SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the period ended: June 30, 1996
NORTH FORK BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-315460
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
275 BROAD HOLLOW ROAD, MELVILLE, NEW YORK 11747
(Address of principal executive offices) (Zip Code)
(516) 298-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes (X) No ( )
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date.
CLASSES OF COMMON STOCK NUMBER OF SHARES OUTSTANDING 08/07/96
$2.50 Par Value 24,123,937
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
North Fork Bancorporation, Inc.
(1.) Consolidated Balance Sheets
(2.) Consolidated Statements of Income.
(3.) Consolidated Statements of Cash Flows.
(4.) Consolidated Statements of Changes in Stockholders'
Equity.
(5.) Notes to Consolidated Financial Statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Shortly following the announcement on July 15, 1996 that the
Registrant had entered into an Agreement and Plan of Merger with
North Side Savings Bank ("North Side") providing for the merger
of North Side and a wholly owned subsidiary of the Registrant
(the "Merger"), two alleged stockholders of North Side filed
purported class action lawsuits in the Supreme Court of the
State of New York County of New York (the "Court") against North
Side, the members of the North Side Board of Directors and the
Registrant. The plaintiffs allege, among other things, that the
Registrant has aided and abetted breaches of fiduciary duty by
the members of the North Side Board of Directors in connection
with the proposed Merger. The plaintiffs seek, among other
things an order enjoining the defendants from taking any steps to
implement the proposed Merger, awarding purported unspecified
damage and to account for any profits realized by them. The
plaintiffs also seek the award of the costs and disbursements of
the actions, including reasonable attorneys' and experts' fees.
The Registrant believes the allegations contained in the
complaints are baseless, entirely without merit and intend to
contest them vigorously.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
<PAGE>
PART II. OTHER INFORMATION (continued)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Registrant's Annual Meeting of Stockholders was held
on Tuesday April 23, 1996.
(b) At the Annual Meeting , the following Nominees were
elected to the Registrant's Board of Directors for a period of
three years:
For Withheld
John Bohlsen 19,846,536 241,985
Malcolm J. Delaney 19,904,961 183,560
James H. Rich, Jr. 19,882,790 205,731
The following sets forth the names of those directors whose term
of office continued after the Registrant's Annual Meeting:
Allan C. Dickerson
Lloyd Gerard
John A. Kanas
James Reeve
George H. Rowsom
Raymond W. Terry, Jr.
Dr. Kurt Schmeller
(c) The following matters were also voted upon at the
Registrant's Annual Meeting:
1) The Registrant's stockholders approved with 18,367,952
affirmative votes cast, 1,404,120 negative votes cast and
191,621 votes abstaining, an amendment to the Registrant's Key
Employee Stock Plan to increase the number of shares of the
Registrant's common stock, par value $2.50 per share, issuable
thereunder from 700,000 to 1,200,000.
2) The Registrant's stockholders approved with 17,775,824
affirmative votes cast and 1,960,412 negative votes cast and
191,621 votes abstaining, the Registrant's Annual Incentive
Compensation Plan, as amended, to ensure that bonus amounts
payable to top executives thereunder will continue to be tax
deductible to the Registrant.
<PAGE>
PART II. OTHER INFORMATION (continued)
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are submitted herewith:
(a) Exhibit # Description
(11) Statement Re: Computation of per share earnings.
(27) Financial Data Schedule
(b) Current Report on Form 8-K/A dated March 15, 1996
(this Report amends the Registrant's current report
on Form 8-K dated on March 15, 1996).
Current Report on Form 8-K dated July 15, 1996
(reporting that the Registrant had entered into an
agreement and plan of merger with North Side Savings
Bank).
Current Report on Form 8-K dated July 15, 1996
(reporting certain additional information regarding
the transaction with North Side Savings Bank).
