS' REPORT
The Shareholders and the Board of Directors
North Side Savings Bank:
We have audited the accompanying consolidated statements of
condition of North Side Savings Bank and subsidiaries (the
"Bank") as of September 30, 1995 and 1994 and the related
consolidated statements of operations, changes in shareholders'
equity, and cash flows for each of the years in the three-year
period ended September 30, 1995. These consolidated financial
statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of North Side Savings Bank and subsidiaries as of
September 30, 1995 and 1994 and the results of their operations
and their cash flows for each of the years in the three-year
period ended September 30, 1995 in conformity with generally
accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements,
the Bank adopted the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities" effective October 1, 1994.
KPMG PEAT MARWICK
New York, New York
October 18, 1995
Consolidated Statements of Condition
_______________
SEPTEMBER 30, 1995 1994
(Dollars in Thousands)
ASSETS
Cash and due from banks $ 11,530 $ 12,333
Money market investments (Note 2) 29,456 1,200
Securities available for sale: (Note 3)
Investment securities 26,520 -
Mortgage-backed securities 300,022 -
Total securities available for sale 326,542 -
Investment securities, net (estimated
market value of $92,460 and $132,005,
respectively) (Notes 4 and 10) 93,301 135,972
Federal Home Loan Bank of NY stock, at cost 9,430 -
Mortgage-backed securities, net
(estimated market value of $642,864
and $826,666, respectively) (Note 5) 651,153 858,700
Loans (Notes 6 and 7) 432,180 489,883
Less allowance for loan losses 6,417 11,178
Loans, net 425,763 478,705
Accrued interest receivable 13,230 12,533
Premises and equipment, net 15,215 15,526
Other real estate owned, (net of
allowance of $1.1 million
and $7.5 million, respectively) (Note 8) 2,515 8,369
Other assets (Note 11) 9,868 17,713
Total assets $1,588,003 $1,541,051
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits (Note 9) $1,199,077 $1,191,509
Mortgagors' escrow 4,607 4,372
Borrowed funds (Note 10) 251,000 226,875
Other liabilities 17,035 17,297
Total liabilities 1,471,719 1,440,053
Shareholders' Equity:
Preferred stock, par value $1.00 per
share, 5,000,000 shares
authorized, none outstanding - -
Common stock, par value $1.00
per share, 10,000,000 shares
authorized, 4,798,022 shares
and 4,541,068 shares issued
and outstanding at September 30, 1995
and 1994, respectively 4,798 4,541
Paid-in capital 62,985 57,641
Surplus fund 24,101 24,101
Undivided profits 22,606 15,592
Unrealized depreciation on certain
marketable equity securities (Note 4) - (436)
Net unrealized appreciation on
securities available for sale, net of
income taxes (Note 3) 2,360 -
Unallocated shares in Management
Development and Recognition Plan (Note 15) - (416)
Unearned portion of incentive compensation (566) (25)
Total shareholders' equity 116,284 100,998
Commitments and contingencies
(Notes 12 and 13)
Total liabilities and shareholders'
equity $ 1,588,003 $ 1,541,051
See accompanying notes to consolidated financial statements.
Consolidated Statements of Operations
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
(Dollars in Thousands, except per share amounts)
INTEREST INCOME:
Mortgage loans $ 35,610 $ 38,631 $ 42,566
Mortgage-backed securities 59,604 44,682 47,911
Investment securities (Note 4) 8,964 6,164 4,745
Federal Home Loan Bank of NY Stock 307 - -
Money market investments 642 534 894
Other loans 648 920 1,299
Total interest income 105,775 90,931 97,415
INTEREST EXPENSE:
Deposits (Note 9) 40,172 35,602 42,097
Borrowings (Note 10) 15,058 5,747 1,887
Total interest expense 55,230 41,349 43,984
Net interest income 50,545 49,582 53,431
Provision for loan losses (Note 7) 2,825 3,550 16,308
Net interest income after provision
for loan losses 47,720 46,032 37,123
OTHER OPERATING INCOME (LOSS):
Gain(loss) on redemptions and
sales of securities 355 - (136)
Loss on disposition of assets - - (11,063)
Gain on sale of bank property - 356 -
Loss on sales of mortgages and
other real estate owned (OREO) (520) (176) (273)
Customer service fees 1,990 2,265 2,648
Other 471 663 282
Total other operating income (loss) 2,296 3,108 (8,542)
OTHER OPERATING EXPENSES:
Compensation and benefits
(Notes 13 and 15) 10,782 10,967 11,031
Occupancy and equipment 3,404 3,512 3,717
BIF deposit insurance premiums 2,054 3,249 3,355
Amortization of excess cost
over fair value of net assets acquired - - 10,192
OREO expense, net 475 1,225 11,002
Other 6,823 7,244 9,025
Total other operating expenses 23,538 26,197 48,322
Income (loss) before provision
(benefit) for income taxes and
cumulative effect of accounting changes 26,478 22,943 (19,741)
Provision (benefit) for income
taxes (Note 11) 11,371 9,576 (3,961)
Income (loss) before cumulative
effect of accounting changes 15,107 13,367 (15,780)
Cumulative effect of accounting changes:
Postretirement benefits cost - - (2,300)
Income taxes - - 5,329
NET INCOME (LOSS) $ 15,107 $ 13,367 $ (12,751)
PRIMARY EARNINGS PER COMMON SHARE
BEFORE ACCOUNTING CHANGES (1) $ 3.15 $ 2.82 $ (3.35)
PRIMARY EARNINGS (LOSS) PER
COMMON SHARE (1) $ 3.15 $ 2.82 $ (2.71)
FULLY DILUTED EARNINGS PER
COMMON SHARE $ 3.06 N/A N/A
(1) Prior years are restated to reflect the 5% stock dividends paid during
fiscal 1994 and 1995
See accompanying notes to consolidated financial statements.
Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
UNREALIZED NET UNALLOCATED
DEPRECIATION UNREALIZED SHARES IN UNEARNED
ON CERTAIN APPRECIATION MANAGEMENT PORTION OF
YEARS ENDED MARKETABLE ON SECURITIES DEVELOPMENT INCENTIVE
SEPTEMBER 30 COMMON PAID-IN SURPLUS UNDIVIDED EQUITY AVAILABLE & RECOGNITION COMPEN-
1993, 1994 AND 1995 STOCK CAPITAL FUND PROFITS SECURITIES FOR SALE PLAN SATION TOTAL
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT OCTOBER 1, 1992 $ 4,053 $ 49,409 $ 24,101 $ 24,156 $ (80) $ - $ (1,587) $ (313) $ 99,739
Net loss - - - (12,751) - - - - (12,751)
Prorated portion of Management
Development and Recognition
Plan awards earned by grantees - - - - - - - 161 161
Payment of 401(k) contribution 15 257 - - - - - - 272
Management Development and
Recognition Plan sale of 93,627
shares of Common Stock - - - - - - 1,174 - 1,174
Payment of 5% stock dividend 203 3,152 - (3,355) - - - - -
Cash dividend paid ($.20 per
share) - - - (812) - - - - (812)
Dividend Reinvestment 2 14 - - - - - - 16
Exercise of options for 8,828
shares of Common Stock 9 76 - - - - - - 85
Decrease in unrealized
depreciation on certain
marketable equity securities - - - - 69 - - - 69
BALANCE AT SEPTEMBER 30, 1993 4,282 52,908 24,101 7,238 (11) - (413) (152) 87,953
Net income - - - 13,367 - - - - 13,367
Prorated portion of Management
Development and Recognition Plan
awards earned by grantees - - - - - - - 125 125
Forfeiture of 210 shares to
Management Development and
Recognition Plan - 2 - - - - (3) 2 1
Payment of 401 (k) Contribution 15 277 - - - - - - 292
Payment of 5% stock dividend 215 4,223 - (4,438) - - - - -
Cash dividend paid ($.125 per
share) - - - (575) - - - - (575)
Dividend Reinvestment - 9 - - - - - - 9
Exercise of options for 29,189
shares of Common Stock 29 222 - - - - - - 251
Increase in unrealized
depreciation on certain
marketable equity securities - - - - (425) - - - (425)
BALANCE AT SEPTEMBER 30, 1994 4,541 57,641 24,101 15,592 (436) - (416) (25) 100,998
Net income - - - 15,107 - - - - 15,107
Prorated portion of Management
Development and Recognition
Plan awards earned by grantees - - - - - - - 125 125
Awarded 36,506 shares of Common
Stock from Management Development
and Recognition Plan at $18.25
per share, market value on date
of grant - 250 - - - - 416 (666) -
Payment of 401 (k) contribution 16 286 - - - - - - 302
Payment of 5% stock dividend 227 4,657 - (4,884) - - - - -
Cash dividend paid ($.675
per share) - - - (3,209) - - - - (3,209)
Dividend Reinvestment 2 39 - - - - - - 41
Exercise of options for 11,632
shares of Common Stock 12 112 - - - - - - 124
Decrease in unrealized
depreciation on certain
marketable equity securities - - - - 436 - - - 436
Net unrealized appreciation
on securities available for
sale, net of taxes of $1,922 - - - - - 2,360 - - 2,360
BALANCE AT SEPTEMBER 30, 1995 $4,798 $ 62,985 $ 24,101 $ 22,606 $ - $2,360 $ - $ (566) $116,284
</TABLE>
See accompanying notes to consolidated financial statements.
Consolidated Statements of Cash Flows
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
(Dollars in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 15,107 $ 13,367 $ (12,751)
Adjustments to reconcile
net income (loss) to net
cash provided by operating activities:
Change in accounting principles - - (3,029)
Amortization of goodwill - - 10,192
Depreciation and amortization 1,327 1,204 1,298
Provision for possible loan losses
and real estate losses 3,148 4,330 25,808
(Gain) loss on sale of loans (5) 123 11,063
Amortization of premium, accretion
of (discount), net 5,172 11,098 8,837
401(k) contribution 302 292 272
Net (gain) loss on redemption
of investments (355) (22) 203
Net losses on sale of OREO 525 53 273
Gain on sale of Bank property - (356) -
Losses on Municipal Put - - 907
(Increase) decrease in accrued
interest receivable (697) (2,521) 3,522
Decrease (increase) in other
assets 5,923 16,201 (7,461)
(Decrease) increase in other
liabilities (262) 6,665 (8,185)
Increase (decrease) in others, net 285 405 ( 120)
NET CASH PROVIDED BY OPERATING
ACTIVITIES 30,470 50,839 30,829
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and
redemptions of investment
securities available for sale 6,643 - -
Purchases of investment securities
available for sale (8,004) - -
Proceeds from principal
repayments of mortgage-backed
securities available for sale 54,514 - -
Purchases of mortgage-backed
securities available for sale (174,408) - -
Proceeds from principal
repayments, maturities and
redemptions of investment
securities held to maturity 30,713 18,006 14,931
Proceeds from redemptions and
sales of investment
securities held to maturity 574 - 6,313
Purchase of investment securities
held to maturity (10,280) (94,043) (27,526)
Proceeds from sales of loans
held for sale - 2,146 108,386
Purchase of FHLBNY stock (9,430) - -
Proceeds from principal repayments
of mortgage-backed securities
held to maturity 72,951 348,194 414,332
Proceeds from sales of
mortgage-backed securities
held to maturity - - 460
Purchase of mortgage-backed
securities held to maturity (48,320) (466,886) (454,399)
Maturities of certificates
of deposit 400 400 200
Purchases of certificates of deposit (500) (400) (300)
Proceeds from loan repayments and
satisfactions 50,514 107,886 80,321
Proceeds from loans sold 3,825 1,464 10,134
Proceeds from student loans sold 1,154 1,592 1,638
Loan purchases and originations (6,882) (218,704) (14,732)
Proceeds from sales of bank building - 987 -
Proceeds from sales of OREO 5,551 2,589 2,773
Capital expenditures (1,016) (998) (516)
NET CASH (USED IN) PROVIDED
BY INVESTING ACTIVITIES (32,001) (297,767) 142,015
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposit
accounts, net, including
deposits purchased of $48.6
million in 1995, deposits sold of
$22.5 million in 1994 and $5.1
million in 1993 7,568 (88,786) (60,296)
Receipt of borrowed funds 988,500 1,022,752 249,330
Repayment of borrowed funds (964,375) (795,877) (250,775)
Receipt (Disbursement) of
mortgage escrow (net) 235 (407) (3,323)
Proceeds from sale of common stock
by Management Development
and Recognition Plan - - 1,174
Proceeds from exercise of stock
options 124 251 85
Cash dividend paid on common
stock, net of dividend
reinvestment (3,168) (566) (796)
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 28,884 137,367 (64,601)
Net increase (decrease) in Cash
and Cash Equivalents 27,353 (109,561) 108,243
Cash and Cash Equivalents at
Beginning of Year 13,333 122,894 14,651
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 40,686 $ 13,333 $ 122,894
SUPPLEMENTAL INFORMATION:
Cash paid during the year for:
Interest $ 55,764 $ 41,349 $ 43,984
Income taxes 6,937 2,419 4,984
Additions to OREO 546 3,032 3,244
Elimination of unit investment trust - - (20,831)
See accompanying notes to consolidated financial statements.
NORTH SIDE SAVINGS BANK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated financial statements of North Side Savings Bank
and subsidiaries (the Bank) are prepared in conformity with
generally accepted accounting principles using the accrual basis
of accounting for financial reporting and tax purposes. Certain
reclassifications have been made to prior year financial
statements to conform to the fiscal 1995 presentation. The
following summarizes the significant accounting policies of the
Bank.
PRINCIPLES OF CONSOLIDATION The consolidated financial
statements include the accounts of North Side Savings Bank and
its wholly-owned subsidiaries. Significant inter-company
accounts and transactions are eliminated in consolidation.
MONEY MARKET INVESTMENTS Money market investments represent
short-term instruments, usually with maturities of six months or
less. These investments are carried at cost, adjusted for
premiums and discounts which are recognized in interest income
over the period to maturity. The carrying values of these
investments approximate current market values.
SECURITIES AVAILABLE FOR SALE Effective October 1, 1994, the
Bank adopted Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"). Under this statement, mortgage-
backed securities and other securities which the Bank intends to
hold for indefinite periods of time and does not intend to hold
to maturity are classified as securities available for sale and
carried at estimated market value. Premiums are amortized and
discounts are accreted to maturity using a method which
approximates the level-yield method. Securities available for
sale include securities that management intends to use as part of
its asset/liability management strategy and that may be sold in
response to changes in interest rates and/or resultant prepayment
risk changes or other factors related to interest rates and
prepayment risk changes. Gains and losses arising from sales of
these securities are included in net gain (loss) on sales of
assets and are determined using the specific identification
method. Unrealized gains and losses are reported as a separate
component of shareholders' equity, net of taxes.
INVESTMENT SECURITIES Investment securities consist of debt and
equity securities which the Bank has the intent and ability to
hold until maturity. Debt securities, which include bonds, notes
and debentures, are carried at amortized historical cost.
Premiums are amortized and discounts are accreted using a method
which approximates the level-yield method. Equity securities are
carried at estimated market value.
MORTGAGE-BACKED SECURITIES Mortgage-backed securities, exclusive
of collateralized mortgage obligations, represent participating
interests in pools of long-term, first mortgage loans.
Collateralized mortgage obligations are multi-class, mortgage-
backed securities that are secured by mortgage loans or other
mortgage-backed securities. The Bank has the intent and ability
to hold these securities until maturity. Mortgage-backed
securities are carried at amortized historical cost. Premiums are
amortized and discounts are accreted using a method which
approximates the level-yield method.
LOANS Mortgage and other loans are carried at cost plus net
unamortized premium and deferred loan origination fees and the
allowance for loan losses. Premiums are amortized and discounts
are accreted over various composite lives using methods which
approximate the level-yield method. Loan origination fees and
direct loan origination costs are deferred and subsequently
recognized in interest income as a yield adjustment using the
level-yield method over the contractual loan term, adjusted for
estimated prepayments in certain circumstances.
Interest is accrued monthly on the outstanding balance of
mortgage and other loans unless management considers collection
to be doubtful. Loans are placed on a non-accrual basis when
principal or interest payments are in arrears ninety days or
more, or sooner, if management deems it appropriate. When loans
are placed on a non-accrual basis, previously accrued but unpaid
interest is reversed and charged against current income and
interest is subsequently recognized only to the extent cash is
received.
ALLOWANCE FOR LOAN LOSSES The Bank uses the reserve method of
accounting for loan losses. Under this method, provisions for
loan losses are charged to operations and recognized loan losses
(recoveries) are charged (credited) to the allowance. The
allowance for loan losses is based on management's periodic
evaluations of the adequacy of the allowance, which takes into
consideration the Bank's past loan loss experience, known and
inherent risks in the portfolio, adverse situations which may
affect the borrowers' ability to repay, overall portfolio
quality, and current and prospective economic conditions. In
addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Bank's
allowance for loan losses. Such agencies could require the Bank
to recognize additions to the allowance based on their judgments
about information available to them at the time of their
examination. Management believes that the allowance for loan
losses is adequate.
PREMISES AND EQUIPMENT Premises, furniture and fixtures and
equipment are carried at cost less accumulated depreciation
computed on a straight-line basis over the estimated useful lives
of the respective assets. Maintenance, repairs and minor
improvements are charged to operating expense as incurred.
OTHER REAL ESTATE OWNED Other real estate owned ("OREO")
consists of property acquired by foreclosure or by deed-in-lieu
of foreclosure, or properties classified as in-substance
foreclosure. These properties are carried at the lower of
estimated fair value or the balance of the loan at the date of
acquisition or classification. The Bank maintains an allowance
for subsequent declines in fair values of OREO. Expenses for
holding costs are charged to operations as incurred.
PENSION PLAN The Bank maintains a qualified defined benefit
pension plan through the RSI Retirement Trust, a group trust
administered by Retirement Systems Group, Inc. The Bank's
pension plan is non-contributory and covers substantially all
full-time employees. The Bank's funding policy is to make
contributions to the plan at least equal to the amounts required
by applicable Internal Revenue Service regulations.
INCOME TAXES The Bank follows Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("SFAS No. 109").
SFAS No. 109 requires deferred income taxes to be accounted for
under the asset and liability method. Deferred income tax
expense (benefit) under SFAS No. 109 is determined by recognizing
deferred tax assets and liabilities for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. The realization of deferred tax
assets is assessed and a valuation allowance provided for that
portion of the asset for which it is more likely than not that it
will not be realized. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The Bank files consolidated
Federal, State and Local income tax returns.
EARNINGS (LOSS) PER SHARE Primary earnings (loss) per share are
computed by dividing net income (loss) by the average number of
shares outstanding. Fully diluted earnings (loss) per share are
calculated by dividing net income (loss) by the weighted average
number of fully diluted common shares and common stock
equivalents. The common stock equivalents consist of common
stock options. All earnings (loss) per share amounts included in
the financial statements have been restated to reflect the 5%
stock dividends paid during fiscal 1995 and fiscal 1994.
STATEMENT OF CASH FLOWS For purposes of reporting cash flows,
cash and cash equivalents include cash and amounts due from banks
including Federal Home Loan Bank overnight deposits, Federal Home
Loan Bank balance, and Federal funds sold. Generally, Federal
funds are sold for one-day periods.
(2) MONEY MARKET INVESTMENTS
Money market investments generally have maturities of six months
or less. The following table presents the components of money
market investments:
SEPTEMBER 30, 1995 1994
(In Thousands)
Federal funds sold $ - $ 1,000
Certificates of deposit 300 200
FHLB Bank Balance 356 -
FHLB Overnight Deposit 28,800 -
Total money market investments $29,456 $ 1,200
(3) SECURITIES AVAILABLE FOR SALE
Effective October 1, 1994, the Bank adopted SFAS No. 115 which
requires securities available for sale to be carried at estimated
fair value with the resultant net unrealized gain or loss from
amortized cost reflected as a separate component of stockholders'
equity net of related income taxes. At September 30, 1995, the
net unrealized gain on securities available for sale was $4.3
million or $2.4 million net of income taxes. Prior to the
adoption of SFAS No. 115, the Bank carried securities available
for sale at the lower of amortized cost or estimated fair value.
There were no securities available for sale at September 30,
1994. The amortized cost and estimated fair values of securities
available for sale at September 30, 1995 are summarized as
follows:
SEPTEMBER 30, 1995
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED MARKET
COST GAINS LOSSES VALUE
(In Thousands)
Investment Securities
available for sale:
United States
Government
securities $ 230 $ - $ (1) $ 229
Equity Securities 23,626 3,148 (483) 26,291
Total Investment
Securities 23,856 3,148 (484) 26,520
Mortgage Backed
Securities available
for sale:
FHLMC & FNMA 273,811 1,846 (219) 275,438
CMOs 24,593 31 (40) 24,584
Total mortgage-
backed
securities 298,404 1,877 (259) 300,022
Total securities
available for sale $ 322,260 $ 5,025 $ (743) $ 326,542
The Bank's portfolio of mortgage-backed securities available for
sale had an estimated weighted average expected life of
approximately 3.8 years at September 30, 1995.
U.S. Government securities at September 30, 1995 had contractual
maturities between November 1995 and February 1997.
Accrued interest receivable on securities available for sale was
$3.1 million at September 30, 1995.
(4) INVESTMENT SECURITIES
The carrying value and related estimated market value of investment
securities as of September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 1994
GROSS UN- GROSS UN- ESTIMATED Gross Un- Gross Un- Estimated
CARRYING REALIZED REALIZED MARKET Carrying Realized Realized Market
VALUE GAINS LOSSES VALUE Value Gains Losses Value
(In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bonds and Other
Debt Securities:
United States
Government and
Federal Agencies $ 62,837 $ 13 $ 264 $ 62,586 $ 76,663 $ 3 $ 3,000 $ 73,666
State and Municipal 1,663 - - 1,663 1,758 57 - 1,815
Corporate and other 22,696 - 590 22,106 35,332 77 1,104 34,305
Total bonds 87,196 13 854 86,355 113,753 137 4,104 109,786
Equity Securities 6,105 - - 6,105 22,655 - (436) 22,219
Less allowance for
unrealized
depreciation - - - - (436) - 436 -
Total equity
securities 6,105 - - 6,105 22,219 - - 22,219
Total investment
securities, net $ 93,301 $ 13 $ 854 $ 92,460 $ 135,972 $ 137 $4,104 $ 132,005
</TABLE>
The following is a summary of the carrying value of bonds at September 30,
1995 by remaining term to maturity:
UNITED STATES
GOVERNMENT ESTIMATED
AND FEDERAL STATE AND CORPORATE MARKET
SEPTEMBER 30, 1995 AGENCIES MUNICIPAL AND OTHER TOTAL VALUE
(In Thousands)
1 year or less $ - $ - $ 6,106 $ 6,106 $ 5,977
Over 1 year to 5 years - 483 13,333 13,816 13,277
Over 5 years to 10 years 37,837 - 2,007 39,844 39,808
Over 10 years 25,000 1,180 1,250 27,430 27,293
TOTAL $ 62,837 $ 1,663 $ 22,696 $ 87,196 $ 86,355
The following is a summary of interest and dividend income by type of
investment security for the years ended:
SEPTEMBER 30, 1995 1994 1993
(In Thousands)
U.S. Government and
Federal Agencies $ 5,422 $ 2,172 $ 310
State and Municipal 147 155 999
Corporate and other 1,981 2,974 3,022
Equity Securities 1,414 863 414
Total $ 8,964 $ 6,164 $ 4,745
(5) MORTGAGE-BACKED SECURITIES
The carrying values and estimated market values of mortgage-backed
securities at September 30, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 CARRYING VALUE
PRINCIPAL BALANCES GNMA FNMA FHLMC CMO OTHER TOTAL
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Fixed-rate $ 8,130 $ 155,499 $ 63,089 $ 260,310 $ 2,221 $ 489,249
Variable-rate - 91,361 - - 63,258 154,619
Total principal balance 8,130 246,860 63,089 260,310 65,479 643,868
Unamortized Premium
Fixed-rate - 2,607 822 2,017 - 5,446
Variable-rate - 2,655 - - - 2,655
Total premium - 5,262 822 2,017 - 8,101
Unamortized Discount
Fixed-rate - 28 69 697 - 794
Variable-rate - - - - 22 22
Total discount - 28 69 697 22 816
Total mortgage-backed, net 8,130 252,094 63,842 261,630 65,457 651,153
Gross unrealized gains 136 522 285 - 41 984
Gross unrealized losses (1) (2,353) (550) (5,673) (696) (9,273)
Estimated market value $ 8,265 $ 250,263 $ 63,577 $ 255,957 $ 64,802 $ 642,864
1994 Carrying Value
Principal Balances GNMA FNMA FHLMC CMO OTHER TOTAL
( In Thousands)
Fixed-rate $ 9,125 $ 183,474 $ 224,983 $ 307,089 $ 3,812 $ 728,483
Variable-rate - 96,151 - - 20,434 116,585
Total principal
balance 9,125 279,625 224,983 307,089 24,246 845,068
Unamortized Premium
Fixed-rate - 3,601 5,670 2,946 - 12,217
Variable-rate - 2,821 - - - 2,821
Total premium - 6,422 5,670 2,946 - 15,038
Unamortized Discount
Fixed-rate - 44 370 963 - 1,377
Variable-rate - - - - 29 29
Total discount - 44 370 963 29 1,406
Total mortgage-backed, net 9,125 286,003 230,283 309,072 24,217 858,700
Gross unrealized gains 7 207 963 85 41 1,303
Gross unrealized losses (90) (10,214) (4,586) (18,144) (303) (33,337)
Estimated market value $ 9,042 $ 275,996 $ 226,660 $ 291,013 $ 23,955 $ 826,666
</TABLE>
(6) LOANS
The composition of the loan portfolio is summarized as follows:
SEPTEMBER 30, 1995 1994
(In Thousands)
Mortgage loans:
Conventional:
One-to four-family $285,161 $322,751
Commercial 80,212 89,961
Multi-family 45,286 50,027
Construction loans 211 931
FHA-insured and VA-guaranteed 13,120 16,151
Unamortized purchase premium, net 2,537 3,483
Other deferred discounts and
deferred fees, net (437) (690)
Mortgage loans 426,090 482,614
Other loans 6,090 7,269
Total loans 432,180 489,883
Less: Allowance for loan losses (6,417) (11,178)
Total Loans, net $425,763 $478,705
The Bank's loan portfolio is varied as to type, geographic
location, borrower concentration and fixed or adjustable interest
rates. The Bank's lending policy generally requires maximum loan
to value ratios of 80% for one-to four-family residential loans
and 65% for multi-family and commercial real estate loans. At
September 30, 1995 approximately $370 million and $32 million of
the Bank's real estate loans were secured by properties located
in the New York metropolitan area and California, respectively,
and, as such, a substantial portion of the Bank's borrowers'
ability to honor their contracts and increases or decreases in
market value of the real estate collateralizing such loans may be
significantly affected by the level of economic activity of these
regions.
The Bank services mortgage loans for third parties, primarily
the FNMA and FHLMC, as well as certain other investors, and the
unpaid principal balance of such serviced loans totalled
approximately $53 million and $65 million at September 30, 1995
and 1994, respectively. Custodial escrow balances maintained in
connection with such loans amounted to $4.1 million and $4.4
million at the same respective dates.
(7) ALLOWANCE FOR LOAN LOSSES
The following table summarizes activity in the allowance for loan
losses for the years ended September 30, 1995, 1994 and 1993:
SEPTEMBER 30, 1995 1994 1993
(In Thousands)
Balance, beginning of year $11,178 $11,114 $15,012
Provision charged to
operations 2,825 3,550 16,308
Loans charged-off (5,477) (2,144) (8,410)
Charge-off due to sale
of loans
(2,156) - (9,069)
Charge-off due to
transfer of loans to
loans held for sale - - (1,894)
Charge-off due to transfer
of loans to OREO (225) (1,846) (1,113)
Recoveries 272 504 280
Balance, end of year $ 6,417 $11,178 $11,114
Non-accrual loans and renegotiated loans for which interest has
been reduced totalled approximately $14.3 million, $20.7 million
and $22.9 million at September 30, 1995, 1994 and 1993,
respectively. Interest income would have increased by $1.3
million, $1.6 million and $1.7 million for the years ended
September 30, 1995, 1994 and 1993, respectively, if interest on
non-accrual and restructured loans had been accrued under their
original terms. The Bank recorded interest income of $.9
million, $.8 million and $.8 million on such loans for the years
ended September 30, 1995, 1994 and 1993, respectively.
(8) OTHER REAL ESTATE OWNED
Other real estate owned is summarized as follows:
SEPTEMBER 30, 1995 1994
(In Thousands)
Land $ 2,830 $14,460
Commercial real estate 466 844
One-to four-family 283 289
Multi-family - 315
Less: Allowance for OREO (1,064) (7,539)
Total Other Real Estate Owned $ 2,515 $ 8,369
The following table summarizes activity in the allowance for OREO
for the years ended September 30, 1995, 1994 and 1993:
SEPTEMBER 30, 1995 1994 1993
(In Thousands)
Balance, beginning of year $ 7,539 $9,050 $ -
Provision charged to
operations 323 780 9,500
Charge off due to sale
of OREO (6,798) (2,291) (450)
Balance, end of year $ 1,064 $7,539 $ 9,050
(9) DEPOSITS
Deposits at September 30, 1995 and 1994 are summarized as
follows:
SEPTEMBER 30, 1995 1994
(In Thousands)
NOW accounts $ 19,869 $ 19,072
Money market accounts 55,806 64,747
Checking accounts 35,759 32,184
Savings accounts 576,593 627,707
Time deposits 508,263 442,103
Other 2,787 5,696
Total deposits $ 1,199,077 $1,191,509
At September 30, 1995 and 1994 the aggregate amount of time
deposits in denominations of $100,000 or more amounted to
approximately $30.5 million and $21.8 million, respectively.
Interest expense on deposits for the years ended September 30,
1995, 1994 and 1993 are summarized as follows:
SEPTEMBER 30, 1995 1994 1993
(In Thousands)
NOW accounts $ 236 $ 247 $ 373
Money market accounts 1,586 1,534 2,146
Savings accounts 14,335 14,272 18,148
Time deposits 23,813 19,336 21,173
Other 202 213 257
Total interest expense $ 40,172 $ 35,602 $ 42,097
The following is a summary of time deposits at September 30, 1995
by remaining term to maturity by the weighted average interest
rate being paid on such deposits:
AMOUNTS AT LESS THAN MORE THAN ONE MORE THAN TWO MORE THAN
SEPTEMBER 30, 1995 ONE YEAR BUT LESS YEARS BUT LESS THREE
MATURING YEAR THAN TWO YEARS THAN THREE YEARS YEARS TOTAL
(Dollars in Thousands)
Total maturities $309,907 $91,231 $33,158 $73,967 $508,263
Weighted Average
Interest Rate 5.30% 5.76% 5.73% 6.67% 5.61%
(10) BORROWED FUNDS
As of September 30, 1995, securities sold under repurchase
agreements amounted to $251.0 million as compared to borrowings
outstanding of $226.9 on September 30, 1994. The Bank may sell
securities to broker/dealers under agreements to repurchase the
same securities within a predetermined period of time (reverse
repurchase agreements). These agreements are accounted for as
financing transactions. Accordingly, the collateral securities
continue to be carried as an asset, and a liability is
established for the transaction proceeds. The following table
presents activity concerning such borrowings for the year ended
September 30, 1995:
(Dollars in Thousands)
Average balance during the year $248,897
Maximum month-end balance during the year 339,000
Average interest rate during the year 6.05%
(11) FEDERAL, STATE AND LOCAL TAXES
The components of income tax expense (benefit) are as follows:
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
(In Thousands)
Federal-current $ 2,603 $ 4,115 $ 891
Federal-deferred 5,131 2,399 (4,385)
State and local-current 1,344 2,144 226
State and local-deferred 2,293 918 (693)
Total tax expense (benefit) $ 11,371 $ 9,576 $ (3,961)
The reconciliation of the expected Federal income tax expense
(benefit) at the statutory tax rate to the actual expense
follows:
YEARS ENDED SEPTEMBER 30, 1995 1994 1993
(In Thousands)
Federal income tax expense
(benefit) computed
by applying the statutory
rate to income (loss)
before income taxes $ 9,267 $8,030 $(7,493)
State and local income
taxes (benefit)
net of Federal taxes (benefit) 2,364 1,990 (1,084)
Adjustment to reflect change
in tax rates - 252 -
Dividend received deduction (135) (64) (81)
Amortization of goodwill - - 3,465
Tax exempt interest (52) (54) (63)
Other, net (73) (578) 119
Valuation allowance - - 1,176
Actual income tax expense
(benefit) $ 11,371 $9,576 $(3,961)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities included in other assets at September 30, 1995 and
1994 are as follows:
SEPTEMBER 30, 1995 1994
(In Thousands)
Deferred tax assets:
Allowance for loan losses $ 2,863 $ 5,018
Allowance for OREO losses 475 3,384
Nonaccrual of interest 247 338
Postretirement benefits costs 1,053 1,165
Discount on mortgages acquired 313 408
Deferred loan fees 192 247
Other 565 735
Total gross deferred tax assets 5,708 11,295
Less valuation allowance (1,176) (1,176)
Deferred tax assets, net 4,532 10,119
Deferred tax liabilities:
Basis differences of assets
acquired in business combination (1,268) (1,298)
Mortgage servicing rights (71) (112)
Unrealized appreciation on securities
available for sale (1,922) -
Other (39) (53)
Total gross deferred tax liabilities (3,300) (1,463)
Net deferred tax asset $ 1,232 $ 8,656
If certain definitional tests and other conditions are met,
the Bank is allowed a special bad debt deduction in determining its
taxable income for Federal income tax purposes, based upon either
specified experience formulas or a percentage of its taxable
income, after utilization of available net operating loss
carryforwards, if any. The Bank has used the experience method
for the fiscal years 1993 and 1994 and expects to use this method
for fiscal year 1995.
At September 30, 1995, the Bank's bad debt reserve on qualifying
real property loans for Federal income tax purposes approximated
$23.0 million. Any charges to this reserve for other than bad
debt on a qualified real property loan would create income for
tax purposes only, which would be subject to the corporate income
tax rate in effect at that time. However, management does not
contemplate that amounts allocated to bad debt deductions will be
used in any manner that would create income tax liabilities.
The Bank files New York State franchise and New York City
financial corporation tax returns for fiscal periods identical to
its Federal income tax return. The Bank's tax liability for each
year is the greater of a tax based on "entire net income,"
"alternative entire net income," "taxable assets" or a minimum
tax. A special bad debt deduction based on a percentage of
taxable income (currently at 32%) is allowed if the Bank meets
certain definitional tests and conditions. The Bank's provision
for New York State and New York City taxes is based on "entire
net income" for the fiscal years ended September 30, 1995 and
1994. For fiscal 1993, the Bank's provision for New York State
taxes was based on "taxable assets" and the provision for New
York City taxes was based on "entire net income". The Bank is
subject to a temporary surcharge based upon New York State tax
liability.
(12) COMMITMENTS AND CONTINGENCIES
In the normal course of the Bank's business, there are various
outstanding legal proceedings. In the opinion of management,
after consultation with legal counsel, the financial position of
the Bank will not be materially affected as a result of the
outcome of such legal proceedings.
The principal commitments and contingent liabilities of the Bank
are discussed below.
LOAN COMMITMENTS At September 30, 1995, outstanding commitments
made by the Bank to originate or acquire mortgage loans and other
loans approximated $3.4 million. These commitments mature within
six months and are principally for loans with interest rates
which float or which are adjustable at periodic intervals, or
loans with fixed-rates which mature within five years. Such
commitments have fixed expirations and consequently, may not
represent future cash requirements.
LEASE COMMITMENTS The Bank has entered into non-cancelable
operating lease agreements for bank equipment having expiration
dates not greater than one year. In connection with its
acquisition of two branches the Bank assumed two lease agreements
for bank premises. One has an expiration date of May 31, 1996
with a rental expense through such date of $16,600. The other
lease agreement expires in mid-1997, contains a renewal option
and has a minimum annual rental expense of $22,425 per year, plus
certain other expenses including real estate taxes. The Bank
expects to renew such agreements at expiration in the normal
course of business.
Occupancy and equipment expense includes rental expense of
$51,000, $72,000 and $128,000 for the years ended September 30,
1995, 1994 and 1993 respectively.
(13) BENEFIT PLANS
RETIREMENT PLAN The Bank's retirement plan covers substantially
all of the full-time employees of the Bank. The plan is a
defined benefit pension plan. Substantially all full-time
employees are eligible after one year of service provided they
are at least 21 years of age. The benefits are an annual amount
equal to 2.5% of average highest earnings (W-2 compensation over
the highest 36 consecutive months, within the final 120
consecutive months of credited service), multiplied by the number
of years and any fraction thereof of credited service, not to
exceed 30 years, less 1.67% of the participant's Social Security
benefit multiplied by the number of years and any fraction
thereof of credited service (up to a maximum of 30 years),
subject to certain limitations.
Pension expense for the years ended September 30, 1995, 1994 and
1993 was $214,000, $221,000 and $53,000, respectively.
The status of the pension plan at the valuation dates of
September 30, 1995 and 1994 was as follows:
SEPTEMBER 30, 1995 1994
(In Thousands)
ACTUARIAL PRESENT VALUE OF
BENEFIT OBLIGATIONS:
Vested $ 14,077 $ 12,832
Non-vested 391 356
Total accumulated benefit
obligation $ 14,468 $ 13,188
Actuarial present value of
projected benefit obligation
for service rendered to date $ 15,824 $ 14,425
Plan assets at fair value,
primarily listed stocks, and
US government obligations 18,768 16,317
Plan assets in excess of
projected benefit obligation 2,944 1,892
Unrecognized past service liability 463 538
Unrecognized (gain) (3,047) (1,707)
Unamortized transition net asset
being amortized over 8.9 years (268) (60)
Prepaid pension expense $ 92 $ 306
NET PENSION EXPENSE FOR THE YEARS
ENDED SEPTEMBER 30,
1995 AND 1994 INCLUDED THE
FOLLOWING COMPONENTS:
Service cost-benefits earned
during the period $ 412 $ 512
Interest cost on projected
benefit obligation 1,145 1,109
Expected return on plan assets (1,261) (1,340)
Net amortization and deferral (82) (60)
Net periodic pension expense $ 214 $ 221
The discount rate used in determining the projected benefit
obligation for the years ended September 30, 1995 and 1994 was
8.25% and 7.00%, respectively. The expected long-term rate of
return on assets was 8% and the rate of increase in compensation
levels was estimated at 6.0% and 5.5% for the years ended
September 30, 1995 and 1994.
INCENTIVE SAVINGS PLAN The Bank maintains an incentive savings
plan (the "401(k) Plan"), which is a defined contribution plan
providing for contributions to several trust funds by both the
Bank and its employees. Employees are eligible to join the
401(k) Plan upon completion of one year's service. Plan
participants may make contributions to the 401(k) Plan in amounts
ranging from 1% to 6% of their compensation. The Bank matches
the employee's contribution at the rate of 50% during the first
two years of an employee's participation and 100% thereafter.
Incentive savings expense, which is included in compensation and
benefits, amounted to $302,000, $292,000 and $272,000 for the
years ended September 30, 1995, 1994 and 1993, respectively.
BENEFIT PRESERVATION PLAN
The Bank adopted, effective October 1, 1993, an unfunded, non-
qualified Benefit Preservation Plan ("BPP") for certain senior
officers of the Bank to compensate such individuals who
participate in the Retirement Plan and the 401(k) Plan for
benefits lost under such plans by reason of benefit limits
imposed by Sections 415, 401(a) (17) and 402(g) of the Internal
Revenue Code. The Bank expensed $94,000 and $100,000 in respect
of the BPP in fiscal 1995 and 1994, respectively.
HEALTH CARE AND LIFE INSURANCE In fiscal 1994, the Bank adopted
SFAS No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions. SFAS No. 106 principally focuses on health
care benefits to an employee and the employee's beneficiaries and
covered dependents, although it applies to all forms of post-
retirement benefits other than pensions. The adoption has
changed the Bank's practice of accounting for these benefits from
the cash basis to the accrual basis, which recognizes the expense
during the years that the employee renders the necessary service.
The Bank currently provides postretirement benefits other than
pensions in the form of health care and life insurance. The
benefits cover retirees aged 60 and over with a minimum of 10
years of service who currently collect their pension and were
hired prior to February 1, 1991. Retirees make co-payments for
medical coverage and are subject to deductibles.
The following table sets forth the composition of the accrued
postretirement benefit cost recognized in the Consolidated
Statements of Financial Condition at September 30, 1995 and 1994:
SEPTEMBER 30, 1995 1994
(In Thousands)
ACCUMULATED POSTRETIREMENT BENEFITS
OBLIGATIONS("APBO"):
Retirees $ (1,052) $ (1,018)
Active Plan Participants (526) (429)
APBO in excess of plan assets (1,578) (1,447)
Unrecognized net loss 664 589
Unrecognized past service liability (1,348) (1,456)
Accrued postretirement benefit cost $(2,262) $(2,314)
Net periodic postretirement benefit cost included the following
components for the fiscal years ended September 30, 1995 and
1994:
SEPTEMBER 30, 1995 1994
(In Thousands)
Service cost-benefits earned during
the period $ 25 $ 44
Interest cost on APBO 117 244
Amortization of unrecognized loss 28 -
Amortization of unrecognized
past service liability (108) -
Net periodic postretirement
benefit cost $ 62 $ 288
For measurement purposes, the average annual rate of increase in
the per capita cost of covered health benefits was assumed to be
.5% for fiscal 1995 and was assumed to increase to 5.5% in fiscal
2005 and remain at that level thereafter. Increasing the assumed
health care cost trend rates by 1.0% in each year would have no
effect on the APBO and the aggregate of the service and interest
cost components of the net periodic postretirement benefit cost
for fiscal 1995. The Bank utilized a 7.5% weighted average
discount rate in determining the APBO. In the calculation of the
APBO for the postretirement life insurance plan, the Bank
utilized a 5.5% annual rate of increase in future compensation
levels.
The expense of providing postretirement benefits other than
pensions to retirees amounted to approximately $62,000 in fiscal
1995 and $288,000 in fiscal 1994.
(14) STOCK CONVERSION, SHAREHOLDERS' EQUITY AND
REGULATORY CAPITAL
Pursuant to a Plan of Conversion adopted by the Bank's Board of
Directors in 1985, the Bank established a liquidation account in
the amount of $31.9 million, the total net worth of the Bank at
December 31, 1985, for the benefit of all eligible account
holders who continue to maintain their deposits in the Bank. In
the event of future liquidation of the Bank (and only in such
event), an eligible account holder will be entitled to receive a
distribution from the liquidation account prior to any payments
to holders of common stock. The total amount of the liquidation
account is reduced by an amount proportionate to the decrease in
the deposit balances of eligible account holders. Richmond Hill
Savings Bank was subject to these same requirements and its
liquidation account continues to be maintained. At September 30,
1995, the remaining balance of the liquidation account for the
combined banks was approximately $4.3 million.
Payments of dividends by the Bank on its common stock are
subject to various restrictions. According to New York State
Banking Law, dividends may be declared and paid only out of net
profits of the Bank. The approval of the Superintendent of Banks
of the State of New York is required if the total of all
dividends declared in any calendar year will exceed net profit
for that year plus the retained net profits of the proceeding two
years, as defined in the regulations.
The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was signed into law on December 19, 1991. FDICIA
imposed a number of new mandatory supervisory and regulatory
measures.
The FDICIA requires financial institutions to take certain
actions relating to their internal operations, including:
providing annual reports on financial condition and management to
the appropriate federal banking regulators, having an annual
independent audit of financial statements performed and
establishing an independent audit committee comprised solely of
outside directors.
The Bank is subject to certain capital requirements established
by the Federal Deposit Insurance Corporation ("FDIC"). In
December 1992, the FDIC, jointly with other Bank regulatory
agencies, issued regulations implementing the prompt correction
provisions of the FDICIA. The regulation defines the capital
categories.
Insofar as applicable to banks, the FDIC requires the most highly
rated banks to have a leverage ratio to assets of at least 3% and
other banking organizations are required to maintain higher
levels (100 to 200 basis points), based on their particular
circumstances, as defined in the regulation.
The Bank is required to meet certain capital to risk-weighted
asset ratios. Generally, the Bank is required to maintain a
capital to risk-based asset ratio of 8% as more fully defined in
the regulations.
As of September 30, 1995, North Side complied with all capital
levels required by the FDIC and all such ratios are in the well
capitalized category. The Bank's total risk-based ratio, Tier I
risk-based ratio and leverage ratio were 16.89%, 15.98% and 7.02%
(unaudited), respectively at September 30, 1995.
(15) STOCK OPTION AND MANAGEMENT DEVELOPMENT AND
RECOGNITION PLANS
STOCK OPTION PLAN North Side Savings Bank's Long-Term Incentive
and Capital Accumulation Plan for the benefit of officers and
employees of the Bank took effect upon conversion of the Bank to
the stock form in 1986. The Board of Directors of the Bank in
October 1993 adopted, and the Bank's stockholders subsequently
approved an Amended and Restated Long-Term Incentive and Capital
Accumulation Plan (the "Option Plan"), which, among other things,
authorized an additional 243,934 options to be available for
grants to officers and employees of the Bank.
Options heretofore granted under the Option Plan generally vest
at the rate of 20% per year (beginning generally on the first
anniversary of each grant), are exercisable over a ten year
period, are not transferable, and will terminate within a period
of time following termination of employment with the Bank or its
subsidiaries.