<PAGE>
<TABLE>
Consolidated Balance Sheets
(in thousands, except per share amounts) June 30, 1996 Dec.31, 1995 June 30, 1995
<S> <C> <C> <C>
Assets (unaudited) (unaudited)
Cash & Due from Banks $175,897 $106,476 $86,334
Interest Earning Deposits 1,465 1,347 969
Federal Funds Sold & Securities
Purchased under Agreements to
Resell - - 19,000
Securities:
Available-for-Sale 1,121,843 814,485 271,978
Held-to-Maturity 377,883 342,143 547,316
Total Securities 1,499,726 1,156,628 819,294
Loans 2,322,948 1,985,028 1,888,841
Less: Unearned Income & Fees 22,370 18,588 18,474
Allowance for Loan Losses 50,384 50,210 52,003
Net Loans 2,250,194 1,916,230 1,818,364
Premises & Equipment, Net 53,657 45,169 39,772
Accrued Income Receivable 28,112 22,400 18,555
Intangibles 84,755 26,633 21,529
Other Real Estate 6,519 4,805 4,047
Other Assets 37,936 23,623 30,969
Total Assets $4,138,261 $3,303,311 $2,858,833
Liabilities and Stockholders' Equity
Demand Deposits $657,516 $451,802 $407,098
Savings, N.O.W. & Money Market Deposits 1,378,208 1,153,739 1,124,776
Other Time Deposits 1,005,610 753,809 761,394
Certificates of Deposits, $100,000 and Over 214,896 176,110 131,622
Total Deposits 3,256,230 2,535,460 2,424,890
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase 447,739 391,369 47,625
Other Borrowings 60,000 10,000 10,000
Senior Note Payable 25,000 25,000 25,000
Purchased Security Liabilities 12,035 - 35,889
Accrued Expenses & Other Liabilities 37,569 31,637 29,564
Total Liabilities $3,838,573 $2,993,466 $2,572,968
Stockholders' Equity
Preferred Stock, par value $1.00; authorized
10,000,000 shares,unissued - - -
Common stock, par value $2.50; authorized
50,000,000 shares;issued & outstanding
25,042,752, 24,879,196, 24,696,910
shares at the periods ending, respectively 62,607 62,198 61,742
Additional Paid in Capital 104,952 102,398 100,137
Retained Earnings 166,557 144,773 123,728
Unrealized (Losses)/Gains on Securities
Available-for-Sale, net of taxes (10,000) 2,149 1,957
Deferred Compensation (1,823) (1,020) (1,081)
Treasury Stock at cost; 924,437, 36,187,
35,185 shares at the periods
ending, respectively (22,605) (653) (618)
Total Stockholders' Equity 299,688 309,845 285,865
Total Liabilities and
Stockholders' Equity $4,138,261 $3,303,311 $2,858,833
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Income (Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
<S> <C> <C> <C> <C>
Interest Income
Loans $50,824 $42,782 $96,375 $83,239
Mortgage-Backed Securities 17,894 9,710 34,391 18,806
U.S. Treasury & Government
Agency Securities 3,258 1,134 5,375 2,386
State & Municipal Obligations 1,255 653 2,002 1,341
Other Securities 327 382 666 703
Federal Funds Sold & Securities Purchased
Under Agreements to Resell 86 386 595 543
Interest Earning Deposits 19 20 40 54
Total Interest Income 73,663 55,067 139,444 107,072
Interest Expense
Savings, N.O.W. & Money Market Deposits 7,846 7,020 14,580 14,474
Other Time Deposits 13,345 10,254 23,753 18,359
Certificates of Deposit, $100,000
and Over 3,069 1,996 5,999 3,499
Short-Term Borrowings 3,349 517 9,596 886
Long-Term Borrowings 724 725 1,449 1,447
Total Interest Expense 28,333 20,512 55,377 38,665
Net Interest Income 45,330 34,555 84,067 68,407
Provision for Loan Losses 1,500 2,000 3,000 4,000
Net Interest Income after
Provision for Loan Losses 43,830 32,555 81,067 64,407
Non-Interest Income
Fees & Service Charges on
Deposit Accounts 4,262 2,757 7,245 5,373
Investment Management & Trust Fees 1,614 829 2,823 1,683
Mortgage Banking Operations 490 642 1,142 1,271
Other Operating Income 1,269 1,025 2,225 1,981
Net Securities Gains 5 50 996 148
Total Non-Interest Income 7,640 5,303 14,431 10,456
Non-Interest Expense
Compensation & Employee Benefits 11,297 8,079 20,958 16,235
Occupancy 2,536 1,598 4,458 3,269
Equipment 1,529 1,116 2,825 2,296
Other Real Estate 303 63 932 311
Amortization of Intangibles 1,894 367 2,367 735
Other Operating Expenses 6,207 5,578 10,979 11,192
Total Non-Interest Expense 23,766 16,801 42,519 34,038
Income Before Income Taxes 27,704 21,057 52,979 40,825
Provision for Income Taxes 10,568 8,827 21,417 17,095
Net Income $17,136 $12,230 $31,562 $23,730
Per Share:
Net Income $0.69 $0.50 $1.27 $0.98
Cash Dividends $0.20 $0.125 $0.40 $0.25
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 1996 1995
(in thousands)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $31,562 $23,730
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 3,000 4,000
Provision for Losses on Real Estate Acquired
in Settlement of Loans 541 203
Depreciation and Amortization 3,090 2,236
Amortization of Intangibles 2,367 735
Accretion of Discounts and Net Deferred
Loan Fees (2,407) (1,736)
Amortization of Premiums 3,657 1,982
Net Securities Gains (996) (148)
Other, Net (5,897) (2,142)
Net Cash Provided by Operating Activities 34,917 28,860
Cash Flows from Investing Activities:
Maturities, Calls and Principal Repayments on
Securities Held-to-Maturity 41,540 85,327
Purchases of Securities Held-to-Maturity (76,685) (2,536)
Proceeds from Sales of Securities
Available-for-Sale 7,556 56,581
Maturities and Principal Repayments on
Securities Available-for-Sale 157,921 21,996
Purchases of Securities Available-for-Sale (426,169) (164,573)
Loans Originated and Principal Repayments
on Loans and Other Real Estate Owned, Net (150,054) (63,985)
Proceeds from Sales of Real Estate Acquired
in Settlements of Loans 2,502 4,146
Proceeds from the Sale of Loans 10,826 3,568
Purchases of Premises and Equipment, Net (4,138) (2,737)
Net Cash & Cash Equivalents Received
in Acquisitions 595,650 -
Net Cash Provided by/(Used in)
Investing Activities 158,949 (62,213)
Cash Flows from Financing Activities:
Net (Decrease)/Increase in Deposits (196,509) 82,003
Net Increase/(Decrease) in Short-Term
and Other Borrowings 101,080 (12,375)
Purchase of Treasury Shares (22,566) (1,265)
Common Stock Sold for Cash 2,348 8,787
Dividends Paid to Shareholders (8,680) (5,410)
Net Cash (Used in)/Provided by
Financing Activities (124,327) 71,740
Net Increase in Cash and Cash Equivalents 69,539 38,387
Cash and Cash Equivalents at Beginning
of the Year 107,823 67,916
Cash and Cash Equivalents at End
of the Period $177,362 $106,303
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows (Unaudited), Continued
For the Six Months Ended June 30, 1996 1995
(in thousands)
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest Expense $58,823 $31,474
Income Taxes $8,631 $19,781
Supplemental Schedule of Noncash
Investing and Financing
Activities:
Real Estate Acquired in Settlement of Loans $3,150 $3,683
During the period the Registrant purchased
various investment securities which settled
in the subsequent month $12,035 $35,889
During March of 1996, the Bank acquired the domestic
commercial banking business of Extebank for $47 million in cash
and also acquired the 10 Long Island banking branches of First
Nationwide Bank with approximately $572 million in deposit
liabilities.
Fair Value of Assets Acquired, Including Cash
& Cash Equivalents $826,630
Intangible Assets 60,489
Cash Paid 47,000
Liabilities Assumed $934,119
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Changes in
Stockholders' Equity (Unaudited)
(in thousands, except per share amounts)
Additional Unrealized
Common Paid in Retained Securities Deferred Treasury
Stock Capital Earnings Gains/ Compensation Stock Total
(Losses)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 $57,623 $94,526 $106,186 ($2,871) ($514) ($27) $254,923
Net Income - - 23,730 - - - 23,730
Cash Dividends($0.25per share) - - (6,188) - - - (6,188)
Sale of Common Stock
(659,866 shares) 1,649 2,411 - - - - 4,060
Exercise of Warrants
(987,857 shares) 2,470 3,138 - - - - 5,608
Deferred Compensation Activity:
Restricted Stock Activity,
net (39,798 shares) - 62 - - (773) 674 (37)
Amortization of Other
Deferred Compensation Plans - - - - 206 - 206
Purchase of Treasury Stock
(73,038 shares) - - - - - (1,265) (1,265)
Adjustment to Unrealized
Gains/(Losses) on Securities
Available-for-Sale,
net of taxes - - - 4,828 - - 4,828
Balance, June 30, 1995 $61,742 $100,137 $123,728 $1,957 ($1,081) ($618) $285,865
Balance, December 31, 1995 $62,198 $102,398 $144,773 $2,149 ($1,020) ($653) $309,845
Net Income - - 31,562 - - - 31,562
Cash Dividends
($0.40 per share) - - (9,778) - - - (9,778)
Sale of Common Stock
(163,556 shares) 409 2,122 - - - - 2,531
Restricted Stock Activity,
net (34,650 shares) - 432 - - (803) 614 243
Purchase of Treasury Stock
(922,900 shares) - - - - - (22,566) (22,566)
Adjustment to Unrealized
(Losses)/Gains on Securities
Available-for-Sale,
net of taxes - - - (12,149) - - (12,149)
Balance, June 30, 1996 62,607 104,952 166,557 (10,000) (1,823) (22,605) 299,688
</TABLE>
<PAGE>
North Fork Bancorporation, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
June 30, 1996 and 1995
General
The accounting and reporting policies of North Fork
Bancorporation, Inc. (the "Registrant"), and its banking
subsidiary, North Fork Bank (the "Bank") and non-bank
subsidiaries, are in conformity with generally accepted
accounting principles and prevailing practices within the
financial services industry. The preparation of financial
statements in conformity with generally accepted accounting
principles requires that management make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts
of income and expenses during the reporting period. Such
estimates are subject to change in the future as additional
information becomes available or previously existing
circumstances are modified. Actual results could differ from
those estimates.
These statements should be read in conjunction with the
Registrant's summary of significant accounting policies which
are incorporated herein by reference in its 1995 Annual Report
on Form 10-K.
Results of operations for the three and six months ended June
30, 1996 are not necessarily indicative of the results of
operations which may be expected for the full year 1996 or any
other interim periods.