A summary of the stock options activity is as follows:
Options Range of
Description Available Options Option Price
and Year For Grant Outstanding Per Share (1)
SEPTEMBER 30, 1992 47,016 127,312 $4.53 - $10.00
Adjustment for 5%
stock dividend 2,484 6,122
Granted (52,050) 52,050 15.65 - 15.65
Exercised - (8,828) 9.52 - 10.00
Canceled 2,550 (2,550) 9.52 - 10.00
SEPTEMBER 30, 1993 - 174,106 4.53 - 15.65
Additional shares
authorized 1/24/94 243,934 -
Adjustment for 5%
stock dividend 6,274 14,460 4.53 - 17.69
Granted (118,481) 118,481 17.69 - 17.69
Exercised - (29,189) 4.76 - 16.43
Canceled 1,063 (1,063) 4.76 - 17.69
SEPTEMBER 30, 1994 132,790 276,795 4.53 - 17.69
Adjustment for 5%
stock dividend 6,145 14,285 4.53 - 17.69
Granted (9,900) 9,900 17.69 - 17.69
Exercised - (11,632) 4.53 - 17.69
Canceled 2,484 (2,484) 15.65 - 17.69
SEPTEMBER 30, 1995 131,519 286,864 $4.53 - $17.69
(1) Exercise prices adjusted as applicable to reflect 5% stock
dividends paid in June 1993, June 1994 and March 1995.
MANAGEMENT DEVELOPMENT AND RECOGNITION PLAN The Bank has a
Management Development and Recognition Plan (the "Management
Plan"), the objective of which is to enable the Bank to retain
its corporate officers and key employees. All salaried
employees of the Bank and its subsidiaries are eligible to
receive benefits under the Management Plan, although benefits
have been provided primarily to officers and key management
employees, as determined, with the approval of the Board of
Directors, by the Stock and Executive Compensation Committee of
the Board of Directors ("the Committee"), a committee comprised
of non-employee Directors who administer the Management Plan.
Awards are in the form of Common Stock held in trust by the
Management Plan for the benefit of participants pending the
vesting of such shares, generally in 33-1/3% or 20% increments
over three or five years. The Management Plan is authorized to
invest in shares of Common Stock in an amount not to exceed 10%
of the outstanding shares of Common Stock. Compensation expense
in the amount of the fair market value of the common stock at the
date of the grant is recognized pro rata over the periods during
which the shares are payable. The Board of Directors can
terminate the Management Plan at any time. The Board of
Directors awarded grants of 36,506 shares during the year ended
September 30, 1995, which are all the shares of Common Stock
currently held by the Management Plan. No grants were awarded
during the years ended September 30, 1994 and 1993. Stock
compensation expense amounted to $125,000, $121,000 and $162,000
for the years ended September 30, 1995, 1994 and 1993,
respectively.
(16) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No.107, "Disclosures
about Fair Value of Financial Instruments" ("SFAS NO.107"), as
amended by SFAS No. 119, "Disclosures about Derivative Financial
Instruments and Fair Value of Financial Instruments," requires
disclosure of the fair value of financial instruments, both
assets and liabilities whether recognized or not recognized, in
the consolidated Statements of Condition, for which it is
practicable to estimate fair value as of the Statements of
Condition date. Changes in market conditions subsequent to that
date are not reflected. SFAS No. 107 has no effect on financial
position or results of operations in the current year or any
future period. Furthermore, the results of implementing SFAS No.
107 are not representative of the Bank's total value.
When quoted market prices are not available, SFAS No.107 permits
using the present value of anticipated future cash flows. In
that regard, the estimated fair value will be affected by
prepayment and discount rate assumptions. Such method may not
provide the actual proceeds which would be realized in the
ultimate sale of the financial instrument.
SEPTEMBER 30, 1995 1994
CARRYING ESTIMATED Carrying Estimated
VALUE FAIR VALUE Value Fair Value
(In Thousands)
FINANCIAL ASSETS:
Cash and due from banks $ 11,530 $ 11,530 $ 12,333 $ 12,333
Money market investments 29,456 29,456 1,200 1,200
Securities available for
sale 326,542 326,542 - -
Investment securities 93,301 92,460 135,972 132,005
Federal Home Loan
Bank stock 9,430 9,430 - -
Mortgage-backed
securities 651,153 642,864 858,700 826,666
Loans, net 425,763 423,354 478,705 467,631
Accrued interest
receivable 13,230 13,230 12,533 12,533
FINANCIAL LIABILITIES:
Deposits 1,199,077 1,202,964 1,191,509 1,193,470
Mortgage escrow
payments 4,607 4,607 4,372 4,372
Borrowed funds 251,000 250,576 226,875 226,875
Accrued interest payable 1,505 1,505 2,038 2,038
Outstanding Commitments 3,448 3,448 2,821 2,821
The following methods and assumptions were used to estimate the
fair value of each class of financial instruments for which it is
practical to estimate that value:
CASH AND SHORT-TERM INVESTMENTS
The carrying amount of cash and due from banks, money market
investments, and accrued interest receivable approximates fair
value.
SECURITIES
The estimated fair value of securities available for sale,
investment securities and mortgage-backed securities are based on
quoted market prices as published by various quotation services
or, if quoted market prices are not available, on dealer quotes.
The carrying value of the FHLB stock approximates fair value
since these securities do not present credit concerns and are
redeemable at cost from the issuer only.
LOAN RECEIVABLES AND COMMITMENTS TO EXTEND CREDIT
Certain homogeneous categories of loans, such as one-to four-
family mortgages and co-operative apartment loans, have been
valued on a pooled basis using market prices for securities
backed by loans with similar characteristics. The fair value of
other types of loans and commitments to extend credit are
estimated by discounting the future cash flows using the current
rates at which similar loans would be made to borrowers with
similar credit risks and for the same remaining maturities. For
potential problem loans, the present value result is separately
downward adjusted consistent with management's assumptions in
evaluating the adequacy of the allowance for loan losses.
DEPOSIT LIABILITIES AND BORROWINGS
Carrying amount is a reasonable estimate of fair value for
savings, demand deposit and money market accounts. Fair value of
certificates of deposit and borrowings are estimated by
discounting the future cash flows using the rates currently
offered for deposits of similar remaining maturities. Carrying
amount of mortgage escrow payments, accrued interest payable and
outstanding commitments approximate fair value.
(17) RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN In June 1993,
the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 114 "Accounting
by Creditors for Impairment of a Loan" ("SFAS No. 114"), which is
effective for fiscal years beginning after December 15, 1994.
The statement generally would require all creditors to account
for impaired loans, except those loans that are accounted for at
fair value or at the lower of cost or fair value, at the present
value of the expected future cash flows discounted at the loan's
effective interest rate or at the fair value of the loan's
collateral if the loan is collateral dependent. SFAS No. 114
also provides that in-substance foreclosed loans should not be
included in Real Estate Owned for financial reporting purposes
but, rather, should be included in the loan portfolio. In
October 1994, the FASB issued SFAS No. 118, "Accounting by
Creditors for Impairment of a Loan-Income Recognition and
Disclosures". This statement applies to all creditors and amends
SFAS No. 114. SFAS No. 118 eliminates the income recognition
provisions that had been included in SFAS No. 114. Creditors are
permitted to use existing methods for recognizing interest income
on impaired loans. SFAS No. 118 requires that an entity disclose
its policy for recognizing interest income on impaired loans,
including how cash receipts are recorded. The Bank adopted SFAS
Nos. 114 and 118 on October 1, 1995. The adoption did not have a
material impact on the Bank's financial statements.
ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-
LIVED ASSETS TO BE DISPOSED OF In March 1995, the FASB issued
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" ("SFAS No. 121").
SFAS No. 121 is effective for fiscal years beginning after
December 15, 1995 and establishes accounting standards for the
impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and
used and for long-lived assets and certain identifiable
intangibles to be disposed of. This statement requires that
long-lived assets and certain identifiable intangibles to be held
and used by an entity be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. The Bank does not expect SFAS
No. 121 to have a significant effect on its financial statements.
ACCOUNTING FOR MORTGAGE SERVICING RIGHTS In May 1995 the FASB
issued SFAS No. 122, " Accounting for Mortgage Servicing Rights"
("SFAS No. 122"). SFAS No. 122 is effective for fiscal years
beginning after December 15, 1995 and requires that mortgage
banking enterprises recognize as separate assets the rights to
service mortgage loans regardless of whether such rights are
obtained through the direct purchase of servicing rights or from
the origination of mortgage loans intended to be sold with
servicing retained. SFAS No. 122 also requires assessments of
capitalized servicing rights for impairment based on the fair
value of those rights. Based upon the extent of the it's current
mortgage banking activities, the Bank does not expect SFAS No.
122 to have a significant effect on its financial statements.
ACCOUNTING FOR STOCK-BASED COMPENSATION In October 1995, the
FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation"("SFAS No. 123"). SFAS No. 123 establishes a fair
value based method of accounting for stock-based compensation
arrangements with employees, rather than the intrinsic value
based method that is contained in APB Opinion No. 25 ("Opinion
25"). However, SFAS No. 123 does not require an entity to adopt
the new fair value based method for purposes of preparing its
basic financial statements. Entities are allowed (1) to continue
to use the Opinion 25 method or (2) to adopt the SFAS No. 123
fair value based method. The SFAS No. 123 fair value based
method is considered by the FASB to be preferable to the Opinion
25 method, and thus, once the fair value based method is adopted,
an entity cannot change back to the Opinion 25 method. SFAS No.
123 applies to all transactions in which an entity acquires goods
or services by issuing equity instruments or by incurring
liabilities where the payment amounts are based on the entity's
common stock price, except for employee stock ownership plans.
For entities not adopting the Statement No.123 fair value based
method, Statement No.123 requires the entity to display in the
footnotes to the financial statements pro forma net income and
earnings per share information as if the fair value based method
had been adopted. The accounting requirements of SFAS No. 123
are effective for transactions entered into in fiscal years that
begin after December 15, 1995, though they may be adopted on
issuance. The disclosure requirements are effective for
financial statements for fiscal years beginning after December
15, 1995, or for an earlier fiscal year for which SFAS No. 123 is
initially adopted for recognizing compensation cost. Management
continues to assess the impact of SFAS No. 123.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FOR THE QUARTER ENDED 12/31/94 3/31/95 6/30/95 9/30/95 12/31/93 3/31/94 6/30/94 9/30/94
- ------------------------------------------------------------------------------------------------------------
(Dollars in Thousands, Except Per Share Amounts and Market Prices)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total interest income $ 25,234 $ 25,977 $ 26,353 $ 28,211 $ 22,451 $ 21,049 $ 23,082 $ 24,349
Total interest expense 12,366 13,311 13,902 15,651 10,136 9,323 10,290 11,600
- ----------------------- ------- ------- ------- ------- ------- ------ ------- ------
Net interest income 12,868 12,666 12,451 12,560 12,315 11,726 12,792 12,749
- ---------------------- ------- ------- ------- ------- ------- ------- ------- ------
Provision for loan losses 850 850 750 375 1,000 850 850 850
Net gain on redemption
of securities - 169 142 44 - - - -
Net (loss) gain on sale of
mortgages and OREO (144) (11) 46 (411) 6 (36) (132) (14)
Gain on sale of bank property - - - - - - - 356
Other income 571 535 821 534 722 642 970 594
OREO expense, net 212 11 101 151 142 72 762 249
Other expenses 5,820 6,051 5,871 5,321 6,332 6,011 6,176 6,453
- -------------- ------ ------ ------ ------ ------- ------ ------ -----
Income before provision
for income taxes 6,413 6,447 6,738 6,880 5,569 5,399 5,842 6,133
Provision for income taxes 2,819 2,755 2,900 2,897 2,350 2,131 2,456 2,639
- --------------------------- ------ ------ ------ ------ ------ ------ ------ -----
Net income $ 3,594 $ 3,692 $ 3,838 $ 3,983 $ 3,219 $ 3,268 $ 3,386 $ 3,494
- ----------------- --------- --------- --------- --------- --------- --------- --------- --------
Primary earnings per share $ 0.75 $ 0.77 $ 0.80 $ 0.83 $ 0.68 $ 0.70 $ 0.71 $ 0.73
Fully diluted earnings per (1) (1) (1) $ 0.80 (1) (1) (1) (1)
share Market price of
common stock
High $ 22 3/8 $ 22 1/8 $ 24 3/4 $ 31 1/2 $20 3/8 $20 $21 1/2 $ 24 3/4
Low $ 16 $ 17 1/8 $ 20 1/2 $ 23 $16 3/4 $16 3/4 $17 $ 20 3/4
Closing price
December 1, 1995 $ 30
(1) Fully diluted earnings per share not represented as dilution is less than
3%.
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDER INFORMATION
<S> <C>
CORPORATE HEADQUARTERS: North Side Savings Bank
170 Tulip Avenue
Floral Park, New York 11001
(516) 488-6900
STOCK LISTING: The common stock of North Side Savings Bank is traded on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ")
National Market, under the symbol " NSBK". As of December 1, 1995 the Bank
had approximately 650 shareholders of record.
PRICE RANGE OF STOCK: QUARTER ENDED HIGH LOW
December 31, 1993 $ 20 3/8 $16 3/4
March 31, 1994 20 16 3/4
June 30, 1994 21 1/2 17
September 30, 1994 24 3/4 20 3/4
December 31, 1994 22 3/8 16
March 31, 1995 22 1/8 17 1/8
June 30, 1995 24 3/4 20 1/2
September 30, 1995 31 1/2 23
REGISTRAR AND TRANSFER AGENT: American Stock Transfer and Trust Company
99 Wall Street
New York, New York 10005
INVESTOR RELATIONS: Judith A. MacGregor
Corporate Secretary
North Side Savings Bank
170 Tulip Avenue
Floral Park, New York 11001
(516) 488-6900
ANNUAL REPORT: The Bank is required to file an Annual Report on Form F-2 for its fiscal
year ended September 30, 1995 with the Federal Deposit Insurance
Corporation ("FDIC"). Shareholders may obtain, free of charge, a copy of
such annual report (excluding exhibits) by writing to Ms. Judith A.
MacGregor, North Side Savings Bank, 170 Tulip Avenue, Floral Park, New York
11001.
ANNUAL SHAREHOLDERS' MEETING: The Annual Shareholders' Meeting of North Side Savings Bank will be held
at 10:00 am, Monday, January 22, 1996 at The New York Helmsley Hotel, 212
East 42nd Street, New York, New York 10017.
INDEPENDENT AUDITORS: KPMG Peat Marwick LLP
345 Park Avenue
New York, N.Y. 10154
THIS ANNUAL REPORT HAS NOT BEEN REVIEWED, OR CONFIRMED FOR ACCURACY OR
RELEVANCE, BY THE FEDERAL DEPOSIT INSURANCE CORPORATION.
</TABLE>
CORPORATE DIRECTORY
DIRECTORS
IRVIN L. CHERASHORE
Director of Winchester Group, Inc.
GREG L. COLLINS
President of Incline Capital Group
DONALD C. FLEMING
Executive Vice President and
Chief Financial Officer
of North Side Savings Bank
RICHARD D. GIDRON
Chairman of Dick Gidron Cadillac, Inc.
and Dick Gidron Ford, Inc.
MARGARET M. HEALY
Principal
PHNetwork
RALPH J. MARINO
Partner
Marino, Bernstein
& LeMarca, P.C.
JOHN J. MURPHY
Senior Vice President and Director of
Skandia Investment Management, Inc.
THOMAS M. O'BRIEN
Chairman of the Board,
President and Chief Executive Officer
of North Side Savings Bank
STEPHEN J. SCHILDWACHTER
Field Underwriter
New York Life Insurance Co.
DIRECTOR EMERITUS
ANTHONY F. EARLEY
President
Ce-Tex, Inc.
OFFICERS
THOMAS M. O'BRIEN
Chairman of the Board ,
President and
Chief Executive Officer
DONALD C. FLEMING
Executive Vice President and
Chief Financial Officer
MARTIN J. BRADY
Senior Vice President
Loan Origination
FELIX G. GONZALEZ
Senior Vice President
Loan Servicing
MARIE ALLEVA
Senior Vice President
Retail Banking
ALISSA E. BALLOT
General Counsel
JOSEPH R. KWASNIK
Vice President and
Comptroller
GEORGE D. CARTER
Vice President
Human Resources
JUDITH A. MACGREGOR
Corporate Secretary
KATHLEEN MALLON
Teasurer
STEVEN R. FRESE
Administrative Vice President
SAMY SAPEK
Auditor
E. DUKE OKORIE
Director of Compliance
CHRISTINE J. SANTANGELO
Director of Marketing
JAMES VANELLA
Second Vice President
KENNETH J. SAPANSKI
Second Vice President
KATHLEEN HANRAHAN
Second Vice President
JOHN J. HERNON, JR.
Second Vice President
FRANCES SBLENDORIO
Second Vice President
PAUL DESTEFANO
Director of Security
MARGARET DONATO
Assistant Vice President
JOHN D'ANGELO
Assistant Vice President
MICHAEL GENTILELLA
Assistant Vice President
CATHERINE PANDOLFO
Assistant Vice President
WILLIAM PENTECK
Assistant Treasurer
TANYA MANNING
Assistant Treasurer
PAULA YASLOWITZ
Assistant Treasurer
NANCY CHASE
Assistant Treasurer
BRANCH LOCATIONS
BRONX COUNTY:
S Main Office
185 West 231st Street
Bronx, New York 10463
Nancy Chase
Assistant Treasurer and Manager
S 4201 White Plains Road
Bronx, New York 10466
Patrick Brown
Manager
S 3159 Bainbridge Avenue
Bronx, New York 10467
Paula Yaslowitz
Assistant Treasurer and Manager
1941 Williamsbridge Road
Bronx, New York 10461
Nicoletta Cartiglia
Manager
S 5977 Riverdale Avenue
Bronx, New York 10471
Margaret Donato
Assistant Vice President and
Manager
S 3030 Buhre Avenue
Bronx, New York 10461
Roseann Greco
Manager
A 725 Co-op City Boulevard
S Bronx, New York 10475
Frances Mansi
Assistant Manager
QUEENS COUNTY:
114-19 Liberty Avenue
Richmond Hill, New York 11419
George Portalatin
Manager
S 257-03 Hillside Avenue
Floral Park, New York 11004
Elaine Russo
Manager
A 103-42 Lefferts Boulevard
S Richmond Hill, New York 11419
Saheed Amin
Manager
115-20 Jamaica Avenue
Richmond Hill, New York 11418
John D'Angelo
Assistant Vice President and Manager
Public Accommodation Office
A 115-02 Jamaica Avenue
D Richmond Hill, New York 11418
Marine Air Terminal
77-22 21st. Avenue
East Elmhurst, New York 11370
Eileen Greer
Manager
NASSAU COUNTY:
A 170 Tulip Avenue
S Floral Park, New York 11001
Ann De Boesche
Manager
A 1800 Grand Avenue
D Baldwin, New York 11510
S Frances Gordis
Manager
A 2303 Grand Avenue
D Baldwin, New York 11510
S Elizabeth Pitelli
Manager
A 550 Franklin Avenue
D Franklin Square, New York 11010
S Catherine Pandolfo
Assistant Vice President and
Manager
SUFFOLK COUNTY:
A 150 North Main Street
D Sayville, New York 11782
S Joan Fish
Manager
FOR FURTHER BANKING INFORMATION CONTACT CUS- TOMER SERVICE 1-800-548-5699
HEARING IMPAIRED CUSTOMERS USING TTY/TDD, CALL 1-800-267-4227
"A" Denotes 24 hour NYCE Banking Center
"D" Drive up at this location
"S" Safe Deposit Boxes at this location
North Side Savings Bank
Member FDIC
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
Form F-4
QUARTERLY REPORT
UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR
THE QUARTER ENDED DECEMBER 31, 1995
FDIC Insurance Certificate Number 16007
North Side Savings Bank
(Exact name of bank as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
13-1723204
(IRS Employer Identification No.)
170 Tulip Avenue, Floral Park, New York
(Address of principal executive offices)
11001
(Zip Code)
(516) 488-6900
(Bank's telephone number, including area code)
Indicate by check mark whether the bank (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter
period that the bank 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 bank's
classes of common stock, as of the latest practicable date:
Securities registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934: Common Stock, par value
$1.00 per share.
Number of shares outstanding at February 1, 1996 - 4,813,346
NORTH SIDE SAVINGS BANK
INDEX
Item 1. Financial Statements Page No.
Consolidated Statements of Condition,
December 31, 1995 and September 30, 1995 1
Consolidated Statements of Income,
Three Months Ended December 31, 1995 and 1994 2
Consolidated Statements of Changes in
Shareholders' Equity, Three Months Ended
December 31, 1995 and 1994 3
Consolidated Statements of Cash Flows,
Three Months Ended December 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in Thousands)
December 31, September 30,
1995 1995
(Unaudited)
ASSETS:
Cash and due from banks $ 11,392 $ 11,530
Money market investments 90,341 29,456
Securities available for sale:
Bonds and equities 18,722 26,520
Mortgage-backed securities 410,015 300,022
Total securities available for sale 428,737 326,542
Investment securities, net
(estimated market value of $47,909
and $92,460, respectively) 48,116 93,301
Federal Home Loan Bank of NY stock,
at cost 9,430 9,430
Mortgage-backed securities, net
(estimated market value of $531,340
and $642,864, respectively) 532,875 651,153
Loans 421,555 432,180
Less allowance for loan losses 6,607 6,417
Loans, net 414,948 425,763
Accrued interest receivable 11,232 13,230
Premises and equipment, net 15,100 15,215
Other real estate owned, net
of allowance of $1.0 million
and $1.1 million, respectively 2,485 2,515
Other assets 8,027 9,868
Total assets $ 1,572,683 $ 1,588,003
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits $ 1,217,018 $ 1,199,077
Mortgagors' escrow payments 3,242 4,607
Borrowed funds 214,000 251,000
Other liabilities 18,199 17,035
Total liabilities 1,452,459 1,471,719
Shareholders' Equity:
Preferred stock, par value $1.00
per share, 5,000,000 shares
authorized, none outstanding -- --
Common stock, par value $1.00
per share, 10,000,000 shares
authorized, 4,802,679 and 4,798,022
shares issued and outstanding at
December 31, 1995 and
September 30, 1995, respectively 4,803 4,798
Paid-in capital 63,025 62,985
Surplus fund 24,101 24,101
Undivided profits 27,239 22,606
Net unrealized appreciation on
securities available
for sale, net of income taxes 1,589 2,360
Unearned portion of incentive
compensation (533) (566)
Total shareholders' equity 120,224 116,284
Total liabilities and
shareholders' equity $ 1,572,683 $ 1,588,003
See accompanying notes to consolidated financial statements.
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED
DECEMBER 31,
1995 1994
Interest Income:
Mortgage loans $ 8,497 $ 8,827
Mortgage-backed securities 16,653 13,914
Investment securities 1,428 2,318
Money market investments 882 28
Other loans 140 147
Total interest income 27,600 25,234
Interest Expense:
Deposits and mortgage escrow
accounts 11,636 9,109
Borrowings 3,469 3,257
Total interest expense 15,105 12,366
Net interest income 12,495 12,868
Provision for loan losses 300 850
Net interest income after
provision for loan losses 12,195 12,018
Other Operating Income:
Net gain on sales of securities 3,086 --
Net loss on sales of other
real estate owned (10) (144)
Customer service fees 454 502
Other 31 69
Total other operating income 3,561 427
Other Operating Expenses:
Compensation and benefits 2,587 2,648
Occupancy and equipment 890 797
BIF deposit insurance premiums 115 790
OREO expense, net 46 212
Other 1,972 1,585
Total other operating expenses 5,610 6,032
Income before provision for income
taxes 10,146 6,413
Provision for income taxes 4,312 2,819
Net income $ 5,834 $ 3,594
Primary Earnings per share (a) $ 1.22 $ .75
Fully Diluted Earnings Per Share (b)$ 1.18 $ N/A
(a) Based on the weighted average number of shares outstanding
for each period of 4,800,936 and 4,768,924 for the three
months ended December 31, 1995 and 1994, respectively.
(b) Based on the weighted average number of shares outstanding
of 4,950,853 for the three months ended December 31, 1995.
See accompanying notes to consolidated financial statements.
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED DECEMBER 31, 1995 AND 1994
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Unrealized Unallocated
Depreciation Unrealized Shares in
On Certain Depreciation Management Unearned
Marketable On Securities Development Portion of
Common Paid-In Surplus Undivided Equity Available & Recognition Incentive
Stock Capital Fund Profits Securities For Sale Plan Compensation Total
1994
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1994 $ 4,541 $ 57,281 $ 24,101 $ 15,952 $ (436) $ - $ (416) $ (25) $ 100,998
Net Income - - - 3,594 - - - - 3,594
Payment of $.125 per
share cash dividend - - - (567) - - - - (567)
Prorated portion of
Management Development and
Recognition Plan awards
earned by grantees - - - - - - - 25 25
Decrease in unrealized
depreciation on certain
marketable equity securities - - - - 436 - - - 436
Unrealized depreciation on
securities available
for sale, net of taxes
of $ 1,757 - - - - - (2,157) - - (2,157)
Exercise of stock options
for 992 shares of
Common Stock 1 3 - - - - - - 4
------- -------- --------- -------- ------- --------- -------- --------- --------
Balance at December 31, 1994 $ 4,542 $ 57,284 $ 24,101 $ 18,979 $ - $(2,157) $ (416) $ - $ 102,333
======= ======== ========= ======== ======= ========== ========= ========== ========
Fiscal 1995
Balance at September 31, 1995 $ 4,798 $ 62,985 $ 24,101 $ 22,606 $ - $ 2,360 $ - $ (566) $ 116,284
Net Income - - - 5,834 - - - - 5,834
Payment of $.25 per
share cash dividend - - - (1,201) - - - - (1,201)
Dividend reinvestment 1 12 - - - - - - 13
Prorated portion of Management
Development and Recognition
Plan awards earned by grantees - - - - - - - 33 33
Decrease on unrealized
appreciation on securities
available for sale, net of
taxes of $1,294 - - - - - (771) - - (771)
Exercise of stock options
for 4,241 shares of
Common Stock 4 28 - - - - - - 32
------- -------- -------- -------- ------- -------- -------- --------- ---------
Balance at December 31, 1995 $ 4,803 $ 63,025 $ 24,101 $ 27,239 $ - $ 1,589 $ - $ (533) $ 120,224
====== ======= ======= ======= ======= ======== ======== ========= ========
See accompanying notes to consolidated financial statements.
</TABLE>
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
Three months ended December 31, 1995 1994
- --------------------------------------------------------------------------------------
Cash Flows From Operating Activities:
<S> <C> <C>
Net income $ 5,834 $ 3,594
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 362 330
Provision for possible loan and real estate losses 300 999
Amortization of premium, accretion of (discount), net 1,058 2,026
Net gain on sales of securities (3,086) --
Net loss on sales of OREO 10 144
Decrease in accrued interest receivable 1,998 430
Decrease in other assets 2,469 3,232
Increase in other liabilities 1,164 2,058
Other, net 128 25
- --------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
Net cash provided by operating activities 10,237 12,838
Cash Flows From Investing Activities:
Proceeds from maturities and redemptions
of investment securities 60,000 2,049
Proceeds from principal repayment of investment securities 1,216 --
Purchase of securities available for sale (233) (2,690)
Purchase of investment securities (16,030) (7)
Proceeds from principal repayments, maturities and
redemptions of securities available for sale 25,243 12,460
Proceeds from principal repayments of mortgage-
backed securities 19,407 18,763
Proceeds from sales of securities available for sale 8,098 --
Purchase of mortgage-backed securities (35,647) (48,320)
Proceeds from loan repayments and satisfactions 10,997 12,916
Proceeds from loans sold 289 927
Loan purchases and originations (1,085) (1,883)
Proceeds from sales of OREO 81 1,606
Capital expenditures (246) (205)
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities 72,090 (4,384)
Cash Flows From Financing Activities:
Increase (decrease) in deposit accounts, net 17,941 (29,700)
Receipt of borrowed funds -- 339,500
Repayment of borrowed funds (37,000) (316,875)
Disbursements of mortgage escrow (net) (1,365) (897)
Proceeds from exercise of stock options 32 4
Cash dividend paid on common stock, net of
dividend reinvestment (1,188) (567)
- ---------------------------------------------------------------------------------------
Net cash used in financing activities (21,580) (8,535)
Net increase (decrease) in Cash and Cash Equivalents 60,747 (81)
Cash and Cash Equivalents at Beginning of Period 40,686 13,333
- --------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 101,433 $ 13,252
======================================================================================
Supplemental Information:
Cash paid during quarter for:
Interest $ 15,930 $ 12,672
Income taxes 444 808
Additions to OREO 61 222
======================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
NORTH SIDE SAVINGS BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary for a
fair presentation of the Bank's financial condition as of
December 31, 1995 and the results of operations, changes in
shareholders' equity and cash flows for the periods presented.
In preparing the financial statements, management is required to
make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the statement of
condition and revenues and expenses for the period.
Material estimates that are particularly susceptible to
significant change in the near-term relate to the determination
of the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of
loans. It is the general policy of the Bank to obtain
independent appraisals for significant loans every three years.
However, as a matter of general practice, management obtains more
frequent appraisals as it deems necessary on significant troubled
loans and other real estate owned. Other real estate owned
includes real estate acquired in connection with foreclosures or
by deed-in-lieu of foreclosure (collectively, "OREO").
The Bank's loan portfolio is varied as to type, geographic
location, borrower concentration, and fixed or adjustable-rate
mortgages. At December 31, 1995 approximately $360.4 million of
the Bank's real estate loans were secured by properties located
in New York and, as such, a substantial portion of the Bank's
borrowers' ability to honor their contracts and increases or
decreases in market value of the real estate collateralizing such
loans may be significantly affected by the level of economic
activity in New York.
The Bank believes that the allowances for loan losses and
OREO losses are adequate. While the Bank uses available
information to recognize losses on loans and estimate the fair
value of OREO, future additions to the allowances for loan losses
and OREO may be necessary based on, among other things, changes
in economic conditions in the region. In addition, various
regulatory agencies, as an integral part of their examination
process, periodically review the Bank's allowance for loan losses
and the net carrying value of OREO. Such agencies may require
the Bank to recognize additions to the allowance or reductions in
net carrying values based on their judgments about information
available to them at the time of their examination.
The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions for Form
F-4. The financial statements should be read in conjunction with
the consolidated financial statements and the related notes
thereto included in the Bank's Annual Report to Stockholders for
the year ended September 30, 1995 and in the related Annual
Report on Form F-2 for the year ended September 30, 1995.
NOTE 2 - CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash
equivalents include cash and amounts due from banks including
Federal Home Loan Bank overnight deposits, Federal Home Loan Bank
balance, and Federal funds sold. Generally, Federal funds are
sold for one-day periods.
NOTE 3 - ADOPTION OF NEW ACCOUNTING STANDARD
Effective October 1, 1995, the Bank adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan," and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures." These statements prescribe
recognition criteria for loan impairment, generally related to
commercial type loans, and measurement methods for certain
impaired loans and all loans whose terms are modified in troubled
debt restructurings subsequent to the adoption of these
statements. Loans are identified as impaired when it is probable
that all amounts of principal and interest due will not be
collected according to the original contractual terms of the loan
agreement. The effect of the adoption of these standards was not
material to the financial statements.
As a result of the adoption of SFAS No. 114, the allowance
for possible loan losses related to impaired loans that are
identified for evaluation in accordance with SFAS No. 114 is
based on the present value of expected cash flows discounted at
the loans' initial effective interest rate, except that as a
practical expedient, impairment may be measured at the loans'
observable market price, or the fair value of the collateral for
certain loans where repayment of the loan is expected to be
provided solely by the underlying collateral. The Bank considers
estimated cost to sell when determining the fair value of
collateral in the measurement of impairment if those costs are
expected to reduce the cash flows available to repay or otherwise
satisfy the loans.
SFAS No. 114 also amends SFAS No. 15 "Accounting by Debtors
and Creditors for Troubled Debt Restructurings," by requiring
creditors to measure all loans that are restructured in a
troubled debt restructuring (subsequent to September 30, 1995) in
accordance with the criteria of SFAS No. 114. Loans which were
restructured prior to the adoption of SFAS No. 114 and are
performing in accordance with their restructured terms are not
considered impaired and continue to be accounted for under SFAS
No. 15.
Prior to the adoption of SFAS No. 114, OREO included both
formally foreclosed and in-substance foreclosed real properties,
which properties included those where the borrower had little or
no equity in the property considering its fair value; where
repayment was only expected to come from the operation or sale of
the property; and where the borrower had effectively abandoned
control of the property or it was doubtful that the borrower
would be able to rebuild equity in the property. SFAS No. 114
requires that a loan be classified as an in-substance foreclosure
only when the Bank has taken possession of the collateral
property regardless of whether formal foreclosure proceedings
have taken place. The Bank did not have any in-substance
foreclosed properties included in OREO at December 31, 1995 or
September 30, 1995.
SFAS No. 118 amended SFAS No. 114 and allows creditors to
continue to use existing accounting methods for recognizing
interest income on impaired loans and requires certain related
disclosures. Cash receipts on impaired loans are generally
recorded as principal repayments or interest income according to
the terms of the loan agreement.
At December 31, 1995, the recorded investment in loans that
are considered impaired under SFAS No. 114 totaled $2.8 million.
Included in this amount is $1.0 million of impaired loans for
which the related allowance for credit losses is $191,000. The
average recorded investment in impaired loans during the three
months ended December 31, 1995 was approximately $2.7 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
North Side Savings Bank ("North Side" or the "Bank") is a New
York State chartered, stock savings bank which was chartered in
1905. North Side's deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") to the full extent permissible by
law and regulation. As of December 31, 1995, the Bank conducted
business from seventeen full-service banking offices in the
Bronx, Queens, Nassau and Suffolk Counties, New York. The Bank
had total assets of $1.57 billion at December 31, 1995, and
shareholders' equity at such date of $120.2 million, which
constituted 7.64% of total assets.
At its Annual Meeting following the Bank's Annual Meeting of
Stockholders on January 22, 1996, the Board of Directors declared
a $.25 per share cash dividend payable on February 23, 1996 to
shareholders of record on February 9, 1996. The Board also
authorized management to take the steps necessary to form a
holding company for North Side. Such holding company formation
will be subject to, among other things, receipt of stockholder
and regulatory approvals. Stockholder action on this matter is
currently anticipated during the third quarter of fiscal 1996.
At the Annual Meeting of Stockholders held on January 22,
1996, shareholders re-elected Irvin L. Cherashore, Greg L.
Collins and Thomas M. O'Brien as Directors of the Bank for three-
year terms expiring in 1999. Shareholders also ratified the
appointment of KPMG Peat Marwick LLP as the Bank's independent
auditors for the fiscal year ending September 30, 1996.
North Side is subject to examination and comprehensive
regulation by the New York State Banking Department, which is its
primary regulator, and by the FDIC. The Bank is subject to
further regulation of the Federal Reserve Board governing
reserves required to be maintained against deposits and certain
other matters. At December 31, 1995, the Bank had 4,802,679
shares of common stock issued and outstanding. Its common stock
is traded over the counter and quotations for trades of the
Bank's common stock are included on the National Association of
Securities Dealers Automated Quotations ("NASDAQ") National
Market System under the symbol "NSBK."
FINANCIAL CONDITION
The Bank's total assets amounted to $1.57 billion at December
31, 1995 as compared to $1.59 billion at September 30, 1995.
During the first quarter of fiscal 1996, the Bank took advantage
of the one-time opportunity granted by the FASB to reassess the
appropriateness of its classification of all securities under
SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities". As a result, the Bank reclassified $134.0
million of mortgage-backed securities from held to maturity to
available for sale at an unrealized depreciation of $.1 million,
net of income taxes, at the time of transfer. During the first
quarter of fiscal 1996, mortgage-backed securities, net decreased
by $118.3 million, investment securities held to maturity
decreased $45.2 million, loans, net decreased by $10.8 million
and bonds and equities available for sale decreased $7.8 million.
These decreases were offset by increases in mortgage-backed
securities available for sale of $110.0 million and money market
investments of $60.9 million.
The $118.3 million decrease in mortgage-backed securities,
net was primarily due to the transfer described above of $134.0
million to available for sale along with $19.4 million of
principal repayments which was partially offset by $35.6 million
of purchases during the quarter. Investment securities, net
decreased $45.2 million primarily due to $60.0 million of Federal
Home Loan Bank bonds being called during the quarter and $1.2
million of principal repayments which were partially offset by
purchases of $16.0 million. Loans, net decreased $10.8 million
primarily due to $11.0 million of loan amortizations and
satisfactions, $.3 million of loans sold, $.1 million of loans
charged-off and $.1 million of loans transferred to OREO. These
decreases in loans, net were partially offset by $1.1 million of
loan originations. The decrease of $7.8 million in bonds and
equities available for sale was primarily due to $4.7 million of
securities sold at a $3.1 million profit along with a decrease of
$3.2 million in net unrealized appreciation on these securities
for the quarter ended December 31, 1995. The $110.0 million
increase in mortgage-backed securities available for sale is due
to the transfer described above of $134.0 million from the
mortgage-backed securities portfolio and a $1.8 million increase
in net unrealized appreciation on these securities for the
quarter ended December 31, 1995. These increases were partially
offset by $25.0 million of principal repayments. The $60.9
million increase in money market investments is primarily due to
the funds received in connection with the call of $60.0 million
of Federal Home Loan Bank bonds.
Total liabilities decreased to $1.45 billion at December 31,
1995 as compared to $1.47 billion at September 30, 1995. The
change in liabilities consisted of a decrease of $37.0 million in
borrowings and $1.4 million in mortgagors' escrow payments which
were partially offset by an increase in deposits of $17.9 million
and an increase of $1.2 million in other liabilities.
Shareholders' equity increased $3.9 million primarily due to net
income for the quarter of $5.8 million, which was partially
offset by $1.2 million of cash dividends paid along with a
decrease of $.8 million in net unrealized appreciation on
securities available for sale, net of income taxes, for the
quarter ended December 31, 1995.
RESULTS OF OPERATIONS
The Bank reported net income for the quarter ended December
31, 1995 of $5.8 million compared to $3.6 million for the quarter
ended December 31, 1994. Primary earnings per share for the
quarter ended December 31, 1995 was $1.22 compared to $0.75 for
the same quarter in the prior year. Net income for the current
quarter reflects the substantial impact of a gain of $3.1
million, before income taxes, realized upon the sale of
securities. On a fully diluted basis, earnings per share was
$1.18 for the first quarter of fiscal 1996.
The $2.2 million increase in earnings for the first quarter
of fiscal 1996 compared to the first quarter of fiscal 1995 was
due primarily to a $3.1 million gain on sale of securities and a
$.6 million reduction in the provision for loan losses, which
were partially offset by an increase of $1.5 million in the
provision for income taxes.
Net interest income before provision for possible loan losses
decreased $.4 million to $12.5 million for the first quarter of
fiscal 1996 compared to $12.9 million for the first quarter of
fiscal 1995. The decrease was primarily the result of a
narrowing of the Bank's interest rate spread from 3.33% for the
quarter ended December 31, 1994 to 3.04% for the quarter ended
December 31, 1995. This decrease was offset to some extent by an
increase in the ratio of average interest-earning assets to
average interest-bearing liabilities from 1.05% at December 31,
1994 to 1.06% at December 31, 1995. The yield on average
interest-earning assets rose to 7.19% for the quarter ended
December 31, 1995 compared to 6.80% for the quarter ended
December 31, 1994. The average cost of funds also increased to
4.15% for the quarter ended December 31, 1995 from 3.47% for the
quarter ended December 31, 1994. As a result, the Bank's net
interest margin decreased from 3.44% for the quarter ended
December 31, 1994 to 3.23% for the same quarter this year.
INTEREST INCOME AND EXPENSE
Aggregate interest income on mortgage loans decreased $.3
million to $8.5 million for the three months ended December 31,
1995 compared to the same period in the prior year. The decrease
was primarily due to a $55.3 million, or 11.6%, decrease in the
average balance of loans during the first quarter of fiscal 1996
compared to the same period in fiscal 1995, which was partially
offset by a 66 basis point increase in the average yield earned
from 7.40% for the three months ended December 31, 1994 to 8.06%
for the three months ended December 31, 1995, with 100 basis
points being equal to 1.0%.
Interest income from mortgage-backed securities increased
$2.7 million to $16.7 million for the three month period ended
December 31, 1995 compared to the same period in the prior year.
The increase was attributable to a $94.9 million increase in the
average balance of all mortgage-backed securities during the
period, along with an 52 basis point increase in the average
yield earned from 6.45% during the three months ended December
31, 1994 to 6.97% for the three months ended December 31, 1995.
Interest income on investment securities decreased $.9
million from $2.3 million for the three month period ended
December 31, 1994 to $1.4 million for the three month period
ended December 31, 1995. The decrease was due to a $46.8 million
decrease in the average balance of all investment securities
along with a 40 basis point decrease in the average yield earned
from 6.83% for the three months ended December 31, 1994 to 6.43%
for the three months ended December 31, 1995. Interest income on
money market investments increased by $.9 million for the three
months ended December 31, 1995 compared to the same period in the
prior year. The increase was primarily due to a $60.2 million
increase in the average balance of money market investments along
with a 72 basis point increase in the average yield earned from
4.92% during the three months ended December 31, 1994 to 5.64%
for the three months ended December 31, 1995.
Interest expense on deposits and mortgage escrow accounts
increased $2.5 million to $11.6 million for the three month
period ended December 31, 1995 compared to the three month period
ended December 31, 1994. This increase was primarily due to an
increase in the average balance of deposits and escrow accounts
of $33.9 million over the periods along with an increase in the
average cost of deposits and mortgage escrow accounts of 74 basis
points to 3.80%. The increase in the average balance was
primarily due to the purchase of two branch locations during the
fourth quarter of fiscal 1995. Interest expense on borrowings
increased $.2 million due to a 43 basis point increase in the
average cost of borrowings from 5.55% for the three months ended
December 31, 1994 to 5.98% for the three months ended December
31, 1995, which was partially offset by a decrease of $5.7
million in the average balance during the first quarter of fiscal
1996 compared to the same period in fiscal 1995.
PROVISION FOR LOAN LOSSES
The provision for loan losses is based on management's
periodic evaluation of the adequacy of the allowance for loan
losses which is based on a review of the loan portfolio. Such
reviews are performed by a loan review committee of the Bank on a
quarterly basis. The committee considers, among other things,
the borrower's ability to repay, the estimated value of
collateral, general economic conditions, conditions in the real
estate market in the Bank's lending areas, past loss experience
and the level of non-performing loans.
As a result of management's evaluation of the adequacy of the
allowance for loan losses, which considered, among other things,
the significant decrease in the ratio of non-performing loans to
total loans at December 31, 1995 compared to December 31, 1994
and the continued high credit quality of the Bank's loan
portfolio, the Bank deemed it appropriate to reduce the level of
provisions for loan losses to $300,000 in the first quarter of
fiscal 1996 as compared to $850,000 in the first quarter of
fiscal 1995.
The Bank's level of non-performing loans decreased to $5.4
million at December 31, 1995 compared to $13.9 million at
December 31, 1994. Non-performing loans were $4.9 million at
September 30, 1995. The increase in non-performing loans at
December 31, 1995 compared to September 30, 1995 was mainly
attributable to $.3 million of new non-performing commercial
loans and $.2 million of additional one-to four-family non-
performing loans. Total non-performing loans amounted to .34%,
.31% and .91% of total assets at December 31, 1995, September 30,
1995 and December 31, 1994, respectively.
At December 31, 1995, the allowance for loan losses was $6.6
million, compared to $6.4 million at September 30, 1995 and $11.5
million at December 31, 1994. The allowance for loan losses as a
percentage of non-performing loans was 122.9% at December 31,
1995 compared to 130.8% at September 30, 1995 and 82.9% at
December 31, 1994. Charge-offs net of recoveries for the three
months ended December 31, 1995 were $.1 million compared to $.6
million for the three months ended December 31, 1994.
In addition, total non-performing assets decreased from $20.4
million, or 1.3% of total assets, at December 31, 1994 to $7.9
million, or .50% of total assets, at December 31, 1995. Non-
performing assets were $7.4 million, or .47% of total assets, at
September 30, 1995.
OTHER OPERATING INCOME
The Bank had other operating income of $3.6 million for the
three months ended December 31, 1995 compared to $.4 million for
the three months ended December 31, 1994. The increase was
primarily due to a $3.1 million gain on the sale of $4.7 million
of bonds and equities available for sale during the quarter ended
December 31, 1995. In addition the Bank sold OREO properties at
a net loss of $10,000 during the quarter ended December 31, 1995
as compared to a net loss of $144,000 on the sale of OREO
properties during the quarter ended December 31, 1994.
OTHER OPERATING EXPENSES
Total other operating expenses decreased $.4 million from
$6.0 million for the three months ended December 31, 1994 to $5.6
million for the three months ended December 31, 1995. This
decrease was primarily the result of a $.7 million decrease in
deposit insurance premiums and a $.2 million decrease in OREO
expense, net. These decreases were partially offset by a $.4
million increase in other operating expenses - other, which
increase was primarily the result of higher advertising costs.
Effective January 1, 1996, the Bank's deposit insurance premiums
will be reduced to $2,000 per year. The Bank continues its
effort to maintain strong control over other operating expenses
as evidenced by the Bank's efficiency ratio (which is operating
expense before net OREO expense as a percentage of net interest
income, customer service fees and other income, excluding gains
and losses) of 42.9% for the quarter ended December 31, 1995.
Provisions for income taxes of $4.3 million and $2.8 million
were made for the three month periods ended December 31, 1995 and
1994, respectively. The increase in the provision for income
taxes was primarily due to the increase of $3.7 million in income
before provision for income taxes to $10.1 million for the first
quarter of fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity of North Side's operations, measured by the
ratio of daily average balances for the quarter of cash and cash
equivalents (not committed, pledged, or required to liquidate
specific liabilities) to the sum of net withdrawable deposits and
borrowings payable within one year, averaged 4.49% for the twelve
months ended December 31, 1995 compared to 2.66% for the twelve
months ended September 30, 1995.
North Side's primary sources of funds have consisted of
deposits, amortization and prepayments of outstanding loans,
mortgage-backed securities and bond maturities. At December 31,
1995, total approved loan commitments amounted to $6.5 million.
The amount of time deposits which are scheduled to mature during
the twelve months ending December 31, 1996 is $341.4 million.