Mergers and Acquisitions
A) Completed Acquisitions
On March 15, 1996, the Bank completed its purchase of the
domestic commercial banking business of Extebank ("Extebank").
Extebank had approximately $388 million in total assets, $200
million in net loans, $348 million in deposit liabilities, $30
million in capital, and operated through eight branch locations
in the metropolitan New York area.
On March 23, 1996, the Bank completed its acquisition of the ten
banking branches of First Nationwide Bank ("First Nationwide")
located on Long Island, and assumed $572 million of customer
deposit liabilities for which it paid a deposit premium of
6.35%. Assets acquired consisting primarily of cash totaled
$529 million.
These transactions have been accounted for under the purchase
method of accounting, and, accordingly, the Registrant's
consolidated results of operations reflect only activity
subsequent to the acquisition dates. There was minimal effect
on operating results from these transactions in the quarter
ended March 31, 1996.
The intangibles created from the aforementioned transactions
aggregated approximately $60 million, of which $23 million is
attributable to the First Nationwide core deposit intangible.
The intangible assets associated with these transactions are
currently being amortized using various methods over periods not
exceeding 15 years for financial reporting purposes. The
intangible assets created from the First Nationwide transaction
are being amortized on a straight line basis over 15 years for
tax purposes.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table sets forth the unaudited pro forma summary
results of operations for the six month periods ended June 30,
1996 and 1995, and assumes that the foregoing completed purchase
transactions had been consummated as of January 1, 1996 and
1995, respectively. Although separate financial data had
historically been prepared for Extebank, such financial
information also included certain international operations.
Accordingly, since only the domestic commercial banking business
was acquired, certain estimates and assumptions have been
utilized in determining the pro forma adjustments applied to the
historical results of operations of Extebank. The First
Nationwide branch acquisition, which consisted principally of
cash and customer deposit liabilities, did not constitute a
distinct business entity for which separate financial data had
historically been prepared. Therefore, subjective estimates have
been utilized in determining the pro forma adjustments applied
to the historical results of operations of the Registrant.
These pro forma results are not necessarily indicative of the
results that would have been achieved had these acquisitions
occurred on the dates indicated or that may occur in the future.
<TABLE>
Pro Forma Combined Condensed Statements of Income
(Unaudited)
Six Months Ended
June 30, June 30,
1996 1995
<S> <C> <C>
Net Interest Income $89,352 $83,183
Provision for Loan Losses 3,221 5,350
Net Interest Income after
Provision for Loan Losses 86,131 77,833
Non-Interest Income 15,842 13,890
Non-Interest Expense exclusive of
Amortization of Intangibles 46,095 44,746
Amortization of Intangibles 3,736 3,571
Income before Income Taxes 52,142 43,406
Provision for Income Taxes 20,924 18,423
Net Income $31,218 $24,983
Earnings per Share $1.25 $1.03
</TABLE>
1) Extebank Domestic Commercial Banking Business
Specific assumptions utilized: 1) Extebank's historical
statement of operations for the six month period ended June 30,
1995 included certain international operations of Extebank. The
historical statement of operations for Extebank was adjusted to
reflect the elimination of the international operations; 2)
interest earning assets have been reduced by the transaction
purchase price and additional costs incurred in connection with
the consummation of the transaction. These cash outlays are
assumed to have been incurred as of January 1, 1995 at the
Registrant's average federal funds sold rate in effect during
each of the periods presented (5.31% and 5.97% for the six
months ended June 30, 1996 and 1995, respectively ; 3) the
intangible asset associated with this transaction is currently
being amortized for financial reporting purposes on a straight
line basis over fifteen years ; and 4) income taxes have been
provided using the Registrant's effective tax rate for the pro
forma adjustments. The pro forma adjustments do not reflect any
possible cost savings to be derived from the elimination of
redundant operations.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2) First Nationwide Long Island Banking Branches
Specific assumptions utilized: 1) the assets acquired,
principally cash, are assumed to be invested in certain
investment securities at the beginning of each period presented
using the average rates in effect during such periods (6.56%
and 6.34% for the six month periods ended June 30,1996 and 1995,
respectively ) ; 2) the actual interest bearing deposit
liabilities acquired are assumed to have been acquired at the
beginning of each period using consummation date fair values and
are reflected during the periods using the average rates in
effect at the consummation date ( weighted average cost of funds
of 4.40% ) ; 3) non-interest income and non-interest expense
amounts are based upon an extrapolation of three months actual
operating results subsequent to consummation ; 4) the intangible
assets associated with this transaction are currently being
amortized over periods not exceeding fifteen years for both
financial reporting and tax purposes ; and 5) income taxes have
been provided using the Registrant's effective tax rate for the
pro forma periods. The pro forma adjustments do not reflect any
possible cost savings from branch operating efficiencies which
may be realized in the future.
Weighted average shares outstanding utilized in the calculation
of pro forma earnings per share were 24,939,433 and 24,167,562,
which represented the Registrant's actual weighted average
shares outstanding for the six month periods ended June 30, 1996
and 1995, respectively.
B) Pending Acquisition
On July 15, 1996, the Registrant entered into an agreement and
plan of merger with North Side Savings Bank ("North Side"),
whereby it would acquire North Side in a stock-for-stock
exchange valued at approximately $210 million. Under the terms
of the agreement, each share of North Side common stock will be
converted into the Registrant's common stock at a fixed exchange
ratio of 1.556. The agreement permits North Side to terminate
the transaction if the average closing price of the Registrant's
shares falls below $24 for the ten trading days ending on the
fifth business day prior to the date on which the Federal
Reserve Board approval is received, unless the Registrant elects
to increase the exchange ratio so that the value of the
Registrant's common stock to be received in respect to each
North Side common share is not less than $37.34. The Registrant
also received an option to acquire up to 19.9% of North Side's
outstanding shares at $34.75 per share should certain events
occur as set forth in the stock option agreement.
The transaction is expected to be treated as a tax-free
reorganization and accounted for using the pooling-of-interests
method. The merger is expected to close in January 1997,
following receipt of required regulatory approvals and approval
by shareholders of both companies and certain other customary
closing conditions.
North Side had total assets of $1.7 billion, deposits of $1.2
billion and stockholders equity of $123.5 million at June 30,
1996. It operates seventeen banking offices in Queens, Bronx,
Nassau and Suffolk counties.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
RECENT ACCOUNTING DEVELOPMENTS:
Accounting for Mortgage Servicing Rights:
Statement of Financial Accounting Standards No. 122 ("SFAS 122").
SFAS 122 was adopted effective January 1, 1996. This Statement
amends certain provisions of Statement of Financial Accounting
Standards No. 65, "Accounting for Certain Mortgage Banking
Activities" requiring an entity to capitalize the rights to
service mortgage loans for others, whether those rights are
acquired through loan origination activities or purchased from
others. Additionally, SFAS 122 requires an entity to assess its
capitalized mortgage servicing rights for impairment based on
the fair value of those rights. Adoption of SFAS 122 did not
have an effect on the financial condition or results of
operations.
Accounting for Stock Based Compensation:
Statement of Financial Accounting Standards No. 123, ("SFAS
123").
SFAS 123 was adopted effective January 1, 1996. This Statement
establishes the financial accounting and reporting standards for
employee stock-based compensation plans in which an employer
grants shares of its stock or other equity instruments to
employees except for employee stock ownership plans. SFAS 123
permits a company to choose either a new fair value based method
or continue to follow the current arrangements under Accounting
Principles Board Opinion No. 25 ("Opinion No. 25") practice in
accounting for its stock-based compensation. The Registrant
will continue to follow the current practice in accounting for
such arrangements under Opinion No. 25.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Earnings Summary
The Registrant recognized net income of $31.6 million, or $1.27
per share for the first six months of 1996, as compared with net
income of $23.7 million, or $.98 per share earned in 1995.
Return on average total assets was 1.69% and the return on
average stockholders' equity was 20.63% for the first six months
of 1996. Return on average total assets was 1.72% and the
return on average stockholders' equity was 17.77% for the prior
year period.
Net income for the quarter ended June 30, 1996 was $17.1
million, or $.69 per share, as compared with net income of $12.2
million, or $.50 per share in 1995. Return on average total
assets was 1.72% and the return on average stockholders' equity
was 22.93% for the 1996 second quarter. Return on average total
assets was 1.73% and the return on average stockholders' equity
was 17.77% for the comparable prior year period. The three
months ended June 30, 1996 represents the first full quarter
reflecting the acquisition of the domestic commercial banking
business of Extebank and the Long Island branches of First
Nationwide Bank. See "Mergers and Acquisitions - (A) Completed
Acquisitions" section above for a description of these
acquisitions.
The improvement in the 1996 second quarter results, when
compared with the prior year period, is due in part to the
acquisitions, a $10.8 million increase in net interest income, a
$.5 million decline in the provision for loan losses and a $2.3
million increase in non-interest income. This activity was
partially offset by a $7.0 million increase in non-interest
expense (primarily from the acquired businesses) and a $1.7
million increase in the provision for income taxes.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Net Interest Income
Net interest income, which represents the difference between
interest earned on interest earning assets and interest incurred
on interest bearing liabilities, is the primary source of
earnings. Net interest income is affected by the level and
composition of assets, liabilities and equity, as well as
changes in market interest rates.
Net interest income increased $10.8 million to $45.3 million for
the second quarter of 1996, from $34.5 million for the
comparable prior year period. The net interest margin, on a
taxable equivalent basis, declined to 5.01% during the second
quarter of 1996 from 5.26% in the 1995 comparable period.