Based on past experience, management expects that a substantial
portion of these maturing deposits will be redeposited at North
Side.
At December 31, 1995, stockholders' equity equaled $120.2
million, or 7.6% of total assets, compared to $116.3 million or
7.3% of total assets at September 30, 1995.
The FDIC has issued regulations that require insured banks,
such as North Side, to maintain minimum levels of capital. In
general, current regulations require a leverage ratio of core
capital of 3% of adjusted total assets for the most highly rated
banks. Other banks are required to maintain levels 100 to 200
basis points higher, based on their particular circumstances as
defined in the regulations. At December 31, 1995, the Bank's
leverage ratio was 7.44%.
The Bank also is required to maintain minimum capital levels
based upon a weighting of its assets according to risk. The Bank
is required to maintain a ratio of qualifying total capital to
risk-weighted assets and off-balance sheet items of a minimum of
8.00%. At least one-half of that amount must be Tier I or core
capital and up to one-half of total capital can consist of Tier
II or supplementary capital. On December 31, 1995, the Bank's
Tier I capital to risk-weighted assets ratio and total capital to
risk-weighted assets ratio, calculated under the FDIC risk-based
capital requirement, was 17.34% and 18.32%, respectively.
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934,
the Bank has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NORTH SIDE SAVINGS BANK
Date: February 9, 1996 /s/ Thomas M. O'Brien
___________________________
Thomas M. O'Brien
President and
Chief Executive Officer
Date: February 9, 1996 /s/ Donald C. Fleming
____________________________
Donald C. Fleming
Executive Vice President and
Chief Financial Officer
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
Form F-4
QUARTERLY REPORT
UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR
THE QUARTER ENDED MARCH 31, 1996
FDIC Insurance Certificate No. 16007
North Side Savings Bank
(Exact name of bank as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
13-1723204
(IRS Employer Identification No)
170 Tulip Avenue, Floral Park, New York
(Address of principal executive offices)
11001
(Zip code)
(516) 488-6900
(Bank's telephone number, including area code)
Indicate by check mark whether the bank (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter
period that the bank 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 bank's
classes of common stock, as of the latest practicable date:
Securities registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934: Common Stock, par value
$1.00 per share.
Number of shares outstanding at May 1, 1996: 4,833,576
NORTH SIDE SAVINGS BANK
INDEX
Item 1. Financial Statements Page No.
Consolidated Statements of Condition,
March 31, 1996 and September 30, 1995 1
Consolidated Statements of Income,
Three and Six Months Ended
March 31, 1996 and 1995 2
Consolidated Statements of Changes in
Shareholders' Equity, Six Months Ended
March 31, 1996 and 1995 3
Consolidated Statements of Cash Flows,
Six Months Ended March 31, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
<TABLE>
<CAPTION>
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
March 31, September 30,
1996 1995
(Unaudited)
ASSETS:
<S> <C> <C>
Cash and due from banks $ 11,234 $ 11,530
Money market investments 81,033 29,456
Securities available for sale:
Bonds and equities 18,898 26,520
Mortgage-backed securities 384,183 300,022
----------- -----------
Total securities available for sale 403,081 326,542
Investment securities, net (estimated market value of $25,579
and $92,460, respectively) 25,436 93,301
Federal Home Loan Bank of NY stock, at cost 9,685 9,430
Mortgage-backed securities, net (estimated market value of $599,153
and $642,864, respectively) 608,070 651,153
Loans 411,059 432,180
Less allowance for loan losses 6,855 6,417
------------ ------------
Loans, net 404,204 425,763
Accrued interest receivable 11,330 13,230
Premises and equipment, net 14,876 15,215
Other real estate owned, net of allowance of $1.1 million
and $1.1 million, respectively 2,447 2,515
Other assets 9,039 9,868
----------- -----------
Total assets $ 1,580,435 $ 1,588,003
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits $ 1,226,902 $ 1,199,077
Mortgagors' escrow payments 4,199 4,607
Borrowed funds 214,000 251,000
Other liabilities 13,037 17,035
------------ ------------
Total liabilities 1,458,138 1,471,719
----------- -----------
Shareholders' Equity:
Preferred stock, par value $1.00 per share,
5,000,000 shares authorized, none outstanding -- --
Common stock, par value $1.00 per share,
10,000,000 shares authorized, 4,814,751 and 4,798,022
shares issued and outstanding at March 31, 1996 and
September 30, 1995, respectively 4,815 4,798
Paid-in capital 63,343 62,985
Surplus fund 24,101 24,101
Undivided profits 30,334 22,606
Net unrealized appreciation on securities available
for sale, net of income taxes 204 2,360
Unearned portion of incentive compensation (500) (566)
------------ -------------
Total shareholders' equity 122,297 116,284
----------- -----------
Total liabilities and shareholders' equity $ 1,580,435 $ 1,588,003
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
----- ---- ---- ----
Interest Income:
<S> <C> <C> <C> <C>
Mortgage loans $ 8,220 $ 8,864 $ 16,717 $ 17,691
Mortgage-backed securities 16,524 14,660 33,177 28,574
Investment securities 1,317 2,247 2,745 4,565
Money market investment 1,060 46 1,942 74
Other loans 139 160 279 307
------- -------- -------- --------
Total interest income 27,260 25,977 54,860 51,211
------- ------- ------- -------
Interest Expense:
Deposits and mortgage escrow accounts 11,488 9,573 23,124 18,682
Borrowings 3,229 3,738 6,698 6,995
------- ------ ------- -------
Total interest expense 14,717 13,311 29,822 25,677
------- ------- ------- -------
Net interest income 12,543 12,666 25,038 25,534
Provision for loan losses 200 850 500 1,700
------- ------- ------- ------
Net interest income after
provision for loan losses 12,343 11,816 24,538 23,834
------- ------- ------- -------
Other Operating Income:
Net loss on sale of other real estate owned -- (11) (10) (155)
Net gain on sales and redemptions of securities 407 169 3,493 169
Customer service fees 476 499 930 1,001
Other 15 36 46 105
-------- -------- ------- -------
Total other operating income 898 693 4,459 1,120
-------- -------- ------- -------
Other Operating Expense:
Compensation and benefits 2,912 2,797 5,499 5,445
Occupancy and equipment 892 879 1,782 1,676
BIF deposit insurance premiums 1 672 116 1,462
OREO expense, net 153 11 199 223
Other 1,873 1,703 3,845 3,288
------- ------- ------- -------
Total other operating expense 5,831 6,062 11,441 12,094
------- -------- ------- -------
Income before provision for
income taxes 7,410 6,447 17,556 12,860
Provision for income taxes 3,112 2,755 7,424 5,574
------- ------- ------- -------
Net income $ 4,298 $ 3,692 $ 10,132 $ 7,286
======= ======= ======== =======
Net income per share (a) $ .86 $ .77 $ 2.04 $ 1.52
======= ======= ======= =======
(a) Based on the weighted average number of shares of common stock and dilutive common stock equivalents outstanding of
4,969,168 and 4,958,377 for the three and six month periods ended March 31, 1996 and the weighted average number of shares
of common stock outstanding of 4,781,206 and 4,774,999 for the three and six month periods ended March 31, 1995,
respectively.
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unallocated
Unrealized Unreal- Shares in
Depreciation ized Appre- Management
On Certain ciation on Develop- Unearned
Marketable Securities ment & Re- Portion of
Common Paid-In Surplus Undivided Equity Available cognition Incentive
Stock Capital Fund Profits Securities For Sale Plan Compensation Total
- ---------------------------------------------------------------------------------------------------------------------------------
Fiscal 1995
Balance at September 30, $ 4,541 $57,281 $24,101 $15,952 $ (436) $ - $ (416) $ (25) $100,998
1994
Net Income - - - 7,286 - - - - 7,286
Prorated portion of Management
Development and Recognition
Plan awards earned by
grantees - - - - - - - 58 58
Awarded 36,506 common shares
from Management Development
and Recognition Plan at
$18.25 per share, market
value on date of grant - 250 - - - - 416 (666) -
Payment of 401(k) contri-
bution 16 286 - - - - - - 302
Distribution of 5% stock
dividend 227 4,440 - (4,667) - - - - -
Payment of $.275 per share
cash dividend - - - (1,286) - - - - (1,286)
Dividend Reinvestment 1 15 - - - - - - 16
Exercise of stock options for
2,573 shares of Common Stock 3 23 - - - - - - 26
Decrease in unrealized depre-
ciation on certain market-
able equity securities - - - - 436 - - - 436
Unrealized appreciation on
securities available for sale,
net of taxes - - - - - 157 - - 157
------- ------- --------- -------- ------- -------- -------- -------- --------
Balance at March 31, 1995 $ 4,788 $62,295 $24,101 $ 17,285 $ - $ 157 $ - $ (633) $ 107,993
======= ======= ======== ======== ======= ======== ======== ======== =========
Fiscal 1996
Balance at September 30,
1995 $ 4,798 $62,985 $24,101 $ 22,606 $ - $ 2,360 $ - $ (566) $ 116,284
Net Income - - - 10,132 - - - - 10,132
Payment of $.50 per share
cash dividend - - - (2,404) - - - - (2,404)
Dividend Reinvestment 1 24 - - - - - - 25
Prorated portion of Manage-
ment Development and
Recognition Plan awards
earned by grantees - - - - - - - 66 66
Payment of 401(k) contribution 11 298 - - - - - - 309
Exercise of stock options for
5,218 shares of Common Stock 5 36 - - - - - - 41
Decrease on unrealized appre-
ciation on securities
available for sale, net
of taxes - - - - - (2,156) - - (2,156)
_______ _______ _______ ________ ________ _________ ________ ________ __________
Balance at March 31, 1996 $ 4,815 $63,343 $24,101 $ 30,334 $ - $ 204 $ - $ (500) $ 122,297
======= ======= ======= ======== ======== ========= ======== ======== =========
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
- ----------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED MARCH 31, 1996 1995
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 10,132 $ 7,286
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 727 665
Provision for possible loan and real estate losses 500 1,849
Amortization of premium, accretion of (discount), net 2,556 2,811
Net gain on sales of securities (3,493) (169)
Net loss on sale of OREO 10 155
401(k) contribution 309 144
Decrease in accrued interest receivable 1,900 84
Decrease in other assets 2,585 1,867
Decrease in other liabilities (3,998) (1,800)
Other, net 198 51
- --------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 11,426 12,943
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and redemptions of investment securities 76,003 470
Proceeds from principal repayments of investment securities 7,936 2,812
Purchase of securities available for sale (73,349) (7,399)
Purchase of investment securities (16,089) (265)
Proceeds from principal repayments, maturities and redemptions
of securities available for sale 58,602 28,064
Proceeds from principal repayment of mortgage-
backed securities 31,646 34,863
Proceeds from sales of securities available for sale 70,403 --
Purchase of mortgage-backed securities (123,379) (48,320)
Purchase of FHLBNY Stock (255) (2,358)
Proceeds from loan repayments and satisfactions 25,911 24,496
Proceeds from loans sold 507 1,277
Loan purchases and originations (5,865) (3,293)
Proceeds from sales of OREO 91 1,772
Capital expenditures (387) (279)
- ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 51,775 31,840
- ----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposit accounts, net 27,825 (41,203)
Receipt of borrowed funds -- 597,500
Repayment of borrowed funds (37,000) (601,375)
(Disbursement) receipt of mortgage escrow (net) (408) 176
Proceeds from exercise of stock options 41 26
Cash dividend paid on common stock, net of dividend reinvestment (2,379) (1,270)
-------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (11,921) (46,146)
- ----------------------------------------------------------------------------------------------------------
Net Increase (decrease) in Cash and Cash Equivalents 51,280 (1,363)
Cash and Cash Equivalents at Beginning of Period 40,686 13,333
- ---------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 91,966 $ 11,970
=========================================================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during period for:
Interest $ 30,677 $ 26,698
Income taxes 7,044 4,593
Additions to OREO 61 420
=========================================================================================================
See accompanying notes to consolidated financial statements.
</TABLE>
NORTH SIDE SAVINGS BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
Unaudited
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary for a
fair presentation of the Bank's financial condition as of March
31, 1996 and the results of operations, changes in shareholders'
equity and cash flows for the periods presented. In preparing
the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the statement of
condition and revenues and expenses for the period.
Material estimates that are particularly susceptible to
significant change in the near-term relate to the determination
of the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of
loans. It is the general policy of the Bank to obtain independent
appraisals for significant loans every three years. However, as a
matter of general practice, management obtains more frequent
appraisals as it deems necessary on significant troubled loans
and other real estate owned. Other real estate owned includes
real estate acquired in connection with foreclosures or by deed-
in-lieu of foreclosure (collectively, "OREO").
The Bank's loan portfolio is varied as to type, geographic
location, borrower concentration, and fixed or adjustable-rate
mortgages. At March 31, 1996 approximately $343.3 million of the
Bank's real estate loans were secured by properties located in
New York and, as such, a substantial portion of the Bank's
borrowers' ability to honor their contracts and increases or
decreases in market value of the real estate collateralizing such
loans may be significantly affected by the level of economic
activity in New York.
The Bank believes that the allowances for loan losses and
OREO losses are adequate. While the Bank uses available
information to recognize losses on loans and estimate the fair
value of OREO, future additions to the allowances for loan losses
and OREO may be necessary based on, among other things, changes
in economic conditions in the region. In addition, various
regulatory agencies, as an integral part of their examination
process, periodically review the Bank's allowance for loan losses
and the net carrying value of OREO. Such agencies may require
the Bank to recognize additions to the allowance or reductions in
net carrying values based on their judgments about information
available to them at the time of their examination.
The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions for Form
F-4. The financial statements should be read in conjunction with
the consolidated financial statements and the related notes
thereto included in the Bank's Annual Report to Stockholders for
the year ended September 30, 1995 and in the related Annual
Report on Form F-2 for the year ended September 30, 1995.
NOTE 2 - CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash
equivalents include cash and amounts due from banks including
Federal Home Loan Bank overnight deposits, the Federal Home Loan
Bank balance, and Federal funds sold. Generally, Federal funds
are sold for one-day periods.
NOTE 3 - ADOPTION OF NEW ACCOUNTING STANDARD
Effective October 1, 1995, the Bank adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan," and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures." These statements prescribe
recognition criteria for loan impairment, generally related to
commercial type loans, and measurement methods for certain
impaired loans and all loans whose terms are modified in troubled
debt restructurings subsequent to the adoption of these
statements. Loans are identified as impaired when it is probable
that all amounts of principal and interest due will not be
collected according to the original contractual terms of the loan
agreement. The adoption of these standards had no effect on the
financial statements.
As a result of the adoption of SFAS No. 114, the allowance
for possible loan losses related to impaired loans that are
identified for evaluation in accordance with SFAS No. 114 is
based on the present value of expected cash flows discounted at
the loans' initial effective interest rate, except that as a
practical expedient, impairment may be measured at the loans'
observable market price, or the fair value of the collateral for
certain loans where repayment of the loan is expected to be
provided solely by the underlying collateral. The Bank considers
estimated cost to sell when determining the fair value of
collateral in the measurement of impairment if those costs are
expected to reduce the cash flows available to repay or otherwise
satisfy the loans.
SFAS No. 114 also amends SFAS No. 15 "Accounting by Debtors
and Creditors for Troubled Debt Restructurings," by requiring
creditors to measure all loans that are restructured in a
troubled debt restructuring (subsequent to September 30, 1995) in
accordance with the criteria of SFAS No. 114. Loans which were
restructured prior to the adoption of SFAS No. 114 and are
performing in accordance with their restructured terms are not
considered impaired and continue to be accounted for under SFAS
No. 15.
Prior to the adoption of SFAS No. 114, OREO included both
formally foreclosed and in-substance foreclosed real properties,
which properties included those where the borrower had little or
no equity in the property considering its fair value; where
repayment was only expected to come from the operation or sale of
the property; and where the borrower had effectively abandoned
control of the property or it was doubtful that the borrower
would be able to rebuild equity in the property. SFAS No. 114
requires that a loan be classified as an in-substance foreclosure
only when the Bank has taken possession of the collateral
property regardless of whether formal foreclosure proceedings
have taken place. The Bank did not have any in-substance
foreclosed properties included in OREO at March 31, 1996 or
September 30, 1995.
SFAS No. 118 amended SFAS No. 114 and allows creditors to
continue to use existing accounting methods for recognizing
interest income on impaired loans and requires certain related
disclosures. Cash receipts on impaired loans are generally
recorded as principal repayments or interest income according to
the terms of the loan agreement.
At March 31, 1996, the recorded investment in loans that are
considered impaired under SFAS No. 114 totaled $2.7 million.
Included in this amount is $1.0 million of impaired loans for
which the related allowance for credit losses is $230,000. The
average recorded investment in impaired loans during the three
and six months ended March 31, 1996 was approximately $2.8
million and $2.7 million, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
North Side Savings Bank ("North Side" or the "Bank") is a New
York State chartered, stock savings bank which was chartered in
1905. North Side's deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") to the full extent permissible by
law and regulation. As of March 31, 1996, the Bank conducted
business from seventeen full-service banking offices in the
Bronx, Queens, Nassau and Suffolk Counties, New York. North Side
had total assets of $1.58 billion at March 31, 1996, and
shareholders' equity at such date of $122.3 million, which
constituted 7.74% of total assets.
At its meeting held April 15, 1996, the Board of Directors of
North Side declared a quarterly cash dividend of $.25 per share
payable on May 17, 1996 to shareholders of record on May 3, 1996.
North Side is subject to examination and comprehensive
regulation by the New York State Banking Department,
which is its primary regulator, and by the FDIC. The Bank is
subject to further regulation of the Federal Reserve Board
governing reserves required to be maintained against deposits and
certain other matters. At March 31, 1996, the Bank had 4,814,751
shares of common stock issued and outstanding. Its common stock
is traded over the counter and quotations for trades of the
Bank's common stock are included on the National Association of
Securities Dealers Automated Quotations ("NASDAQ") National
Market System under the symbol "NSBK."
FINANCIAL CONDITION
The Bank's total assets amounted to $1.58 billion at March
31, 1996 as compared to $1.59 billion at September 30, 1995.
During the first quarter of fiscal 1996, the Bank took advantage
of the one-time opportunity granted by the FASB to reassess the
appropriateness of its classification of all securities under
SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities". As a result, the Bank reclassified $134.0
million of mortgage-backed securities from held to maturity to
available for sale at an unrealized depreciation of $.1 million,
net of income taxes, at the time of transfer. During the six
months ended March 31, 1996, mortgage-backed securities, net
decreased by $43.1 million, investment securities, net decreased
$67.9 million, loans, net decreased by $21.6 million and bonds
and equities available for sale decreased $7.6 million. These
decreases were offset by increases in mortgage-backed securities
available for sale of $84.2 million and money market investments
of $51.6 million.
The $43.1 million decrease in mortgage-backed securities, net
was primarily due to the transfer described above of $134.0
million from the mortgage-backed securities portfolio to
available for sale along with $31.6 million of principal
repayments which was partially offset by $123.4 million of
purchases during the six months. Investment securities, net
decreased $67.9 million primarily due to $76.0 million of Federal
Home Loan Bank bonds being called during the six months and $7.9
million of principal repayments which were partially offset by
purchases of $16.0 million. Loans, net decreased $21.6 million
primarily due to $25.9 million of loan amortizations and
satisfactions, $.5 million of loans sold, $.1 million of loans
charged-off and $.1 million of loans transferred to OREO. These
decreases in loans, net were partially offset by $5.9 million of
loan originations. The decrease of $7.6 million in bonds and
equities available for sale was primarily due to $4.7 million of
securities sold at a $3.1 million profit along with a decrease of
$3.2 million in net unrealized appreciation on these securities
for the six months ended March 31, 1996. The $84.2 million
increase in mortgage-backed securities available for sale is due
to the transfer described above of $134.0 million from the
mortgage-backed securities portfolio and $72.9 million of
purchases. These increases were partially offset by $62.2
million of securities sold at a $.4 million profit, $58.4 million
of principal repayments and a $.7 million decrease in net
unrealized appreciation on these securities for the six months
ended March 31, 1996. The $51.6 million increase in money market
investments is due to management's decision to increase the
Bank's liquidity rather than invest during a period when, in
management's opinion rates of return on alternative investments
were at a relatively low point.
Total liabilities decreased to $1.46 billion at March 31,
1996 as compared to $1.47 billion at September 30, 1995. The
change in liabilities consisted of decreases of $37.0 million in
borrowings, $4.0 million in other liabilities and $.4 million in
mortgagors' escrow payments, which were partially offset by an
increase in deposits of $27.8 million. Shareholders' equity
increased $6.0 million primarily due to net income of $10.1
million, which was partially offset by $2.4 million of cash
dividends paid along with a decrease of $2.2 million in net
unrealized appreciation on securities available for sale, net of
income taxes, for the six months ended March 31, 1996.
RESULTS OF OPERATIONS
For the three months and six months ended March 31, 1996, the
Bank reported net income of $4.3 million or $.86 per share, and
$10.1 million, or $2.04 per share, respectively, compared to $3.7
million or $.77 per share, and $7.3 million, or $1.52 per share,
for the same respective periods in the prior year.
The $.6 million rise in earnings for the second quarter of
fiscal 1996 compared to the second quarter of fiscal 1995 was due
primarily to a $.7 million reduction in the provision for loan
losses along with lower other operating expenses of $.2 million
which were partially offset by an increase of $.4 million in the
provision for income taxes.
Net interest income before provision for possible loan losses
decreased $.1 million to $12.5 million for the second quarter of
fiscal 1996 compared to the second quarter of fiscal 1995. The
decrease was primarily the result of a narrowing of the Bank's
interest rate spread from 3.22% for the quarter ended March 31,
1995 to 2.99% for the quarter ended March 31, 1996. The Bank's
interest rate spread was 3.04% for the quarter ended December 31,
1995. The decrease for the second quarter of fiscal 1996 as
compared to the second quarter of fiscal 1995 was offset to some
extent by an increase in the ratio of average interest-earning
assets to average interest-bearing liabilities from 1.05% at
March 31, 1995 to 1.07% at March 31, 1996. The Bank's net
interest margin was 3.27% for the quarter ended March 31, 1996
compared to 3.50% for the same quarter in the prior year.
For the six month period ended March 31, 1996 compared to the
same period in the prior year, net income increased $2.8 million.
This increase was primarily comprised of a $1.2 million reduction
in the provision for loan losses, and a $3.3 million improvement
in gain on sales and redemptions of investments, which were
partially offset by an increase of $1.9 million in the provision
for income taxes.
INTEREST INCOME AND EXPENSE
Aggregate interest income on mortgage loans decreased from
$8.9 million for the three months ended March 31, 1995 to $8.2
million for the three months ended March 31, 1996. The decrease
was due to a $53.9 million decrease in the average balance of
mortgage loans during the second quarter of fiscal 1996 compared
to the same period in fiscal 1995, which was partially offset by
a 38 basis point increase in the average yield earned from 7.64%
during the three months ended March 31, 1995 to 8.02% for the
three months ended March 31, 1996. Interest income on mortgage
loans for the six months ended March 31, 1996 decreased $1.0
million from $17.7 million for the six months ended March 31,
1995 to $16.7 million for the six months ended March 31, 1996.
The decrease was attributable to a decrease in the average
balance of such loans of $54.6 million, which was partially
offset by an increase of 52 basis points in the yield from 7.52%
during the six months ended March 31, 1995 to 8.04% during the
six months ended March 31, 1996.
Interest income from mortgage-backed securities increased
$1.9 million to $16.5 million for the three month period ended
March 31, 1996 compared to the same period in fiscal 1995. The
increase was attributable to a $115.3 million increase in the
average balance of mortgage-backed securities for the three month
period ended March 31, 1996 compared to the three month period
ended March 31, 1995, which was partially offset by a 4 basis
point decrease in average yield earned during the fiscal 1996
period compared to the fiscal 1995 period. Interest income on
mortgage-backed securities for the six months ended March 31,
1996 increased $4.6 million to $33.2 million for the six months
ended March 31, 1996. The increase was primarily due to a $105.1
million increase in the average balance of such securities for
the six months ended March 31, 1996 compared to the six months
ended March 31, 1995 along with a 23 basis point increase in the
average interest rate earned from 6.65% for the six months ended
March 31, 1995 compared to 6.88% for the six months ended March
31, 1996.
Interest income on investment securities decreased $.9
million for the three month period ended March 31, 1996 compared
to the same period in fiscal 1995. The average balance of
investment securities decreased $63.6 million, which was
partially offset by an increase in the average yield earned of 76
basis points from 6.65% for the three months ended March 31, 1995
to 7.41% for the three months ended March 31, 1996. Interest
income on investment securities for the six months ended March
31, 1996 decreased $1.8 million to $2.7 million. The average
balance of such securities decreased $55.2 million for the six
months ended March 31, 1996 compared to the same period in fiscal
1995 and the average interest rate earned increased 12 basis
points to 6.86% for the six months ended March 31, 1996 from
6.74% for the same period in fiscal 1995.
Interest income on money market investments increased by $1.0
million for the three months ended March 31, 1996 compared to the
three months ended March 31, 1995. The increase was primarily
due to a $77.0 million increase in the average balance of money
market investments which was partially offset by a 31 basis point
decrease in yield to 5.28% during the second quarter of fiscal
1996 compared to 5.59% for the same period in fiscal 1995. For
the six months ended March 31, 1996 compared to the same period
in fiscal 1995, interest income on money market investments
increased $1.9 million due to an increase in average balance of
$68.6 million along with an increase in average yield earned on
such balances of 12 basis points to 5.44% for the six month
period in fiscal 1996 compared to 5.32% for the six month period
in fiscal 1995.
Interest expense on deposits and mortgage escrow accounts
increased $1.9 million to $11.5 million for the three month
period ended March 31, 1996 compared to the same period in fiscal
1995. This increase was due to an increase in the average cost
of deposits and mortgage escrow accounts of 40 basis points to
3.75% during the second quarter of fiscal 1996 compared to 3.35%
for the second quarter of fiscal 1995, along with an increase of
$70.6 million in the average balance of deposits. Interest
expense on deposits and mortgage escrow accounts increased $4.4
million for the six months ended March 31, 1996 compared to
fiscal 1995, primarily due to an increase of 57 basis points in
the average rates paid on such deposits to 3.77% for the six
month period ended March 31, 1996 along with a $52.1 million
increase in the average balance of such deposits. The increase
in the average balances was primarily due to the purchase of two
branch locations during the fourth quarter of fiscal 1995.
Interest expense on borrowings decreased $.5 million during
the second quarter of fiscal 1996 as compared to the second
quarter of fiscal 1995 due to a decrease of $25.4 million in the
average balance during the fiscal 1996 period compared to the
same period in fiscal 1995, along with a 36 basis point decrease
in the average cost of borrowings from 6.33% for the three months
ended March 31, 1995 to 5.97% for the three months ended March
31, 1996. Interest expense on borrowings decreased $.3 million
for the six months ended March 31, 1996 as compared to the same
period in fiscal 1995 due to a decrease of $15.5 million in the
average balance of borrowings which was partially offset by a 12
basis point increase in the average cost of borrowings to 6.06%
during the fiscal 1996 period.
PROVISION FOR LOAN LOSSES
The provision for loan losses is based on management's
periodic evaluation of the adequacy of the allowance for loan
losses, which is based on a review of the loan portfolio. Such
reviews are performed by a loan review committee of the Bank on a
quarterly basis. The committee considers, among other things,
the borrower's ability to repay, the estimated value of
collateral, general economic conditions, conditions in the real
estate market in the Bank's lending areas, past loss experience
and the level of non-performing loans.
As a result of management's evaluation of the adequacy of the
allowance for loan losses, which considered, among other things,
the significant decrease in the ratio of non-performing loans to
total loans at March 31, 1996 compared to March 31, 1995 and the
continued high credit quality of the Bank's loan portfolio, the
Bank deemed it appropriate to reduce the level of provisions for
loan losses to $500,000 in the first six months of fiscal 1996 as
compared to $1.7 million in the first six months of fiscal 1995.
The Bank's level of non-performing loans decreased to $5.7
million at March 31, 1996 compared to $12.9 million at March 31,
1995. Non-performing loans were $4.9 million at September 30,
1995. The increase in non-performing loans at March 31, 1996
compared to September 30, 1995 was mainly attributable to $.5
million of additional one-to four-family non-performing loans and
$.3 million of new non-performing commercial loans. Total non-
performing loans amounted to .36%, .31% and .86% of total assets
at March 31, 1996, September 30, 1995 and March 31, 1995,
respectively.
At March 31, 1996, the allowance for loan losses was $6.9
million, compared to $6.4 million at September 30, 1995 and $11.8
million at March 31, 1995. The allowance for loan losses as a
percentage of non-performing loans was 121.8% at March 31, 1996
compared to 130.8% at September 30, 1995 and 91.9% at March 31,
1995. Charge-offs net of recoveries for the six months ended
March 31, 1996 were $.1 million compared to $1.1 million for the
six months ended March 31, 1995.
In addition, total non-performing assets decreased from $19.6
million, or 1.3% of total assets, at March 31, 1995 to $8.1
million, or .51% of total assets, at March 31, 1996. Non-
performing assets were $7.4 million, or .47% of total assets, at
September 30, 1995.
OTHER OPERATING INCOME
For the three months ended March 31, 1996 the Bank reported
other operating income of $898,000 compared to $693,000 for the
comparable period in fiscal 1995. The increase in other
operating income was primarily due to profits of $407,000 on
sales of mortgage-backed securities available for sale as
compared to a profit of $169,000 on the redemption of an
investment security during the second quarter of fiscal 1995.
For the six months ended March 31, 1996, other operating
income totalled $4.5 million, compared to $1.1 million for the
comparable period in fiscal 1995. This was primarily due to the
$3.3 million increase in gains on sales and redemptions of
securities available for sale during the six months ended March
31, 1996.
OTHER OPERATING EXPENSES
The Bank's total other operating expenses decreased $.2
million to $5.8 million for the three months ended March 31, 1996
compared to the three months ended March 31, 1995. This decrease
was primarily the result of a $.7 million decrease in deposit
insurance premiums, which was partially offset by a $.1 million
increase in OREO expense, net and a $.2 million increase in other
operating expenses - other, which increase was primarily the
result of higher advertising costs. Effective January 1, 1996,
the Bank's deposit insurance premiums were reduced to $2,000 per
year. The Bank continues its effort to maintain strong control
over other operating expenses as evidenced by the Bank's
efficiency ratio (which is operating expense before net OREO
expense as a percentage of net interest income, customer service
fees and other income, excluding gains and losses) of 43.6% for
the quarter ended March 31, 1996.
Total other operating expenses decreased $.7 million for the
six month period ended March 31, 1996 over the comparable period
in fiscal 1995. This decrease was primarily the result of a $1.3
million decrease in deposit insurance premiums which was
partially offset by a $.6 million increase in other operating
expenses - other, which increase was primarily the result of
higher advertising costs.
PROVISION FOR INCOME TAXES
Provisions for income taxes of $3.1 million and $2.8 million
were made for the three month periods ended March 31, 1996 and
1995, respectively. The increase was due to the $1.0 million
increase in income before provision for income taxes for the
quarter ended March 31, 1996 compared to the quarter ended March
31, 1995.
Provisions for income taxes of $7.4 million and $5.6 million
were made for the six month periods ended March 31, 1996 and
1995, respectively. The increase was due to the increase of $4.7
million in income before provision for income taxes for the six
months ended March 31, 1996 compared to the six months ended
March 31, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity of North Side's operations, measured by the
ratio of daily average balances for the quarter of cash and cash
equivalents (not committed, pledged, or required to liquidate
specific liabilities) to the sum of net withdrawable deposits and
borrowings payable within one year, averaged 6.85% for the twelve
months ended March 31, 1996 compared to 2.36% for the twelve
months ended March 31, 1995.
North Side's primary sources of funds have consisted of
deposits, amortization and prepayments of outstanding loans and
mortgage-backed securities and bond maturities. At March 31,
1996, total approved loan commitments amounted to $15.4 million.
The amount of time deposits which are scheduled to mature during
the twelve months ending March 31, 1997 is $352.4 million. Based
on past experience, management expects that a substantial portion
of these maturing deposits will be redeposited at North Side.
At March 31, 1996, shareholders' equity equaled $122.3
million or 7.74% of total assets, compared to $116.3 million or
7.32% of total assets at September 30, 1995.
The FDIC has issued regulations that require insured banks,
such as North Side, to maintain minimum levels of capital. The
FDIC's leverage ratio requirements require core capital equal to
3% for the most highly rated banks. Other banks are required to
maintain ratios 100 to 200 basis points higher based on their
particular circumstances. At March 31, 1996, the Bank's leverage
ratio was 7.69%.
The Bank also is required to maintain minimum capital levels
based upon a weighting of its assets according to risk. The Bank
was required to maintain a ratio of qualifying total capital to
risk-weighted assets and off-balance sheet items of a minimum of
8%. At least one-half of that amount must be Tier I or Core
Capital and up to one-half of total capital can consist of Tier
II or supplementary capital. On March 31, 1996, the Bank's Tier
I capital to risk-weighted assets ratio and total capital to
risk-weighted assets ratio, calculated under the FDIC risk-based
capital requirement, were 17.54% and 18.53%, respectively.
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934,
the Bank has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NORTH SIDE SAVINGS BANK
Date: May 10, 1996 /s/ Thomas M. O'Brien
_______________________________
Thomas M. O'Brien
President and
Chief Executive Officer
Date: May 10, 1996 /s/ Donald C. Fleming
_______________________________
Donald C. Fleming
Executive Vice President and
Chief Financial Officer
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
Form F-4
QUARTERLY REPORT
UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR
THE QUARTER ENDED JUNE 30, 1996
FDIC Insurance Certificate No. 16007
North Side Savings Bank
(Exact name of bank as specified in its charter)
New York
(State or other jurisdiction of incorporation or organization)
13-1723204
(IRS Employer Identification No.)
170 Tulip Avenue, Floral Park, New York
(Address of principal executive offices)
11001
(Zip code)
(516) 488-6900
(Bank's telephone number, including area code)
Indicate by check mark whether the bank (1) has filed all reports
required to be filed by Section 13 of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter
period that the bank 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 bank's
classes of common stock, as of the latest practicable date:
Securities registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934: Common Stock, par value
$1.00 per share.
Number of shares outstanding at August 1, 1996: 4,833,997
NORTH SIDE SAVINGS BANK
INDEX
Item 1. Financial Statements
Page No.
Consolidated Statements of Condition,
June 30, 1996 and September 30, 1995 1
Consolidated Statements of Income,
Three and Nine Months Ended
June 30, 1996 and 1995 2
Consolidated Statements of Changes in
Shareholders' Equity, Nine Months Ended
June 30, 1996 and 1995 3
Consolidated Statements of Cash Flows,
Nine Months Ended June 30, 1996 and 1995 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF CONDITION
(Dollars in thousands)
June 30, September 30,
1996 1995
(Unaudited)
ASSETS:
Cash and due from banks $ 12,530 $ 11,530
Money market investments 3,648 29,456
Loans held for sale 1,530 _
Securities available for sale:
Bonds and Equities 5,102 26,520
Mortgage-backed securities 348,639 300,022
Total securities available for sale 353,741 326,542
Investment securities, net (esti-
mated market value of $24,937
and $92,460, respectively) 24,754 93,301
Federal Home Loan Bank of NY stock,
at cost 9,685 9,430
Mortgage-backed securities, net
(estimated market value of $640,223
and $642,864, respectively) 653,458 651,153
Loans 561,269 432,180
Less allowance for loan losses 5,604 6,417
Loans, net 555,665 425,763
Accrued interest receivable 12,047 13,230
Premises and equipment, net 14,859 15,215
Other real estate owned, net of
allowance of $.6 million
and $1.1 million, respectively 2,320 2,515
Other assets 10,387 9,868
Total assets $ 1,654,624 $ 1,588,003
LIABILITIES AND SHAREHOLDERS' EQUITY:
Liabilities:
Deposits $ 1,225,179 $ 1,199,077
Mortgagors' escrow payments 3,032 4,607
Borrowed funds 286,000 251,000
Other liabilities 16,882 17,035
Total Liabilities 1,531,093 1,471,719
Shareholders' Equity:
Preferred stock, par value $1.00 per
share, 5,000,000 shares authorized,
none outstanding -- --
Common stock, par value $1.00 per
share, 10,000,000 shares authorized,
4,833,997 and 4,798,022 shares
issued and outstanding at June 30,
1996 and September 30, 1995,
respectively 4,834 4,798
Paid-in capital 63,567 62,985
Surplus fund 24,101 24,101
Undivided profits 33,824 22,606
Net unrealized (depreciation) appre-
ciation on securities available
for sale, net of income taxes (2,329) 2,360
Unearned portion of incentive
compensation (466) (566)
Total shareholders' equity 123,531 116,284
Total liabilities and share-
holders' equity $ 1,654,624 $ 1,588,003
See accompanying notes to consolidated financial statements.
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
1996 1995 1996 1995
Interest Income:
Mortgage loans $ 8,631 $ 9,007 $ 25,347 $ 26,698
Mortgage-backed securities 16,493 14,551 49,671 43,125
Investment securities 1,450 2,503 4,196 7,068
Money market investment 686 132 2,628 206
Other loans 166 160 444 467
Total interest income 27,426 26,353 82,286 77,564
Interest Expense:
Deposits and mortgage
escrow accounts 11,303 10,501 34,426 29,183
Borrowings 3,437 3,401 10,136 10,396
Total interest expense 14,740 13,902 44,562 39,579
Net interest income 12,686 12,451 37,724 37,985
Provision for loan losses 200 750 700 2,450
Net interest income
after provision for
loan losses 12,486 11,701 37,024 35,535
Other Operating Income:
Net gain (loss) on sale
of other real estate
owned 564 46 554 (109)
Net gain on sales and
redemptions of securities 103 142 3,596 311
Customer service fees 497 496 1,427 1,497
Other 37 325 83 430
Total other operating
income 1,201 1,009 5,660 2,129
Other Operating Expense:
Compensation and benefits 2,714 2,693 8,214 8,138
Occupancy and equipment 892 852 2,673 2,528
BIF deposit insurance
premiums - 672 116 2,134
OREO expense, net 187 101 386 324
Other 1,789 1,654 5,634 4,942
Total other operating
expense 5,582 5,972 17,023 18,066
Income before provision for
income taxes 8,105 6,738 25,661 19,598
Provision for income taxes 3,407 2,900 10,831 8,474
Net income $ 4,698 $ 3,838 $ 14,830 $ 11,124
Net income per share (a) $ .94 $ .80 $ 2.98 $ 2.32
(a) Based on the weighted average number of shares of common stock
and dilutive common stock equivalents outstanding of 5,000,200 and
4,981,781 for the three and nine month periods ended June 30, 1996
and the weighted average number of shares of common stock outstanding
of 4,791,886 and 4,780,628 for the three and nine month periods ended
June 30, 1995, respectively.
See accompanying notes to consolidated financial statements.
<TABLE>
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
(Dollars in thousands)
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unrealized Unallocated
Unrealized Apprecia- Shares in
Depreciation tion (Depre- Management
On Certain tion) on Develop- Unearned
Marketable Securities ment & Re- Portion of
Common Paid-In Surplus Undivided Equity Available cognition Incentive
Stock Capital Fund Profits Securities For Sale Plan Compensation Total
- ------------------------------------------------------------------------------------------------------------------------------------
Fiscal 1995
Balance at September 30, $ 4,541 $57,281 $24,101 $15,952 $ (436) $ - $ (416) $ (25) $100,998
1994
Net Income - - - 11,124 - - - - 11,124
Prorated portion of Manage-
ment Development and Recog-
nition Plan awards earned
by grantees - - - - - - - 91 91
Awarded 36,506 common shares
from Management Development
and Recognition Plan at
$18.25 per share, market
value on date of grant - 250 - - - - 416 (666) -
Payment of 401(k) contribu-
tion 16 286 - - - - - - 302
Distribution of 5% stock
dividend 227 4,440 - (4,667) - - - - -
Payment of $.475 per share
cash dividend - - - (2,250) - - - - (2,250)
Dividend Reinvestment 2 27 - - - - - - 29
Exercise of stock options for
7,337 shares of Common Stock 7 80 - - - - - - 87
Decrease in unrealized depre-
ciation on certain market-
able equity securities - - - - 436 - - - 436
Unrealized appreciation on
securities available for
sale, net of taxes - - - - - 1,407 - - 1,407
------- ------- --------- -------- ------- -------- -------- -------- --------
Balance at June 30, 1995 $ 4,793 $62,364 $24,101 $ 20,159 $ - $ 1,407 $ - $ (600) $ 112,224
======= ======= ======== ======== ======= ======== ======== ======== =========
Fiscal 1996
Balance at September 30,
1995 $ 4,798 $62,985 $24,101 $ 22,606 $ - $ 2,360 $ - $ (566) $ 116,284
Net Income - - - 14,830 - - - - 14,830
Payment of $.75 per share
cash dividend - - - (3,612) - - - - (3,612)
Dividend Reinvestment 1 38 - - - - - - 39
Prorated portion of Manage-
ment Development and
Recognition Plan awards
earned by grantees - - - - - - - 100 100
Payment of 401(k) contri-
bution 11 298 - - - - - - 309
Exercise of stock options for
24,043 shares of Common
Stock 24 246 - - - - - - 270
Decrease on unrealized appre-
ciation on securities
available for sale, net
of taxes - - - - - (4,689) - - (4,689)
_______ _______ _______ ________ ________ _________ ________ ________ __________
Balance at June 30, 1996 $ 4,834 $63,567 $24,101 $ 33,824 $ - $ (2,329) $ - $ (466) $ 123,531
======= ======= ======= ======== ======== ========= ======== ======== =========
See accompanying notes to consolidated financial statements.
</TABLE>
NORTH SIDE SAVINGS BANK
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
______________________________________________________________________________
NINE MONTHS ENDED JUNE 30, 1996 1995
______________________________________________________________________________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,830 $ 11,124
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 1,094 985
Provision for possible loan and
real estate losses 819 2,670
Amortization of premium, accretion
of (discount), net 3,420 3,707
Net gain on sales of securities (3,596) (311)
Net (gain) loss on sale of OREO (554) 109
401(k) contribution 309 222
Decrease in accrued interest receivable 1,183 (481)
Decrease in other assets 3,300 3,982
Decrease in other liabilities (153) (1,975)
Other, net 480 7
_______________________________________________________________________________
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,132 20,039
- -------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities and redemp-
tions of investment securities 76,003 2,070
Proceeds from principal repayments of
investment securities 8,903 3,867
Purchase of securities available for sale (213,386) (159,597)
Purchase of investment securities (16,377) (10,273)
Proceeds from principal repayments,
maturities and redemptions
of securities available for sale 138,925 37,404
Proceeds from principal repayment of
mortgage-backed securities 50,772 53,869
Proceeds from sales of securities
available for sale 174,724 --
Purchase of mortgage-backed securities (188,291) (48,320)
Purchase of FHLBNY Stock (255) (9,430)
Proceeds from loan repayments and
satisfactions 43,225 37,507
Proceeds from loans sold 734 3,697
Loan purchases and originations (177,234) (5,339)
Proceeds from sales of OREO 830 2,405
Capital expenditures (737) (613)
______________________________________________________________________________
NET CASH USED IN INVESTING ACTIVITIES (102,164) (92,753)
______________________________________________________________________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposit
accounts, net 26,102 (30,169)
Receipt of borrowed funds 218,000 966,500
Repayment of borrowed funds (183,000) (854,375)
Disbursement of mortgage escrow (net) (1,575) (899)
Proceeds from exercise of stock options 270 87
Cash dividend paid on common stock,
net of dividend reinvestment (3,573) (2,221)
______________________________________________________________________________
NET CASH PROVIDED BY FINANCING ACTIVITIES 56,224 78,923
______________________________________________________________________________
Net (decrease) increase in Cash and
Cash Equivalents (24,808) 6,209
Cash and Cash Equivalents at
Beginning of Period 40,686 13,333
______________________________________________________________________________
Cash and Cash Equivalents at End
of Period $ 15,878 $ 19,542
==============================================================================
SUPPLEMENTAL INFORMATION:
Cash paid during period for:
Interest $ 45,521 $ 40,009
Income taxes 7,796 4,537
Additions to OREO 206 447
==============================================================================
See accompanying notes to consolidated financial statements
NORTH SIDE SAVINGS BANK
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting of only normal recurring accruals) necessary for a
fair presentation of the Bank's financial condition as of June
30, 1996 and the results of operations, changes in shareholders'
equity and cash flows for the periods presented. In preparing
the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of
assets and liabilities as of the date of the statement of
condition and revenues and expenses for the period.
Material estimates that are particularly susceptible to
significant change in the near-term relate to the determination
of the allowance for loan losses and the valuation of real estate
acquired in connection with foreclosures or in satisfaction of
loans. It is the general policy of the Bank to obtain independent
appraisals for significant loans every three years. However, as a
matter of general practice, management obtains more frequent
appraisals as it deems necessary on significant troubled loans
and other real estate owned. Other real estate owned includes
real estate acquired in connection with foreclosures or by deed-
in-lieu of foreclosure (collectively, "OREO").
The Bank's loan portfolio is varied as to type, geographic
location, borrower concentration, and fixed or adjustable-rate
mortgages. At June 30, 1996 approximately $422.1 million of the
Bank's real estate loans were secured by properties located in
New York and, as such, a substantial portion of the Bank's
borrowers' ability to honor their contracts and increases or
decreases in market value of the real estate collateralizing such
loans may be significantly affected by the level of economic
activity in New York.
The Bank believes that the allowances for loan losses and
OREO losses are adequate. While the Bank uses available
information to recognize losses on loans and estimate the fair
value of OREO, future additions to the allowances for loan losses
and OREO may be necessary based on, among other things, changes
in economic conditions in the region. In addition, various
regulatory agencies, as an integral part of their examination
process, periodically review the Bank's allowance for loan losses
and the net carrying value of OREO. Such agencies may require
the Bank to recognize additions to the allowance or reductions in
net carrying values based on their judgments about information
available to them at the time of their examination.