Interest income improved $18.6 million to $73.7 million during
the second quarter of 1996 when compared to $55.1 million during
the comparable prior year period. This increase resulted from
the $1.0 billion increase in the level of interest earning
assets to $3.7 billion during the second quarter ended June 30,
1996 when compared to $2.7 billion during the prior year period.
The rise in interest earning assets was due principally to the
Extebank and First Nationwide acquisitions. The decline in
yield on interest earning assets to 8.07% from 8.33% during the
period was due to a shift in the overall composition of interest
earning assets from higher yielding loans to investment
securities. As of June 30, 1996, average net loans represented
60.4% of total interest earning assets as compared to 70.0%
during the prior year period.
Average mortgage-backed securities increased $480.8 million or
78% to $1.1 billion during the second quarter of 1996 as
compared with $616.8 million during the comparable prior year
period. This increase resulted from the investment of the cash
proceeds received in its recent acquisitions, and liquidity
generated from entering into short-term borrowing arrangements
to finance purchases of mortgage-backed securities.
Average net loans increased $375.7 million or 20.1% to $2.24
billion for the 1996 second quarter when compared to $1.87
billion, for the comparable prior year period. This level of
growth was achieved through a combination of strong loan demand
in virtually all loan categories, and the acquisition of
approximately $200 million loans from Extebank.
Interest expense increased to $28.3 million in the second
quarter of 1996, reflecting a 3.78% cost of funds, as compared
with $20.5 million or 3.89% in 1995. The $7.8 million increase
is partially due to a $899.3 million increase in average
interest bearing liabilities to $3.0 billion during the 1996
second quarter as compared to $2.1 billion during the prior year
period, partially offset by a reduction in the Registrant's
overall cost of funds during this time period. The rise in the
level of interest bearing liabilities was due principally to the
Extebank and First Nationwide acquisitions.
Average demand deposits increased $242.7 million or 60.8% to
$641.5 million during the second quarter of 1996 as compared to
$398.8 million during 1995. Demand deposits acquired from
Extebank were approximately $105.3 million. Demand deposits
represented 20.2% of total deposits at June 30, 1996 as compared
to 16.8% at June 30, 1995.
The following table sets forth a summary analysis of the
relative impact on net interest income of changes in the average
volume of interest earning assets and interest bearing
liabilities and changes in average rates on such assets and
liabilities. Because of the numerous simultaneous volume and
rate changes during the period analyzed, it is not possible to
precisely allocate changes between volume or rate. For
presentation purposes, changes which are not solely due to
volume changes or rate changes have been allocated to these
categories based on the respective percentage changes in average
volume and average rates as they compare to each other. In
addition, average interest earning assets include non-accrual
loans.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
<TABLE>
Six Months Ended Three Months Ended
For the Periods Ended June 30, 1996 vs. 1995 1996 vs. 1995
(in thousands ) Change in Change in
Average Average Net Average Average Net
Volume Rate Interest Volume Rate Interest
Income Income
<S> <C> <C> <C> <C> <C> <C>
Interest Income from Earning Assets:
Interest Earning Deposits - (14) (14) (1) - (1)
Taxable Securities 3,025 (40) 2,985 2,191 (94) 2,097
Non-Taxable Municipals 1,019 20 1,039 921 19 940
Mortgage-Backed Securities 14,912 673 15,585 7,799 385 8,184
Loans, including
non-accrual loans 12,842 310 13,152 8,457 (355) 8,102
Federal Funds Sold and Securities
Purchased Under Agreements
to Resell 116 (64) 52 (259) (41) (300)
Total Interest Income 31,914 885 32,799 19,108 (86) 19,022
Interest Expense on Liabilities:
Total Savings and Time Deposits 9,028 (1,028) 8,000 6,541 (1,551) 4,990
Short-Term Borrowings 8,630 80 8,710 2,779 53 2,832
Long-Term Borrowings - 2 2 - (1) (1)
Total Interest Expense 17,658 (946) 16,712 9,320 (1,499) 7,821
Net Change in
Net Interest Income 14,256 1,831 16,087 9,788 1,413 11,201
</TABLE>
The above table has been prepared on a Taxable Equivalent Basis.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
The following tables present an analysis of net interest income
by each major category of interest earning assets and interest
bearing liabilities for the six and three month periods ended
June 30, 1996 and 1995, respectively:
<TABLE>
For the Six Months Ended June 30, 1996 1995
(dollars in thousands ) Average Average Average Average
Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Earning Deposits $1,516 $40 5.31% $1,522 $54 7.15%
Taxable Securities 209,842 6,208 5.95% 107,901 3,223 6.02%
Non-Taxable Municipals 88,537 3,077 6.99% 59,345 2,038 6.93%
Mortgage-Backed Securities 1,054,106 34,391 6.56% 597,915 18,806 6.34%
Loans, net of unearned
income & fees 2,130,539 96,593 9.12% 1,852,497 83,441 9.08%
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell 22,539 595 5.31% 18,353 543 5.97%
Total Interest Earning Assets 3,507,079 140,904 8.08% 2,637,533 108,105 8.27%
Allowance for Loan Losses (51,567) (51,163)
Cash and Due from Banks 117,601 84,074
Other Non-Interest Earning Assets 192,148 113,263
Total Assets $3,765,261 $2,783,707
Interest Bearing Liabilities:
Savings, N.O.W. &
Money Market Deposits 1,316,674 14,580 2.23% 1,189,892 14,474 2.45%
Time Deposits 1,135,660 29,752 5.27% 849,979 21,858 5.19%
Total Savings and Time Deposits 2,452,334 44,332 3.64% 2,039,871 36,332 3.59%
Short-Term Borrowings 359,633 9,596 5.37% 36,060 886 4.95%
Long-Term Borrowings 35,000 1,449 8.33% 35,000 1,447 8.34%
Total Interest Bearing
Liabilities 2,846,967 55,377 3.91% 2,110,931 38,665 3.69%
Rate Spread 4.17% 4.57%
Non-Interest Bearing Deposits 550,637 370,219
Other Non-Interest Bearing
Liabilities 59,957 33,206
Total Liabilities 3,457,561 2,514,356
Stockholders' Equity 307,700 269,351
Total Liabilities and
Stockholders' Equity $3,765,261 $2,783,707
Net Interest Income and
Net Interest Margin 85,527 4.90% 69,440 5.31%
Less: Tax Equivalent
Basis Adjustment (1,460) (1,033)
Net Interest Income $84,067 $68,407
</TABLE>
(1) The above table has been prepared on a taxable equivalent
basis.
(2) Unrealized gains/(losses) on available-for-sale securities
are recorded in other non-interest earning assets.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
<TABLE>
For the Three Months Ended June 30,
1996 1995
(dollars in thousands ) Average Average Average Average
Balance Interest Rate Balance Interest Rate
<C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Earning Deposits $1,446 $19 5.28% $1,496 $20 5.36%
Taxable Securities 256,139 3,677 5.77% 103,591 1,580 6.12%
Non-Taxable Municipals 110,756 1,935 7.03% 57,856 995 6.90%
Mortgage-Backed Securities 1,097,555 17,894 6.56% 616,770 9,710 6.31%
Loans, net of unearned
income & fees 2,244,539 50,985 9.14% 1,868,889 42,883 9.20%
Federal Funds Sold and
Securities Purchased Under
Agreements to Resell 6,571 86 5.26% 25,922 386 5.97%
Total Interest Earning
Assets 3,717,006 74,596 8.07% 2,674,524 55,574 8.33%
Allowance for Loan Losses (51,351) (51,316)
Cash and Due from Banks 138,075 86,795
Other Non-Interest
Earning Assets 208,148 119,842
Total Assets $4,011,878 $2,829,845
Interest Bearing Liabilities:
Savings, N.O.W. &
Money Market Deposits 1,436,750 7,846 2.20% 1,135,721 7,020 2.48%
Time Deposits 1,275,467 16,414 5.18% 898,905 12,250 5.47%
Total Savings and
Time Deposits 2,712,217 24,260 3.60% 2,034,626 19,270 3.80%
Short-Term Borrowings 266,591 3,349 5.05% 44,929 517 4.62%
Long-Term Borrowings 35,000 724 8.32% 35,000 725 8.31%
Total Interest Bearing
Liabilities 3,013,808 28,333 3.78% 2,114,555 20,512 3.89%
Rate Spread 4.29% 4.44%
Non-Interest Bearing
Deposits 641,474 398,844
Other Non-Interest
Bearing Liabilities 56,054 40,436
Total Liabilities 3,711,336 2,553,835
Stockholders' Equity 300,542 276,010
Total Liabilities and
Stockholders' Equity $4,011,878 $2,829,845
Net Interest Income and
Net Interest Margin 46,263 5.01% 35,062 5.26%
Less: Tax Equivalent
Basis Adjustment (933) (507)
Net Interest Income $45,330 $34,555
</TABLE>
(1) The above table has been prepared on a taxable equivalent
basis.
(2) Unrealized gains/(losses) on available-for-sale securities
are recorded in other non-interest earning assets.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Non-Interest Income
Non-interest income, exclusive of net securities gains was $7.6
million in the 1996 second quarter, compared with $5.3 million
in the comparable prior year period.
Fees and Service Charges on deposit accounts improved 14% to
$4.3 million during the 1996 second quarter when compared to
$2.8 million in the comparable prior year period. This
improvement is primarily due to the recent acquisitions and the
corresponding growth in demand deposits.
Investment management and trust fees improved to $1.6 million
during the 1996 second quarter when compared to $.8 million in
the comparable prior year period, reflecting continued growth at
the Registrant's broker/dealer subsidiary (Compass Investment
Services Corp.)
Non-Interest Expense
Non-interest expense increased $7.0 million to $23.8 million
during the 1996 second quarter when compared to $16.8 million
during the comparable prior year period.