The accompanying unaudited consolidated financial statements
have been prepared in accordance with the instructions for Form
F-4. The financial statements should be read in conjunction with
the consolidated financial statements and the related notes
thereto included in the Bank's Annual Report to Stockholders for
the year ended September 30, 1995 and in the related Annual
Report on Form F-2 for the year ended September 30, 1995.
NOTE 2 - CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash
equivalents include cash and amounts due from banks including
Federal Home Loan Bank overnight deposits, the Federal Home Loan
Bank balance, and Federal funds sold. Generally, Federal funds
are sold for one-day periods.
NOTE 3 - ADOPTION OF NEW ACCOUNTING STANDARD
Effective October 1, 1995, the Bank adopted the provisions of
Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan," and SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures." These statements prescribe
recognition criteria for loan impairment, generally related to
commercial type loans, and measurement methods for certain
impaired loans and all loans whose terms are modified in troubled
debt restructurings subsequent to the adoption of these
statements. Loans are identified as impaired when it is probable
that all amounts of principal and interest due will not be
collected according to the original contractual terms of the loan
agreement. The adoption of these standards had no effect on the
financial statements.
As a result of the adoption of SFAS No. 114, the allowance
for possible loan losses related to impaired loans that are
identified for evaluation in accordance with SFAS No. 114 is
based on the present value of expected cash flows discounted at
the loans' initial effective interest rate, except that as a
practical expedient, impairment may be measured at the loans'
observable market price, or the fair value of the collateral for
certain loans where repayment of the loan is expected to be
provided solely by the underlying collateral. The Bank considers
estimated cost to sell when determining the fair value of
collateral in the measurement of impairment if those costs are
expected to reduce the cash flows available to repay or otherwise
satisfy the loans.
SFAS No. 114 also amends SFAS No. 15 "Accounting by Debtors
and Creditors for Troubled Debt Restructurings," by requiring
creditors to measure all loans that are restructured in a
troubled debt restructuring (subsequent to September 30, 1995) in
accordance with the criteria of SFAS No. 114. Loans which were
restructured prior to the adoption of SFAS No. 114 and are
performing in accordance with their restructured terms are not
considered impaired and continue to be accounted for under SFAS
No. 15.
Prior to the adoption of SFAS No. 114, OREO included both
formally foreclosed and in-substance foreclosed real properties,
which properties included those where the borrower had little or
no equity in the property considering its fair value; where
repayment was only expected to come from the operation or sale of
the property; and where the borrower had effectively abandoned
control of the property or it was doubtful that the borrower
would be able to rebuild equity in the property. SFAS No. 114
requires that a loan be classified as an in-substance foreclosure
only when the Bank has taken possession of the collateral
property regardless of whether formal foreclosure proceedings
have taken place. The Bank did not have any in-substance
foreclosed properties included in OREO at June 30, 1996 or
September 30, 1995.
SFAS No. 118 amended SFAS No. 114 and allows creditors to
continue to use existing accounting methods for recognizing
interest income on impaired loans and requires certain related
disclosures. Cash receipts on impaired loans are generally
recorded as principal repayments or interest income according to
the terms of the loan agreement.
At June 30, 1996, the recorded investment in loans that are
considered impaired under SFAS No. 114 totaled $.6 million. None
of these impaired loans require a related allowance for loan
losses. The average recorded investment in impaired loans during
the three and nine months ended June 30, 1996 was approximately
$1.6 million and $2.2 million, respectively.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
North Side Savings Bank ("North Side" or the "Bank") is a New
York State chartered, stock savings bank which was chartered in
1905. North Side's deposits are insured by the Federal Deposit
Insurance Corporation ("FDIC") to the full extent permissible by
law and regulation. As of June 30, 1996, the Bank conducted
business from seventeen full-service banking offices in the
Bronx, Queens, Nassau and Suffolk Counties, New York. North Side
had total assets of $1.65 billion at June 30, 1996, and
shareholders' equity at such date of $123.5 million, which
constituted 7.47% of total assets.
The Bank entered into an Agreement and Plan of Merger dated
as of July 15, 1996 (the "Merger Agreement"), with North Fork
Bancorporation, Inc., a Delaware corporation ("North Fork"),
pursuant to which North Side will be merged with and into a
wholly-owned subsidiary of North Fork (the "Merger").
Pursuant to the Merger Agreement, each share of the common
stock, par value $1.00 per share ("North Side Common Stock"), of
North Side outstanding on the date of the Merger, with certain
exceptions, will be converted into the right to receive 1.556
shares (the "Exchange Ratio") of common stock, par value $2.50
per share, of North Fork ("North Fork Common Stock"). If the
"Average Closing Price" (as defined below) is less than $24.00,
North Side may, at its option, terminate the Merger Agreement
unless North Fork agrees to increase the Exchange Ratio such that
the shares of North Fork Common Stock issued in exchange for each
share of North Side Common Stock have a value (valued at the
Average Closing Price) of at least $37.34. The Average Closing
Price is defined as the average closing sales price of North Fork
Common Stock on the New York Stock Exchange for the 10
consecutive trading days ending on the 5th business day prior to
the date on which approval of the Merger by the Board of
Governors of the Federal Reserve Board is obtained, without
regard to any requisite waiting period in respect thereof.
Consummation of the Merger is subject to certain conditions,
including, but not limited to, approval of the Merger Agreement
by the stockholders of North Side, approval by the stockholders
of North Fork of the issuance of shares of North Fork Common
Stock to the stockholders of North Side pursuant to the Merger
Agreement and the receipt of all required regulatory approvals,
and is expected to close in January 1997.
As a condition to the execution and delivery of the Merger
Agreement, North Fork and North Side entered into a stock option
agreement, dated as of July 15, 1996, pursuant to which North
Side granted North Fork an option to purchase up to 961,965
shares of North Side Common Stock at a purchase price of $34.75
per share, subject to adjustment. The option will become
exercisable upon the occurrence of certain events described
therein, none of which has occurred as of the date hereof.
At its meeting held July 16, 1996, the Board of Directors of
North Side declared a quarterly cash dividend of $.25 per share
payable on August 15, 1996 to shareholders of record on July 25,
1996.
North Side is subject to examination and comprehensive
regulation by the New York State Banking Department,
which is its primary regulator, and by the FDIC. The Bank is
subject to further regulation of the Federal Reserve Board
governing reserves required to be maintained against deposits and
certain other matters. The Bank's common stock is traded over
the counter and quotations for trades of the Bank's common stock
are included on the National Association of Securities Dealers
Automated Quotations ("NASDAQ") National Market System under the
symbol "NSBK."
FINANCIAL CONDITION
The Bank's total assets amounted to $1.65 billion at June 30,
1996 as compared to $1.59 billion at September 30, 1995. This
change of $66.6 million is comprised primarily of increases in
mortgage-backed securities available for sale of $48.6 million,
and loans, net of $129.9 million, partially offset by decreases
in money market investments of $25.8 million, bonds and equities
available for sale of $21.4 million and investment securities,
net of $68.5 million.
During the first quarter of fiscal 1996, the Bank took
advantage of the one-time opportunity granted by the FASB to
reassess the appropriateness of its classification of all
securities under SFAS No.115, "Accounting for Certain Investments
in Debt and Equity Securities." As a result, the Bank
reclassified $134.0 million of mortgage-backed securities from
held to maturity to available for sale at an unrealized
depreciation of $.1 million, net of income taxes, at the time of
transfer. The increase of $48.6 million in mortgage backed
securities available for sale is due to the transfer described
above of $134.0 million and subsequent purchases of $143.2
million. These additions were partially offset by $138.0 million
of securities sold at a profit of $.7 million, $82.7 million of
principal repayments and a $5.6 million decrease in net
unrealized appreciation on these securities for the nine months
ended June 30, 1996. The increase in loans, net of $129.9
million was primarily due to the purchases of $147.2 million of
residential mortgage loans located predominantly in the Bank's
market area and $14.3 million of multi-family mortgage loans, all
of which are located in the Bank's market area. In addition, the
Bank also originated $15.7 million of loans during the nine
months ended June 30, 1996. These increases in the loan
portfolio were partially offset by $43.2 million of loan
amortizations and satisfactions. The decrease of $21.4 million
in bonds and equities available for sale was due predominantly to
the sale of $89.1 million of securities at a net realized gain of
$2.9 million during the nine months ended June 30, 1996. These
sales were offset somewhat by purchases of $70.2 million in this
portfolio during the same time period. Investment securities,
net decreased $68.5 million primarily due to $76.0 million of
Federal Home Loan Bank bonds being called during the Bank's first
fiscal quarter and $8.9 million of principal repayments that were
partially offset by purchases of $16.4 million. The $25.8
million decrease in money market investments was due to
management's decision to redirect funds to higher yielding funds
as part of the Bank's general investment strategy.
Total liabilities increased $59.4 million to $1.53 billion at
June 30, 1996. This change was driven predominantly by an
increase of $26.1 million in deposits and a $35.0 million
increase in borrowings. The increase in borrowings occurred in
the latter part of the current fiscal quarter and is consistent
with the Bank's overall asset/liability management strategy to
leverage its capital base at favorable re-investment spreads when
considered appropriate to do so by Bank management. Shareholders'
equity increased $7.2 million for the nine months ended June 30,
1996, primarily because of the $14.8 million in net income for
the period, which was partially offset by a decrease of $4.7
million in net unrealized appreciation on securities available
for sale, net of income taxes and $3.6 million of cash dividends
paid.
RESULTS OF OPERATIONS
For the three and nine months ended June 30, 1996, the Bank
reported net income of $4.7 million or $.94 per share, and $14.8
million, or $2.98 per share, respectively, compared to $3.8
million or $.80 per share, and $11.1 million, or $2.32 per share,
for the same respective periods in the prior year.
The $.9 million increase in earnings for the third quarter of
fiscal 1996 compared to the third quarter of fiscal 1995 was due
primarily to a $.6 million reduction in the provision for loan
losses, a $.5 million improvement in net gain on sales of OREO
and lower operating expenses of $.4 million. These improvements
were partially offset by an increase of $.5 million in the
provision for income taxes.
Net interest income before the provision for possible loan
losses increased $.2 million to $12.7 million for the third
quarter of fiscal 1996 compared to the third fiscal quarter of
1995. This increase was primarily due to an increase in the
ratio of average interest-earning assets to average interest-
bearing liabilities from 1.05% at June 30, 1995 to 1.07% at June
30, 1996. Offsetting this increase in this ratio to some extent
was a decrease in the Bank's interest rate spread from 3.18% for
the quarter ended June 30, 1995 to 2.98% for the quarter ended
June 30, 1996. The Bank's interest rate spread for the quarter
ended March 31, 1996 was 2.99%. The Bank's net interest margin
for the quarter ended June 30, 1996 was 3.26% compared to 3.41%
for the same quarter of the prior year.
Net income increased $3.7 million for the nine months ended
June 30, 1996 compared to the nine months ended June 30, 1995.
This increase was caused primarily by a $1.8 million lower
provision for loan losses, a $.7 million decrease in net loss on
sales of OREO, a $3.3 million increase in net gains on sales and
redemption of securities and a $1.0 million decrease in operating
expenses. These were partially offset by an increase of $2.4
million in the provision for income taxes.
INTEREST INCOME AND EXPENSE
Aggregate interest income on mortgage loans decreased from
$9.0 million for the three months ended June 30, 1995 to $8.6
million for the three months ended June 30, 1996. The decrease
was due to a $19.0 million decrease in the average balance of
mortgage loans during the third quarter of fiscal 1996 compared
to the same period in fiscal 1995, which was partially offset by
a slight 2 basis point increase in the average yield earned from
7.96% during the three months ended June 30, 1995 to 7.98% for
the three months ended June 30, 1996. Interest income on
mortgage loans for the nine months ended June 30, 1996 decreased
$1.4 million from $26.7 million for the nine months ended June
30, 1995 to $25.3 million for the nine months ended June 30,
1996. The decrease was attributable to a decrease in the average
balance of such loans of $42.7 million, which was partially
offset by an increase of 35 basis points in the yield from 7.66%
during the nine months ended June 30, 1995 to 8.01% during the
nine months ended June 30, 1996.
Interest income from mortgage-backed securities increased
$1.9 million to $16.5 million for the three month period ended
June 30, 1996 compared to the same period in fiscal 1995. The
increase was attributable to a $115.1 million increase in the
average balance of mortgage-backed securities for the three month
period ended June 30, 1996 compared to the three month period
ended June 30, 1995, which was partially offset by a 1 basis
point decrease in average yield earned during the fiscal 1996
period compared to the fiscal 1995 period. Interest income on
mortgage-backed securities for the nine months ended June 30,
1996 increased $6.5 million to $49.7 million for the nine months
ended June 30, 1996. The increase was primarily due to a $108.4
million increase in the average balance of such securities for
the nine months ended June 30, 1996 compared to the nine months
ended June 30, 1995 along with a 15 basis point increase in the
average interest rate earned from 6.72% for the nine months ended
June 30, 1995 compared to 6.87% for the nine months ended June
30, 1996.
Interest income on investment securities decreased $1.1
million for the three month period ended June 30, 1996 compared
to the same period in fiscal 1995. The average balance of
investment securities decrease $42.8 million and the average
yield earned decreased 123 basis points from 6.86% for the three
months ended June 30, 1995 to 5.63% for the three months ended
June 30, 1996. Interest income on investment securities for the
nine months ended June 30, 1996 decreased $2.9 million to $4.2
million. The average balance of such securities decreased $51.2
million for the nine months ended June 30, 1996 compared to the
same period in fiscal 1995 and the average interest rate earned
decreased 40 basis points to 6.38% for the nine months ended June
30, 1996 from 6.78% for the same period in fiscal 1995.
Interest income on money market investments increased by $.6
million for the three months ended June 30, 1996 compared to the
three months ended June 30, 1995. The increase was primarily due
to a $44.6 million increase in the average balance of money
market investments which was partially offset by a 139 basis
point decrease in yield to 5.22% during the third quarter of
fiscal 1996 compared to 6.61% for the same period in fiscal 1995.
For the nine months ended June 30, 1996 compared to the same
period in fiscal 1995, interest income on money market
investments increased $2.4 million due to an increase in average
balance of $60.6 million which was partially offset by a decrease
in average yield earned on such balances of 70 basis points to
5.38% for the nine month period in fiscal 1996 compared to 6.08%
for the nine month period in fiscal 1995.
Interest expense on deposits and mortgage escrow accounts
increased $.8 million to $11.3 million for the three month period
ended June 30, 1996 compared to the same period in fiscal 1995.
This increase was due to an increase in the average cost of
deposits and mortgage escrow accounts of 7 basis points to 3.68%
during the third quarter of fiscal 1996 compared to 3.61% for the
third quarter of fiscal 1995, along with an increase of $66.4
million in the average balance of deposits. Interest expense on
deposits and mortgage escrow accounts increased $5.2 million for
the nine months ended June 30, 1996 compared to fiscal 1995,
primarily due to an increase of 40 basis points in the average
rates paid on such deposits to 3.74% for the nine month period
ended June 30, 1996 along with a $56.8 million increase in the
average balance of such deposits. The increase in the average
balances was primarily due to the purchase of two branch
locations during the fourth quarter of fiscal 1995.
Interest expense on borrowings remained constant at $3.4
million for the third quarters of both fiscal 1996 and fiscal
1995. An increase in the average balance of $9.7 million to
$228.5 million during the current fiscal quarter compared to the
same period a year ago was offset by a decrease in the average
cost of borrowings of 20 basis points during the same period.
The average cost of borrowings for the quarter ended June 30,
1996 was 5.95%. Interest expense on borrowings decreased $.3
million for the nine months ended June 30, 1996 as compared to
the same period in fiscal 1995 due to a decrease of $7.1 million
in the average balance of borrowings which was partially offset
by a 1 basis point increase in the average cost of borrowings to
6.05% during the fiscal 1996 period.
PROVISION FOR LOAN LOSSES
The provision for loan losses is based on management's
periodic evaluation of the adequacy of the allowance for loan
losses, which is based on a review of the loan portfolio. Such
reviews are performed by a loan review committee of the Bank on a
quarterly basis. The committee considers, among other things,
the borrower's ability to repay, the estimated value of
collateral, general economic conditions, conditions in the real
estate market in the Bank's lending areas, past loss experience
and the level of non-performing loans.
As a result of management's evaluation of the adequacy of the
allowance for loan losses, which considered, among other things,
the significant decrease in the ratio of non-performing loans to
total loans at June 30, 1996 compared to June 30, 1995 and the
continued high credit quality of the Bank's loan portfolio, the
Bank deemed it appropriate to reduce the level of provisions for
loan losses to $700,000 in the first nine months of fiscal 1996
as compared to $2.5 million in the first nine months of fiscal
1995.
The Bank's level of non-performing loans decreased to $3.1
million at June 30, 1996 compared to $5.2 million at June 30,
1995. Non-performing loans were $4.9 million at September 30,
1995. The decrease in non-performing loans at June 30, 1996
compared to September 30, 1995 was mainly attributable to the
repayment of a $1.5 million non-performing land loan which
resulted in a recovery of $.2 million to the allowance for loan
losses. Total non-performing loans amounted to .18%, .31% and
.32% of total assets at June 30, 1996, September 30, 1995 and
June 30, 1995, respectively.
At June 30, 1996, the allowance for loan losses was $5.6
million, compared to $6.4 million at September 30, 1995 and $6.0
million at June 30, 1995. The allowance for loan losses as a
percentage of non-performing loans was 183.5% at June 30, 1996
compared to 130.8% at September 30, 1995 and 114.8% at June 30,
1995. Charge-offs net of recoveries for the nine months ended
June 30, 1996 were $1.5 million compared to $7.6 million for the
nine months ended June 30, 1995. During the quarter ended June
30, 1996, the Bank took charge-offs of $1.6 million in connection
with the transfer of certain marginally performing and non-
performing commercial real estate loans to loans held for sale.
These loans are carried in loans held for sale at $1.5 million
which represents the anticipated net realizable value.
In addition, total non-performing assets decreased from $11.3
million, or .69% of total assets, at June 30, 1995 to $5.4
million, or .32% of total assets, at June 30, 1996. Non-
performing assets were $7.4 million, or .47% of total assets, at
September 30, 1995.
OTHER OPERATING INCOME
Other operating income was $1.2 million for the three months
ended June 30, 1996 compared to $1.0 million for the same period
in fiscal 1995. The increase of $.2 million was primarily due to
a $.5 million increase in net gains from the sale of OREO, offset
by a decrease in other income of $.3 million.
For the nine months ended June 30, 1996, other operating
income totaled $5.7 million compared to $2.1 million for the same
period of fiscal 1995. The increase of $3.6 million was
predominantly due to the $3.3 million increase in net gains
realized on securities sales and redemptions during the nine
months ended June 30, 1996.
OTHER OPERATING EXPENSES
The Bank's total other operating expenses amounted to $5.6
million for the quarter ended June 30, 1996, a decrease of $.4
million compared to $6.0 million for the same quarter of the
prior year. This decrease was primarily the result of a $.7
million decrease in deposit insurance premiums, which was
partially offset by increases in OREO expense, net of $.1 million
and $.1 million in other operating expenses - other. The Bank's
efficiency ratio (which is operating expense before net OREO
expense as a percentage of net interest income, customer service
fees and other income, excluding gains and losses) was 40.8% for
the quarter ended June 30, 1996 and is evidence of the Bank's
continuing effort to maintain strong control over operating
expenses.
Total other operating expenses decreased $1.0 million for the
nine month period ended June 30, 1996 over the comparable period
in fiscal 1995. This decrease was primarily due to a $2.0
million decrease in deposit insurance premiums which was
partially offset by a $.7 million increase in other operating
expenses - other, which increase was primarily the result of
higher advertising costs.
PROVISION FOR INCOME TAXES
Provisions for income taxes of $3.4 million and $2.9 million
were made for the three month periods ended June 30, 1996 and
1995, respectively. The increase was due to the $1.4 million
increase in income before provision for income taxes for the
quarter ended June 30, 1996 compared to the quarter ended June
30, 1995.
Provisions for income taxes of $10.8 million and $8.5 million
were made for the nine month periods ended June 30, 1996 and
1995, respectively. The increase was due to the increase of $6.1
million in income before provision for income taxes for the nine
months ended June 30, 1996 compared to the nine months ended June
30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The liquidity of North Side's operations, measured by the
ratio of daily average balances for the quarter of cash and cash
equivalents (not committed, pledged, or required to liquidate
specific liabilities) to the sum of net withdrawable deposits and
borrowings payable within one year, averaged 7.88% for the twelve
months ended June 30, 1996 compared to 2.03% for the twelve
months ended June 30, 1995.
North Side's primary sources of funds have consisted of
deposits, amortization and prepayments of outstanding loans and
mortgage-backed securities and bond maturities. At June 30,
1996, total approved loan commitments amounted to $25.6 million.
The amount of time deposits which are scheduled to mature during
the twelve months ending June 30, 1997 is $353.2 million. Based
on past experience, management expects that a substantial portion
of these maturing deposits will be redeposited at North Side.
At June 30, 1996, shareholders' equity equaled $123.5 million
or 7.47% of total assets, compared to $116.3 million or 7.32% of
total assets at September 30, 1995.
The FDIC has issued regulations that require insured banks,
such as North Side, to maintain minimum levels of capital. The
FDIC's leverage ratio requirements require core capital equal to
3% for the most highly rated banks. Other banks are required to
maintain ratios 100 to 200 basis points higher based on their
particular circumstances. At June 30, 1996, the Bank's leverage
ratio was 7.74%.
The Bank also is required to maintain minimum capital levels
based upon a weighting of its assets according to risk. The Bank
was required to maintain a ratio of qualifying total capital to
risk-weighted assets and off-balance sheet items of a minimum of
8%. At least one-half of that amount must be Tier I or Core
Capital and up to one-half of total capital can consist of Tier
II or supplementary capital. On June 30, 1996, the Bank's Tier I
capital to risk-weighted assets ratio and total capital to risk-
weighted assets ratio, calculated under the FDIC risk-based
capital requirement, was 17.29% and 18.07%, respectively.
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934,
the Bank has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NORTH SIDE SAVINGS BANK
Date: August 9, 1996 /s/ Thomas M. O'Brien
______________________________
Thomas M. O'Brien
President and
Chief Executive Officer
Date: August 9, 1996 /s/ Donald C. Fleming
______________________________
Donald C. Fleming
Executive Vice President and
Chief Financial Officer
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-3
CURRENT REPORT
Under Section 13 of the Securities Exchange Act of 1934
For the month of January, 1996
North Side Savings Bank
(Exact name of bank as specified in charter)
170 Tulip Avenue, Floral Park, New York 11001
(Address of principal office)
New York
(State or other jurisdiction of incorporation or organization)
16007
(FDIC Certificate No.)
13-1723204
(IRS Employer Identification No.)
(516) 488-6900
(Bank's telephone number, including area code)
ITEM 9--SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders of North Side
Savings Bank (the Bank ) was held on January 22, 1996.
At the Meeting, the following nominees for director
received the number of votes, and had the number of votes
withheld, set forth opposite their names.
Votes
Votes For Withheld
Irvin L. Cherashore 4,097,696 6,423
Greg L. Collins 4,066,085 38,033
Thomas M. O Brien 4,097,494 6,625
Thus, all the Bank s nominees were re-elected to
serve as directors for three-year terms expiring in 1999.
At the Annual Meeting, the following votes were cast
in favor of and against, and abstained from voting upon,
the ratification of the selection of KPMG Peat Marwick
LLP as the independent auditors of the Bank for the
fiscal year ending September 30, 1996:
IN FAVOR: 4,096,321 AGAINST: 2,393 ABSTAIN 5,404
ITEM 13--FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Not applicable.
(b) Exhibits
None.
SIGNATURES
Under the requirements of the Securities Exchange Act of
1934, the Bank has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly
authorized.
NORTH SIDE SAVINGS BANK
By: /s/ Thomas M. O Brien
Thomas M. O'Brien
Date: February 6, 1996 Chairman of the Board,
President and Chief
Executive Officer
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
FORM F-3
CURRENT REPORT
Under Section 13 of the Securities Exchange Act of 1934
For the month of March, 1996
North Side Savings Bank
(Exact name of bank as specified in charter)
170 Tulip Avenue, Floral Park, New York 11001
(Address of principal office)
New York
(State or other jurisdiction of incorporation or organization)
16007
(FDIC Certificate No.)
13-1723204
(IRS Employer Identification No.)
(516) 488-6900
(Bank's telephone number, including area code)
ITEM 12--OTHER MATERIALLY IMPORTANT EVENTS
In accordance with the Bank s By-Laws, the Board of
Directors of the Bank, at its meeting on March 18, 1996,
increased the size of the Board to ten members, creating
a vacancy in the class of directors whose terms expire at
the Annual Meeting of Stockholders in January 1999. The
Board elected Carmine M. Tenga of New York, New York, a
former Acting Superintendent and Deputy Superintendent of
the New York State Banking Department, as a director to
fill such vacancy.
ITEM 13--FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Not applicable.
(b) Exhibits
None.
SIGNATURES
Under the requirements of the Securities Exchange Act of
1934, the Bank has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
NORTH SIDE SAVINGS BANK
By: /s/ Thomas M. O Brien
Thomas M. O'Brien
Date: April 1, 1996 Chairman of the Board,
President and Chief Execu-
tive Officer
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
____________________
FORM F-3
CURRENT REPORT
UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
For the month of April, 1996
NORTH SIDE SAVINGS BANK
(Exact name of bank as specified in its charter)
170 Tulip Avenue
Floral Park, New York
(Address of principal office)
<TABLE>
<S> <C> <C>
New York 16007 13-1723204
(State or other jurisdiction (FDIC Certificate No.) (IRS Employer Identification No.)
of incorporation or organization)
</TABLE>
(516) 488-6900
(Bank's telephone number, including area code)
ITEM 12. OTHER MATERIALLY IMPORTANT EVENTS.
On April 15, 1996, the Board of Directors of
North Side Savings Bank (the "Bank") adopted a
shareholder rights plan pursuant to which rights will be
distributed as a dividend at the rate of one right for
each outstanding share of common stock, par value $1.00
per share, of the Bank held by stockholders of record at
the close of business on April 30, 1996. The description
and term of the rights are set forth in the Rights
Agreement, dated as of April 18, 1996, between the Bank
and American Stock Transfer and Trust Company, a New York
corporation, as Rights Agent, which was filed as Exhibit
1 to the Bank's Registration Statement on Form F-10,
dated April 24, 1996, and is incorporated herein by
reference.
ITEM 13. FINANCIAL STATEMENTS AND EXHIBITS.
1 Rights Agreement, dated as of April 18,
1996, between the Bank and American Stock
Transfer and Trust Company, as Rights Agent,
incorporated herein by reference to Exhibit
1 to the Bank's Registration Statement on
Form F-10, dated April 24, 1996.
2 Press Release of the Bank dated April 18,
1996.
SIGNATURES
Under the requirements of the Securities
Exchange Act of 1934, the Bank has duly caused this
report to be signed on its behalf by the undersigned,
thereto duly authorized.
NORTH SIDE SAVINGS BANK
By: /s/ Thomas M. O'Brien
Name: Thomas M. O'Brien
Title: Chairman of the Board; President
and Chief Executive Officer
Date: May 1, 1996
EXHIBIT 2
NORTH SIDE SAVINGS BANK ADOPTS
SHAREHOLDER RIGHTS PLAN
North Side Savings Bank, (NASDAQ: NSBK), Floral
Park, New York, April 18, 1996 - North Side Savings Bank
announced today its Board of Directors adopted a
Shareholder Rights Plan pursuant to which rights will be
distributed as a dividend at the rate of one Right for
each share of common stock, par value $1.00 per share, of
the Bank held by shareholders of record as of the close
of business on April 30, 1996. The Rights Plan is
designed to deter abusive takeover tactics, including the
accumulation of a significant amount of shares in the
open market or through private transactions, and to
prevent an acquiror from gaining control of the Bank
without offering a fair price to all of the Bank's
shareholders. On March 18, 1996, New York Bancorp, Inc.
reported that it had acquired 7.84% of the Bank's common
stock and was considering the possibility of seeking to
obtain control of the Bank, including through the
acquisition of additional shares of the Bank's common
stock. North Side's Chairman and Chief Executive, Thomas
M. O'Brien, has previously said in response to the New
York Bancorp filing that North Side's Board of Directors
would take appropriate action against an inappropriate
stock accumulation by New York Bancorp.
Each Right initially will entitle shareholders
to buy one unit of a share of preferred stock for $100.
The Rights will be exercisable only if a person or group
acquires beneficial ownership of 10% or more of the
Bank's common stock or commences a tender or exchange
offer upon consummation of which such person or group
would beneficially own 10% or more of the Bank's common
stock.
If any person becomes the beneficial owner of
10% or more of the Bank's common stock, other than
pursuant to a tender or exchange offer for all
outstanding shares of the Bank approved by a majority of
the independent directors not affiliated with a 10%-or-
more shareholder, then each Right not owned by a 10%-or-
more shareholder or related parties will entitle its
holder to purchase, at the Right's then current exercise
price, shares of the Bank's common stock (or, in certain
circumstances as determined by the Board, cash, other
property, or other securities) having a value of twice
the Right's then current exercise price. In addition, if
after any person has become a 10%-or-more shareholder,
the Bank is involved in a merger or other business
combination transaction with another person in which the
Bank does not survive or in which its common stock is
changed or exchanged (other than a merger or other
business combination that follows an offer described in
the previous sentence and meets certain other
requirements), or sells 50% or more of its assets or
earning power to another person, each Right will entitle
its holder to purchase, at the Right's then current
exercise price, shares of common stock of such other
person having a value of twice the Right's then current
exercise price.
The Bank will generally be entitled to redeem
the Rights at $0.01 per Right at any time until 10 days
(subject to extension) following a public announcement
that a 10% position has been acquired. The Rights will
expire on April 30, 2006.
Contact: Thomas O'Brien, Chairman, Chief Executive
Officer and President
(516) 488-6900, Extension
Judith A. MacGregor, Corporate Secretary
(516) 488-6900, Extension 209
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
FORM F-3
CURRENT REPORT
UNDER SECTION 13 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE MONTH OF: JULY 1996
North Side Savings Bank
(Exact name of bank as specified in its charter)
170 Tulip Avenue, Floral Park, New York 11001
(Address of principal executive offices)
New York
(State or other jurisdiction of incorporation or organization)
16007
(FDIC Certificate No.)
13-1723204
(IRS Employer Identification No.)
(516) 488-6900
(Bank's telephone number, including area code)
ITEM 12 - OTHER MATERIALLY IMPORTANT EVENTS
On July 15, 1996, North Side Savings Bank, a New York
chartered stock form savings bank ("North Side"), announced that
it had entered into an Agreement and Plan of Merger, dated as of
July 15, 1996 (the "Merger Agreement"), with North Fork
Bancorporation, Inc., a Delaware corporation ("North Fork"),
pursuant to which a New York-chartered savings bank to be formed
as a wholly owned subsidiary of North Fork will merge with and
into North Side (the "Merger"), with North Side thereafter
becoming a direct, wholly owned subsidiary of North Fork.
Pursuant to the Merger Agreement, each share of the common
stock, par value $1.00 per share ("North Side Common Stock"), of
North Side outstanding on the date of the Merger (except for
shares of North Side Common Stock held by North Side or North
Fork or any of their subsidiaries (other than shares of North
Side Common Stock (i) held directly or indirectly by North Fork
or North Side or any of their respective subsidiaries in trust
accounts, managed accounts and the like or otherwise held in a
fiduciary capacity that are beneficially owned by third parties
and (ii) held by North Fork or North Side or any of their
respective subsidiaries in respect of a debt previously
contracted) will be converted into the right to receive 1.556
shares (the "Exchange Ratio") of common stock, par value $2.50
per share, of North Fork ("North Fork Common Stock"). If the
"Average Closing Price" (as defined below) is less than $24.00,
North Side may, at its option, terminate the Merger Agreement
unless North Fork agrees to increase the Exchange Ratio such that
the shares of North Fork Common Stock issued in exchange for each
share of North Side Common Stock have a value (valued at the
Average Closing Price) of at least $37.34. The Average Closing
Price is defined as the average closing sales price of North Fork
Common Stock on the New York Stock Exchange for the 10
consecutive trading days ending on the 5th business day prior to
the date on which approval of the Merger by the Board of
Governors of the Federal Reserve Board is obtained, without
regard to any requisite waiting period in respect thereof.
The shares of North Fork Common Stock issued in the Merger
will include the corresponding number of rights attached to such
shares pursuant to North Fork's shareholder rights plan. No
fractional shares of North Fork Common Stock will be issued in
the Merger, and North Side stockholders who otherwise would be
entitled to receive a fractional share of North Fork Common Stock
will receive a cash payment in lieu thereof.
Consummation of the Merger is subject to certain conditions,
including, but not limited to, approval of the Merger Agreement
by the stockholders of North Side, approval by the stockholders
of North Fork of the issuance of shares of North Fork Common
Stock to the stockholders of North Side pursuant to the Merger
Agreement and the receipt of all required regulatory approvals.
Following the Merger, the Board of Directors of North Fork
will be expanded by two members and Mr. Thomas M. O'Brien, the
Chairman, Chief Executive Officer and President of North Side,
and an additional director of North Side selected by North Side
and reasonably acceptable to North Fork will be appointed to such
Board of Directors. Mr. O'Brien is also expected to serve as a
Vice Chairman of the Board of Directors.
As a condition to the execution and delivery of the Merger
Agreement, North Fork and North Side entered into a stock option
agreement, dated as of July 15, 1996 (the "Stock Option
Agreement"), pursuant to which North Side granted North Fork an
option to purchase up to 961,965 shares of North Side Common
Stock at a purchase price of $34.75 per share, subject to
adjustment. The option will become exercisable upon the
occurrence of certain events described therein, none of which has
occurred as of the date hereof.
A copy of the Merger Agreement and the Stock Option
Agreement are attached hereto as exhibits 1 and 2, respectively,
and incorporated herein by reference in their entirety. The
foregoing summaries of the Merger Agreement and the Stock Option
Agreement do not purport to be complete and are qualified in
their entirety by reference to such exhibits.
The press release issued by North Fork and North Side with
respect to the announcement of the transactions described herein
is attached hereto as Exhibit 3 and is hereby incorporated herein
by reference in its entirety.
The press release incorporated herein by reference contains
certain forward looking statements with respect to the financial
condition, results of operations and business of North Fork
following the consummation of the Merger, including statements
relating to: (a) the cost savings and revenue enhancements that
will be realized from the Merger and (b) projected 1997 earnings
per share. Factors that may cause actual results to differ
materially from those contemplated by such forward looking
statements include, among others, the following possibilities:
(1) expected cost savings or revenue enhancements from the Merger
cannot be fully realized; (2) deposit attrition, customer loss or
revenue loss following the Merger is greater than expected; (3)
competitive pressure in the banking and financial services
industry increases significantly; (4) changes in the interest
rate environment reduce margins; and (5) general economic
conditions, either nationally or in New York, are less favorable
than expected.
ITEM 13 - FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
Not applicable.
(b) Exhibits
(1) Agreement and Plan of Merger, dated as of July 15,
1996, among North Fork Bancorporation, Inc., a New
York-chartered savings bank to be formed as a
wholly-owned subsidiary of North Fork
Bancorporation, Inc. and North Side Savings Bank,
excluding exhibits thereto.
(2) Stock Option Agreement, dated as of July 15, 1996,
between North Fork Bancorporation, Inc. and North
Side Savings Bank.
(3) Press release, dated July 15, 1996.
SIGNATURES
Under the requirements of the Securities Exchange Act of
1934, North Side Savings Bank has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
NORTH SIDE SAVINGS BANK
Date: July 24, 1996 By: /s/ Thomas M. O'Brien
__________________________
Thomas M. O'Brien
Chairman, President and
Chief Executive Officer
NORTH SIDE SAVINGS BANK
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JANUARY 22, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of
Stockholders of North Side Savings Bank, Floral Park, New York
("North Side" or the "Bank") will be held at The New York
Helmsley Hotel, 212 East 42nd Street, New York, New York 10017 on
Monday, January 22, 1996, at 10:00 a.m., Eastern Time, for the
following purposes, all of which are more completely set forth in
the accompanying Proxy Statement:
(1) To elect three directors for a term of three years
or until their respective successors have been elected and
qualified;
(2) To ratify the appointment of KPMG Peat Marwick LLP
as the Bank's independent auditors for the fiscal year
ending September 30, 1996; and
(3) To transact such other business as may properly
come before the meeting or any adjournment thereof. Except
with respect to procedural matters incident to the conduct
of the meeting, management of North Side is not aware of any
other matters which may properly come before the meeting.
Stockholders of the Bank of record at the close of business
on December 8, 1995 are entitled to notice of and to vote at the
Annual Meeting and at any adjournment thereof.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
Judith A. MacGregor
Corporate Secretary
Floral Park, New York
December 22, 1995
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. IT
IS IMPORTANT THAT YOUR SHARES BE REPRESENTED REGARDLESS OF THE
NUMBER YOU OWN. EVEN IF YOU PLAN TO BE PRESENT, YOU ARE URGED TO
COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN
THE POSTAGE PAID ENVELOPE PROVIDED. IF YOU ATTEND THE MEETING,
YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY
BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO
ITS EXERCISE.
BOWNE CONVERSION
NORTH SIDE SAVINGS BANK
170 TULIP AVENUE
FLORAL PARK, NEW YORK 11001
(516) 488-6900
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JANUARY 22, 1996
This Proxy Statement is furnished to the holders of common
stock, $1.00 par value per share (the "Common Stock"), of North
Side Savings Bank ("North Side" or the "Bank") in connection with
the solicitation of proxies on behalf of the Board of Directors,
to be used at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at The New York Helmsley Hotel, 212 East
42nd Street, New York, New York 10017 on Monday, January 22, 1996
at 10:00 a.m., Eastern Time, and at any adjournment thereof, for
the purposes set forth in the Notice of Annual Meeting. This
Proxy Statement is expected to be mailed to stockholders on or
about December 26, 1995.
All properly executed proxies received in time for the
meeting and not revoked will be voted as specified. If no
instructions are specified, the proxy will be voted FOR the slate
of directors described herein, and FOR the ratification of KPMG
Peat Marwick LLP as the Bank's independent auditors for the
fiscal year ending September 30, 1996 and, upon the transaction
of such other business as may properly come before the meeting,
in the discretion of the person appointed as proxy.
REVOCATION RIGHTS
Any stockholder giving a proxy may revoke it at any time
prior to the voting thereof by signing, dating and delivering a
subsequent proxy or written notice to the Secretary of the Bank
or by attending the Annual Meeting and notifying the Secretary of
his or her intention to vote in person. Proxies solicited hereby
may be exercised only at the Annual Meeting and any adjournment
thereof and will not be used for any other meeting. If you are a
stockholder whose shares are not registered in your own name, you
will need additional documentation from your record holder to
vote personally at the Annual Meeting. Examples of such
documentation include a broker's statement, letter or other
document that will confirm your ownership of Common Stock on the
Voting Record Date.
OUTSTANDING SHARES, VOTING RIGHTS AND QUORUM REQUIREMENTS
Only stockholders of record at the close of business on
December 8, 1995 ("Voting Record Date") will be entitled to vote
at the Annual Meeting and at any adjournment thereof. At the
close of business on the Voting Record Date, there were 4,802,679
shares of Common Stock of the Bank outstanding, and the Bank had
no other class of equity securities outstanding. Each share of
Common Stock is entitled to one vote with respect to matters to
be voted on at the Annual Meeting and any adjournments thereof.
The presence, either in person or by proxy, of the holders of a
majority of the shares of Common Stock issued and outstanding as
of the Voting Record Date is necessary to constitute a quorum at
the Annual Meeting.
The election of directors shall be by a plurality of votes
cast by the holders of Common Stock present, in person or by
proxy, and entitled to vote thereon. The holders of Common Stock
may not vote their shares cumulatively with respect to the
election of the directors.
The ratification of the appointment of independent auditors
and any other matters to properly come before the meeting require
the affirmative vote of a majority of the votes cast by the
holders of Common Stock present, in person or by proxy, and
entitled to vote thereon.
Abstentions will be counted for purposes of determining the
presence of a quorum at the Annual Meeting but will not be
counted as votes cast. Under the rules of the New York Stock
Exchange, the proposals to elect directors and to ratify the
appointment of KPMG Peat Marwick LLP as independent auditors for
North Side are considered "discretionary" items upon which
brokerage firms may vote in their discretion on behalf of their
clients if such clients have not furnished voting instructions
within ten days of the Annual Meeting, and for which there thus
are not expected to be "broker non-votes." However, if there are
any "broker non-votes," such shares will not be counted as
present or as votes cast.
Properly executed unmarked proxies will be voted FOR the
election of the Board's nominees as directors, FOR the
ratification of the appointment of the independent auditors and,
as to any other business that may come before the Annual Meeting,
at the discretion of the proxy holder.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the only stockholders known
by the Bank to own beneficially or of record more than 5% of the
Common Stock and the nature of their stockholdings. This
information has been obtained from reports filed pursuant to
Sections 13(d) and 13(g) of the Securities Exchange Act of 1934
(the "Exchange Act") and regulations promulgated by the Federal
Deposit Insurance Corporation (the "FDIC"), and reflects an
adjustment for the Bank's 5% stock dividend paid March 1, 1995
(the "Stock Dividend"). Unless otherwise indicated, each
stockholder listed in the table has sole voting and dispositive
powers as of December 8, 1995 with respect to the shares owned
beneficially or of record by such person.
AMOUNT AND NATURE PERCENT
TITLE OF NAME AND ADDRESS OF BENEFICIAL OF
CLASS OF BENEFICIAL OWNER OWNERSHIP CLASS
Common First Manhattan Co. 279,574(1) 5.82%
437 Madison Avenue
New York, New York 10022
Common FMR Corp. 466,440(2) 9.71
82 Devonshire Street
Boston, Massachusetts 02109
(1) Information obtained from Amendment No. 8 to Schedule 13G,
dated February 10, 1995, as adjusted to reflect the Stock
Dividend. All shares are held on behalf of others. First
Manhattan Co. claims sole dispositive and voting power over
197,604 shares, shared voting power with the direct owners
of 14,304 shares and shared dispositive power with the
direct owners of 81,970 shares.
(2) Information obtained from Amendment No. 2 to Form F-11A
dated February 13, 1995, as adjusted to reflect the Stock
Dividend. FMR Corp. ("FMR") is the parent holding company
of Fidelity Management & Research Company ("Fidelity"), an
investment adviser. Fidelity is the beneficial owner of
434,832 of such shares as a result of acting as an
investment adviser to several investment companies. One
investment company, Fidelity Select Home Finance Portfolio,
owns 428,812 of such shares. Edward C. Johnson 3rd, FMR and
certain mutual funds (the "Funds") each have sole
dispositive power over these 434,832 shares, but no voting
power. Voting power resides in the Funds' Boards of
Trustees. Fidelity Management Trust Company ("FMT"), a bank
which serves as investment manager of certain institutional
accounts and is a subsidiary of FMR, is the beneficial owner
of 31,608 shares as a result of such service as investment
manager. FMR and Edward C. Johnson 3rd, through control of
FMT, have sole voting and dispositive power over
31,608 shares held in such accounts. Edward C. Johnson 3rd
and Abigail P. Johnson, together with various trusts for the
benefit of Johnson family members, form a controlling group
with respect to FMr. The Bank understands that, subsequent
to Amendment No. 2 to Form F-11A, there may have been
changes in the ownership structure of FMR and Fidelity.
The following table sets forth certain information with
respect to the beneficial ownership of Common Stock of the
directors of the Bank, the executive officers listed in the
Summary Compensation Table and the directors and current
executive officers of the Bank as a group. Unless indicated
otherwise, ownership figures are as of December 8, 1995, and each
indicated person has sole voting and dispositive power over the
shares owned beneficially by such person.
AMOUNT AND NATURE PERCENT
TITLE OF NAME OF OF BENEFICIAL OF
CLASS BENEFICIAL OWNER OWNERSHIP(1) CLASS
Common Thomas M. O'Brien 165,319.657(2) 3.38%
Common Irvin L. Cherashore 13,497 --(3)
Common Greg L. Collins 44,261(4) --(3)
Common Donald C. Fleming 55,006(5) 1.14
Common Richard D. Gidron 51,064(6) 1.06
Common Margaret M. Healy 39,145(6) --(3)
Common Ralph J. Marino 1,000 --(3)
Common John J. Murphy 39,603(6) --(3)
Common Stephen J. Schildwachter 2,634.735 --(3)
Common Alissa E. Ballot 14,604(7) --(3)
Common Marie Alleva 11,700(8) --(3)
Common All directors and execu-
tive officers (17 403,230.392(9) 8.11
persons) as a group
(1) Based on information provided by the respective directors
and executive officers and filings with the FDIC.
(2) Includes 7,875 restricted shares awarded to Mr. O'Brien
under the Bank's Management Development and Recognition Plan
(the "MDR") which are held by the MDR Trustees and as to
which Mr. O'Brien has sole voting power, 57,931 shares which
are held jointly with Mr. O'Brien's wife, with whom
Mr. O'Brien has shared voting and dispositive power, 254
shares in the name of Mr. O'Brien's wife and 410.553 shares
which are held by Mr. O'Brien as custodian for his three
sons, with whom Mr. O'Brien has shared voting and
dispositive power. Also includes a 4.15% beneficial
interest in 47,143 shares (as of September 30, 1995) held in
trust under the Bank's 401(k) Savings Plan as to which
Mr. O'Brien shares voting power and options exercisable
within 60 days after the Voting Record Date to purchase
82,690 shares of Common Stock. Does not include 108,384
shares of Common Stock held by Marine Midland Bank as
Trustee for the North Side Savings Bank Retirement Trust II
as to which Mr. O'Brien, through his membership on the
Bank's Employee Benefits Committee, generally shares voting
power. Such Committee does not intend to provide voting
instructions to the Trustee in connection with the proposals
to be presented at the Annual Meeting. In accordance with
the provisions of the Trust Agreement governing the
Retirement Plan Trust II, the Bank expects the Trustee to
independently exercise the voting power appurtenant to such
shares. Mr. O'Brien disclaims beneficial ownership of such
shares. See "Executive Compensation--Long Term Incentive
and Capital Accumulation Plan," "--401(k) Savings Plan," "--
Retirement Plan," and "--Management Development and
Recognition Plan."
(3) Holdings amount to less than 1% of the issued and
outstanding shares of Common Stock of the Bank.
(4) Includes 33,236 shares held individually and 11,025 shares
held by Incline Capital group in a SEP-IRA account for the
benefit of Mr. Collins and for which Mr. Collins has voting
authority.
(5) Includes 4,200 restricted shares awarded to Mr. Fleming
under the MDR which are held by the MDR Trustees and as to
which Mr. Fleming has sole voting power. Also includes a
7.41% beneficial interest in 47,143 shares (as of
September 30, 1995) held in trust under the Bank's 401(k)
Savings Plan as to which Mr. Fleming shares voting power and
options exercisable within 60 days after the Voting Record
Date to purchase 32,843 shares of Common Stock. Does not
include 108,384 shares of Common Stock held by Marine
Midland Bank as Trustee for the North Side Savings Bank
Retirement Plan Trust II as to which Mr. Fleming, through
his membership on the Bank's Employee Benefits Committee,
generally shares voting power. Such Committee does not
intend to provide voting instructions to the Trustee in
connection with the proposals to be presented at the Annual
Meeting. In accordance with the provisions of the Trust
Agreement governing the Retirement Plan Trust II, the Bank
expects the Trustee to independently exercise the voting
power appurtenant to such shares. Mr. Fleming disclaims
beneficial ownership of such shares. See "Executive
Compensation--Long Term Incentive and Capital Accumulation
Plan," "--401(k) Savings Plan," "--Retirement Plan" and "--
Management Development and Recognition Plan."
(6) Includes 38,331 shares held by the MDR of which Mr. Gidron,
Ms. Healy and Mr. Murphy are Trustees. Mr. Gidron, Ms.
Healy and Mr. Murphy have sole dispositive power but no
voting power over such shares. Mr. Gidron, Ms. Healy and
Mr. Murphy disclaim beneficial ownership of such shares.
See "Executive Compensation--Management Development and
Recognition Plan."
(7) Includes 3,150 restricted shares awarded to Ms. Ballot
under the MDR which are held by the MDR Trustees and as to
which Ms. Ballot has sole voting power. Also includes a
3.16% beneficial interest in 47,143 shares (as of
September 30, 1995) held in trust under the Bank's 401(k)
Savings Plan as to which Ms. Ballot shares voting power and
options exercisable within 60 days after the Voting Record
Date to purchase 8,407 shares of Common Stock. See
"Executive Compensation--Long Term Incentive and Capital
Accumulation Plan," "--401(k) Savings Plan," and "--
Management Development and Recognition Plan."
(8) Includes 3,150 restricted shares awarded to Ms. Alleva
under the MDR which are held by the MDR Trustees and as to
which Ms. Alleva has sole voting power. Also includes a
0.3% beneficial interest in 47,143 shares (as of
September 30, 1995) held in trust under the Bank's 401(k)
Savings Plan as to which Ms. Alleva shares voting power and
options exercisable within 60 days after the Voting Record
Date to purchase 8,407 shares of Common Stock. See
"Executive Compensation--Long Term Incentive and Capital
Accumulation Plan," "--401(k) Savings Plan," and "--
Management Development and Recognition Plan."
(9) Includes 38,331 shares of North Side Common Stock held by
the MDR Trust which have been granted to certain of the
Bank's officers and as to which such officers have sole
voting power. All of such shares of North Side Common Stock
currently held by the MDR Trustees have been awarded, and
will vest at the rate of 20% per year for five years
beginning on January 1, 1996. Employees who are awarded
North Side Common Stock are entitled to all voting and other
stockholder rights, except that the shares, while
restricted, may not be sold, pledged or otherwise disposed
of and are required to be held by the MDR Trustees. Shares
of North Side Common Stock which have been awarded are voted
by the MDR Trustees as directed by the employee to whom such
shares have been granted. See "Executive Compensation--
Management Development and Recognition Plan." Also includes
options to purchase 171,501 shares of North Side Common
Stock which are exercisable within 60 days after the Voting
Record Date. The percentage is computed by including
executive officers' holdings of options exercisable within
sixty (60) days after December 8, 1995 as outstanding Common
Stock. See "Executive Compensation--Long Term Incentive and
Capital Accumulation Plan." Such figures also include an
aggregate 29.2% undivided beneficial interest of executive
officers who are members of the group in an aggregate of
47,143 shares of Common Stock held by the trust established
in connection with the 401(k) Savings Plan of North Side
Savings Bank (the "Savings Plan Trust") as of September 30,
1995, as to which shares the respective account holders have
shared voting power and no investment power except for such
aggregate 29.2% of such shares which may be liquidated and
reinvested in alternate investments. Does not include
108,384 shares of Common Stock held by Marine Midland Bank
as Trustee for the North Side Savings Bank Retirement Plan
Trust II as to which certain executive officers, through
their membership on the Bank's Employee Benefits Committee,
generally share voting power. Such Committee does not
intend to provide voting instructions to the Trustee in
connection with the proposals to be presented at the Annual
Meeting. In accordance with the provisions of the Trust
Agreement governing the Retirement Plan Trust II, the Bank
expects the Trustee to independently exercise the voting
power appurtenant to such shares.
PROPOSAL I
ELECTION OF DIRECTORS
One purpose of the Annual Meeting is the election of
directors. Pursuant to North Side's Bylaws and by resolution of
North Side's Board of Directors, the Board of Directors currently
consists of nine members. The Bank's Board of Directors is
divided into three classes, as nearly equal in number as
possible, and the members of each class generally are elected for
a term of three years and until their successors are elected and
qualified. One class of directors is to be elected annually.
Each nominee previously has served as a director of the Bank.
STOCKHOLDER NOMINATIONS
Article II, Section 15 of the Bank's Bylaws provides that
the Board of Directors shall act as a nominating committee for
selecting the nominees for election as directors. Stockholders
may name nominees for election to the Board of Directors by
submitting written nominations to the Secretary of the Bank not
less than 15 days prior to the anniversary date of the mailing of
proxy materials by the Bank for its immediately preceding annual
meeting of stockholders. Such stockholder's notice shall set
forth certain specified information, including (a) the name of
the stockholder and of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record
of stock of the Bank entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of
all arrangements or understandings between the stockholder and
each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are
to be made; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be disclosed
in solicitations of proxies with respect to nominees for election
as directors, pursuant to Regulation 14A under the Exchange Act;
and (e) the consent of each nominee to serve as a director of the
Bank if so elected. If any stockholder nomination is properly
and timely made, ballots will be provided for use by stockholders
at the Annual Meeting bearing the name of such nominee or
nominees.
THE NOMINEES
Unless otherwise directed, each proxy executed and returned
by a stockholder will be voted FOR the election of the three
nominees listed below. There are no arrangements or
understandings between the persons named and any other person
pursuant to which such nominee was selected. If any person named
as a nominee should be unable or unwilling to stand for election
at the time of the Annual Meeting, the proxy will nominate and
vote for a replacement nominee or nominees recommended by the
Board of Directors. At this time, the Board of Directors knows
of no reason why any of the nominees listed below may not be able
to serve as director if elected.
NOMINEES FOR DIRECTOR FOR A THREE-YEAR TERM EXPIRING IN 1999
POSITION WITH THE BANK
AND PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE DURING PAST FIVE YEARS SINCE
Irvin L. Cherashore Director; Director of Winchester Group, 1976(1)
Age 60 Inc., a money management and
institutional brokerage firm,
previously an analyst/broker and
chairman of the executive
committee of Sterling, Grace &
Company, Inc.; Director of North
Side Capital Corp.; former
chairman of the Board of Fused
Silica Technology.
Greg L. Collins Director; President of Incline Capital 1990
Age 42 Group, a management consulting
firm, from June 1988 to present;
Director, Gateway Technologies,
Inc.; Director, Iriscan;
previously President and Chief
Executive Officer of Raster Image
Processing Systems from April 1991
to September 1992; and Chief
Executive Officer of Carlisle
Systems Group, a computer
technologies firm, from February
1986 to June 1988; Director of
Transistor Devices, Inc. from 1988
to 1992.
Thomas M. O'Brien Chairman of the Board, President 1985(1)
Age 45 and Chief Executive Officer of the
Bank since October 1, 1987; President
and Chief Operating Officer of the
Bank from December 1985 to
September 30, 1987; Director,
President and Chief Executive
Officer of North Side Capital
Corp.; Trustee, American Skandia
Trust, an investment company;
Member of the Thrift Advisory
Board of the Federal Reserve Bank
of New York; Director, Retirement
System Group, Inc.
(1) Includes term as Trustee prior to the Bank's conversion from
the mutual to stock form of organization on April 15, 1986.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE NOMINEES BE ELECTED AS DIRECTORS
DIRECTORS WITH A TERM ENDING IN 1997
POSITION WITH THE BANK
AND PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE DURING PAST FIVE YEARS SINCE
Margaret M. Healy Director; Principal, PH Network, a 1978(1)
Age 57 marketing public relations firm
serving the retailing industry,
since March, 1992; Public
Relations Program Manager at
J.C. Penney Company from July
1988 to February 1992; owner of
Peggy Healy Associates, a retail
consulting firm, from 1981 to
1988. Member of the Board of
Directors of Dallas Children's
Theater.
John J. Murphy Director; Certified Public Accoun- 1988
Age 59 tant; Senior Vice President and
Director of Skandia Investment
Management, Inc., an investment
company, since September 1992;
previously Vice President of
Skandia America Reinsurance
Corporation from June 1981 to
September 1992. Member Switzer
Foundation.
Stephen J. Director; Field Underwriter with New 1974(1)
Schildwachter York Life Insurance Company
Age 59 since 1980; financial counselor;
Director of Life Underwriters
Association of Westchester
County; President of Rye Rotary
Club; Captain, USNR (Ret.).
DIRECTORS WITH A TERM ENDING IN 1998
POSITION WITH THE BANK
AND PRINCIPAL OCCUPATION DIRECTOR
NAME AND AGE DURING PAST FIVE YEARS SINCE
Richard D. Gidron Director; Chairman and Chief Exe- 1978(1)
Age 57 cutive Officer of Dick Gidron
Cadillac, Inc. since 1972 and
Dick Gidron Ford, Inc. since
1983; President of the Bronx
Chamber of Commerce.
Donald C. Fleming Director; Executive Vice President 1991
Age 46 and Chief Financial Officer of the
Bank since October 1989; Senior
Vice President and Chief
Financial Officer from April
1988 to October 1989; previously
Senior Vice President/ Financial
Management at the East New York
Savings Bank from 1983 to March
1988; Director, North Side
Capital Corp.; Certified Public
Accountant; Member: American
Institute of Certified Public
Accountants and New York State
Society of Certified Public
Accountants.
Ralph J. Marino Director; Attorney, Partner in 1995
Age 67 Marino, Bernstein & LaMarca P.C.
since March 1995; Senator, New
York State Senate from 1969 to
February 1995.
(1) Includes term as Trustee prior to the Bank's conversion
from mutual to stock form of organization on April 15,
1986.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors holds regular monthly meetings in all
months except February and August and special meetings when
called from time to time. The Board of Directors held a total of
10 meetings during the fiscal year ended September 30, 1995.
During fiscal 1995, no incumbent director attended less than 75%
of the aggregate of the number of meetings held by the Board of
Directors and by all committees of the Board of Directors on
which such director served. The committees of the Board of
Directors are the Executive Committee, the Audit Committee, the
CRA and Compliance Committee, and the Stock and Executive
Compensation Committee. Matters relating to the election of
directors are considered by the full Board of Directors and not
by a standing nominating committee. Members of committees are
elected each year by the Board of Directors at its first meeting
following the Annual Meeting.
* The Executive Committee consists of the Bank's Chief
Executive Officer and two or more other directors. The
Executive Committee, which currently consists of five
members, holds regular monthly meetings and is
authorized to exercise the powers of the Board of
Directors between regular meetings of the Board. The
Executive Committee, which met eleven times during
fiscal 1995, is comprised of Messrs. O'Brien,
Cherashore, Collins, Murphy and Fleming.
* The Audit Committee, which met four times during fiscal
1995, consists of four members of the Board of
Directors who are not officers of the Bank--
Messrs. Schildwachter, Gidron and Marino (effective May
1995) and Ms. Healy. The Audit Committee reviews the
affairs and records of the Bank to determine its
financial condition, reviews the Bank's system of
internal control, reviews the audit scope and reports
of the Bank's independent auditors and internal auditor
and reviews accounting and financial reporting, to
ensure compliance with applicable accounting
principles.
* The CRA and Compliance Committee, which met twice
during fiscal 1995, consists of three members of the
Board of Directors, Messrs. Marino (effective May 1995)
and Gidron and Ms. Healy. The Committee reviews the
Bank's compliance and CRA-related policies and
activities and makes recommendations to the Board of
Directors.
* The Stock and Executive Compensation Committee consists
of three members of the Board of Directors,
Messrs. Collins, Murphy and Gidron. The Committee,
which met once and took action by Unanimous Consent
once during fiscal 1995, reviews executive
compensation, administers the Bank's Long Term
Incentive and Capital Accumulation Plan and MDR and
makes recommendations to the Board of Directors.
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
The following information is supplied with respect to
persons who currently serve as executive officers of North Side
but do not serve on the Board of Directors. There are no
arrangements or understandings between North Side and any such
person pursuant to which such person has been elected as an
officer.
NAME AGE TITLE
Marie J. Alleva 53 Senior Vice President
Martin J. Brady 42 Senior Vice President
Felix G. Gonzalez 60 Senior Vice President
Alissa E. Ballot 40 General Counsel
Joseph R. Kwasnik 44 Vice President and Comptroller
Samy F. Sapek 47 Auditor
Kathleen Mallon 51 Treasurer
Judith A. MacGregor 43 Corporate Secretary
DIRECTORS' COMPENSATION
Retainer and Fees--Directors who are not executive officers
of the Bank and who attend a minimum of 75% of Board meetings
throughout calendar year 1995 will receive an annual fee of
$20,000, in addition to a payment of $1,000 per Board meeting
attended. Directors who were not executive officers of the Bank
and who attended a minimum of 75% of Board meetings through
calendar year 1994 received an annual fee of $16,000, in addition
to a payment of $1,000 per Board meeting attended. In addition,
non-officer members of committees of the Board receive a fee of
$400 per committee meeting attended. Directors who are also
officers of the Bank receive no compensation for attendance at
Board or committee meetings. The Chairperson of the Audit
Committee receives an additional fee of $1,000 annually.
Deferred Compensation Plan--Effective October 1, 1993, North
Side adopted a Directors Deferred Compensation Plan under which a
director may elect to defer receipt of compensation otherwise
payable currently for payment at a later date. Amounts deferred
for later payment are invested for the account of the director
electing deferred payment. Amounts payable to the director
reflect the earnings and losses on the investments made with the
amount deferred.
STOCK AND EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE
COMPENSATION
The Report of the Stock and Executive Compensation Committee
and the Stock Performance Chart shall not be deemed incorporated
by reference by any general statement incorporating by reference
this proxy statement into any filing under the Securities Act of
1933 or the Securities Exchange Act of 1934, except to the extent
that the Bank specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such
Acts.
REPORT OF THE STOCK AND EXECUTIVE COMPENSATION COMMITTEE
Under rules established by the Securities and Exchange
Commission ("SEC") and adopted by the FDIC, the Bank is required
to provide certain data and information regarding the
compensation and benefits provided to its Chief Executive Officer
and certain other executives. The disclosure requirements for
the Chief Executive Officer and such other executives include the
use of tables and a report explaining the rationale and
considerations that led to fundamental compensation decisions
affecting those individuals. In fulfillment of this requirement,
the following report of the Stock and Executive Compensation
Committee ("Compensation Committee") is provided.
After the end of each fiscal year, the Compensation
Committee meets to consider and make recommendations to the Board
of Directors with respect to short-term incentive compensation
(bonuses) for the fiscal year ending on the preceding
September 30 and officers' salaries for the year beginning on the
February 1 next following such meeting. The Board of Directors
considers and acts upon such recommendations in December of each
year. Thus, base compensation for the period beginning on
February 1, 1995, as well as short-term incentive compensation
for fiscal 1994, were reviewed in December 1994. Awards under
the Bank's long-term incentive compensation plans (the Management
Development and Recognition Plan, or "MDR," and the Amended and
Restated Long-Term Incentive and Capital Accumulation Plan, or
"Option Plan") are considered by the Compensation Committee as it
deems appropriate.
The primary objective of the Bank's executive compensation
program is to attract and retain highly skilled and motivated
executive officers who will manage the Bank in a manner to
promote its growth and profitability and advance the interests of
its stockholders. As such, the compensation program is designed
to provide levels of compensation which are reflective of both
the individual's and the organization's performance in achieving
the organization's goals and objectives, both financial and
non-financial, as determined in its business plan, and in helping
to build value for the Bank's stockholders. The long-term
component of the program aligns the interests of the executives
with those of the Bank's stockholders by providing a proprietary
interest in North Side, the value of which can be significantly
enhanced by appreciation of the Common Stock. The program also
seeks to adequately provide for the needs of the executives upon
retirement based upon the length of service provided to the Bank.
In structuring its executive compensation program, among the
factors considered by North Side is the financial impact the
program will have or likely have on the Bank, including but not
limited to its impact on federal income taxes incurred.
Effective January 1, 1994, Section 162(m) of the Code places a
limitation of $1 million per executive named in the "Summary
Compensation Table" below (the "Named Executive Officer" or
"Named Executive Officers") on the deductibility of certain
elements of compensation, as defined in the Code, paid to such
executive by the Bank. For fiscal 1995, based upon the current
level and composition of the compensation of its executive
officers, the Bank does not believe that the limitations
contained in Section 162(m) of the Code will have any impact on
it.
North Side's executive compensation program consists of four
elements: base salary, short-term incentive compensation,
long-term incentive compensation and retirement benefits.
Base salaries for officers other than the Chief Executive
Officer are recommended by the Compensation Committee to the
Board based in part upon recommendations provided by the Chief
Executive Officer. Salary levels reflect each executive
officer's performance, responsibilities and experience and the
Chief Executive Officer's and Compensation Committee's subjective
perception of labor market conditions. The Compensation
Committee's current philosophy is to fix the base salaries of the
Bank's senior executive officers (including the Named Executive
Officers) at a level generally designed, in the subjective
judgment of the Compensation Committee, to provide a reasonable
level of compensation even if no short-term incentive
compensation is paid.
Short-term incentive compensation consists of awards which
may be paid annually in the discretion and pursuant to the
subjective judgment of the Compensation Committee and the Board
of Directors. The Chief Executive Officer makes recommendations
to the Compensation Committee with respect to short-term
incentive compensation after the end of each fiscal year for all
executive officers other than himself. The Compensation
Committee, subjectively evaluating both the officer's individual
performance and the overall performance of the Bank, makes
recommendations to the Board with respect to short-term incentive
compensation for all executive officers, including the Chief
Executive Officer. For fiscal 1994, the Board accepted all such
recommendations, and the Named Executive Officers, other than the
Chief Executive Officer, received an aggregate of $65,000 in
short-term incentive compensation.
The long-term incentive compensation portion of the Bank's
compensation program consists of the MDR and the Option Plan.
The Bank established the MDR as a method of providing key Bank
officers and employees with a proprietary interest in the Bank in
a manner designed to encourage such persons to remain with North
Side, as shares of Common Stock granted under the MDR generally
vest at a rate of 20% per year beginning one year after grant.
The Named Executive Officers (other than the Chief Executive
Officer) were awarded an aggregate of 10,500 shares of Common
Stock (after adjustment for the stock dividend paid March 1,
1995) under the MDR, effective January 3, 1995. See "Executive
Compensation--Management Development and Recognition Plan." The
Option Plan is designed to provide key officers with incentives
for long term performance and to further align such officers'
financial interest with those of the Bank's stockholders by
providing them with the opportunity to participate in the
appreciation, if any, of the Common Stock which may occur after
the date the options are granted. See "Executive Compensation--
Long-Term Incentive and Capital Accumulation Plan."
Retirement benefits are designed to provide for an adequate
level of income to the executive officer following his or her
retirement from the Bank based upon length of service with the
organization and to support the goals and objectives of the rest
of the compensation program as described above. The retirement
benefits are provided through the 401(k) Savings Plan, the
Retirement Plan, and the Benefit Preservation Plan (the "BPP").
See "Executive Compensation--401(k) Plan," "--Retirement Plan"
and "--Benefit Preservation Plan".
In evaluating the compensation of Thomas M. O'Brien,
Chairman, President and Chief Executive Officer of the Bank, in
order to determine short-term compensation for fiscal 1994 and
base salary for the year beginning February 1, 1995, the
Compensation Committee subjectively evaluated both quantitative
and qualitative factors. The Committee reviewed the Bank's
financial results for fiscal 1994, a year in which the Bank had
record earnings and continued improvement in the credit quality
of its loan portfolio. In addition to these quantitative
accomplishments, the Compensation Committee considered
Mr. O'Brien's leadership in positioning the Bank strategically
for future developments and changes in its market, the economy
and the regulatory environment, as well as his efforts in
addressing various state and federal legislative initiatives
affecting the Bank through his Chairmanship of the Government
Relations Committees of both the Community Bankers Association of
New York and America's Community Bankers. Based on the
foregoing, the Committee determined to award Mr. O'Brien
short-term incentive compensation of $115,000 with respect to
fiscal 1994 and to continue Mr. O'Brien's base salary at its
existing level of $385,000, in accordance with its philosophy
concerning base salaries as set forth above. In addition,
Mr. O'Brien was awarded 7,875 shares of Common Stock (after
adjustment for the stock dividend paid March 1, 1995) under the
MDR, effective January 3, 1995. The Compensation Committee's
decisions relating to Mr. O'Brien were approved by the full Board
of Directors (without the participation of the directors who are
also officers of the Bank).
Although the Compensation Committee had not formally held
its post-fiscal 1995 meeting prior to the printing of this proxy
statement, it is considering recommending to the Board a grant of
an aggregate of approximately $205,000 in short-term incentive
compensation in respect of fiscal 1995 to the Named Executive
Officers (including the Chief Executive Officer), as well as
increases in the base salaries of such persons of 2%-4% effective
February 1, 1996 to reflect increases in the cost of living.
Stock and Executive Compensation Committee
Greg L. Collins (Chairman)
Richard D. Gidron
John J. Murphy
STOCK AND EXECUTIVE COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
One of the responsibilities of the Compensation Committee of
the Board of Directors of the Company is to determine the level
of compensation for executive officers of the Bank. The
Compensation Committee for 1995 consisted of Messrs. Collins,
Murphy and Gidron. There are no interlocks, as defined under the
rules and regulations of the SEC, between the Compensation
Committee and corporate affiliates of members of the Compensation
Committee or otherwise.
PERFORMANCE GRAPH
Pursuant to the regulations of the FDIC promulgated under
the Securities Exchange Act of 1934, as amended, the graph below
compares the performance of North Side Savings Bank with that of
the Nasdaq Composite Index (U.S. Companies) and the SNL Thrift
Index (savings institutions). The graph assumes the reinvestment
of dividends in additional shares of the same class of equity
securities as those below.
NORTH SIDE SAVINGS BANK
STOCK PRICE PERFORMANCE
There can be no assurance that stock performance will
continue into the future with the same or similar trends depicted
in the graph above.
EXECUTIVE COMPENSATION
The following Summary Compensation Table includes individual
compensation information on the Chief Executive Officer and the
other most highly compensated executive officers whose base
salary and bonus aggregated or is expected to aggregate $100,000
or more for the fiscal year ended September 30, 1995 (the "Named
Executive Officers") for services rendered in all capacities to
the Bank during the fiscal years ended September 30, 1995, 1994
and 1993.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS
------------------- ------
OTHER ANNUAL RESTRICTED SECURITIES PAYOUTS
COMPEN- STOCK UNDERLYING LTIP ALL OTHER
NAME AND FISCAL SALARY($) BONUS($) SATION($) AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR (1) (2) (3) ($)(4) (#)(5) ($) ($)(6)
------------------ ---- --- --- --- ------ ------ --- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas M. O'Brien 1995 $385,000 (2) 0 $136,828 110,250 0 $23,100
Chairman of the Board, 1994 365,962 $115,000 0 0 110,250 0 8,994
President and CEO 1993 260,000 100,000 0 0 64,502 0 8,728
Donald C. Fleming 1995 $156,000 (2) 0 $ 72,975 44,100 0 $ 9,240
Executive Vice 1994 152,400 $ 35,000 0 0 44,100 0 8,700
President and CFO 1993 142,900 30,000 0 0 26,026 0 5,272
Alissa E. Ballot 1995 $101,000 (2) 0 $ 54,731 14,884 0 $ 3,016
General Counsel 1994 98,889 $ 15,000 0 0 14,884 0 2,190
1993 91,473 10,000 0 0 3,859 0 0
Marie Alleva 1995 $ 87,000 (2) 0 $ 54,731 14,884 0 $ 5,196
Senior Vice President 1994 85,235 $ 15,000 0 0 14,884 0 2,448
1993 80,550 10,000 0 0 3,859 0 1,170
</TABLE>
(1) Salary includes payroll deduction contributions to benefit plans made
pursuant to Sections 401(k) and 125 of the Internal Revenue Code.
(2) Bonus consists of amount earned as a bonus for the year in which
earned, without regard to the year in which paid. Bonuses to be paid
for the fiscal year ended September 30, 1995 were not determined as of
the date of printing of this proxy statement.
(3) For fiscal 1993, 1994 and 1995, the Bank believes that there were no
(a) perquisites with a value aggregating more than the lesser of
$50,000 or 10% of the individual's total salary and bonus for the
year; (b) payments of above-market preferential earnings on deferred
compensation; (c) payments of earnings with respect to long-term
incentive plans prior to settlement or maturation; (d) tax payment
reimbursements; or (e) preferential discounts on stock.
(4) Effective January 3, 1995, awards of 7,875, 4,200, 3,150 and 3,150
shares were made under the MDR Plan to Mr. O'Brien, Mr. Fleming, Ms.
Ballot and Ms. Alleva, respectively. The awards vest at a rate of
20% per year commencing on January 1, 1996. The dollar amounts in the
table for fiscal 1995 are based upon $17.375 per share, the closing
price (as adjusted) of the Common Stock as reported on the Nasdaq
National Market System on the date of grant, January 3, 1995. As of
September 29, 1995, the number of unvested shares of Common Stock
allocated to Mr. O'Brien, Mr. Fleming, Ms. Ballot and Ms. Alleva and
the dollar value thereof based on a per-share value of $30.25 were
7,875 shares, $238,218.75; 4,200 shares, $127,050; 3,150 shares,
$95,287.50; and 3,150 shares, $95,287.50, respectively. Dividends are
paid on unvested shares awarded pursuant to the MDR Plan to the same
extent as paid on other shares of the Company's outstanding Common
Stock and are held in the MDR Plan Trust for distribution on the
vesting date of the related shares. All figures have been adjusted in
accordance with the MDR Plan to give effect to the stock dividend paid
on March 1, 1995.
(5) Consists of number of shares available for purchase as of the last day
of the fiscal year in question upon exercise of options granted under
the Long Term Incentive and Capital Accumulation Plan, regardless of
whether such options were exercisable on such date. All share numbers
have been adjusted to reflect stock dividends declared by the Bank
pursuant to automatic anti-dilution provisions of the Long Term
Incentive and Capital Accumulation Plan. For additional information,
see "Long-Term Incentive and Capital Accumulation Plan."
(6) Includes the Bank's matching contributions to the 401(k) Plan, a cash
or deferred plan designed to be qualified under Sections 401(a)
and 401(k) of the Internal Revenue Code, which in fiscal 1995 totalled
$9,240 for Mr. O'Brien; $9,240 for Mr. Fleming; $3,016 for Ms.
Ballot; and $5,196 for Ms. Alleva. Also includes the Bank's accruals
with respect to the Benefit Preservation Plan ("BPP") (excluding
amounts contributed with respect to supplemental retirement benefits
thereunder), which in fiscal 1995 totalled $13,860 for Mr. O'Brien and
$0 for the other Named Executive Officers. See "401(k) Plan" and
"Benefit Preservation Plan."
EMPLOYMENT AGREEMENT
On February 1, 1989, North Side entered into an employment
agreement with Thomas M. O'Brien ("Employment Agreement")
pursuant to which Mr. O'Brien is retained as the Chairman,
President and Chief Executive Officer of the Bank. The
Employment Agreement is for an initial term of five years, with
an automatic one-year extension every February 1st, unless
60 days' prior written notice is given by either party to the
other. The Agreement was last extended on February 1, 1995 and
currently is for a term expiring on February 1, 2000.
Pursuant to the Employment Agreement, Mr. O'Brien receives a
salary at a minimum annual rate of $385,000, subject to upward
adjustment by the Bank's Board of Directors each year. The
Employment Agreement provides for Mr. O'Brien's participation in
any pension, stock option, profit-sharing, medical or other
benefit plans covering North Side's employees and in any program
of executive compensation, benefits or perquisites available
generally to Senior Vice Presidents or more senior officers of
North Side. It also provides for the continued payment of all or
a portion of base salary, on prescribed terms, in the event of
disability. In the event of Mr. O'Brien's death during the term
of the Employment Agreement, North Side is obligated to pay a
death benefit (which may, but need not, be provided through
insurance) equal to three times Mr. O'Brien's highest annual
salary rate achieved during the term, either in a lump sum or in
36 monthly installments; to provide for a cash settlement of all
stock options outstanding to Mr. O'Brien at the time of death;
and to provide continued health and disability insurance coverage
for certain surviving members of Mr. O'Brien's family for a
period of up to 36 months.
The Employment Agreement reserves to North Side the power to
terminate Mr. O'Brien's employment at any time. Any termination
by North Side for just cause (as defined in the Employment
Agreement) and any resignation by Mr. O'Brien other than for good
reason (as defined in the Employment Agreement) would not result
in North Side's liability for severance payments. In the event
of termination without just cause or resignation for good reason,
in either case in the absence of a change of control (as defined
in the Employment Agreement), North Side would be liable to pay
Mr. O'Brien severance as follows: (a) a payment, in lieu of
continued salary, equal to Mr. O'Brien's annual base salary rate
at termination or resignation multiplied by 2.99 or, if greater,
the number of years remaining in the unexpired term of the
Employment Agreement, payable in semi-monthly installments; and
(b) full and immediate vesting of all stock options then
outstanding to Mr. O'Brien. In the event of termination without
just cause or resignation with good reason, in either case after
a change of control (as defined in the Employment Agreement),
North Side would be liable to Mr. O'Brien for severance payments
as follows: (a) a payment, in lieu of continued salary, equal to
Mr. O'Brien's average annual base salary for the 5 years
immediately preceding termination or resignation multiplied by
2.99 or, if greater, payments remaining in the unexpired term of
the Employment Agreement, payable in a lump sum or bi-weekly
installments at Mr. O'Brien's discretion; and (b) at North Side's
expense, continued coverage under North Side's group health,
hospitalization, dental, life and other similar insurance and
benefit plans, or substantially similar coverage from another
source, for a period of three years or until Mr. O'Brien obtains
substantially the same coverage through another employer;
(c) full and immediate vesting of all stock options then
outstanding to Mr. O'Brien; and (d) to the extent that any
payments by North Side to Mr. O'Brien constitute "excess
parachute payments" subject to the excise tax imposed under
section 4999 of the Code, an additional monetary payment equal to
the amount of such excise tax. The approximate lump sum present
value of the contract damages that would be payable to
Mr. O'Brien under the Employment Agreement if his employment
terminated without just cause or if he had resigned for good
reason as of September 30, 1995 is $3,000,000 if such termination
or resignation followed a change of control (as defined in the
Employment Agreement) and $1,400,000 if such termination or
resignation did not follow such a change of control.
LONG TERM INCENTIVE AND CAPITAL ACCUMULATION PLAN
The Board of Directors of the Bank has adopted the Amended
and Restated Long-Term Incentive and Capital Accumulation Plan
("Option Plan"), which was approved by stockholders at the annual
meeting of stockholders on January 24, 1994 by the requisite
vote. The Option Plan authorizes the grant to certain officers
and employees of stock options ("Options") which qualify as
"Incentive Stock Options" under section 422 of the Code, of stock
options that do not qualify as incentive stock options
("Non-Qualified Stock Options"), and of stock appreciation rights
associated with stock options, which entitle the holder to
surrender his or her right to purchase shares of the Bank's
authorized but unissued Common Stock, par value $1.00 per share
("Shares"), by exercising the Option and to receive in return a
payment equal to the excess of the fair market value of the
Shares subject to the Option surrendered over the exercise price
("SARs"). Only employees of the Bank and subsidiaries thereof
are eligible to receive a grant of an Option or SAR pursuant to
the Option Plan.
The Stock and Executive Compensation Committee administers
the Option Plan and determines, in its sole discretion and in
accordance with the provisions of the Option Plan, the officers
and other employees to whom Options are granted, the type of
Option granted, the number of Shares to be covered by the Option,
the exercise price and the Option period.
Under the terms of the Option Plan, after providing for
option exercises and anti-dilution adjustments to reflect stock
dividends, there remain 414,142 Shares reserved for future
issuance.
There were no options or SARs granted to the Named Executive
Officers during the fiscal year ended September 30, 1995.
The following table provides information on unexercised
options or SARs held by the Named Executive Officers as of
September 30, 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES (1)
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS OPTIONS/SARS
ON VALUE AT FY-END(#) AT FY-END($)(2)
EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
Thomas M. O'Brien 0 0 66,568/43,682 $1,269,332/
$ 567,763
Donald C. Fleming 0 0 26,105/17,995 $ 492,145/
$ 235,073
Alissa E. Ballot 0 0 4,686/10,198 $ 62,791/
$ 132,024
Marie Alleva 0 0 4,686/10,198 $ 62,791/
$ 132,024
(1) Under the provisions of the Option Plan, all outstanding
Options and SARs become vested and fully exercisable upon
the occurrence of an actual or threatened change of control
of the Bank, as defined in the Option Plan.
(2) Based upon the difference between $30.25, the closing price
of the Common Stock as reported on the Nasdaq National
Market System on September 29, 1995, and the respective
exercise prices of the options (adjusted to give effect to
stock dividends paid on Common Stock.)
MANAGEMENT DEVELOPMENT AND RECOGNITION PLAN
The Board of Directors of the Bank has adopted the
Management Development and Recognition Plan ("MDR Plan"), under
which the Bank grants non-transferable and non-assignable awards
to officers of the Bank and its affiliates. The awards are in
the form of shares of Common Stock held in trust by the MDR Plan
(the "Awards"). The Stock and Executive Compensation Committee,
with the approval of the Board of Directors, selects the
individuals who participate in the MDR Plan and sets the terms
and conditions of such participation. As a general rule, upon
receipt of an Award, the recipient enjoys the immediate right to
all incidents of ownership of the shares of Common Stock subject
to such Award (including all voting, tender and dissenters'
rights, as well as the right to receive dividends), except for
the right to sell or otherwise dispose of such shares. Shares
subject to an Award are held in the MDR Trust for the benefit of
the Award recipient pending the vesting of such shares in
accordance with a vesting schedule established by the Stock and
Executive Compensation Committee upon making the Award. Shares
subject to an Award are distributed to the Award recipient as and
when they become vested. Termination of employment due to death,
disability, retirement, or change in control (as defined in the
MDR Plan) results in the immediate vesting and distribution of
all then unvested shares.
Pursuant to the terms of the MDR Plan, the Bank has
established an irrevocable trust ("MDR Trust"), the trustees of
which are Messrs. Gidron and Murphy and Ms. Healy. The trustees
of the MDR Trust are authorized to invest the assets of the MDR
Trust in shares of North Side Common Stock in an amount not to
exceed 10% of the outstanding shares of North Side Common Stock.
The MDR Trust currently holds 38,331 shares of North Side Common
Stock.
401(K) SAVINGS PLAN
The Bank maintains the 401(k) Savings Plan of North Side
Savings Bank, a defined contribution profit-sharing plan designed
to remain qualified under Section 401(a) and Section 401(k) of
the Code (the "401(k) Plan"). The 401(k) Plan generally covers
all salaried and hourly employees of the Bank who have completed
at least one year of eligibility service with the Bank. Under
the 401(k) Plan, a participant may elect to defer from 1% to 6%
of his or her base pay.
At the end of each calendar year, the Bank matches the
deferrals of each participant then employed by North Side and
each former participant who died, retired or became disabled
during the year at prescribed rates. The Bank's 401(k) Plan
contributions may be made in the form of cash, Common Stock or
any combination thereof, in the Bank's discretion. The 401(k)
Plan also permits the Bank to contribute additional amounts as
determined by the Board of Directors in its discretion.
The 401(k) Plan includes a fund that purchases shares of the
Bank's Common Stock (the "Bank Stock Fund"). Each participant
who directs the trustee to invest all or part of his account in
the Bank Stock Fund will have assets in his account applied to
the purchase of shares of the Common Stock. Purchases of the
Common Stock by participants under the 401(k) Plan will be
subject to the applicable legal purchase limitations, and
participants will direct the trustee how to vote their allocable
shares of the Common Stock. As of September 30, 1995, the 401(k)
Plan had $5,453,036 in assets, of which $1,494,253 was invested
in the Bank Stock Fund.
Effective October 1, 1993, the Bank adopted a Benefit
Preservation Plan to provide for the accrual of matching
contributions and related investment returns that may not be
accrued under the 401(k) Plan due to certain limits imposed under
the Code. See "Benefit Preservation Plan."
RETIREMENT PLAN
The Bank maintains a tax-qualified, defined benefit pension
plan ("Retirement Plan") for salaried employees of the Bank who
have attained age 21 and completed one year of eligibility
service. The Retirement Plan is maintained through the RSI
Retirement Trust, a group trust administered by the Retirement
System Group, Inc. ("RSG"). The Retirement Plan's assets are
primarily invested through Retirement System Investors Inc.
("RSII"), a wholly-owned subsidiary of RSG, or by investment
managers selected by RSII or the Bank. A portion of the
Retirement Plan's assets have been placed in a separate trust
with Marine Midland Bank, as trustee, for investment in Common
Stock. Voting rights associated with such Common Stock are
exercised as directed by the members of the Bank's Employee
Benefits Committee, or, if no direction is given by the Employee
Benefits Committee, by the trustee in its discretion. Certain
actuarial and administrative services are provided through
Retirement System Consultants Inc., which also is a wholly owned
subsidiary of RSG. The Retirement Plan is designed to comply
with the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
The following table sets forth, in straight life annuity
amounts, the estimated annual benefits payable to a participant
upon retirement at normal retirement age during the fiscal year
ended September 30, 1995 for the average highest earnings and
years of credited service classifications specified. These
amounts are subject to an offset for Social Security benefits.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
AVERAGE
ANNUAL YEARS OF SERVICE
EARNINGS 15 20 25(1) 30(1) 35(1)
- -------- -- -- ----- ----- -----
<C> <C> <C> <C> <C> <C>
$125,000 $ 46,875 $ 62,500 $ 75,000 $ 75,000 $ 75,000
150,000 56,250 75,000 90,000 90,000 90,500
175,000(3) 65,625 87,500 105,000 105,000 105,000
200,000(3) 75,000 100,000 120,000 120,000 120,000
225,000(3) 84,375 112,500 135,000(2) 135,000(2) 135,000(2)
250,000(3) 93,750 125,000(2) 150,000(2) 150,000(2) 150,000(2)
300,000(3) 112,500 150,000(2) 180,000(2) 180,000(2) 180,000(2)
400,000(3) 150,000(2) 200,000(2) 240,000(2) 240,000(2) 240,000(2)
450,000(3) 168,750(2) 225,000(2) 270,000(2) 270,000(2) 270,000(2)
500,000(3) 187,500(2) 250,000(2) 300,000(2) 300,000(2) 300,000(2)
550,000(3) 206,250(2) 275,000(2) 330,000(2) 330,000(2) 330,000(2)
600,000(3) 225,000(2) 300,000(2) 360,000(2) 360,000(2) 360,000(2)
</TABLE>
(1) Normal retirement benefits are limited to 60% of average
annual earnings.
(2) These are hypothetical benefits based upon the Retirement
Plan's normal retirement benefit formula. The maximum
annual benefit permitted under Section 415 of the Code in
1995 is $120,000, or if higher, participant's current
accrued benefit as of December 31, 1982 (but not more than
$136,425). The $120,000 ceiling will be adjusted to reflect
cost of living increases in 1996 and succeeding years in
accordance with Section 415 of the Code. The BPP will
provide the difference between the amounts appearing in this
table and the maximum amount allowed by the Code.
(3) The benefits shown corresponding to these compensation
ranges are hypothetical benefits based upon the Retirement
Plan's normal retirement benefit formula. Under Section
401(a)(17) of the Code, a participant's compensation in
excess of $150,000 (as adjusted to reflect cost-of-living
increases) is disregarded for purposes of determining
average annual earnings in plan years beginning in or after
1989 but before 1994. Benefits accrued as of the last day
of the plan year beginning in 1988 on the basis of
compensation in excess of $200,000 are preserved. The
$200,000 limit was increased to $209,200 in 1990, $222,220
in 1991, $228,860 in 1992, and $235,840 in 1993. The
Omnibus Budget Reconciliation Act of 1993 reduced this
limitation to $150,000 for plan years beginning in 1994,
indexed for cost-of-living adjustments in 1995 and
thereafter in accordance with Section 401(a)(17) of the
Code. The table reflects amounts payable in conjunction
with the BPP.
The benefits assume the participant would receive his
benefits under the Retirement Plan in the form of a straight life
annuity. The annual benefits shown in the table do not reflect
any reduction due to the Social Security benefit offset provided
by the Retirement Plan. The following table sets forth the years
of credited service (i.e., benefit service) as of September 30,
1995 for each of the Named Executive Officers as well as the
average annual earnings of each such individual as of
September 30, 1995:
AVERAGE ANNUAL YEARS OF
EARNINGS CREDITED
SERVICE
AS OF 9/30/95 AS OF 9/30/95
Thomas M. O'Brien $450,072 17.5
Donald C. Fleming $209,669 7.5
Alissa E. Ballot $100,521 3.5
Marie Alleva $ 89,282 3.25
BENEFIT PRESERVATION PLAN
The Bank adopted, effective October 1, 1993, an unfunded,
non-qualified Benefit Preservation Plan ("BPP") for certain
senior officers of the Bank to compensate such individuals who
participate in the Retirement Plan and the 401(k) Plan for
benefits lost under such plans by reason of benefit limits
imposed by sections 415, 401(a)(17) and 402(g) of the Code.
Benefits accrued under the BPP are payable on the later of the
first day of the month following the month in which the
individual attains 65 and the month following the month in which
the individual terminates employment with the Bank. Payment of
benefits with respect to the Retirement Plan under the BPP is
made in the same form as payments under the Bank's Retirement
Plan, unless the participant elects an alternative option.
Payments with respect to benefits under the 401(k) Plan are
payable in 15 annual installments unless the participant elects
another form of payment. Benefits accruing under the BPP with
respect to the Retirement Plan are reflected in the pension
table. Benefits accrued under the BPP with respect to the
401(k) Plan for the fiscal year ended September 30, 1995 are
included in the Summary Compensation Table.
CERTAIN TRANSACTIONS
The Bank has made, and may in the future make, loans in the
ordinary course of business to directors, executive and
non-executive officers and their respective associates. Except
with respect to loans to non-executive officers made pursuant to
the employee loan program described below, such loans are made on
substantially the same terms, including interest rate and
collateral, as those prevailing at the same time for comparable
transactions with persons unaffiliated with the Bank and do not
involve more than the normal risk of collectibility or present
other unfavorable features.
North Side offers home mortgage loans to its employees,
including officers other than executive officers, on terms which
are substantially the same as those offered for comparable
transactions with persons unaffiliated with the Bank at the time
the loan is made, except that the Bank waives the application fee
and 50% of the points, if any. Pursuant to Regulation O of the
Board of Governors of the Federal Reserve System, made applicable
to the Bank by FDIC regulations, as well as comparable
regulations under the New York Banking Law, extensions of credit
to directors and "executive officers" must be on terms
substantially the same as those prevailing at the time for
comparable transactions with persons unaffiliated with the Bank.
In the judgment of management of the Bank, loans made to
employees as described above do not involve more than the normal
risk of collectibility.
PROPOSAL II
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Bank has appointed KPMG Peat
Marwick LLP as independent auditors of the Bank for the year
ending September 30, 1996, and has further directed that the
selection of such auditors be submitted for ratification by the
stockholders at the Annual Meeting. The Bank has been advised by
KPMG Peat Marwick LLP that neither that firm nor any of its
associates has any relationship with the Bank or its subsidiaries
other than the usual relationship that exists between independent
certified public accountants and clients. KPMG Peat Marwick LLP
will have a representative at the Annual Meeting who will have an
opportunity to make a statement, if he or she so desires, and who
will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS
INDEPENDENT AUDITORS FOR THE YEAR ENDING SEPTEMBER 30, 1996. THE
PROPOSAL WILL BE ADOPTED IF APPROVED BY THE HOLDERS OF A MAJORITY
OF THE SHARES OF COMMON STOCK VOTING ON THE PROPOSAL.
OTHER MATTERS WHICH MAY BE PRESENTED
FOR ACTION AT THE MEETING
Management is not aware of any matter other than those set
forth in the Notice of Annual Meeting of Stockholders that is to
be presented for action at this Annual Meeting. If any other
matter is presented properly for action at the meeting, it is the
intention of the persons named in the attached form of proxy to
vote thereon in accordance with their judgment pursuant to the
discretionary authority conferred by the proxy.
STOCKHOLDER PROPOSALS
Any stockholder may make any other proposal at the next
Annual Meeting and the same may be considered if such proposal is
stated in writing and contains the information set forth in
Article II, Section 16 of the Bank's Bylaws, and is submitted to
the Secretary of the Bank not later than the date which is
fifteen days before the anniversary date of this Proxy Statement.
In accordance with the rules of the FDIC, any stockholder
who wishes to present a proposal for action at the Annual Meeting
of Stockholders in January 1997 and have such proposal included
in the Proxy Statement with respect to such meeting must submit
such proposal so that it is received at the Bank's principal
executive offices no later than September 27, 1996. If such
proposal is in compliance with all applicable requirements, it
will be included in the Proxy Statement and set forth on the form
of proxy issued for such Annual Meeting. Please send any such
proposal by certified mail, return receipt requested.
ANNUAL REPORTS AND FINANCIAL STATEMENTS
A copy of the Bank's Annual Report to Stockholders for the
year ended September 30, 1995 accompanies this Proxy Statement.
Additional copies of the Bank's Annual Report to Stockholders may
be obtained by written request to the Secretary of the Bank at
the address indicated below. Such annual report is not part of
the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST, THE BANK WILL FURNISH TO
ANY STOCKHOLDER WITHOUT CHARGE A COPY OF THE BANK'S ANNUAL REPORT
ON FORM F-2 FOR THE YEAR ENDED SEPTEMBER 30, 1995 (EXCLUDING
EXHIBITS THERETO) REQUIRED TO BE FILED WITH THE FDIC UNDER THE
EXCHANGE ACT. SUCH WRITTEN REQUEST SHOULD BE DIRECTED TO JUDITH
A. MACGREGOR, NORTH SIDE SAVINGS BANK, 170 TULIP AVENUE, FLORAL
PARK, NEW YORK 11001. THE FORM F-2 IS NOT PART OF THE PROXY
SOLICITATION.
COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT
Under the securities laws of the United States, the Bank's
directors, its executive officers, and any person holding more
than ten percent of the Bank's Common Stock are required to file
initial reports of ownership of the Bank's Common Stock and
reports of changes in that ownership with the FDIC and the
National Association of Securities Dealers, Inc. Specific due
dates for these reports have been established and the Bank is
required to disclose in this Proxy Statement any failure to file
by these dates during fiscal 1995. During 1995, all these filing
requirements were satisfied, except that Martin J. Brady, Senior
Vice President, failed to timely file one Form F-8 with respect
to one transaction, which failure was subsequently corrected. In
making these disclosures, the Bank has relied solely on written
representations of its directors and executive officers and
copies of the reports that they have filed with the FDIC.
MISCELLANEOUS
The cost of solicitation of proxies will be borne by the
Bank. The Bank will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to the beneficial
owners of the Bank's Common Stock. In addition to solicitations
by mail, directors, officers and employees of the Bank may
solicit proxies personally or by telephone without additional
compensation.
IMPORTANT--PLEASE SIGN, DATE AND MAIL YOUR PROXY CARD
By Order of the Board of Directors,
[SIGNATURE]
Judith A. MacGregor
Corporate Secretary
December 22, 1995
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Restated Organization Certificate of North Side,
effective upon the Conversion, authorized the issuance of up to
10,000,000 shares of Common Stock, $1.00 par value per share, and
5,000,000 shares of preferred stock, $1.00 par value per share.
Each share of Common Stock will have the same relative rights as,
and will be identical in all respects with, each other share of
Common Stock.
COMMON STOCK
DIVIDENDS. Subject to the limitations which are imposed by
the Conversion Regulations, the holders of Common Stock will be
entitled to receive and to share equally in such dividends as may
be declared by the Board of Directors of North Side out of funds
legally available therefor.
VOTING RIGHTS. Upon consummation of the Conversion, the
holders of Common Stock will possess exclusive voting rights in
North Side. Each holder of shares of Common Stock will be
entitled to one vote for each share held on all matters submitted
to a vote of stockholders. North Side's Restated Organization
Certificate provides that stockholders will not be permitted to
cumulate their votes for the election of directors.
SPECIAL STOCKHOLDERS' MEETINGS. Special meetings of the
stockholders may be called at any time by the Board of Directors,
the Chairman of the Board, the President or the holders of a
majority of the outstanding capital stock of North Side entitled
to vote at the meeting.
LIQUIDATION. In the event of any liquidation, dissolution,
or winding up of North Side, the holders of Common Stock will be
entitled to receive all assets of North Side available for
distribution in cash or in kind after payment of all debts and
liabilities of North Side (including all deposit accounts with
accrued interest thereon) and after distribution of the balance
in the special liquidation account to Eligible Account Holders
and distributions with respect to any preferred stock
outstanding.
REDEMPTION. Holders of Common Stock will not be entitled to
preemptive rights with respect to any shares of North Side which
may be issued subsequent to the Conversion. The Common Stock
will not be subject to call for redemption and under New York law
cannot be redeemed. Upon receipt by North Side of the full
specified purchase price therefor (less any Underwriters'
discount applicable thereto), the Common Stock will be fully paid
and nonassessable.
PREFERRED STOCK.
The preferred stock may be issued at such time after the
Conversion and upon such terms as the Board of Directors of North
Side may determine in its discretion. Although there is no
present intention to issue any shares of preferred stock after
the Conversion, any shares of preferred stock issued would
generally entitle the holders thereof to priority over common
stockholders with regard to the payment of dividends and any
liquidation distributions. In addition, the preferred
stockholders could be given certain voting rights which could
adversely affect the voting power of common stockholders.
TRANSFER AGENT
The transfer agent for the Bank's Common Stock is American
Stock Transfer Company, New York, New York.
ANTI-TAKEOVER PROVISIONS
PROVISIONS IN RESTATED ORGANIZATION CERTIFICATE AND BYLAWS
The following discussion is a general summary of certain
provisions of the Bank's proposed Restated Organization
Certificate and bylaws which may be deemed to have an "anti-
takeover" effect. The following description of certain of these
provisions is necessarily general and reference should be made in
each case to the Restated Organization Certificate and bylaws,
which are part of the Bank's application to the Superintendent.
Although the Board of Trustees of North Side is not aware of
any effort that might be made to obtain control of North Side
after the Conversion, the Board of Trustees believes that it is
appropriate to adopt certain provisions to the extent permitted
by applicable regulations to protect the interests of North Side
and its stockholders from any hostile takeover. In addition to
the provisions described below, the Board of Trustees may adopt
additional provisions of an anti-takeover nature in the future,
although there is no specific intent to do so at this time. Such
provisions, to the extent they involve amendments to the Restated
Organization Certificate, would be subject to stockholder
approval.
DIRECTORS. Certain provisions of the Bank's Restated
Organization Certificate and bylaws will impede changes in
majority control of the Board of Directors. The Bank's Restated
Organization Certificate provides that the Board of Directors of
the Bank will be divided into three classes, with Directors in
each class elected for three-year staggered terms. The Restated
Organization Certificate provides that removal of a Director for
cause, as defined, required the approval of not less than a
majority of stockholders entitled to vote, and without cause, as
defined, requires approval of not less than 75% of the
stockholders entitled to vote. The bylaws also provided that
vacancies not exceeding one-third of the Board, including
vacancies created by an increase in the number of Directors, may
be filled for the unexpired term by a majority vote of the
Directors then in office. Finally, the bylaws impose certain
restrictions on the nomination by stockholders of candidates for
election to the Board of Directors.
CALL OF SPECIAL MEETINGS. The Restated Organization
Certificate contains a provision which provides that a special
meeting of stockholders may be called at any time by the
President of the Bank, the Chairman of the Board of Directors, a
majority of the Board of Directors, or upon the request of a
majority of the outstanding capital stock.
CUMULATIVE VOTING. The Bank's Restated Organization
Certificate denies cumulative voting rights in the election of
Directors.
AUTHORIZATION OF PREFERRED STOCK. The Restated Organization
Certificate of the Bank authorized 5,000,000 shares of serial
preferred stock, $1.00 par value. The Bank is authorized to
issue preferred stock from time to time in one or more series
subject to applicable provisions of law, and the Board of
Directors is authorized, without stockholder approval, to fix the
designations, powers, preferences, and relative participating,
optional and other special rights of such shares, including
voting rights (which could be multiple or as a separate class)
and conversion rights. In the event of a proposed merger, tender
offer or other attempt to gain control of the Bank of which
management does not approve, it might be possible for the Board
of Directors to authorize the issuance of a series of preferred
stock with rights and preferences that could impede the
completion of such a transaction. An effect of the possible
issuance of preferred stock, therefore, may be to deter a future
takeover attempt. Such an issuance could also adversely affect
the voting power of common stockholders. The Board of Directors
has no present plans or understandings for the issuance of any
preferred stock and does not intend to issue any preferred stock
except on terms which the Board deems to be in the best interests
of the Bank and its stockholders.
LIMITATIONS ON ACQUISITIONS OF CONTROL. The Bank's Restated
Organization Certificate prohibits any person (including an
individual, company or group acting in concert), directly or
indirectly, from offering to acquire or acquiring beneficial
ownership of more than 10% of any class of equity security of the
Bank for a period of three years from the consummation of the
Conversion. These provisions would not apply to a transaction in
which the Bank forms a holding company without change in
respective beneficial ownership interest of its stockholders or
to the purchase of shares by underwriters in connection with a
public offering. Shares acquired in excess of these limitations
would not be entitled to vote or to take other stockholder action
or be counted in determining the total number of outstanding
shares of voting stock in connection with any matter involving
stockholder action.
PROVISIONS RELATING TO AUTHORIZATION OF CERTAIN BUSINESS
COMBINATIONS. Article XI of the Bank's Restated Organization
Certificate requires, unless all stockholders are treated fairly
and other conditions are met or unless otherwise approved by the
Board of Directors, a supermajority stockholder vote requirement
for certain "Business Combinations" (as defined) with or proposed
by a "Related Person" (as defined). Under this provision, a
Business Combination would have to comply with a number of
specified conditions, including conditions designed to ensure
that the Bank's stockholders receive a minimum price for their
stock upon consummation of the Business Combination. Article XI
will require the approval of the holders of 75% of the Bank's
outstanding Voting Shares and an Independent Majority of
Stockholders as a condition to specified Business Combinations
with or proposed by a Related Person, except in cases in which
the transaction (1) has been approved by a majority of the whole
Board of Directors before the person involved became a Related
Person, (2) has otherwise been approved by 75% of the Whole Board
of Directors and by a majority of the directors who are not
affiliated with the Related Person (defined as "Continuing
Directors"), (3) is between the Bank and a subsidiary of the Bank
and certain conditions are met, or (4) meets certain minimum
price criteria and procedural conditions described below. If the
Business Combination satisfies any one of these four exceptions,
the normal requirements of applicable law, regulations and other
provisions of the Restated Organization Certificate would apply.
The term "Related Person" includes persons (other than the
Bank and subsidiaries or employee benefit plans (including the
trustees of such plans) of the Bank) directly or indirectly
owning or having the right to acquire or vote more than 10% of
the outstanding voting stock of the Bank.
A "Business Combination" is defined to include the following
transactions with, or proposed by, a Related Person: (a) a
merger or consolidation of the Bank or any of its subsidiaries;
(b) the sale or other disposition by the Bank or any of its
subsidiaries of assets having an aggregate fair market value of
more than 10% of the total consolidated assets of the Bank and
its subsidiaries as of the end of the most recent fiscal year;
(c) the issuance or transfer of stock or other securities of the
Bank or any of its subsidiaries in exchange for cash or property
(including stock or other securities) having an aggregate fair
market value of more than 10% of the total consolidated assets of
the Bank and its subsidiaries as of the end of the most recent
fiscal year; (d) the adoption of any plan or proposal to
liquidate or dissolve the Bank; (e) any reclassification of
securities, recapitalization, consolidation or other transaction
which has the direct or indirect effect of increasing the actual
or potential voting power of a Related Person in any class or
series of stock of the Bank or any of its subsidiaries; or (f)
any agreement, contract or other arrangement providing directly
or indirectly for any of the foregoing.
Article XI requires the consideration being paid to the
Bank's stockholders in a Business Combination not approved by the
specified votes described above to be either cash or the same
type of consideration used by the Related Person in acquiring the
largest portion of the Bank's Voting Stock (defined as shares
entitled to vote generally in the election of directors) that it
previously acquired. The fair market value of any consideration
other than cash would be conclusively determined by a majority of
the Continuing Directors.
In the case of cash payments to holders of Common Stock, the
fair market value per share of such payments would have to be at
least equal in value to the higher of (i) the highest per share
price paid by the Related Person in acquiring any shares of the
Bank's Common Stock, or (ii) the fair market value per share of
Common Stock on the date the Business Combination is first
proposed. Provision also is made for the amount to be paid to
holders of Preferred Stock in the event the Bank has issued
Preferred Stock.
If consideration other than cash is used to satisfy the
minimum price criteria, the fair market value of the property to
be used is to be determined as of the date of consummation of the
Business Combination. Article XI gives a majority of the
Continuing Directors the power to determine the fair market value
of any assets, securities or other property. As a result of
these provisions, the Related Person may not be able to calculate
the value of the non-cash consideration offered at the time the
Business Combination is proposed and may not be able to determine
with certainty if the minimum price criteria have been met. This
potential uncertainly is likely to encourage the Related Person
to negotiate in advance the terms of the proposed Business
Combination with the Continuing Directors.
It should be noted that under Article XI, the Related Person
would be required to meet the minimum price criteria with respect
to each class or series of the Bank's capital stock, whether or
not the Related Person owned shares of that class or series prior
to proposing the Business Combination. If the transaction did
not involve the receipt of any cash or other property by the
stockholders generally, such as a sale of assets or an issuance
of the Bank's securities to a Related Person, then the minimum
price criteria would not apply and either of the following would
be required: (1) approval by 75% of the Voting Shares and by an
Independent Majority of Stockholders, or (2) approval by 75% of
the Whole Board of Directors and by a majority of the Continuing
Directors.
Additionally, the document sent to stockholders in
connection with any Business Combination must contain a
recommendation of the Continuing Directors as to the advisability
of the proposed transaction and an opinion of an investment
banking firm as to the fairness of the transaction to the
stockholders.
In the event the Related Person complies with the price and
procedural requirements but seeks to take advantage of his or
here position with the Bank in effecting a Business Combination,
such as by receiving a loan from the Bank, approval by 75% of the
Voting Shares and by an Independent Majority of Stockholder or
approval by 75% of the Whole Board of Directors and by a Majority
of the Continuing Directors would be required.
For three years following the consummation of the
Conversion, no amendment to Article XI may be made without (1)
the affirmative vote of a majority of the Whole Board of
Directors, including a majority of the Continuing Directors, and
(2) the affirmative vote of 75% or more of the outstanding Voting
Shares, voting separately as a class and an Independent Majority
of Stockholders. However, if 75% of the Whole Board of
Directors, including a majority of the Continuing Directors
approves of such amendment, the vote required shall be that which
is otherwise required by applicable law. Article XI shall expire
after three years from the effective date of the Conversion
unless it is readopted prior to such date by a majority vote of
the outstanding Voting Shares.
AMENDMENT TO RESTATED ORGANIZATION CERTIFICATE AND BYLAWS.
Except with respect to Article XI described above, for three
years following the consummation of the Conversion, amendments to
the Restated Organization Certificate must be approved by the
Bank's Board of Directors and also by 75% of the total votes
eligible to be cast at a legal meeting, provided, however, that
where 75% of the Board approves of the provision only a majority
stockholder vote is required for adoption. Thereafter,
amendments require two-thirds shareholder approval, unless
approved or ratified by 75% of the Board, in which case only a
majority stockholder vote is required.
The Proposed bylaws may be amended by a majority vote of the
Board of Directors or of the stockholders.
PURPOSE AND ANTI-TAKEOVER EFFECTS OF THE BANK'S RESTATED
ORGANIZATION CERTIFICATE AND BYLAWS. The Board of Trustees of
the Bank believes that the provisions described above are prudent
and will reduce the Bank's vulnerability to takeover attempts and
certain other transactions which have not been negotiated with
and approved by the Bank's Board of Directors. These provisions
will also assist North Side in the orderly deployment of the
Conversion proceeds during the initial period after the
Conversion. The Board of Trustees believes these provisions are
in the best interest of the Bank and its stockholders. In the
Board's judgment, it is in the best position to determine the
true value of the Bank and to negotiate more effectively for what
may be in the best interests of its stockholders. Accordingly,
the Board believes that it is in the best interests of the Bank
and its stockholders to encourage potential acquirors to
negotiate directly with the Board of Directors and that these
provisions will encourage such negotiations and discourage
hostile takeover attempts. It is also the Board's view that
these provisions should not discourage persons from proposing a
merger or other transaction at prices reflective of the true
value of the Bank and where the transaction is in the best
interests of all stockholders.
A number of companies have recently been the subject of
tender offers for or other acquisitions of less than all of their
outstanding stock. In many cases, such purchases have been
followed by business combinations in which the tender offeror or
other purchaser has paid a lower price for the remaining
outstanding shares than the price it paid in acquiring its
original interest in the company and/or has made its payments in
less desirable form. The Board believes that the stockholders
who are "squeezed out" in such a second-step transaction often
are not treated as fairly as stockholders who sold their shares
earlier, yet have no opportunity to prevent or affect the terms
of the business combination. Fear that such a second-step
transaction may be on unfavorable terms also may cause
stockholders to tender shares pursuant to an offer at a price
which would otherwise not be acceptable to such stockholders.
This "coercive" effect of tender offers providing for a less
attractive second-step transaction can result in an acquisition
of a company on terms which are not in the best interests of
stockholders.
Furthermore, the Board of Trustees of the Bank believes that
substantial inequities can be imposed upon the remaining
stockholders after a publicly-held company has come under the
control of another person or company who then proceeds to combine
the acquired company with another company the acquiror also
controls. Because the acquiror controls both sides of the
negotiations, the terms of such a business combination will not
reflect arm's length bargaining, and thus may not assure fair
treatment of the remaining stockholders. In connection with such
a business combination, significant changes in the policies or
management of the acquired company also may be effected.
Federal securities laws and regulations applicable to
certain business combinations generally govern the disclosure
required to be made to stockholders in order to consummate
business transactions, but do not assure stockholders that the
terms of the business combination (i.e., what stockholders will
receive for their shares) will be fair to them, or that they can
prevent the business combination. In the case of some but not
all business combinations, minority stockholders have the right
to dissent from the transaction and to receive the fair or
appraised value of their stock in cash. Exercise of this right,
however, may involve significant expense, delay and uncertainty
to the dissenting stockholders.
Article XI is designed to help bridge these gaps in the
protection afforded to minority stockholders by applicable law by
requiring approval by 75% of the Voting Stock and an Independent
Majority of Stockholders, approval by 75% of the Whole Board of
Directors and by a Majority of the Continuing Directors, or
compliance with conditions designed to achieve substantive
fairness for minority stockholders to effect a Business
Combination. Article XI would help prevent a purchaser who
acquired control of the Bank from subsequently forcing minority
stockholders to sell or exchange their shares for consideration
in a less desirable form or at a lower price than that which the
purchaser paid to acquire its controlling interest. Article XI
also is structured to prevent a Related Person from self-dealing
or otherwise taking advantage of its equity position in the Bank
by using the Bank's resources to finance the proposed Business
Combination or otherwise benefiting itself in a manner not
available to all stockholders.
By requiring a purchaser to pay stockholders a higher price
for their shares and/or structure the transaction differently
than otherwise would be the case, Article XI should increase the
likelihood that a purchaser will negotiate directly with the
Bank. Such negotiations will allow persons, including the
Directors of the Bank not affiliated with the purchaser, the
opportunity to evaluate the terms of the Business Combination, as
well as other alternatives available to the Bank. The Directors'
determination can be made without the threat that the purchaser
will unilaterally impose a transaction on stockholders and, as
discussed above, the threat of imminent removal from their
positions as Directors. Accordingly, Directors will be able to
consider acquisition proposals on their merits and to negotiate
effectively on behalf of all stockholders.
Although designed to encourage potential acquirors to
negotiate with the Bank and to avoid tactics which may not treat
all stockholders equally, Article XI may discourage tender offers
and other acquisitions of the Bank's stock. The requirement that
a subsequent Business Combination satisfy certain minimum price
and procedural requirements also may make the acquisition of all
of the Bank's stock too costly, and consequently may discourage
acquisitions of large blocks of stock and delay or prevent a
change in the management of the Bank. Adoption of these
amendments could tend to reduce the temporary fluctuations in the
market price of the Bank's stock which are caused by such
accumulations. Accordingly, stockholders could be deprived of
certain opportunities to sell their stock at a temporarily higher
market price. The Board of Trustees, however, has concluded that
the potential benefits of Article XI outweigh its possible
disadvantages.
FEDERAL DEPOSIT INSURANCE CORPORATION
Washington, D.C. 20429
________________
FORM F-10
REGISTRATION FOR ADDITIONAL CLASS OF SECURITIES
OF A BANK UNDER SECTION 12(b) OR 12(g) OF THE
SECURITIES EXCHANGE ACT OF 1934
________________
North Side Savings Bank
(Exact name of bank as specified in its charter)
170 Tulip Avenue
Floral Park, New York
(Address of principal executive offices)
11001
(zip code)
________________
Securities to be registered pursuant to Section 12(b) of the Act:
None
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Stock Purchase Rights
ITEM 1. STOCK TO BE REGISTERED.
Not Applicable.
ITEM 2. DEBT SECURITIES TO BE REGISTERED.
Not Applicable.
ITEM 3. OTHER SECURITIES TO BE REGISTERED.
On April 15, 1996, the Board of Directors (the
"Board") of North Side Savings Bank (the "Bank") declared a
dividend distribution of one Right for each outstanding
share of common stock, par value $1.00 per share, of the
Bank (the "Common Stock") to stockholders of record at the
close of business on April 30, 1996 (the "Record Date").
Each right entitles the registered holder to purchase from
the Bank a unit (a "Unit") consisting of one one-hundredth
of a share of Series A Junior Participating Preferred Stock,
par value $1.00 per share (the "Preferred Stock"), at a
purchase price of $100 per Unit, subject to adjustment. The
description and terms of the Rights are set forth in the
Rights Agreement (the "Rights Agreement"), dated as of April
18, 1996, between the Bank and American Stock Transfer and
Trust Company, a New York corporation, as Rights Agent (the
"Rights Agent").
Initially, the Rights will be attached to all
Common Stock certificates representing shares then out-
standing, and no separate Rights certificate will be
distributed. The Rights will separate from the Common
Stock upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of
10% or more of the outstanding shares of Common Stock (the
"Stock Acquisition Date") or (ii) 10 business days (or
such later date as the Board shall determine) following
the commencement of a tender offer or exchange offer that
would result in a person or group beneficially owning 10%
or more of such outstanding shares of Common Stock (the
earlier of (i) and (ii), the "Distribution Date"). Until
the Distribution Date, (i) the Rights will be evidenced by
the Common Stock certificates and will be transferred with
and only with such Common Stock certificates, (ii) new
Common Stock certificates issued subsequent to the Record
Date will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for trans-
fer of any certificates for Common Stock outstanding will
also constitute the transfer of the Rights associated with
the Common Stock represented by such certificate.
The Rights are not exercisable until the Distri-
bution Date and will expire at the close of business on
April 30, 2006 unless earlier redeemed by the Bank as
described below. At no time will the Rights have any
voting power.
As soon as practicable after the Distribution
Date, Rights certificates will be mailed to holders of
record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights
certificates alone will represent the Rights. Except as
otherwise determined by the Board and except in connection
with shares of Common Stock issued upon the exercise of
employee stock options or upon the exercise, conversion or
exchange of securities of the Bank, only shares of Common
Stock issued prior to the Distribution Date will be issued
with Rights.
In the event that any person or group becomes an
Acquiring Person (unless the event causing such person or
group to become an Acquiring Person is a tender or ex-
change offer for all outstanding shares of the Bank, at a
price determined by a majority of the independent direc-
tors of the Bank who are not representatives, nominees,
Affiliates or Associates of an Acquiring Person to be fair
and otherwise in the best interest of the Bank and its
stockholders after receiving advice from one or more
investment banking firms), each holder of a Right will
thereafter have the right to receive, upon exercise,
Common Stock (or, in certain circumstances, cash, property
or other securities of the Bank), having a value equal to
two times the exercise price of the Right. Notwithstand-
ing any of the foregoing, following the occurrence of the
event set forth in this paragraph, all Rights that are, or
(under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring
Person will be null and void. However, Rights are not
exercisable following the occurrence of the event set
forth above until such time as the Rights are no longer
redeemable by the Bank as set forth below.
In the event that following the Stock Acquisi-
tion Date, (i) the Bank engages in a merger or business
combination transaction in which the Bank is not the
surviving corporation, (ii) the Bank engages in a merger
or business combination transaction in which the Bank is
the surviving corporation and the Common Stock of the Bank
is changed or exchanged (other than, in the case of claus-
es (i) and (ii), a merger or business combination that
follows an offer described in the previous paragraph and
that meets certain other requirements), or (iii) 50% or
more of the Bank's assets or earning power is sold or
transferred, each holder of a Right (except Rights which
have previously been voided as set forth above) shall
thereafter have the right to receive, upon exercise of the
Right, Common Stock of the acquiring company having a
value equal to two times the exercise price of the Right.
The Purchase Price payable, and the number of
Units of Preferred Stock or other securities or property
issuable upon exercise of the Rights, are subject to
adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combi-
nation or reclassification of, the Preferred Stock, (ii)
if holders of the Preferred Stock are granted certain
rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market
price of the Preferred Stock, or (iii) upon the distribu-
tion to holders of the Preferred Stock of evidences of
indebtedness or assets (excluding regular quarterly cash
dividends) or of subscription rights or warrants (other
than those referred to above).
With certain exceptions, no adjustments in the
Purchase Price will be required until cumulative adjust-
ments amount to at least 1% of the Purchase Price. No
fractional Units will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price
of the Preferred Stock on the last trading date prior to
the date of exercise.
At any time until ten days following the Stock
Acquisition Date, the Bank may redeem the Rights in whole,
but not in part, at a price of $0.01 per Right (payable in
cash, stock or other consideration deemed appropriate by
the Board). Immediately upon the action of the Board
ordering redemption of the Rights, the Rights will termi-
nate and the only right of the holders of Rights will be
to receive the $0.01 redemption price.
Until a Right is exercised, the holder thereof,
as such, will have no rights as a stockholder of the Bank,
including, without limitation, the right to vote or to
receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Bank, stock-
holders may, depending upon the circumstances, recognize
taxable income in the event that the Rights become exer-
cisable for Common Stock (or other consideration) of the
Bank as set forth above.
Any of the provisions of the Rights Agreement
may be amended by the Board prior to the Distribution
Date. After the Distribution Date, the provisions of the
Rights Agreement may be amended by the Board in order to
cure any ambiguity, to make changes which do not adversely
affect the interests of holders of Rights (excluding the
interest of any Acquiring Person), or to shorten or
lengthen any time period under the Rights Agreement;
provided, however, that no amendment to adjust the time
period governing redemption shall be made at such time as
the Rights are not redeemable.
The Rights have certain anti-takeover effects.
The Rights will cause substantial dilution to a person or
group that attempts to acquire the Bank in certain circum-
stances. Accordingly, the existence of the Rights may
deter certain acquirors from making takeover proposals or
tender offers. However, the Rights are not intended to
prevent a takeover, but rather are designed to enhance the
ability of the Board to negotiate with a potential
acquiror on behalf of all of the stockholders.
The Rights Agreement between the Bank and the
Rights Agent specifying the terms of the Rights, which
includes as Exhibit B the Form of Rights Certificate, is
attached hereto as Exhibit 1 and is incorporated herein by
reference. The foregoing description of the Rights does
not purport to be complete and is qualified in its entire-
ty by reference to the Rights Agreement.
ITEM 4. EXHIBITS.
1. Rights Agreement, dated as of April 18, 1996,
between North Side Savings Bank and American Stock Trans-
fer and Trust Company, as Rights Agent, which includes as
Exhibit B thereto the Form of Rights Certificate.
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the bank has duly caused this regis-
tration statement to be signed on its behalf by the under-
signed, thereto duly authorized.
NORTH SIDE SAVINGS BANK
By: /s/ Thomas O'Brien
Name: Thomas O'Brien
Title: Chairman, Chief Executive
Officer and President
Date: April 23, 1996
RIGHTS PLAN
NORTH SIDE SAVINGS BANK
and
AMERICAN STOCK TRANSFER AND TRUST COMPANY
as Rights Agent
Rights Agreement
Dated as of April 18, 1996
Table of Contents
Section Page
1. Certain Definitions . . . . . . . . . . . 2
2. Appointment of Rights Agent . . . . . . . . 9
3. Issue of Rights Certificates . . . . . . . . 9
4. Form of Rights Certificates . . . . . . . 12
5. Countersignature and Registration . . . . 14
6. Transfer, Split Up, Combination and
Exchange of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen
Rights Certificates . . . . . . . . . . 15
7. Exercise of Rights; Purchase Price;
Expiration Date of Rights . . . . . . . 17
8. Cancellation and Destruction of Rights
Certificates . . . . . . . . . . . . . 21
9. Reservation and Availability of Capital
Stock . . . . . . . . . . . . . . . . . 22
10. Preferred Stock Record Date . . . . . . . 25
11. Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights . . 26
12. Certificate of Adjusted Purchase Price or
Number of Shares . . . . . . . . . . . 44
13. Consolidation, Merger or Sale or Transfer
of Assets or Earning Power . . . . . . 45
14. Fractional Rights and Fractional Shares . 50
15. Rights of Action . . . . . . . . . . . . . 53
16. Agreement of Rights Holders . . . . . . . 54
17. Rights Certificate Holder Not Deemed a
Stockholder . . . . . . . . . . . . . . 55
18. Concerning the Rights Agent . . . . . . . 56
19. Merger or Consolidation or Change of Name
of Rights Agent . . . . . . . . . . . . 57
20. Duties of Rights Agent . . . . . . . . . . 58
21. Change of Rights Agent . . . . . . . . . . 62
22. Issuance of New Rights Certificates . . . 64
23. Redemption and Termination . . . . . . . . 65
24. Notice of Certain Events . . . . . . . . . 66
25. Notices . . . . . . . . . . . . . . . . . 68
26. Supplements and Amendments . . . . . . . . 69
27. Successors . . . . . . . . . . . . . . . . 70
28. Determinations and Actions by the Board of
Directors, etc. . . . . . . . . . . . . 70
29. Benefits of this Agreement . . . . . . . . 71
30. Severability . . . . . . . . . . . . . . . 72
31. Governing Law . . . . . . . . . . . . . . 72
32. Counterparts . . . . . . . . . . . . . . . 73
33. Descriptive Headings . . . . . . . . . . . 73
Exhibit A -- Form of Certificate of Amendment
Exhibit B -- Form of Rights Certificate
Exhibit C -- Form of Summary of Rights
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of April 18, 1996
(the "Agreement"), between North Side Savings Bank, a New
York-chartered savings bank (the "Bank"), and American
Stock Transfer and Trust Company, a New York corporation
(the "Rights Agent").
W I T N E S S E T H
WHEREAS, on April 15, 1996 (the "Rights
Dividend Declaration Date"), the Board of Directors of
the Bank (the "Board) authorized and declared a dividend
distribution of one right for each share of Common Stock
(as hereinafter defined) of the Bank outstanding at the
close of business on April 30, 1996 (the "Record Date"),
and authorized the issuance of one Right (as such number
may hereinafter be adjusted pursuant to the provisions of
Section 11(p) hereof) for each share of Common Stock of
the Bank issued between the Record Date (whether
originally issued or delivered from the Bank's treasury)
and the Distribution Date (as hereinafter defined), each
Right initially representing the right to purchase one
one-hundredth of a share of Series A Junior Participating
Preferred Stock of the Bank having the rights, powers and
preferences set forth in the form of Certificate of
Amendment attached hereto as Exhibit A, upon the terms
and subject to the conditions hereinafter set forth (the
"Rights");
NOW, THEREFORE, in consideration of the
premises and the mutual agreements herein set forth, the
parties hereby agree as follows:
Section 1. Certain Definitions. For purposes
of this Agreement, the following terms have the meanings
indicated:
(a) "Acquiring Person" shall mean any
Person who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner
of 10% or more of the shares of Common Stock then
outstanding, but shall not include (i) the Bank, (ii) any
Subsidiary of the Bank, (iii) any employee benefit plan
of the Bank or of any Subsidiary of the Bank, (iv) any
Person or entity organized, appointed or established by
the Bank for or pursuant to the terms of any such plan,
(v) any Person who has reported or is required to report
such ownership (but less than 15%) on Form F-11A under
the Rules and Regulations of the FDIC (or any comparable
or successor report) or on Form F-11 under the Rules and
Regulations of the FDIC (or any comparable or successor
report) which Form F-11 does not state any intention to,
or reserve the right to, control or influence the
management or policies of the Bank or engage in any of
the actions specified in Item 4 of such Schedule (other
than the disposition of the Common Stock) and who, within
10 Business Days of being requested by the Bank to advise
it regarding the same, certifies to the Bank that such
Person acquired shares of Common Stock in excess of 9.9%
inadvertently or without knowledge of the terms of the
Rights and who, together with all Affiliates and
Associates, thereafter does not acquire additional shares
of Common Stock while the Beneficial Owner of 10% or more
of the shares of Common Stock then outstanding; provided,
however, that if the Person requested to so certify fails
to do so within 10 Business Days, then such Person shall
become an Acquiring Person immediately after such 10
Business Day period or (vi) any Person who becomes the
Beneficial Owner of 10% or more of the shares of Common
Stock then outstanding as a result of a reduction in the
number of shares of Common Stock outstanding due to the
repurchase of shares of Common Stock by the Bank unless
and until such Person, after becoming aware that such
Person has become the Beneficial Owner of 10% or more of
the then outstanding shares of Common Stock, acquires
beneficial ownership of additional shares of Common Stock
representing 1% or more of the shares of Common Stock
then outstanding.
(b) "Act" shall mean the Securities Act
of 1933, as amended.
(c) "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in
Section 335.102 of the Rules and Regulations of the FDIC
in effect on the date of this Agreement.
(d) A Person shall be deemed the
"Beneficial Owner" of, and shall be deemed to
"beneficially own," any securities:
(i) which such Person or any of
such Person's Affiliates or Associates,
directly or indirectly, has the right to
acquire (whether such right is exercisable
immediately or only after the passage of time)
pursuant to any agreement, arrangement or
understanding (whether or not in writing) or
upon the exercise of conversion rights,
exchange rights, rights, warrants or options,
or otherwise; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of,
or to "beneficially own," (A) securities
tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's
Affiliates or Associates until such tendered
securities are accepted for purchase or
exchange, or (B) securities issuable upon
exercise of Rights at any time prior to the
occurrence of a Triggering Event, or (C)
securities issuable upon exercise of Rights
from and after the occurrence of a Triggering
Event which Rights were acquired by such Person
or any of such Person's Affiliates or
Associates prior to the Distribution Date or
pursuant to Section 3(a) or Section 22 hereof
(the "Original Rights") or pursuant to Section
11(i) hereof in connection with an adjustment
made with respect to any Original Rights;
(ii) which such Person or any of
such Person's Affiliates or Associates,
directly or indirectly, has the right to vote
or dispose of or has "beneficial ownership" of
(as determined pursuant to Section 335.403 of
the Rules and Regulations of the FDIC in effect
on the date of this Agreement), including
pursuant to any agreement, arrangement or
understanding, whether or not in writing;
provided, however, that a Person shall not be
deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this
subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such
security if such agreement, arrangement or
understanding: (A) arises solely from a
revocable proxy given in response to a public
proxy or consent solicitation made pursuant to,
and in accordance with, the applicable
provisions of the Rules and Regulations of the
FDIC, and (B) is not also then reportable by
such Person on Form F-11 under the Rules and
Regulations of the FDIC (or any comparable or
successor report); or
(iii) which are beneficially owned,
directly or indirectly, by any other Person (or
any Affiliate or Associate thereof) with which
such Person (or any of such Person's Affiliates
or Associates) has any agreement, arrangement
or understanding (whether or not in writing),
for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii)
of this paragraph (d)) or disposing of any
voting securities of the Bank;
provided, however, that nothing in this paragraph (d)
shall cause a Person engaged in business as an
underwriter of securities to be the "Beneficial Owner"
of, or to "beneficially own," any securities acquired
through such person's participation in good faith in a
firm commitment underwriting until the expiration of
forty days after the date of such acquisition.
(e) "Business Day" shall mean any day
other than a Saturday, Sunday or a day on which banking
institutions in the State of New York are authorized or
obligated by law or executive order to close.
(f) "Close of business" on any given date
shall mean 5:00 P.M., New York time, on such date;
provided, however, that if such date is not a Business
Day it shall mean 5:00 P.M., New York time, on the next
succeeding Business Day.
(g) "Common Stock" shall mean the common
stock, $1.00 par value, of the Bank, except that "Common
Stock" when used with reference to any Person other than
the Bank shall mean the capital stock of such Person with
the greatest voting power, or the equity securities or
other equity interest having power to control or direct
the management, of such Person.
(h) "Common Stock Equivalents" shall have
the meaning set forth in Section 11(a)(iii) hereof.
(i) "Current Market Price" shall have the
meaning set forth in Section 11(d)(i) hereof.
(j) "Current Value" shall have the
meaning set in Section 11(a)(iii) hereof.
(k) "Distribution Date" shall have the
meaning set forth in Section 3(a) hereof.
(l) "Exchange Act" shall mean the
Securities Exchange Act of 1934, as amended.
(m) "Expiration Date" shall have the
meaning set forth in Section 7(a) hereof.
(n) "FDIC" shall mean the Federal Deposit
Insurance Corporation.
(o) "Final Expiration Date" shall have
the meaning set forth in Section 7(a) hereof.
(p) "Person" shall mean any individual,
firm, corporation, partnership or other entity.
(q) "Preferred Stock" shall mean shares
of Series A Junior Participating Preferred Stock, $1.00
par value, of the Bank, and, to the extent that there is
not a sufficient number of shares of Series A Junior
Participating Preferred Stock authorized to permit the
full exercise of the Rights, any other series of
Preferred Stock, $1.00 par value, of the Bank designated
for such purpose containing terms substantially similar
to the terms of the Series A Junior Participating
Preferred Stock.
(r) "Principal Party" shall have the
meaning set forth in Section 13(b) hereof.
(s) "Purchase Price" shall have the
meaning set forth in Section 4(a) hereof.
(t) "Redemption Price" shall have the
meaning set forth in Section 23(a) hereof.
(u) "Record Date" shall have the meaning
set forth in the WHEREAS clause at the beginning of the
Agreement.
(v) "Rights" shall have the meaning set
forth in the WHEREAS clause at the beginning of the
Agreement.
(w) "Rights Certificates" shall have the
meaning set forth in Section 3(a) hereof.
(x) "Section 11(a)(ii) Event" shall mean
any event described in Section 11(a)(ii) hereof.
(y) "Section 11(a)(ii) Trigger Date"
shall have the meaning set forth in Section 11(a)(iii)
hereof.
(z) "Section 13 Event" shall mean any
event described in clauses (x), (y) or (z) of Section
13(a) hereof.
(aa) "Spread" shall have the meaning set
forth in Section 11(a)(iii) hereof.
(aa) "Stock Acquisition Date" shall mean
the first date of public announcement (which, for
purposes of this definition, shall include, without
limitation, a report filed pursuant to the Rules and
Regulations of the FDIC) by the Bank or an Acquiring
Person that an Acquiring Person has become such.
(bb) "Subsidiary" shall mean, with
reference to any Person, any corporation of which an
amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is
beneficially owned, directly or indirectly, by such
Person, or otherwise controlled by such Person.
(cc) "Substitution Period" shall have the
meaning set forth in Section 11(a)(iii) hereof.
(dd) "Trading Day" shall have the meaning
set forth in Section 11(d)(i) hereof.
(ee) "Triggering Event" shall mean any
Section 11(a)(ii) Event or any Section 13 Event.
Section 2. Appointment of Rights Agent. The
Bank hereby appoints the Rights Agent to act as agent for
the Bank and the holders of the Rights (who, in
accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of the Common
Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such
appointment. The Bank may from time to time appoint such
Co-Rights Agents as it may deem necessary or desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earlier of (i) the close of
business on the tenth day after the Stock Acquisition
Date (or, if the tenth day after the Stock Acquisition
Date occurs before the Record Date, the close of business
on the Record Date), or (ii) the close of business on the
tenth Business Day (or such later date as the Board shall
determine) after the date that a tender or exchange offer
by any Person (other than the Bank, any Subsidiary of the
Bank, any employee benefit plan of the Bank or of any
Subsidiary of the Bank, or any Person or entity
organized, appointed or established by the Bank for or
pursuant to the terms of any such plan) is first
published or sent or given within the meaning of
Section 335.502 of the Rules and Regulations of the FDIC,
if upon consummation thereof, such Person would be the
Beneficial Owner of 10% or more of the shares of Common
Stock then outstanding (the earlier of (i) and (ii) being
herein referred to as the "Distribution Date"), (x) the
Rights will be evidenced (subject to the provisions of
paragraph (b) of this Section 3) by the certificates for
the Common Stock registered in the names of the holders
of the Common Stock (which certificates for Common Stock
shall be deemed also to be certificates for Rights) and
not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer
to the Bank). As soon as practicable after the
Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each
record holder of the Common Stock as of the close of
business on the Distribution Date, at the address of such
holder shown on the records of the Bank, one or more
rights certificates, in substantially the form of Exhibit
B hereto (the "Rights Certificates"), evidencing one
Right for each share of Common Stock so held, subject to
adjustment as provided herein. In the event that an
adjustment in the number of Rights per share of Common
Stock has been made pursuant to Section 11(p) hereof, at
the time of distribution of the Rights Certificates, the
Bank shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers
of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution
Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) The Bank will make available a copy
of a Summary of Rights, in substantially the form
attached hereto as Exhibit C, to any holder of Rights who
may so request from time to time. With respect to
certificates for the Common Stock outstanding as of the
Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock
and the registered holders of the Common Stock shall also
be the registered holders of the associated Rights.
Until the earlier of the Distribution Date or the
Expiration Date (as such term is defined in Section 7
hereof), the transfer of any certificates representing
shares of Common Stock in respect of which Rights have
been issued shall also constitute the transfer of the
Rights associated with such shares of Common Stock.
(c) Rights shall be issued in respect of
all shares of Common Stock which are issued (whether
originally issued or from the Bank's treasury) after the
Record Date but prior to the earlier of the Distribution
Date or the Expiration Date. Certificates representing
such shares of Common Stock shall also be deemed to be
certificates for Rights, and shall bear the following
legend:
This certificate also evidences and
entitles the holder hereof to certain Rights as
set forth in the Rights Agreement between North
Side Savings Bank (the "Bank") and American
Stock Transfer and Trust Company (the "Rights
Agent"), dated as of April 18, 1996 (the
"Rights Agreement"), the terms of which are
hereby incorporated herein by reference and a
copy of which is on file at the principal
offices of the Bank. Under certain
circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by
separate certificates and will no longer be
evidenced by this certificate. The Bank will
mail to the holder of this certificate a copy
of the Rights Agreement, as in effect on the
date of mailing, without charge promptly after
receipt of a written request therefor. Under
certain circumstances set forth in the Rights
Agreement, Rights issued to, or held by, any
Person who is, was or becomes an Acquiring
Person or any Affiliate or Associates thereof
(as such terms are defined in the Rights
Agreement), whether currently held by or on
behalf of such Person or by any subsequent
holder, may become null and void.
With respect to such certificates containing the
foregoing legend, until the earlier of (i) the
Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such
certificates shall be evidenced by such certificates
alone and registered holders of Common Stock shall also
be the registered holders of the associated Rights, and
the transfer of any of such certificates shall also
constitute the transfer of the Rights associated with the
Common Stock represented by such certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the
forms of election to purchase and of assignment to be
printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B hereto
and may have such marks of identification or designation
and such legends, summaries or endorsements printed
thereon as the Bank may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as
may be required to comply with any applicable law or with
any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the
Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Section 11 and
Section 22 hereof, the Rights Certificates, whenever
distributed, shall be dated as of the Record Date and on
their face shall entitle the holders thereof to purchase
such number of one one-hundredths of a share of Preferred
Stock as shall be set forth therein at the price set
forth therein (such exercise price per one one-hundredth
of a share, the "Purchase Price"), but the amount and
type of securities purchasable upon the exercise of each
Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued
pursuant to Section 3(a) or Section 22 hereof that
represents Rights beneficially owned by: (i) an
Acquiring Person or any Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who
becomes a transferee after the Acquiring Person becomes
such, or (iii) a transferee of an Acquiring Person (or of
any such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person
becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from
the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom such
Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board has determined
is part of a plan, arrangement or understanding which has
as a primary purpose or effect avoidance of Section 7(e)
hereof, and any Rights Certificate issued pursuant to
Section 6 or Section 11 hereof upon transfer, exchange,
replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the
extent feasible) the following legend:
The Rights represented by this Rights
Certificate are or were beneficially owned by a
Person who was or became an Acquiring Person or
an Affiliate or Associate of an Acquiring
Person (as such terms are defined in the Rights
Agreement). Accordingly, this Rights
Certificate and the Rights represented hereby
may become null and void in the circumstances
specified in Section 7(e) of such Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be
executed on behalf of the Bank by its Chairman of the
Board, its Vice Chairman, its President or any Executive
Vice President, either manually or by facsimile
signature, and shall have affixed thereto the Bank's seal
or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Bank, either
manually or by facsimile signature. The Rights
Certificates shall be countersigned by the Rights Agent,
either manually or by facsimile signature, and shall not
be valid for any purpose unless so countersigned. In
case any officer of the Bank who shall have signed any of
the Rights Certificates shall cease to be such officer of
the Bank before countersignature by the Rights Agent and
issuance and delivery by the Bank, such Rights
Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Bank with
the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such
officer of the Bank; and any Rights Certificates may be
signed on behalf of the Bank by any person who, at the
actual date of the execution of such Rights Certificate,
shall be a proper officer of the Bank to sign such Rights
Certificate, although at the date of the execution of
this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the
Rights Agent will keep or cause to be kept, at its
principal office or offices designated as the appropriate
place for surrender of Rights Certificates upon exercise
or transfer, books for registration and transfer of the
Rights Certificates issued hereunder. Such books shall
show the names and addresses of the respective holders of
the Rights Certificates, the number of Rights evidenced
on its face by each of the Rights Certificates, the
Certificate number and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and
Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates. (a) Subject to the
provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the close of business on the
Distribution Date, and at or prior to the close of
business on the Expiration Date, any Rights Certificate
or Certificates may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates,
entitling the registered holder to purchase a like number
of one one-hundredths of a share of Preferred Stock (or,
following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as
the Rights Certificate or Certificates surrendered then
entitled such holder (or former holder in the case of a
transfer) to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in
writing delivered to the Rights Agent, and shall
surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the
principal office or offices of the Rights Agent
designated for such purpose. Neither the Rights Agent
nor the Bank shall be obligated to take any action
whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered
holder shall have completed and signed the certificate
contained in the form of assignment on the reverse side
of such Rights Certificate and shall have provided such
additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Bank shall reasonably request.
Thereupon the Rights Agent shall, subject to Section
4(b), Section 7(e) and Section 14 hereof, countersign and
deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be,
as so requested. The Bank may require payment of a sum
sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) Upon receipt by the Bank and the
Rights Agent of evidence reasonably satisfactory to them
of the loss, theft, destruction or mutilation of a Rights
Certificate, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to them,
and reimbursement to the Bank and the Rights Agent of all
reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the
Rights Certificate if mutilated, the Bank will execute
and deliver a new Rights Certificate of like tenor to the
Rights Agent for countersignature and delivery to the
registered owner in lieu of the Rights Certificate so
lost, stolen, destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price;
Expiration Date of Rights. (a) Subject to Section 7(e)
hereof, the registered holder of any Rights Certificate
may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation,
the restrictions on exercisability set forth in Section
9(c), Section 11(a)(iii) and Section 23(a) hereof) in
whole or in part at any time after the Distribution Date
upon surrender of the Rights Certificate, with the form
of election to purchase and the certificate on the
reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent
designated for such purpose, together with payment of the
aggregate Purchase Price with respect to the total number
of one one-hundredths of a share (or other securities,
cash or other assets, as the case may be) as to which
such surrendered Rights are then exercisable, at or prior
to the earlier of (i) April 30, 2006 (the "Final
Expiration Date"), or (ii) the time at which the Rights
are redeemed as provided in Section 23 hereof (the
earlier of (i) and (ii) being herein referred to as the
"Expiration Date").
(b) The Purchase Price for each one one-
hundredth of a share of Preferred Stock pursuant to the
exercise of a Right shall initially be $100, and shall be
subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in
accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate
representing exercisable Rights, with the form of
election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so
exercised, of the Purchase Price per one one-hundredth of
a share of Preferred Stock (or other shares, securities,
cash or other assets, as the case may be) to be purchased
as set forth below and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to Section
20(k) hereof, thereupon promptly (i) (A) requisition from
any transfer agent of the shares of Preferred Stock (or
make available, if the Rights Agent is the transfer agent
for such shares) certificates for the total number of one
one-hundredths of a share of Preferred Stock to be
purchased and the Bank hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B)
if the Bank shall have elected to deposit the total
number of shares of Preferred Stock issuable upon
exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts
representing such number of one one-hundredths of a share
of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Bank
will direct the depositary agent to comply with such
request, (ii) requisition from the Bank the amount of
cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered
holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, and
(iv) after receipt thereof, deliver such cash, if any, to
or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such
amount may be reduced pursuant to Section 11(a)(iii)
hereof) shall be made in cash or by certified bank check,
bank draft or money order payable to the order of the
Bank. In the event that the Bank is obligated to issue
other securities (including Common Stock) of the Bank,
pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Bank will make all arrangements
necessary so that such other securities, cash and/or
other property are available for distribution by the
Rights Agent, if and when appropriate. The Bank reserves
the right to require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares
of Preferred Stock would be issued.
(d) In case the registered holder of any
Rights Certificate shall exercise less than all the
Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and
delivered to, or upon the order of, the registered holder
of such Rights Certificate, registered in such name or
names as may be designated by such holder, subject to the
provisions of Section 14 hereof.
(e) Notwithstanding anything in this
Agreement to the contrary, from and after the first
occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an
Associate or Affiliate of an Acquiring Person, (ii) a
transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee
of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and
receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring
Person to holders of equity interests in such Acquiring
Person or to any Person with whom the Acquiring Person
has any continuing agreement, arrangement or
understanding regarding the transferred Rights or (B) a
transfer which the Board has determined is part of a
plan, arrangement or understanding which has as a primary
purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and
no holder of such Rights shall have any rights whatsoever
with respect to such Rights, whether under any provision
of this Agreement or otherwise. The Bank shall use all
reasonable efforts to insure that the provisions of this
Section 7(e) and Section 4(b) hereof are complied with,
but shall have no liability to any holder of Rights
Certificates or other Person as a result of its failure
to make any determinations with respect to an Acquiring
Person or its Affiliates, Associates or transferees
hereunder.
(f) Notwithstanding anything in this
Agreement to the contrary, neither the Rights Agent nor
the Bank shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any
purported exercise as set forth in this Section 7 unless
such registered holder shall have (i) completed and
signed the certificate contained in the form of election
to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise, and (ii)
provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or
Affiliates or Associates thereof as the Bank shall
reasonably request.
Section 8. Cancellation and Destruction of
Rights Certificates. All Rights Certificates surrendered
for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Bank
or any of its agents, be delivered to the Rights Agent
for cancellation or in cancelled form, or, if surrendered
to the Rights Agent, shall be cancelled by it, and no
Rights Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of
this Agreement. The Bank shall deliver to the Rights
Agent for cancellation and retirement, and the Rights
Agent shall so cancel and retire, any other Rights
Certificate purchased or acquired by the Bank otherwise
than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Rights Certificates to the Bank, or
shall, at the written request of the Bank, destroy such
cancelled Rights Certificates, and in such case shall
deliver a certificate of destruction thereof to the Bank.
Section 9. Reservation and Availability of
Capital Stock. (a) The Bank covenants and agrees that
it will cause to be reserved and kept available out of
its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out
of its authorized and unissued shares of Common Stock
and/or other securities or out of its authorized and
issued shares held in its treasury), the number of shares
of Preferred Stock (and, following the occurrence of a
Triggering Event, Common Stock and/or other securities)
that, as provided in this Agreement including Section
11(a)(iii) hereof, will be sufficient to permit the
exercise in full of all outstanding Rights.
(b) So long as the shares of Preferred
Stock (and, following the occurrence of a Triggering
Event, Common Stock and/or other securities) issuable and
deliverable upon the exercise of the Rights may be listed
on any national securities exchange, the Bank shall use
its best efforts to cause, from and after such time as
the Rights become exercisable, all shares reserved for
such issuance to be listed on such exchange upon official
notice of issuance upon such exercise.
(c) If required by law, the Bank shall
use its best efforts to (i) file, as soon as practicable
following the earliest date after the first occurrence of
a Section 11(a)(ii) Event on which the consideration to
be delivered by the Bank upon exercise of the Rights has
been determined in accordance with Section 11(a)(iii)
hereof, or as soon as is required by law following the
Distribution Date, as the case may be, a registration
statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate
form, (ii) cause such registration statement to become
effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain
effective (with a prospectus at all times meeting the
requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for
such securities, and (B) the date of the expiration of
the Rights. The Bank will also take such action as may
be appropriate under, or to ensure compliance with, the
securities or "blue sky" laws of the various states in
connection with the exercisability of the Rights. The
Bank may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in
clause (i) of the first sentence of this Section 9(c),
the exercisability of the Rights in order to prepare and
file such registration statement and permit it to become
effective. Upon any such suspension, the Bank shall
issue a public announcement stating that the
exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time
as the suspension is no longer in effect. In addition,
if the Bank shall determine that a registration statement
is required following the Distribution Date, the Bank may
temporarily suspend the exercisability of the Rights
until such time as a registration statement has been
declared effective. Notwithstanding any provision of
this Agreement to the contrary, the Rights shall not be
exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been
obtained, the exercise thereof shall not be permitted
under applicable law, all approvals required for the
issuance of Preferred Stock (or, following the occurrence
of a Triggering Event, Common Stock and/or other
securities) issuable upon exercise of the Rights shall
not have been obtained or a registration statement, if
required by law, shall not have been declared effective.
(d) The Bank covenants and agrees that it
will take all such action as may be necessary to ensure
that all one one-hundredths of a share of Preferred Stock
(and, following the occurrence of a Triggering Event,
Common Stock and/or other securities) delivered upon
exercise of Rights shall, at the time of delivery of the
certificates for such shares (subject to payment of the
Purchase Price), be duly and validly authorized and
issued and fully paid and nonassessable to the fullest
extent permitted under applicable law.
(e) The Bank further covenants and agrees
that it will pay when due and payable any and all federal
and state transfer taxes and charges which may be payable
in respect of the issuance or delivery of the Rights
Certificates and of any certificates for a number of one
one-hundredths of a share of Preferred Stock (or Common
Stock and/or other securities, as the case may be) upon
the exercise of Rights. The Bank shall not, however, be
required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Rights
Certificates to a Person other than, or the issuance or
delivery of a number of one one-hundredths of a share of
Preferred Stock (or Common Stock and/or other securities,
as the case may be) in a name other than that of, the
registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver
any certificates for a number of one one-hundredths of a
share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that
of the registered holder upon the exercise of any Rights
until such tax shall have been paid (any such tax being
payable by the holder of such Rights Certificate at the
time of surrender) or until it has been established to
the Bank's satisfaction that no such tax is due.
Section 10. Preferred Stock Record Date. Each
person in whose name any certificate for a number of one
one-hundredths of a share of Preferred Stock (or Common
Stock and/or other securities, as the case may be) is
issued upon the exercise of Rights shall for all purposes
be deemed to have become the holder of record of such
fractional shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) represented
thereby on, and such certificate shall be dated the date
upon which the Rights Certificate evidencing such Rights
was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment
is a date upon which the Preferred Stock (or Common Stock
and/or other securities, as the case may be) transfer
books of the Bank are closed, such Person shall be deemed
to have become the record holder of such shares
(fractional or otherwise) on, and such certificate shall
be dated, the next succeeding Business Day on which the
Preferred Stock (or Common Stock and/or other securities,
as the case may be) transfer books of the Bank are open.
Prior to the exercise of the Rights evidenced thereby,
the holder of a Rights Certificate shall not be entitled
to any rights of a stockholder of the Bank with respect
to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise
any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Bank, except
as provided herein.
Section 11. Adjustment of Purchase Price,
Number and Kind of Shares or Number of Rights. The
Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in
this Section 11.
(a)(i) In the event the Bank shall at any
time after the date of this Agreement (A) declare a
dividend on the Preferred Stock payable in shares of
Preferred Stock, (B) subdivide the outstanding Preferred
Stock, (C) combine the outstanding Preferred Stock into a
smaller number of shares, or (D) issue any shares of its
capital stock in a reclassification of the Preferred
Stock (including any such reclassification in connection
with a consolidation or merger in which the Bank is the
continuing or surviving corporation), except as otherwise
provided in this Section 11(a) and Section 7(e) hereof,
the Purchase Price in effect at the time of the record
date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital
stock, as the case may be, issuable on such date, shall
be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to
receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of
Preferred Stock or capital stock, as the case may be,
which, if such Right had been exercised immediately prior
to such date and at a time when the Preferred Stock
transfer books of the Bank were open, the holder would
have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs
which would require an adjustment under both this Section
11(a)(i) and Section 11(a)(ii) hereof, the adjustment
provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event that any Person (other
than the Bank, any Subsidiary of the Bank, any employee
benefit plan of the Bank or of any Subsidiary of the
Bank, or any Person or entity organized, appointed or
established by the Bank for or pursuant to the terms of
any such plan), alone or together with its Affiliates and
Associates, shall, at any time after the Rights Dividend
Declaration Date, become an Acquiring Person unless the
event causing such Person to become an Acquiring Person
is an acquisition of shares of Common Stock pursuant to a
tender offer or an exchange offer for all outstanding
shares of Common Stock at a price and on terms determined
by at least a majority of the members of the Board who
are not officers of the Bank and who are not
representatives, nominees, Affiliates or Associates of an
Acquiring Person, after receiving advice from one or more
investment banking firms, to be (a) at a price which is
fair to stockholders (taking into account all factors
which such members of the Board deem relevant including,
without limitation, prices which could reasonably be
achieved if the Bank or its assets were sold on an
orderly basis designed to realize maximum value) and (b)
otherwise in the best interests of the Bank and its
stockholders then, promptly following the occurrence of
any such event, proper provision shall be made so that
each holder of a Right (except as provided below and in
Section 7(e) hereof) shall thereafter have the right to
receive, upon exercise thereof at the then current
Purchase Price in accordance with the terms of this
Agreement, in lieu of a number of one one-hundredths of a
share of Preferred Stock, such number of shares of Common
Stock of the Bank as shall equal the result obtained by
(x) multiplying the then current Purchase Price by the
then number of one one-hundredths of a share of Preferred
Stock for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(a)(ii) Event, and
(y) dividing that product (which, following such first
occurrence, shall thereafter be referred to as the
"Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price
(determined pursuant to Section 11(d) hereof) per share
of Common Stock on the date of such first occurrence
(such number of shares, the "Adjustment Shares").
(iii) In the event that the number of
shares of Common Stock which are authorized by the Bank's
Restated Organization Certificate but not outstanding or
reserved for issuance for purposes other than upon
exercise of the Rights are not sufficient to permit the
exercise in full of the Rights in accordance with the
foregoing subparagraph (ii) of this Section 11(a), the
Bank shall: (A) determine the value of the Adjustment
Shares issuable upon the exercise of a Right (the
"Current Value") and (B) with respect to each Right
(subject to Section 7(e) hereof), make adequate provision
to substitute for the Adjustment Shares, upon the
exercise of a Right and payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Stock or other equity securities of the
Bank (including, without limitation, shares, or units of
shares, of preferred stock, such as the Preferred Stock
which the Board has deemed to have essentially the same
value or economic rights as shares of Common Stock (such
shares of preferred stock, being referred to as "Common
Stock Equivalents")), (4) debt securities of the Bank,
(5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current
Value (less the amount of any reduction in the Purchase
Price), where such aggregate value has been determined by
the Board, based upon the advice of a nationally
recognized investment banking firm selected by the Board;
provided, however, that if the Bank shall not have made
adequate provision to deliver value pursuant to clause
(B) above within thirty (30) days following the later of
(x) the first occurrence of a Section 11(a)(ii) Event and
(y) the date on which the Bank's right of redemption
pursuant to Section 23(a) expires (the later of (x) and
(y) being referred to herein as the "Section 11(a)(ii)
Trigger Date"), then the Bank shall be obligated to
deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. For purposes of the
preceding sentence, the term "Spread" shall mean the
excess of (i) the Current Value over (ii) the Purchase
Price. If the Board determines in good faith that it is
likely that sufficient additional shares of Common Stock
could be authorized for issuance upon exercise in full of
the Rights, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more
than ninety (90) days after the Section 11(a)(ii) Trigger
Date, in order that the Bank may seek stockholder
approval for the authorization of such additional shares
(such thirty (30) day period, as it may be extended, is
herein called the "Substitution Period"). To the extent
that action is to be taken pursuant to the first and/or
third sentences of this Section 11(a)(iii), the Bank (1)
shall provide, subject to Section 7(e) hereof, that such
action shall apply uniformly to all outstanding Rights,
and (2) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order
to seek such stockholder approval for such authorization
of additional shares and/or to decide the appropriate
form of distribution to be made pursuant to such first
sentence and to determine the value thereof. In the
event of any such suspension, the Bank shall issue a
public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no
longer in effect. For purposes of this Section
11(a)(iii), the value of each Adjustment Share shall be
the Current Market Price per share of the Common Stock on
the Section 11(a)(ii) Trigger Date and the per share or
per unit value of any Common Stock Equivalent shall be
deemed to equal to Current Market Price per share of the
Common Stock on such date. Notwithstanding the foregoing
provisions of this subparagraph (iii), in the event that,
pursuant to this subparagraph (iii), upon the exercise of
the Rights of Bank shall be required to deliver value in
any form other than shares of Common Stock, such value
shall be delivered only to the extent and at the time
that, if required, the approval by appropriate financial
regulatory authorities with supervisory jurisdiction over
the Bank of such delivery of such value shall have been
obtained.
(b) In case the Bank shall fix a record
date for the issuance of rights, options or warrants to
all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within
forty-five (45) calendar days after such record date)
Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred
Stock ("equivalent preferred stock")) or securities
convertible into Preferred Stock or equivalent preferred
stock at a price per share of Preferred Stock or per
share of equivalent preferred stock (or having a
conversion price per share, if a security convertible
into Preferred Stock or equivalent preferred stock) less
than the Current Market Price (as determined pursuant to
Section 11(d) hereof) per share of Preferred Stock on
such record date, the Purchase Price to be in effect
after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall
be the number of shares of Preferred Stock outstanding on
such record date, plus the number of shares of Preferred
Stock which the aggregate offering price of the total
number of shares of Preferred Stock and/or equivalent
preferred stock so to be offered (and/or the aggregate
initial conversion price of the convertible securities so
to be offered) would purchase at such Current Market
Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record
date, plus the number of additional shares of Preferred
Stock and/or equivalent preferred stock to be offered for
subscription or purchase (or into which the convertible
securities so to be offered are initially convertible).
In case such subscription price may be paid by delivery
of consideration part or all of which may be in a form
other than cash, the value of such consideration shall be
as determined in good faith by the Board, whose
determination shall be described in a statement filed
with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Shares of Preferred
Stock owned by or held for the account of the Bank shall
not be deemed outstanding for the purpose of any such
computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event
that such rights or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price
which would then be in effect if such record date had not
been fixed.
(c) In case the Bank shall fix a record
date for a distribution to all holders of Preferred Stock
(including any such distribution made in connection with
a consolidation or merger in which the Bank is the
continuing corporation) of evidences of indebtedness,
cash (other than a regular quarterly cash dividend out of
the earnings or retained earnings of the Bank), assets
(other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than
Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b) hereof),
the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current
Market Price (as determined pursuant to Section 11(d)
hereof) per share of Preferred Stock on such record date,
less the fair market value (as determined in good faith
by the Board, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of
the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the
denominator of which shall be such Current Market Price
(as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock. Such adjustments shall be made
successively whenever such a record date is fixed, and in
the event that such distribution is not so made, the
Purchase Price shall be adjusted to be the Purchase Price
which would have been in effect if such record date had
not been fixed.
(d) (i) For the purpose of any
computation hereunder, other than computations made
pursuant to Section 11(a)(iii) hereof, the "Current
Market Price" per share of Common Stock on any date shall
be deemed to be the average of the daily closing prices
per share of such Common Stock for the thirty (30)
consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date, and for purposes
of computations made pursuant to Section 11(a)(iii)
hereof, the "Current Market Price" per share of Common
Stock on any date shall be deemed to be the average of
the daily closing prices per share of such Common Stock
for the ten (10) consecutive Trading Days immediately
following such date; provided, however, that in the event
that the Current Market Price per share of the Common
Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a
dividend or distribution on such Common Stock payable in
shares of such Common Stock or securities convertible
into shares of such Common Stock (other than the Rights),
or (B) any subdivision, combination or reclassification
of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such
subdivision, combination or reclassification shall not
have occurred prior to the commencement of the requisite
thirty (30) Trading Day or ten (10) Trading Day period,
as set forth above, then, and in each such case, the
Current Market Price shall be properly adjusted to take
into account ex-dividend trading. The closing price for
each day shall be the last sale price, regular way, or,
in case no such sale takes place on such day, the average
of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated
transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock
Exchange ("NYSE") or, if the shares of Common Stock are
not listed or admitted to trading on the NYSE, as
reported in the principal consolidated transaction
reporting system with respect to securities listed on the
principal national securities exchange on which the
shares of Common Stock are listed or admitted to trading
or, if the shares of Common Stock are not listed or
admitted to trading on any national securities exchange,
the last quoted price or, if not so quoted, the average
of the high bid and low asked prices in the
over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") or such other system then in
use, or, if on any such date the shares of Common Stock
are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a
professional market maker making a market in the Common
Stock selected by the Board. If on any such date no
market maker is making a market in the Common Stock, the
fair value of such shares on such date as determined in
good faith by the Board shall be used. The term "Trading
Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the
transaction of business or, if the shares of Common Stock
are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock
is not publicly held or not so listed or traded, Current
Market Price per share shall mean the fair value per
share as determined in good faith by the Board, whose
determination shall be described in a statement filed
with the Rights Agent and shall be conclusive for all
purposes.
(ii) For the purpose of any computation
hereunder, the Current Market Price per share of
Preferred Stock shall be determined in the same manner as
set forth above for the Common Stock in clause (i) of
this Section 11(d) (other than the last sentence
thereof). If the Current Market Price per share of
Preferred Stock cannot be determined in the manner
provided above or if the Preferred Stock is not publicly
held or listed or traded in a manner described in clause
(i) of this Section 11(d), the Current Market Price per
share of Preferred Stock shall be conclusively deemed to
be an amount equal to 100 (as such number may be
appropriately adjusted for such events as stock splits,
stock dividends and recapitalizations with respect to the
Common Stock occurring after the date of this Agreement)
multiplied by the Current Market Price per share of the
Common Stock. If neither the Common Stock nor the
Preferred Stock is publicly held or so listed or traded,
Current Market Price per share of the Preferred Stock
shall mean the fair value per share as determined in good
faith by the Board, whose determination shall be
described in a statement filed with the Rights Agent and
shall be conclusive for all purposes. For all purposes
of this Agreement, the Current Market Price of one one-
hundredth of a share of Preferred Stock shall be equal to
the Current Market Price of one share of Preferred Stock
divided by 100.
(e) Anything herein to the contrary
notwithstanding, no adjustment in the Purchase Price
shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the
Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under
this Section 11 shall be made to the nearest cent or to
the nearest ten-hundredth of a share of Common Stock or
other share or one-millionth of a share of Preferred
Stock, as the case may be. Notwithstanding the first
sentence of this Section 11(e), any adjustment required
by this Section 11 shall be made no later than the
earlier of (i) three (3) years from the date of the
transaction which mandates such adjustment, or (ii) the
Expiration Date.
(f) If as a result of an adjustment made
pursuant to Section 11(a)(ii) or Section 13(a) hereof,
the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock other
than Preferred Stock, thereafter the number of such other
shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment
from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect
to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the
provisions of Sections 7, 9, 10, 13 and 14 hereof with
respect to the Preferred Stock shall apply on like terms
to any such other shares.
(g) All Rights originally issued by the
Bank subsequent to any adjustment made to the Purchase
Price hereunder shall evidence the right to purchase, at
the adjusted Purchase Price, the number of one
one-hundredths of a share of Preferred Stock purchasable
from time to time hereunder upon exercise of the Rights,
all subject to further adjustment as provided herein.
(h) Unless the Bank shall have exercised
its election as provided in Section 11(i), upon each
adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right
outstanding immediately prior to the making of such
adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a share of Preferred Stock
(calculated to the nearest one-millionth) obtained by (i)
multiplying (x) the number of one one-hundredths of a
share covered by a Right immediately prior to this
adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase
Price, and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) The Bank may elect on or after the
date of any adjustment of the Purchase Price to adjust
the number of Rights, in lieu of any adjustment in the
number of one one-hundredths of a share of Preferred
Stock purchasable upon the exercise of a Right. Each of
the Rights outstanding after the adjustment in the number
of Rights shall be exercisable for the number of one
one-hundredths of a share of Preferred Stock for which a
Right was exercisable immediately prior to such
adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest one
ten-hundredth) obtained by dividing the Purchase Price in
effect immediately prior to adjustment of the Purchase
Price by the Purchase Price in effect immediately after
adjustment of the Purchase Price. The Bank shall make a
public announcement of its election to adjust the number
of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment
to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter,
but, if the Rights Certificates have been issued, shall
be at least ten (10) days later than the date of the
public announcement. If Rights Certificates have been
issued, upon each adjustment of the number of Rights
pursuant to this Section 11(i), the Bank shall, as
promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record
date Rights Certificates evidencing, subject to Section
14 hereof, the additional Rights to which such holders
shall be entitled as a result of such adjustment, or, at
the option of the Bank, shall cause to be distributed to
such holders of record in substitution and replacement
for the Rights Certificates held by such holders prior to
the date of adjustment, and upon surrender thereof, if
required by the Bank, new Rights Certificates evidencing
all the Rights to which such holders shall be entitled
after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned
in the manner provided for herein (and may bear, at the
option of the Bank, the adjusted Purchase Price) and
shall be registered in the names of the holders of record
of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or
change in the Purchase Price or the number of one one-
hundredths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express
the Purchase Price per one one-hundredth of a share and
the number of one one-hundredths of a share which were
expressed in the initial Rights Certificates issued
hereunder.
(k) Before taking any action that would
cause an adjustment reducing the Purchase Price below the
then stated value, if any, of the number of one
one-hundredths of a share of Preferred Stock issuable
upon exercise of the Rights, the Bank shall take any
corporate action which may, in the opinion of its
counsel, be necessary in order that the Bank may validly
and legally issue fully paid and nonassessable such
number of one one-hundredths of a share of Preferred
Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11
shall require that an adjustment in the Purchase Price be
made effective as of a record date for a specified event,
the Bank may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised
after such record date the number of one one-hundredths
of a share of Preferred Stock and other capital stock or
securities of the Bank, if any, issuable upon such
exercise over and above the number of one one-hundredths
of a share of Preferred Stock and other capital stock or
securities of the Bank, if any, issuable upon such
exercise on the basis of the Purchase Price in effect
prior to such adjustment; provided, however, that the
Bank shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to
receive such additional shares (fractional or otherwise)
or securities upon the occurrence of the event requiring
such adjustment.
(m) Anything in this Section 11 to the
contrary notwithstanding, the Bank shall be entitled to
make such reductions in the Purchase Price, in addition
to those adjustments expressly required by this Section
11, as and to the extent that in their good faith
judgment the Board shall determine to be advisable in
order that any (i) consolidation or subdivision of the
Preferred Stock, (ii) issuance wholly for cash of any
shares of Preferred Stock at less than the Current Market
Price, (iii) issuance wholly for cash of shares of
Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred
Stock, (iv) stock dividends or (v) issuance of rights,
options or warrants referred to in this Section 11,
hereafter made by the Bank to holders of its Preferred
Stock shall not be taxable to such stockholders.
(n) The Bank covenants and agrees that it
shall not, at any time after the Distribution Date, (i)
consolidate with any other Person (other than a
Subsidiary of the Bank in a transaction which complies
with Section 11(o) hereof), (ii) merge with or into any
other Person (other than a Subsidiary of the Bank in a
transaction which complies with Section 11(o) hereof), or
(iii) sell or transfer (or permit any Subsidiary to sell
or transfer), in one transaction, or a series of related
transactions, assets or earning power aggregating more
than 50% of the assets or earning power of the Bank and
its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Bank and/or any of its
Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time
of or immediately after such consolidation, merger or
sale there are any rights, warrants or other instruments
or securities outstanding or agreements in effect which
would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y)
prior to, simultaneously with or immediately after such
consolidation, merger or sale, the shareholders of the
Person who constitutes, or would constitute, the
"Principal Party" for purposes of Section 13(a) hereof
shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and
Associates.
(o) The Bank covenants and agrees that,
after the Distribution Date, it will not, except as
permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that
such action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the
Rights.
(p) Anything in this Agreement to the
contrary notwithstanding, in the event that the Bank
shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a
dividend on the outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the
outstanding shares of Common Stock into a smaller number
of shares, the number of Rights associated with each
share of Common Stock then outstanding, or issued or
delivered thereafter but prior to the Distribution Date,
shall be proportionately adjusted so that the number of
Rights thereafter associated with each share of Common
Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated
with each share of Common Stock immediately prior to such
event by a fraction the numerator which shall be the
total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares
of Common Stock outstanding immediately following the
occurrence of such event.
Section 12. Certificate of Adjusted Purchase
Price or Number of Shares. Whenever an adjustment is
made as provided in Section 11 and Section 13 hereof, the
Bank shall (a) promptly prepare a certificate setting
forth such adjustment and a brief statement of the facts
accounting for such adjustment, (b) promptly file with
the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such
certificate, and (c) if a Distribution Date has occurred,
mail a brief summary thereof to each holder of a Rights
Certificate in accordance with Section 25 hereof. The
Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment therein contained.
Section 13. Consolidation, Merger or Sale or
Transfer of Assets or Earning Power.
(a) In the event that, following the
Stock Acquisition Date, directly or indirectly, (x) the
Bank shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Bank in a
transaction which complies with Section 11(o) hereof),
and the Bank shall not be the continuing or surviving
corporation of such consolidation or merger, (y) any
Person (other than a Subsidiary of the Bank in a
transaction which complies with Section 11(o) hereof)
shall consolidate with, or merge with or into, the Bank,
and the Bank shall be the continuing or surviving
corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part
of the outstanding shares of Common Stock shall be
changed into or exchanged for stock or other securities
of any other Person or cash or any other property, or (z)
the Bank shall sell or otherwise transfer (or one or more
of its Subsidiaries shall sell or otherwise transfer), in
one transaction or a series of related transactions,
assets or earning power aggregating 50% or more of the
assets or earning power of the Bank and its Subsidiaries
(taken as a whole) to any Person or Persons (other than
the Bank or any Subsidiary of the Bank in one or more
transactions each of which complies with Section 11(o)
hereof), then, and in each such case (except as may be
contemplated by Section 13(d) hereof), proper provision
shall be made so that: (i) each holder of a Right,
except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise
thereof at the then current Purchase Price in accordance
with the terms of this Agreement, such number of validly
authorized and issued, fully paid, non-assessable and
freely tradeable shares of Common Stock of the Principal
Party (as such term is hereinafter defined), not subject
to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase
Price by the number of one one-hundredths of a share of
Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event,
multiplying the number of such one one-hundredths of a
share for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(a)(ii) Event by
the Purchase Price in effect immediately prior to such
first occurrence), and dividing that product (which,
following the first occurrence of a Section 13 Event,
shall be referred to as the "Purchase Price" for each
Right and for all purposes of this Agreement) by (2) 50%
of the current market price (determined pursuant to
Section 11(d)(i) hereof) per share of the Common Stock of
such Principal Party on the date of consummation of such
Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of
such Section 13 Event, all the obligations and duties of
the Bank pursuant to this Agreement; (iii) the term
"Bank" shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a
Section 13 Event; (iv) such Principal Party shall take
such steps (including, but not limited to, the
reservation of a sufficient number of shares of its
Common Stock) in connection with the consummation of any
such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as
nearly as reasonably may be, in relation to its shares of
Common Stock thereafter deliverable upon the exercise of
the Rights; and (v) the provisions of Section 11(a)(ii)
hereof shall be of no effect following the first
occurrence of any Section 13 Event.
(b) "Principal Party" shall mean
(i) in the case of any
transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person
that is the issuer of any securities into which
shares of Common Stock of the Bank are
converted in such merger or consolidation, and
if no securities are so issued, the Person that
is the other party to such merger or
consolidation; and
(ii) in the case of any
transaction described in clause (z) of the
first sentence of Section 13(a), the Person
that is the party receiving the greatest
portion of the assets or earning power
transferred pursuant to such transaction or
transactions;
provided, however, that in any such case, (1) if the
Common Stock of such Person is not at such time and has
not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange
Act, and such Person is a direct or indirect Subsidiary
of another Person the Common Stock of which is and has
been so registered, "Principal Party" shall refer to such
other Person; and (2) in case such Person is a
Subsidiary, directly or indirectly, of more than one
Person, the Common Stocks of two or more of which are and
have been so registered, "Principal Party" shall refer to
whichever of such Persons is the issuer of the Common
Stock having the greatest aggregate market value.
(c) The Bank shall not consummate any
such consolidation, merger, sale or transfer unless the
Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been
issued or reserved for issuance to permit the exercise in
full of the Rights in accordance with this Section 13 and
unless prior thereto the Bank and such Principal Party
shall have executed and delivered to the Rights Agent a
supplemental agreement providing for the terms set forth
in paragraphs (a) and (b) of this Section 13 and further
providing that, as soon as practicable after the date of
any consolidation, merger or sale of assets mentioned in
paragraph (a) of this Section 13, the Principal Party
will
(i) prepare and file a
registration statement under the Act, with
respect to the Rights and the securities
purchasable upon exercise of the Rights on an
appropriate form, and will use its best efforts
to cause such registration statement to (A)
become effective as soon as practicable after
such filing and (B) remain effective (with a
prospectus at all times meeting the
requirements of the Act) until the Expiration
Date; and
(ii) will deliver to holders of
the Rights historical financial statements for
the Principal Party and each of its Affiliates
which comply in all respects with the
requirements for registration on Form 10 under
the Exchange Act.
The provisions of this Section 13 shall similarly apply
to successive mergers or consolidations or sales or other
transfers. In the event that a Section 13 Event shall
occur at any time after the occurrence of a Section
11(a)(ii) Event, the Rights which have not theretofore
been exercised shall thereafter become exercisable in the
manner described in Section 13(a).
(d) Notwithstanding anything in this
Agreement to the contrary, Section 13 shall not be
applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares
of Common Stock pursuant to a tender offer or exchange
offer for all outstanding shares of Common Stock which
complies with the provisions of Section 11(a)(ii) hereof
(or a wholly owned subsidiary of any such Person or
Persons), (ii) the price per share of Common Stock
offered in such transaction is not less than the price
per share of Common Stock paid to all holders of shares
of Common Stock whose shares were purchased pursuant to
such tender offer or exchange offer, and (iii) the form
of consideration being offered to the remaining holders
of shares of Common Stock pursuant to such transaction is
the same as the form of consideration paid pursuant to
such tender offer or exchange offer. Upon consummation
of any such transaction contemplated by this Section
13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional
Shares.
(a) The Bank shall not be required to
issue fractions of Rights, except prior to the
Distribution Date as provided in Section 11(p) hereof, or
to distribute Rights Certificates which evidence
fractional Rights. In lieu of such fractional Rights,
there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional
Rights would otherwise be issuable, an amount in cash
equal to the same fraction of the current market value of
a whole Right. For purposes of this Section 14(a), the
current market value of a whole Right shall be the
closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional
Rights would have been otherwise issuable. The closing
price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked
prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on
the NYSE or, if the Rights are not listed or admitted to
trading on the NYSE, as reported in the principal
consolidated transaction reporting system with respect to
securities listed on the principal national securities
exchange on which the Rights are listed or admitted to
trading, or if the Rights are not listed or admitted to
trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or such other system then
in use or, if on any such date the Rights are not quoted
by any such organization, the average of the closing bid
and asked prices as furnished by a professional market
maker making a market in the Rights selected by the
Board. If on any such date no such market maker is
making a market in the Rights the fair value of the
Rights on such date as determined in good faith by the
Board shall be used.
(b) The Bank shall not be required to
issue fractions of shares of Preferred Stock (other than
fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock) upon
exercise of the Rights or to distribute certificates
which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one
one-hundredth of a share of Preferred Stock). In lieu of
fractional shares of Preferred Stock that are not
integral multiples of one one-hundredth of a share of
Preferred Stock, the Bank may pay to the registered
holders of Rights Certificates at the time such Rights
are exercised as herein provided an amount in cash equal
to the same fraction of the current market value of one
one-hundredth of a share of Preferred Stock. For
purposes of this Section 14(b), the current market value
of one one-hundredth of a share of Preferred Stock shall
be one one-hundredth of the closing price of a share of
Preferred Stock (as determined pursuant to Section
11(d)(ii) hereof) for the Trading Day immediately prior
to the date of such exercise.
(c) Following the occurrence of a
Triggering Event, the Bank shall not be required to issue
fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence
fractional shares of Common Stock. In lieu of fractional
shares of Common Stock, the Bank may pay to the
registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in
cash equal to the same fraction of the current market
value of one (1) share of Common Stock. For purposes of
this Section 14(c), the current market value of one share
of Common Stock shall be the closing price of one share
of Common Stock (as determined pursuant to Section
11(d)(i) hereof) for the Trading Day immediately prior to
the date of such exercise.
(d) The holder of a Right by the
acceptance of the Rights expressly waives his right to
receive any fractional Rights or any fractional shares
upon exercise of a Right, except as permitted by this
Section 14.
Section 15. Rights of Action. All rights of
action in respect of this Agreement are vested in the
respective registered holders of the Rights Certificates
(and, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder
of any Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), without the consent of the
Rights Agent or of the holder of any other Rights
Certificate (or, prior to the Distribution Date, of the
Common Stock), may, in the holder's own behalf and for
the holder's own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Bank
to enforce, or otherwise act in respect of, the holder's
right to exercise the Rights evidenced by such Rights
Certificate in the manner provided in such Rights
Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders
of Rights would not have an adequate remedy at law for
any breach of this Agreement and shall be entitled to
specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations
of the obligations hereunder of any Person subject to
this Agreement.
Section 16. Agreement of Rights Holders.
Every holder of a Right by accepting the same consents
and agrees with the Bank and the Rights Agent and with
every other holder of a Right that:
(a) prior to the Distribution Date, the
Rights will be transferable only in connection with the
transfer of Common Stock;
(b) after the Distribution Date, the
Rights Certificates are transferable only on the registry
books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper
instrument of transfer and with the appropriate forms and
certificates fully executed;
(c) subject to Section 6(a) and Section
7(f) hereof, the Bank and the Rights Agent may deem and
treat the person in whose name a Rights Certificate (or,
prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner
thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on
the Rights Certificates or the associated Common Stock
certificate made by anyone other than the Bank or the
Rights Agent) for all purposes whatsoever, and neither
the Bank nor the Rights Agent, subject to the last
sentence of Section 7(e) hereof, shall be required to be
affected by any notice to the contrary; and
(d) notwithstanding anything in this
Agreement to the contrary, neither the Bank nor the
Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to
perform any of its obligations under this Agreement by
reason of any preliminary or permanent injunction or
other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory
or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation;
provided, however, the Bank must use its best efforts to
have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.
Section 17. Rights Certificate Holder Not
Deemed a Stockholder. No holder, as such, of any Rights
Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the number of
one one-hundredths of a share of Preferred Stock or any
other securities of the Bank which may at any time be
issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder
of any Rights Certificate, as such, any of the rights of
a stockholder of the Bank or any right to vote for the
election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof),
or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such
Rights Certificate shall have been exercised in
accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Bank agrees to pay to the Rights
Agent reasonable compensation for all services rendered
by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in the
administration and execution of this Agreement and the
exercise and performance of its duties hereunder. The
Bank also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or
willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending
against any claim of liability in the premises.
(b) The Rights Agent shall be protected
and shall incur no liability for or in respect of any
action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance
upon any Rights Certificate or certificate for Common
Stock or for other securities of the Bank, instrument of
assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed
and, where necessary, verified or acknowledged, by the
proper Person or Persons.
Section 19. Merger or Consolidation or Change
of Name of Rights Agent.
(a) Any corporation into which the Rights
Agent or any successor Rights Agent may be merged or with
which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the
Rights Agent or any successor Rights Agent shall be a
party, or any corporation succeeding to the corporate
trust or stock transfer business of the Rights Agent or
any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution
or filing of any paper or any further act on the part of
any of the parties hereto; provided, however, that such
corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Agreement,
any of the Rights Certificates shall have been
countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a
predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been
countersigned, any successor Rights Agent may countersign
such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent;
and in all such cases such Rights Certificates shall have
the full force provided in the Rights Certificates and in
this Agreement.
(b) In case at any time the name of the
Rights Agent shall be changed and at such time any of the
Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights
Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been
countersigned, the Rights Agent may countersign such
Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights
Certificates shall have the full force provided in the
Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The
Rights Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and
conditions, by all of which the Bank and the holders of
Rights Certificates, by their acceptance thereof, shall
be bound:
(a) The Rights Agent may consult with
legal counsel (who may be legal counsel for the Bank),
and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent
as to any action taken or omitted by it in good faith and
in accordance with such opinion.
(b) Whenever in the performance of its
duties under this Agreement the Rights Agent shall deem
it necessary or desirable that any fact or matter
(including, without limitation, the identity of any
Acquiring Person and the determination of Current Market
Price) be proved or established by the Bank prior to
taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate
signed by the Chairman of the Board, the Vice Chairman,
the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant
Secretary of the Bank and delivered to the Rights Agent;
and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable
hereunder only for its own negligence, bad faith or
willful misconduct.
(d) The Rights Agent shall not be liable
for or by reason of any of the statements of fact or
recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as
to its countersignature on such Rights Certificates), but
all such statements and recitals are and shall be deemed
to have been made by the Bank only.
(e) The Rights Agent shall not be under
any responsibility in respect of the validity of this
Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Bank of any
covenant or condition contained in this Agreement or in
any Rights Certificate; nor shall it be responsible for
any adjustment required under the provisions of Section
11 or Section 13 hereof or responsible for the manner,
method or amount of any such adjustment or the
ascertaining of the existence of facts that would require
any such adjustment (except with respect to the exercise
of Rights evidenced by Rights Certificates after actual
notice of any such adjustment); nor shall it by any act
hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any
shares of Common Stock or Preferred Stock to be issued
pursuant to this Agreement or any Rights Certificate or
as to whether any shares of Common Stock or Preferred
Stock will, when so issued, be validly authorized and
issued, fully paid and nonassessable.
(f) The Bank agrees that it will perform,
execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the
carrying out or performing by the Rights Agent of the
provisions of this Agreement.
(g) The Rights Agent is hereby authorized
and directed to accept instructions with respect to the
performance of its duties hereunder from the Chairman of
the Board, the Vice Chairman, the President, any Vice
President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Bank, and to
apply to such officers for advice or instructions in
connection with its duties, and it shall not be liable
for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such
officer.
(h) The Rights Agent and any stockholder,
director, officer or employee of the Rights Agent may
buy, sell or deal in any of the Rights or other
securities of the Bank or become pecuniarily interested
in any transaction in which the Bank may be interested,
or contract with or lend money to the Bank or otherwise
act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other
capacity for the Bank or for any other legal entity.
(i) The Rights Agent may execute and
exercise any of the rights or powers hereby vested in it
or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or
agents or for any loss to the Bank resulting from any
such act, default, neglect or misconduct; provided,
however, reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall
require the Rights Agent to expend or risk its own funds
or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the
exercise of its rights if there shall be reasonable
grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability
is not reasonably assured to it.
(k) If, with respect to any Right
Certificate surrendered to the Rights Agent for exercise
or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case
may be, has either not been completed or indicates an
affirmative response to clause 1 and/or 2 thereof, the
Rights Agent shall not take any further action with
respect to such requested exercise of transfer without
first consulting with the Bank.
Section 21. Change of Rights Agent. The
Rights Agent or any successor Rights Agent may resign and
be discharged from its duties under this Agreement upon
ten (10) days' notice in writing mailed to the Bank, and
to each transfer agent of the Common Stock and Preferred
Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail.
The Bank may remove the Rights Agent or any successor
Rights Agent upon ten (10) days' notice in writing,
mailed to the Rights Agent or successor Rights Agent, as
the case may be, and to each transfer agent of the Common
Stock and Preferred Stock, by registered or certified
mail, and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting,
the Bank shall appoint a successor to the Rights Agent.
If the Bank shall fail to make such appointment within a
period of ten (10) days after giving notice of such
removal or after it has been notified in writing of such
resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights
Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Bank), then any
registered holder of any Rights Certificate may apply to
any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent,
whether appointed by the Bank or by such a court, shall
be (a) a legal business entity organized and doing
business under the laws of the United States or of any
state of the United States, in good standing, having a
principal office in the State of New York, which is
authorized under such laws to exercise corporate trust or
stock transfer powers and is subject to supervision or
examination by federal or state authority and which has
at the time of its appointment as Rights Agent a combined
capital and surplus of at least $100,000,000 or (b) an
affiliate of a legal business entity described in clause
(a) of this sentence. After appointment, the successor
Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or
deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver
any further assurance, conveyance, act or deed necessary
for the purpose. Not later than the effective date of
any such appointment, the Bank shall file notice thereof
in writing with the predecessor Rights Agent and each
transfer agent of the Common Stock and the Preferred
Stock, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure
to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights
Agent, as the case may be.
Section 22. Issuance of New Rights
Certificates. Notwithstanding any of the provisions of
this Agreement or of the Rights to the contrary, the Bank
may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by its
Board to reflect any adjustment or change in the Purchase
Price and the number or kind or class of shares or other
securities or property purchasable under the Rights
Certificates made in accordance with the provisions of
this Agreement. In addition, in connection with the
issuance or sale of shares of Common Stock following the
Distribution Date and prior to the redemption or
expiration of the Rights, the Bank (a) shall, with
respect to shares of Common Stock so issued or sold
pursuant to the exercise of stock options or under any
employee plan or arrangement, granted or awarded as of
the Distribution Date, or upon the exercise, conversion
or exchange of securities hereinafter issued by the Bank,
and (b) may, in any other case, if deemed necessary or
appropriate by the Board, issue Rights Certificates
representing the appropriate number of Rights in
connection with such issuance or sale; provided, however,
that (i) no such Rights Certificate shall be issued if,
and to the extent that, the Bank shall be advised by
counsel that such issuance would create a significant
risk of material adverse tax consequences to the Bank or
the Person to whom such Rights Certificate would be
issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance
thereof.
Section 23. Redemption and Termination.
(a) The Board may, at its option, at any
time prior to the earlier of (i) the close of business on
the tenth day following the Stock Acquisition Date (or,
if the Stock Acquisition Date shall have occurred prior
to the Record Date, the close of business on the tenth
day following the Record Date), or (ii) the Final
Expiration Date, redeem all but not less than all the
then outstanding Rights at a redemption price of $.01 per
Right, as such amount may be appropriately adjusted to
reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the
"Redemption Price"). Notwithstanding anything contained
in this Agreement to the contrary, the Rights shall not
be exercisable after the first occurrence of a Section
11(a)(ii) Event until such time as the Bank's right of
redemption hereunder has expired. The Bank may, at its
option, pay the Redemption Price in cash, shares of
Common Stock (based on the Current Market Price, as
defined in Section 11(d)(i) hereof, of the Common Stock
at the time of redemption) or any other form of
consideration deemed appropriate by the Board.
(b) Immediately upon the action of the
Board ordering the redemption of the Rights, evidence of
which shall have been filed with the Rights Agent and
without any further action and without any notice, the
right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held.
Promptly after the action of the Board ordering the
redemption of the Rights, the Bank shall give notice of
such redemption to the Rights Agent and the holders of
the then outstanding Rights by mailing such notice to all
such holders at each holder's last address as it appears
upon the registry books of the Rights Agent or, prior to
the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Any notice which is
mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice.
Each such notice of redemption will state the method by
which the payment of the Redemption Price will be made.
Section 24. Notice of Certain Events.
(a) In case the Bank shall propose, at
any time after the Distribution Date, (i) to pay any
dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular
quarterly cash dividend out of earnings or retained
earnings of the Bank), or (ii) to offer to the holders of
Preferred Stock rights or warrants to subscribe for or to
purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities,
rights or options, or (iii) to effect any
reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect
any consolidation or merger into or with any other Person
(other than a Subsidiary of the Bank in a transaction
which complies with Section 11(o) hereof), or to effect
any sale or other transfer (or to permit one or more of
its Subsidiaries to effect any sale or other transfer),
in one transaction or a series of related transactions,
of 50% or more of the assets or earning power of the Bank
and its Subsidiaries (taken as a whole) to any other
Person or Persons (other than the Bank and/or any of its
Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the
liquidation, dissolution or winding up of the Bank, then,
in each such case, the Bank shall give to each holder of
a Rights Certificate, to the extent feasible and in
accordance with Section 25 hereof, a notice of such
proposed action, which shall specify the record date for
the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of
the shares of Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least
twenty (20) days prior to the record date for determining
holders of the shares of Preferred Stock for purposes of
such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of
such proposed action or the date of participation therein
by the holders of the shares of Preferred Stock whichever
shall be the earlier.
(b) In case any of the events set forth
in Section 11(a)(ii) hereof shall occur, then, in any
such case, (i) the Bank shall as soon as practicable
thereafter give to each holder of a Rights Certificate,
to the extent feasible and in accordance with Section 25
hereof, a notice of the occurrence of such event, which
shall specify the event and the consequences of the event
to holders of Rights under Section 11(a)(ii) hereof, and
(ii) all references in the preceding paragraph to
Preferred Stock shall be deemed thereafter to refer to
Common Stock and/or, if appropriate, other securities.
Section 25. Notices. Notices or demands
authorized by this Agreement to be given or made by the
Rights Agent or by the holder of any Rights Certificate
to or on the Bank shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed
(until another address is filed in writing with the
Rights Agent) as follows:
North Side Savings Bank
170 Tulip Avenue
Floral Park, New York 11001
Attention: Corporate Secretary
Subject to the provisions of Section 21, any notice or
demand authorized by this Agreement to be given or made
by the Bank or by the holder of any Rights Certificate to
or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with
the Bank) as follows:
American Stock Transfer and Trust Company
99 Wall Street
New York, New York 10005
Notices or demands authorized by this Agreement to be
given or made by the Bank or the Rights Agent to the
holder of any Rights Certificate (or, if prior to the
Distribution Date, to the holder of certificates
representing shares of Common Stock) shall be
sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address
of such holder as shown on the registry books of the
Bank.
Section 26. Supplements and Amendments. Prior
to the Distribution Date, the Bank and the Rights Agent
shall, if the Bank so directs, supplement or amend any
provision of this Agreement without the approval of any
holders of certificates representing shares of Common
Stock. From and after the Distribution Date, the Bank
and the Rights Agent shall, if the Bank so directs,
supplement or amend this Agreement without the approval
of any holders of Rights Certificates in order (i) to
cure any ambiguity, (ii) to correct or supplement any
provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to
shorten or lengthen any time period hereunder, or (iv) to
change or supplement the provisions hereunder in any
manner which the Bank may deem necessary or desirable and
which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring
Person); provided, this Agreement may not be supplemented
or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) a time period relating to when the Rights
may be redeemed at such time as the Rights are not then
redeemable, or (B) any other time period unless such
lengthening is for the purpose of protecting, enhancing
or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate
from an appropriate officer of the Bank which states that
the proposed supplement or amendment is in compliance
with the terms of this Section 26, the Rights Agent shall
execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights
shall be deemed coincident with the interests of the
holders of Common Stock.
Section 27. Successors. All the covenants and
provisions of this Agreement by or for the benefit of the
Bank or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns
hereunder.
Section 28. Determinations and Actions by the
Board of Directors, etc. For all purposes of this
Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time,
including for purposes of determining the particular
percentage of such outstanding shares of Common Stock of
which any Person is the Beneficial Owner, shall be made
in accordance with the last sentence of
Section 334.403(d)(1)(i) of the Rules and Regulations of
the FDIC as in effect as of the date of this Agreement.
The Board shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Bank,
or as may be necessary or advisable in the administration
of this Agreement, including, without limitation, the
right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this
Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such
actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all
omissions with respect to the foregoing) which are done
or made by the Board in good faith, shall (x) be final,
conclusive and binding on the Bank, the Rights Agent, the
holders of the Rights and all other parties, and (y) not
subject the Board to any liability to the holders of the
Rights.
Section 29. Benefits of this Agreement.
Nothing in this Agreement shall be construed to give to
any Person other than the Bank, the Rights Agent and the
registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the
Common Stock) any legal or equitable right, remedy or
claim under this Agreement; but this Agreement shall be
for the sole and exclusive benefit of the Bank, the
Rights Agent and the registered holders of the Rights
Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).
Section 30. Severability. If any term,
provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force
and effect and shall in no way be affected, impaired or
invalidated; provided, however, that notwithstanding
anything in this Agreement to the contrary, if any such
term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable
and the Board determines in its good faith judgment that
severing the invalid language from this Agreement would
adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close
of business on the tenth day following the date of such
determination by the Board of Directors. Without
limiting the foregoing, if any provision requiring a
determination to be made by (or with the concurrence of)
less than the entire Board is held by any court of
competent jurisdiction or other authority to be invalid,
void or unenforceable, such determination shall then be
made by the Board in accordance with applicable law and
the Bank's Restated Organization Certificate and By-Laws.
Section 31. Governing Law. This Agreement,
each Right and each Rights Certificate issued hereunder
shall be deemed to be a contract made under the laws of
the State of New York and for all purposes shall be
governed by and construed in accordance with the laws of
such State applicable to contracts made and to be
performed entirely within such State.
Section 32. Counterparts. This Agreement may
be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be
an original, and all such counterparts shall together
constitute but one and the same instrument.
Section 33. Descriptive Headings. Descriptive
headings of the several Sections of this Agreement are
inserted for convenience only and shall not control or
affect the meaning or construction of any of the
provisions hereof.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and their
respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: NORTH SIDE SAVINGS BANK
By /s/ Judith A. MacGregor By /s/ Thomas M. O'Brien
Name: Judith A. MacGregor Name: Thomas M. O'Brien
Title: Corporate Secretary Title: Chairman, Chief
Executive Officer
and President
AMERICAN STOCK TRANSFER AND
Attest: TRUST COMPANY
By /s/ Susan Silber By /s/ Herbert J. Lemmer
Name: Susan Silber Name: Herbert J. Lemmer
Title: Assistant Secretary Title: Vice President
Exhibit A
FORM OF
CERTIFICATE OF AMENDMENT OF THE
RESTATED ORGANIZATION CERTIFICATE
OF NORTH SIDE SAVINGS BANK
Pursuant to Section 8005 of the New York Banking Law
We, Thomas M. O'Brien, President, and Judith A.
MacGregor, Secretary, of North Side Savings Bank, a New
York-chartered savings bank, in accordance with the
provisions of Sections 5002 and 8005 of the Banking Law
of the State of New York, DO HEREBY CERTIFY:
FIRST, the name of the Corporation is NORTH
SIDE SAVINGS BANK.
SECOND, The Corporation was initially created
as a mutual savings bank by Special Act of the
Legislature of the State of New York known as Section 104
of Chapter 689 of the Laws of 1892. Under Banking Law
Section 9001(3), such Act is the organization certificate
of the Corporation. On April 8, 1986, in connection with
the bank's conversion to stock form the Restated
Organization Certificate of the Corporation was filed
with the Superintendent of Banks of the State of New
York.
THIRD, the Restated Organization Certificate is
hereby amended by the addition of the following
provisions stating the number, designation, relative
rights, preferences and limitations of a series of
preferred stock of the Corporation, designated as Series
A Junior Participating Preferred Stock, as fixed by
resolution of the Board of Directors of the Corporation
pursuant to the authority vested in it by the Restated
Organization Certificate of the Corporation. Article IV,
Part B of the Restated Organization Certificate of the
Corporation is hereby amended by the addition of the
following at the end thereof:
Series A Junior Participating Preferred Stock
Section 1. Designation and Amount. The shares
of such series shall be designated as "Series A Junior
Participating Preferred Stock" and the number of shares
constituting such series shall be 100,000.
Section 2. Dividends and Distributions.
(A) The dividend rate on the shares of Series
A Junior Participating Preferred Stock for each quarterly
dividend period (hereinafter referred to as a "quarterly
dividend period"), which quarterly dividend periods shall
commence on January 1, April 1, July 1 and October 1 in
each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date") (or in the case of
original issuance, from the date of original issuance)
and shall end on and include the day next preceding the
first date of the next quarterly dividend period, shall
be equal (rounded to the nearest cent) to the greater of
(a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share
amount of all cash dividends, and 100 times the aggregate
per share amount (payable in cash, based upon the fair
market value at the time the non-cash dividend or other
distribution is declared as determined in good faith by
the Board of Directors) of all non-cash dividends or
other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the
outstanding shares of Common Stock (by reclassification
or otherwise), declared (but not withdrawn) on the Common
Stock, during the immediately preceding quarterly
dividend period, or, with respect to the first quarterly
dividend period, since the first issuance of any share or
fraction of a share of Series A Junior Participating
Preferred Stock. In the event the Savings Bank shall at
any time after April 15, 1996 (the "Rights Declaration
Date") (i) declare any dividend on Common Stock payable
in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such
case the amount to which holders of shares of Series A
Junior Participating Preferred Stock were entitled
immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number
of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Savings Bank shall declare a dividend
or distribution on the Series A Junior Participating
Preferred Stock as provided in paragraph (A) above
immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend payable in
shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on
the Series A Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(C) Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Junior
Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such
shares of Series A Junior Participating Preferred Stock,
unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin
to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment
Date or is a date after the record date for the
determination of holders of shares of Series A Junior
Participating Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the
shares of Series A Junior Participating Preferred Stock
in an amount less than the total amount of such dividends
at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all
such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of
holders of shares of Series A Junior Participating
Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall
be no more than 50 days prior to the date fixed for the
payment thereof.
Section 3. Voting Rights. The holders of
shares of Series A Junior Participating Preferred Stock
shall have the following voting rights:
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series A Junior
Participating Preferred Stock shall entitle the holder
thereof to one vote on all matters submitted to a vote of
the stockholders of the Savings Bank. In the event the
Savings Bank shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock
payable in shares of Common Stock, (ii) subdivide the
outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares,
then in each such case the number of votes per share to
which holders of shares of Series A Junior Participating
Preferred Stock were entitled immediately prior to such
event shall be adjusted by multiplying such number by a
fraction the numerator of which is the number of shares
of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of
Common Stock that were outstanding immediately prior to
such event.
(B) Except as otherwise provided herein, by
the Restated Organization Certificate or by law, the
holders of shares of Series A Junior Participating
Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted
to a vote of stockholders of the Savings Bank.
(C) (i) If at any time dividends on any
Series A Junior Participating Preferred Stock shall be in
arrears in an amount equal to six (6) quarterly dividends
thereon, the occurrence of such contingency shall mark
the beginning of a period (herein called a "default
period") which shall extend until such time when all
accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend
period on all shares of Series A Junior Participating
Preferred Stock then outstanding shall have been declared
and paid or set apart for payment. During each default
period, all holders of the Series A Junior Participating
Preferred Stock with dividends in arrears in an amount
equal to six (6) quarterly dividends thereon, voting as a
class, shall have the right to elect two (2) Directors.
(ii) During any default period, such
voting right of the holders of Series A Junior
Participating Preferred Stock may be exercised initially
at a special meeting called pursuant to subparagraph
(iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of
stockholders, provided that neither such voting right nor
the right of the holders of any other series of preferred
stock, if any, to increase, in certain cases, the
authorized number of Directors shall be exercised unless
the holders of ten percent (10%) in number of shares of
Series A Junior Participating Preferred Stock outstanding
shall be present in person or by proxy. The absence of a
quorum of the holders of Common Stock shall not affect
the exercise by the holders of Series A Junior
Participating Preferred Stock of such voting right. At
any meeting at which the holders of Series A Junior
Participating Preferred Stock shall exercise such voting
right initially during an existing default period, they
shall have the right, voting as a class, to elect
Directors to fill such vacancies, if any, in the Board of
Directors as may then exist up to two (2) Directors or,
if such right is exercised at an annual meeting, to elect
two (2) Directors. If the number which may be so elected
at any special meeting does not amount to the required
number, the holders of the Series A Junior Participating
Preferred Stock shall have the right to make such
increase in the number of Directors as shall be necessary
to permit the election by them of the required number.
After the holders of the Series A Junior Participating
Preferred Stock shall have exercised their right to elect
Directors in any default period and during the
continuance of such period, the number of Directors shall
not be increased or decreased except by vote of the
holders of Series A Junior Participating Preferred Stock
as herein provided or pursuant to the rights of any
equity securities ranking senior to or pari passu with
the Series A Junior Participating Preferred Stock.
(iii) Unless the holders of Series A
Junior Participating Preferred Stock shall, during an
existing default period, have previously exercised their
right to elect Directors, the Board of Directors may
order, or any stockholder or stockholders owning in the
aggregate not less than ten percent (10%) of the total
number of shares of Series A Junior Participating
Preferred Stock outstanding, irrespective of series, may
request, the calling of a special meeting of the holders
of Series A Junior Participating Preferred Stock, which
meeting shall thereupon be called by the Chairman, the
President or the Secretary of the Savings Bank. Notice
of such meeting and of any annual meeting at which
holders of Series A Junior Participating Preferred Stock
are entitled to vote pursuant to this Paragraph (C)(iii)
shall be given to each holder of record of Series A
Junior Participating Preferred Stock by mailing a copy of
such notice to the holder at the holder's last address as
the same appears on the books of the Savings Bank. Such
meeting shall be called for a time not earlier than 10
days and not later than 50 days after such order or
request, or in default of the calling of such meeting
within 50 days after such order or request, such meeting
may be called on similar notice by any stockholder or
stockholders owning in the aggregate not less than ten
percent (10%) of the total number of shares of Series A
Junior Participating Preferred Stock outstanding.
Notwithstanding the provisions of this Paragraph
(C)(iii), no such special meeting shall be called during
the period within 50 days immediately preceding the date
fixed for the next annual meeting of the stockholders.
(iv) In any default period, the holders
of Common Stock, and other classes of stock of the
Savings Bank if applicable, shall continue to be entitled
to elect the whole number of Directors until the holders
of Series A Junior Participating Preferred Stock shall
have exercised their right to elect two (2) Directors
voting as a class, after the exercise of which right (x)
the Directors so elected by the holders of Series A
Junior Participating Preferred Stock shall continue in
office until their successors shall have been elected by
such holders or until the expiration of the default
period, and (y) any vacancy in the Board of Directors may
(except as provided in Paragraph (C)(ii) of this Section
3) be filled by vote of a majority of the remaining
Directors theretofore elected by the holders of the class
of stock which elected the Director whose office shall
have become vacant. References in this Paragraph (C) to
Directors elected by the holders of a particular class of
stock shall include Directors elected by such Directors
to fill vacancies as provided in clause (y) of the
foregoing sentence.
(v) Immediately upon the expiration of a
default period, (x) the right of the holders of Series A
Junior Participating Preferred Stock as a class to elect
Directors shall cease, (y) the term of any Directors
elected by the holders of Series A Junior Participating
Preferred Stock as a class shall terminate, and (z) the
number of Directors shall be such number as may be
provided for in the Restated Organization Certificate or
by-laws irrespective of any increase made pursuant to the
provisions of paragraph (C)(ii) of this Section 3 (such
number being subject, however, to change thereafter in
any manner provided by law or in the Restated
Organization Certificate or by-laws). Any vacancies in
the Board of Directors effected by the provisions of
clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining directors.
(D) Except as set forth herein, holders of
Series A Junior Participating Preferred Stock shall have
no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote
with holders of Common Stock as set forth herein) for
taking any corporate action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other
dividends or distributions payable on the Series A Junior
Participating Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and
unpaid dividends and distributions, whether or not
declared, on shares of Series A Junior Participating
Preferred Stock outstanding shall have been paid in full,
the Savings Bank shall not
(i) declare or pay dividends on, make any
other distributions on, or redeem or purchase
or otherwise acquire for consideration, any
shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or
winding up) to the Series A Junior
Participating Preferred Stock;
(ii) declare or pay dividends on or make
any other distributions on, any shares of stock
ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up)
with the Series A Junior Participating
Preferred Stock, except dividends paid ratably
on the Series A Junior Participating Preferred
Stock and all such parity stock on which
dividends are payable or in arrears in
proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise
acquire for consideration shares of any stock
ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up)
with the Series A Junior Participating
Preferred Stock, provided that the Savings Bank
may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in
exchange for shares of any stock of the Savings
Bank ranking junior (either as to dividends or
upon dissolution, liquidation or winding up) to
the Series A Junior Participating Preferred
Stock; or
(iv) purchase or otherwise acquire for
consideration any shares of Series A Junior
Participating Preferred Stock, or any shares of
stock ranking on a parity with the Series A
Junior Participating Preferred Stock, except in
accordance with a purchase offer made in
writing or by publication (as determined by the
Board of Directors) to all holders of such
shares upon such terms as the Board of
Directors, after consideration of the
respective annual dividend rates and other
relative rights and preferences of the
respective series and classes, shall determine
in good faith will result in fair and equitable
treatment among the respective series or
classes.
(B) The Savings Bank shall not permit any
subsidiary of the Savings Bank to purchase or otherwise
acquire for consideration any shares of stock of the
Savings Bank unless the Savings Bank could, under
paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of
Series A Junior Participating Preferred Stock purchased
or otherwise acquired by the Savings Bank in any manner
whatsoever shall be retired and cancelled promptly after
the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares
of Preferred Stock and may be reissued as part of a new
series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the
conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding
Up.
(A) In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
Savings Bank, no distribution shall be made to the
holders of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless,
prior thereto, the holders of shares of Series A Junior
Participating Preferred Stock shall have received $100
per share, plus accrued and unpaid dividends to the date
of distribution, whether or not earned or declared to the
date of such payment (the "Liquidation Preference").
Following the payment of the full amount of the
Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series A Junior
Participating Preferred Stock unless, prior thereto, the
holders of shares of Common Stock shall have received an
amount per share (the "Common Adjustment") equal to the
quotient obtained by dividing (i) the Liquidation
Preference by (ii) 100 (as appropriately adjusted as set
forth in subparagraph C below to reflect such events as
stock splits, stock dividends and recapitalizations with
respect to the Common Stock) (such number in clause (ii),
the "Adjustment Number"). Following the payment of the
full amount of the Liquidation Preference and the Common
Adjustment in respect of all outstanding shares of Series
A Junior Participating Preferred Stock and Common Stock,
respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock
shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Preferred
Stock and Common Stock, on a per share basis,
respectively.
(B) In the event, however, that there are not
sufficient assets available to permit payment in full of
the Liquidation Preference and the liquidation
preferences of all other series of preferred stock, if
any, which rank on a parity with the Series A Junior
Participating Preferred Stock, then such remaining assets
shall be distributed ratably to the holders of such
parity shares in proportion to their respective
liquidation preferences. In the event, however, that
there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such
remaining assets shall be distributed ratably to the
holders of Common Stock.
(C) In the event the Savings Bank shall at any
time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to
which holders of Series A Junior Participating Preferred
Stock were entitled immediately prior to such event
pursuant to clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such
event.
Section 7. Consolidation, Merger, etc. In
case the Savings Bank shall enter into any consolidation,
merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into
other stock or securities, cash and/or any other
property, then in any such case the shares of Series A
Junior Participating Preferred Stock shall at the same
time be similarly exchanged or changed in an amount per
share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into
which or for which each share of Common Stock is changed
or exchanged. In the event the Savings Bank shall at any
time after the Rights Declaration Date (i) declare any
dividend on Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding Common Stock, or
(iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the
exchange or change of shares of Series A Junior
Participating Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which
is the number of shares of Common Stock that were
outstanding immediately prior to such event.
Section 8. No Redemption. The shares of
Series A Junior Participating Preferred Stock shall not
be redeemable.
Section 9. Ranking. The Series A Junior
Participating Preferred Stock shall rank junior to all
other series of the Savings Bank's Preferred Stock as to
the payment of dividends and as regards liquidation,
dissolution and winding up, unless the terms of any such
series shall provide otherwise.
Section 10. Amendment. The Restated
Organization Certificate of the Savings Bank shall not be
further amended in any manner which would materially
alter or change the powers, preferences or special rights
of the Series A Junior Participating Preferred Stock so
as to affect them adversely without the affirmative vote
of the holders of a majority or more of the outstanding
shares of Series A Junior Participating Preferred Stock,
voting separately as a class.
Section 11. Fractional Shares. Series A
Junior Participating Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in
proportion to such holder's fractional shares, to
exercise voting rights, receive dividends, participate in
distributions and to have the benefit of all other rights
of holders of Series A Junior Participating Preferred
Stock.
IN WITNESS WHEREOF, we have made, signed and
acknowledged this Certificate this ____ day of
, 1996.
___________________________
Thomas M. O'Brien
President
________________________
Judith A. MacGregor
Secretary
Exhibit B
[Form of Rights Certificate]
Certificate No. R- ________ Rights
NOT EXERCISABLE AFTER APRIL 30, 2006 OR EARLIER IF
REDEEMED BY THE BANK. THE RIGHTS ARE SUBJECT TO
REDEMPTION, AT THE OPTION OF THE BANK, AT $0.01 PER RIGHT
ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH
TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY,
THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY
MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED
IN SECTION 7(e) OF SUCH AGREEMENT.]*
* The portion of the legend in brackets shall be
inserted only if applicable and shall replace the
preceding sentence.
Rights Certificate
NORTH SIDE SAVINGS BANK
This certifies that , or
registered assigns, is the registered owner of the number
of Rights set forth above, each of which entitles the
owner thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of April 18,
1996 (the "Rights Agreement"), between North Side Savings
Bank, a New York-chartered savings bank (the "Bank"), and
American Stock Transfer and Trust Company, a New York
corporation (the "Rights Agent"), to purchase from the
Bank at any time prior to 5:00 P.M. (New York time) on
April 30, 2006 at the office or offices of the Rights
Agent designated for such purpose, or its successors as
Rights Agent, one one-hundredth of a fully paid, non-
assessable share of Series A Junior Participating
Preferred Stock (the "Preferred Stock") of the Bank, at a
purchase price of $100 in cash per one one-hundredth of a
share (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of
Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights
Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the
Purchase Price per share set forth above, are the number
and Purchase Price as of April 30, 1996, based on the
Preferred Stock as constituted at such date. Pursuant to
the Rights Agreement, the Bank reserves the right to
require prior to the occurrence of a Triggering Event (as
defined below) that, upon any exercise of Rights, a
number of Rights be exercised so that only whole shares
of Preferred Stock will be issued.
Upon the occurrence of a Section 11(a)(ii)
Event (as such term is defined in the Rights Agreement),
if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as
such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or
Affiliate, or (iii) under certain circumstances specified
in the Rights Agreement, a transferee of a person who,
after such transfer, became an Acquiring Person, or an
Affiliate or Associate of an Acquiring Person, such
Rights shall become null and void and no holder hereof
shall have any right with respect to such Rights from and
after the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Agreement, the
Purchase Price and the number and kind of shares of
Preferred Stock or other securities, which may be
purchased upon the exercise of the Rights evidenced by
this Rights Certificate are subject to modification and
adjustment upon the happening of certain events,
including Triggering Events.
This Rights Certificate is subject to all of
the terms, provisions and conditions of the Rights
Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part
hereof and to which Rights Agreement reference is hereby
made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of
the Rights Agent, the Bank and the holders of the Rights
Certificates, which limitations of rights include the
temporary suspension of the exercisability of such Rights
under the specific circumstances set forth in the Rights
Agreement. Copies of the Rights Agreement are on file at
the above-mentioned office of the Rights Agent and are
also available upon written request to the Rights Agent.
This Rights Certificate, with or without other
Rights Certificates, upon surrender at the principal
office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate
or Rights Certificates of like tenor and date evidencing
Rights entitling the holder to purchase a like aggregate
number of one one-hundredths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate
or Rights Certificates surrendered shall have entitled
such holder to purchase. If this Rights Certificate
shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Rights
Certificate or Rights Certificates for the number of
whole Rights not exercised.
Subject to the provisions of the Rights
Agreement, the Rights evidenced by this Certificate may
be redeemed by the Bank at its option at a redemption
price of $0.01 per Right at any time prior to the earlier
of (i) the close of business on the tenth day following
the Stock Acquisition Date (as such time period may be
extended pursuant to the Rights Agreement) and (ii) the
Final Expiration Date.
No fractional shares of Preferred Stock will be
issued upon the exercise of any Right or Rights evidenced
hereby (other than fractions which are integral multiples
of one one-hundredth of a share of Preferred Stock, which
may, at the election of the Bank, be evidenced by
depositary receipts), but in lieu thereof a cash payment
will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate shall be
entitled to vote or receive dividends or be deemed for
any purpose the holder of shares of Preferred Stock or of
any other securities of the Bank which may at any time be
issuable on the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed
to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Bank or any right to vote
for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to
give or withhold consent to any corporate action, or, to
receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced
by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or
obligatory for any purpose until it shall have been
countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper
officers of the Bank and its corporate seal.
Dated as of , 19__
ATTEST: NORTH SIDE SAVINGS BANK
____________________ By_______________________
Secretary Title:
Countersigned:
[ ]
By______________________
Authorized Signature
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ____________________________________
hereby sells, assigns and transfer unto________________
_______________________________________________________
(Please print name and address of transferee)
_______________________________________________________
this Rights Certificate, together with all right, title
and interest therein, and does hereby irrevocably
constitute and appoint _________________ Attorney, to
transfer the within Rights Certificate on the books of
the within-named Bank, with full power of substitution.
Dated: ________ ________, 19__
___________________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking
the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is
not being sold, assigned and transferred by or on behalf
of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as
such terms are defined pursuant to the Rights Agreement);
(2) after due inquiry and to the best
knowledge of the undersigned, it [ ] did [ ] did not
acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate of an
Acquiring Person.
Dated: __________________, 19__ ______________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Assignment and
Certificate must correspond to the name as written upon
the face of this Rights Certificate in every particular,
without alteration or enlargement or any change
whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Rights represented by the
Rights Certificate.)
To: NORTH SIDE SAVINGS BANK:
The undersigned hereby irrevocably elects to
exercise __________ Rights represented by this Rights
Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other
securities of the Bank or of any other person which may
be issuable upon the exercise of the Rights) and requests
that certificates for such shares be issued in the name
of and delivered to:
Please insert social security
or other identifying number
_________________________________________________________
(Please print name and address)
_________________________________________________________
If such number of Rights shall not be all the
Rights evidenced by this Rights Certificate, a new Rights
Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
Please insert social security
or other identifying number
________________________________________________________
(Please print name and address)
________________________________________________________
Dated: _______________, 19__
______________________
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking
the appropriate boxes that:
(1) the Rights evidenced by this Rights
Certificate [ ] are [ ] are not being exercised by or on
behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person
(as such terms are defined pursuant to the Rights
Agreement);
(2) after due inquiry and to the best
knowledge of the undersigned, it [ ] did [ ] did not
acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person
or an Affiliate or Associate of an Acquiring Person.
Dated: ___________, 19__ ___________________________
Signature
Signature Guaranteed:
NOTICE
The signature to the foregoing Election to
Purchase and Certificate must correspond to the name as
written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any
change whatsoever.
Exhibit C
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On April 15, 1996, the Board of Directors (the
"Board") of North Side Savings Bank (the "Bank") declared
a dividend distribution of one Right for each outstanding
share of North Side Common Stock to stockholders of
record at the close of business on April 30, 1996 (the
"Record Date"). Each Right entitles the registered
holder to purchase from the Bank a unit consisting of one
one-hundredth of a share (a "Unit") of Series A Junior
Participating Preferred Stock, $1.00 par value (the
"Preferred Stock"), at a Purchase Price of $100 in cash
per Unit, subject to adjustment. The description and
terms of the Rights are set forth in a Rights Agreement
(the "Rights Agreement") between the Bank and American
Stock Transfer and Trust Company, as Rights Agent.
Initially, the Rights will be attached to all
Common Stock certificates representing shares then
outstanding, and no separate Rights Certificate will be
distributed. The Rights will separate from the Common
Stock and a Distribution Date will occur upon the earlier
of (i) 10 days following a public announcement that a
person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to
acquire, beneficial ownership of 10% or more of the
outstanding shares of Common Stock (the "Stock Acquisition
Date"), or (ii) 10 business days (or such later date as
the Board shall determine) following the commencement of a
tender offer or exchange offer that would result in a
person or group beneficially owning 10% or more of such
outstanding shares of Common Stock. Until the
Distribution Date, (i) the Rights will be evidenced by the
Common Stock certificates and will be transferred with and
only with such Common Stock certificates, (ii) new Common
Stock certificates issued after the Record Date will
contain a notation incorporating the Rights Agreement by
reference and (iii) the surrender for transfer of any
certificates for Common Stock outstanding will also
constitute the transfer of the Rights associated with the
Common Stock represented by such certificate.
The Rights are not exercisable until the
Distribution Date and will expire at the close of business
on April 30, 2006, unless earlier redeemed by the Bank as
described below. Pursuant to the Rights Agreement, the
Bank reserves the right to require prior to the occurrence
of a Triggering Event (as defined below) that, upon any
exercise of Rights, a number of Rights be exercised so
that only whole shares of Preferred Stock will be issued.
As soon as practicable after the Distribution
Date, Rights Certificates will be mailed to holders of
record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as
otherwise determined by the Board of Directors and except
in connection with shares of Common Stock issued upon the
exercise of employee stock options or the conversion of
convertible securities, only shares of Common Stock issued
prior to the Distribution Date will be issued with Rights.
In the event that, at any time following the
Distribution Date, any Person (subject to certain
exceptions) becomes an Acquiring Person except pursuant to
an offer for all outstanding shares of Common Stock which
the independent directors determine to be fair to, and
otherwise in the best interests of, stockholders, each
holder of a Right will thereafter have the right to
receive, upon exercise, Common Stock (or, in certain
circumstances, cash, property or other securities of the
Bank) having a value equal to two times the exercise price
of the Right. Notwithstanding any of the foregoing,
following the occurrence of any event set forth in this
paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null
and void.
For example, at an exercise price of $100 per
Right, each Right not owned by an Acquiring Person (or by
certain related parties) following an event set forth in
the preceding paragraph would entitle its holder to
purchase $200 worth of Common Stock (or other
consideration, as noted above) for $100. Assuming that
the Common Stock had a per share value of $40 at such
time, the holder of each valid Right would be entitled to
purchase 5 shares of Common Stock for $100.
In the event that, at any time following the
Stock Acquisition Date, (i) the Bank is acquired in a
merger or other business combination transaction in which
the Bank is not the surviving corporation or its Common
Stock is changed or exchanged (other than a merger which
follows an offer described in the second preceding
paragraph), or (ii) 50% or more of the Bank's assets or
earning power is sold or transferred, each holder of a
Right (except Rights which previously have been voided as
set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring
company having a value equal to two times the exercise
price of the Right. The events set forth in this
paragraph and in the second preceding paragraph are
referred to as the "Triggering Events."
The Purchase Price payable, and the number of
Units of Preferred Stock or other securities or property
issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Stock,
(ii) if holders of the Preferred Stock are granted certain
rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market
price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the
Purchase Price will be required until cumulative
adjustments amount to at least 1% of the Purchase Price.
No fractional Units will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market
price of the Preferred Stock on the last trading date
prior to the date of exercise.
At any time until the tenth day following the
Stock Acquisition Date, the Bank may redeem the Rights in
whole, but not in part, at a price of $.01 per Right
(payable in cash, stock or other consideration deemed
appropriate by the Board). Immediately upon the action of
the Board of Directors ordering redemption of the Rights,
the Rights will terminate and the only right of the
holders of Rights will be to receive the $.01 redemption
price.
Until a Right is exercised, the holder thereof,
as such, will have no rights as a stockholder of the Bank,
including, without limitation, the right to vote or to
receive dividends. While the distribution of the Rights
will not be taxable to stockholders or to the Bank,
stockholders may, depending upon the circumstances,
recognize taxable income in the event that the Rights
become exercisable for Common Stock (or other
consideration) of the Bank or for common stock of the
acquiring company as set forth above.
Any of the provisions of the Rights Agreement
may be amended by the Board of Directors of the Bank prior
to the Distribution Date. After the Distribution Date,
the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, to make changes
which do not adversely affect the interests of holders of
Rights (excluding the interests of any Acquiring Person),
or to shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust
the time period governing redemption shall be made at such
time as the Rights are not redeemable.
A copy of the Rights Agreement is being filed
with the Federal Deposit Insurance Corporation as an
Exhibit to a Registration Statement on Form F-10. A copy
of the Rights Agreement is available free of charge from
the Bank. This summary description of the Rights does not
purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, which is incorporated
herein by reference.
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
AMENDMENT NO. 1
TO
FORM F-10
REGISTRATION FOR ADDITIONAL CLASS OF SECURITIES
OF A BANK UNDER SECTION 12(B) OR 12(G) OF THE
SECURITIES EXCHANGE ACT OF 1934
NORTH SIDE SAVINGS BANK
(EXACT NAME OF BANK AS SPECIFIED IN ITS CHARTER)
170 TULIP AVENUE
FLORAL PARK, NEW YORK
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
11001
(ZIP CODE)
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(B) OF
THE ACT:
NONE
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(G) OF
THE ACT:
PREFERRED STOCK PURCHASE RIGHTS
ITEM 1. STOCK TO BE REGISTERED.
Not Applicable.
ITEM 2. DEBT SECURITIES TO BE REGISTERED.
Not Applicable.
ITEM 3. OTHER SECURITIES TO BE REGISTERED.
On April 15, 1996, the Board of Directors (the
"Board") of North Side Savings Bank (the "Bank") declared
a dividend distribution of one Right for each outstanding
share of common stock, par value $1.00 per share, of the
Bank (the "Common Stock") to stockholders of record at the
close of business on April 30, 1996 (the "Record Date").
Each right entitles the registered holder to purchase
from the Bank a unit (a "Unit") consisting of one one-
hundredth of a share of Series A Junior Participating
Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), at a purchase price of $100 per Unit,
subject to adjustment. The description and terms of the
Rights are set forth in the Rights Agreement (the "Rights
Agreement"), dated as of April 18, 1996, between the Bank
and American Stock Transfer and Trust Company, a New York
corporation, as Rights Agent (the "Rights Agent").
Initially, the Rights will be attached to all
Common Stock certificates representing shares then
outstanding, and no separate Rights certificate will be
distributed. The Rights will separate from the Common
Stock upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired,
or obtained the right to acquire, beneficial ownership of
10% or more of the outstanding shares of Common Stock
(the "Stock Acquisition Date") or (ii) 10 business days
(or such later date as the Board shall determine)
following the commencement of a tender offer or exchange
offer that would result in a person or group beneficially
owning 10% or more of such outstanding shares of Common
Stock (the earlier of (i) and (ii), the "Distribution
Date"). Until the Distribution Date, (i) the Rights will
be evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued
subsequent to the Record Date will contain a notation
incorporating the Rights Agreement by reference and (iii)
the surrender for transfer of any certificates for Common
Stock outstanding will also constitute the transfer of
the Rights associated with the Common Stock represented
by such certificate.
The Rights are not exercisable until the
Distribution Date and will expire at the close of
business on April 30, 2006 unless earlier redeemed by the
Bank as described below. At no time will the Rights have
any voting power.
As soon as practicable after the Distribution
Date, Rights certificates will be mailed to holders of
record of the Common Stock as of the close of business on
the Distribution Date and, thereafter, the separate
Rights certificates alone will represent the Rights.
Except as otherwise determined by the Board and except in
connection with shares of Common Stock issued upon the
exercise of employee stock options or upon the exercise,
conversion or exchange of securities of the Bank, only
shares of Common Stock issued prior to the Distribution
Date will be issued with Rights.
In the event that any person or group becomes
an Acquiring Person (unless the event causing such person
or group to become an Acquiring Person is a tender or
exchange offer for all outstanding shares of the Bank, at
a price determined by a majority of the independent
directors of the Bank who are not representatives,
nominees, Affiliates or Associates of an Acquiring Person
to be fair and otherwise in the best interest of the Bank
and its stockholders after receiving advice from one or
more investment banking firms), each holder of a Right
will thereafter have the right to receive, upon exercise,
Common Stock (or, in certain circumstances, cash,
property or other securities of the Bank), having a value
equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the
occurrence of the event set forth in this paragraph, all
Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially
owned by any Acquiring Person will be null and void.
However, Rights are not exercisable following the
occurrence of the event set forth above until such time
as the rights are no longer redeemable by the Bank as set
forth below.
In the event that following the Stock
Acquisition Date, (i) the Bank engages in a merger or
business combination transaction in which the Bank is not
the surviving corporation, (ii) the Bank engages in a
merger or business combination transaction in which the
Bank is the surviving corporation and the Common Stock of
the Bank is changed or exchanged (other than, in the case
of clauses (i) and (ii), a merger or business combination
that follows an offer described in the previous paragraph
and that meets certain other requirements), or (iii) 50%
or more the Bank's assets or earning power is sold or
transferred, each holder of a Right (except Rights which
have previously been voided as set forth above) shall
thereafter have the right to receive, upon exercise of
the Right, Common Stock of the acquiring company having a
value equal to two times the exercise price of the Right.
The Purchase Price payable, and the number of
Units of Preferred Stock or other securities or property
issuable upon exercise of the Rights, are subject to
adjustment from time to time to prevent dilution (i) in
the event of a stock dividend, on, or a subdivision,
combination or reclassification of, the Preferred Stock,
(ii) if holders of the Preferred Stock are granted
certain rights or warrants to subscribe for Preferred
Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the
distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustments in the
Purchase Price will be required until cumulative
adjustments amount to at least 1% of the Purchase Price.
No fractional Units will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market
price of the Preferred Stock on the last trading date
prior to the date of exercise.
At any time until ten days following the Stock
Acquisition Date, the Bank may redeem the Rights in
whole, but not in part, at a price of $0.01 per Right
(payable in cash, stock or other consideration deemed
appropriate by the Board). Immediately upon the action
of the Board ordering redemption of the Rights, the
Rights will terminate and the only right of the holders
of Rights will be to receive the $0.01 redemption price.
Until a Right is exercised, the holder thereof,
as such, will have no rights as a stockholder of the
Bank, including, without limitation, the right to vote or
to receive dividends. While the distribution of the
Rights will not be taxable to stockholders or to the
Bank, stockholders may, depending upon the circumstances,
recognize taxable income in the event that the Rights
become exercisable for Common Stock (or other
consideration) of the Bank as set forth above.
Any of the provisions of the Rights Agreement
may be amended by the Board prior to the Distribution
Date. After the Distribution Date, the provisions of
the Rights Agreement may be amended by the Board in order
to cure any ambiguity, to make changes which do not
adversely affect the interests of holders of Rights
(excluding the interest of any Acquiring Person), or to
shorten or lengthen any time period under the Rights
Agreement; provided, however, that no amendment to adjust
the time period governing redemption shall be made at
such time as the Rights are not redeemable.
The Rights have certain anti-takeover effects.
The Rights will cause substantial dilution to a person or
group that attempts to acquire the Bank in certain
circumstances. Accordingly, the existence of the rights
may deter certain acquirors from making takeover
proposals or tender offers. However, the Rights are not
intended to prevent a takeover, but rather are designed
to enhance the ability of the Board to negotiate with a
potential acquiror on behalf of all of the stockholders.
The Rights should not interfere with any merger or other
business combination approved by the Board since the
Board may redeem the Rights as provided above. In this
regard, on July 15, 1996, the Bank and North Fork
Bancorporation, Inc. ("North Fork") executed an Agreement
and Plan of Merger (the "Merger Agreement"), providing
for, among other things, the merger of the Bank with and
into a subsidiary of North Fork. In connection with the
execution of the Merger Agreement, the Company executed
an amendment (the "Amendment") to the Rights Agreement in
order to amend the definition of "Acquiring Person"
set forth in the Rights Agreement to provide that neither
North Fork nor any of its subsidiaries will be deemed to
be an Acquiring Person by virtue of the fact that North
Fork is the Beneficial Owner (as defined in the Rights
Agreement) solely of Common Stock (i) of which North Fork
or such subsidiary was the Beneficial Owner on July 15,
1996, (ii) acquired or acquirable pursuant to the grant
or exercise of the option granted pursuant to the Stock
Option Agreement, dated as of July 15, 1996, between the
Bank and North Fork, (iii) held directly or indirectly in
trust accounts, managed accounts and the like or
otherwise held in a fiduciary capacity for third parties
and (iv) held in respect of a debt previously contracted.
The Rights Agreement between the Bank and the
Rights Agent specifying the terms of the Rights, which
includes as Exhibit B the Form of Rights Certificate, was
attached as an Exhibit to the Company's Form F-10 filed
with the Federal Deposit Insurance Corporation on April
24, 1996 and is incorporated herein by reference. The
Amendment is attached hereto as Exhibit 2 and is
incorporated herein by reference. The foregoing
description of the Rights, the Rights Agreement and the
Amendment does not purport to be complete and is
qualified in its entirety by reference to such Exhibits.
ITEM 4. EXHIBITS.
1. Rights Agreement, dated as of April 18, 1996,
between North Side Savings Bank and American Stock
Transfer and Trust Company, as Rights Agent, incorporated
herein by reference to Exhibit 1 to the Banks
Registration Statement on Form F-10, dated April 24, 1996.
2. Amendment, dated as of July 15, 1996, to the
Rights Agreement, dated as of April 15, 1996, between
North Side Savings Bank and American Stock Transfer and
Trust Company, as Rights Agent.
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the bank has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereto duly authorized.
NORTH SIDE SAVINGS BANK
By: /s/ Thomas O'Brien
Name: Thomas O'Brien
Title: Chairman, Chief Executive
Officer and President
Dated: August 21, 1996
EXHIBIT 1
AMENDMENT TO RIGHTS AGREEMENT
Amendment, dated as of July 15, 1996, to the
Rights Agreement (the "Amendment"), dated as of April 18,
1996 (the "Rights Agreement"), between North Side Savings
Bank, a New York-chartered savings bank (the "Company"),
and American Stock Transfer and Trust Company, a New York
corporation (the "Rights Agent").
W I T N E S S E T H:
WHEREAS, no Distribution Date (as defined in
Section 3(a) of the Rights Agreement) has occurred as of
the date of this Amendment; and
WHEREAS, the Board of Directors of the Company
has approved and adopted this Amendment and directed that
the proper officers take all appropriate steps to execute
and put into effect this Amendment.
NOW, THEREFORE, the parties hereby agree as
follows:
1. Section 1(a) of the Rights Agreement is
hereby amended by inserting the following phrase after
the last word and before the period at the end of the
definition of "Acquiring Person":
"; provided; however, that
neither North Fork
Bancorporation, Inc., a Delaware
corporation ("Parent"), nor any
Subsidiary of Parent shall be
deemed to be an Acquiring
Person by virtue of the fact
that Parent is the Beneficial
Owner solely of Common Stock
(i) of which Parent or such
subsidiary was the Beneficial
Owner on July 15, 1996, (ii)
acquired or acquirable
pursuant to the grant or
exercise of the option granted
pursuant to the Stock Option
Agreement, dated as of July
15, 1996, between Parent and
the Company, (iii) held
directly or indirectly in
trust accounts, managed
accounts and the like or
otherwise held in a fiduciary
capacity for third parties and
(iv) held in respect of a debt
previously contracted."
2. This Amendment shall be effective
immediately upon its execution and the Rights
Agreement shall continue in full force and effect
as amended hereby.
3. Capitalized terms used in this
Amendment and not defined herein shall have the
meanings assigned thereto in the Rights Agreement.
4. This Amendment may be executed in
counterparts.
IN WITNESS WHEREOF, the parties hereto
have caused this Amendment to be duly executed and their
respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above
written.
NORTH SIDE SAVINGS BANK
ATTEST:
By: /s/ Judith A. MacGregor By: /s/ Thomas M. O'Brien
Name: Thomas M. O'Brien
Title: Chairman, President and
Chief Executive Officer
AMERICAN STOCK TRANSFER AND
TRUST COMPANY
By: /s/ Herbert L. Lemmer
Name: Herbert L. Lemmer
Title: Vice President
ATTEST:
By: /s/ Susan Silber
SUSAN SILBER
Assistant Secretary