Compensation and Employee Benefits increased $3.2 million to
$11.3 million during the 1996 second quarter as compared to $8.1
million during the 1995 comparable period. Occupancy and
equipment expense increased $1.4 million to $4.1 million during
the 1996 second quarter when compared to $2.7 million during the
1995 comparable prior period. Amortization of intangibles
increased $1.5 million to $1.9 million during the second quarter
of 1996 when compared to $.5 million during the comparable prior
year period. The rise in non-interest expense was expected due
to the acquisitions. However, the Registrant's core efficiency
ratio remained at 43.53% in the second quarter and 42.02% for
the six months in 1996. Consequently, non-interest expense
levels are commensurate with expectations.
Other Real Estate expense increased $.2 million during the 1996
second quarter when compared to the comparable prior year period
due to the costs associated with liquidation of certain
properties.
Other operating expense increased $.6 million to $6.2 million
during the 1996 second quarter as compared to $5.6 million
during the comparable prior year period. This increase is
attributable to the aforementioned acquisitions partially offset
by a $.4 million reduction in FDIC insurance premiums (as of
June 30, 1996 approximately 45% of the Registrants deposits were
insured under the Savings Association Insurance Fund ("SAIF").
Income Taxes
The Registrant provides for income taxes under the asset and
liability method. Under this method, the Registrant is required
to establish deferred tax assets and liabilities for the
temporary differences between the financial reporting basis and
the tax basis of the Registrant's assets and liabilities at the
enacted tax rates expected to be in effect when such amounts are
realized or settled. A valuation allowance is to be established
to reduce the deferred tax asset if it is "more likely than not"
that some or all of the deferred tax asset will not be realized.
The Registrant's effective tax rate was 38.2% for the second
quarter of 1996, as compared to 41.9% for the comparable prior
year period. The decline in the effective tax rate is
primarily attributable to the Registrant's implementation of
certain tax planning strategies and refining its effective rate
for the 1996 full year. The Registrant's effective tax rate
was 40.4% for the six months ended June 30, 1996, as compared to
41.9% for the comparable prior year period.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Loan Portfolio
The Registrant's loan portfolio is concentrated primarily in
loans secured by real estate in metropolitan New York. The risk
inherent in this portfolio is dependent not only upon regional
and general economic stability which affects property values,
but also the financial well-being and creditworthiness of the
borrowers.
Loans outstanding totaled $2.32 billion at June 30, 1996, an
increase of $337.9 million or 17% when compared to $1.99 billion
at December 31, 1995, of which approximately $200 million was
acquired in the Extebank acquisition. Aggregate loan growth
during the first six months of 1996 was achieved through strong
loan demand in all loan categories, exclusive of residential
mortgage loans which remained unchanged when compared to
December 31, 1995.
The following table represents the components of the loan
portfolio for the periods indicated (dollars in thousands):
<TABLE>
% of % of % of
June 30, Total December 31, Total June 30, Total
1996 1995 1995
<S> <C> <C> <C> <C> <C> <C>
Mortgage Loans-Multi-Family $730,340 31.44% $662,329 33.37% $590,067 31.24%
Mortgage Loans-Residential 552,434 23.78% 552,681 27.84% 579,663 30.69%
Mortgage Loans-Commercial 471,777 20.31% 367,158 18.50% 352,691 18.67%
Commercial & Industrial 348,666 15.01% 245,956 12.39% 225,046 11.91%
Consumer Loans and Leases 167,948 7.23% 111,475 5.61% 93,869 4.97%
Land and Construction Loans 51,783 2.23% 45,429 2.29% 47,505 2.52%
Total $2,322,948 100.00% $1,985,028 100.00% $1,888,841 100.00%
Less:
Unearned Income & Fees 22,370 18,588 18,474
Allowance for Loan Losses 50,384 50,210 52,003
Net Loans $2,250,194 $1,916,230 $1,818,364
</TABLE>
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Asset Quality
At June 30, 1996, non-performing assets, which include loans
past due 90 days and still accruing interest, non accrual loans
and other real estate, declined $3.7 million to $33.7 million,
in comparison to $37.4 million at December 31, 1995. The
overall reduction in the level of non-performing assets resulted
from declines of $6.3 million in residential mortgages (which
was achieved through a bulk sale of approximately $6.0 in
non-performing loans), $3.1 million in commercial mortgages, and
$.7 million in land and construction loans. These declines
were partially offset by increases of $ 3.9 million in
commercial loans, $1.7 million in other real estate, and $.8
million in multi-family mortgages.
Non- performing loans at June 30, 1996 consisted of $8.9 million
in commercial mortgages, $11.7 million in commercial loans, $2.8
million in land and construction loans, $2.7 million in
residential mortgages, $.8 million in multi-family mortgages,
and $.3 million in consumer loans and leases.
The components of non-performing assets and restructured,
accruing loans are detailed below (in thousands):
<TABLE>
June 30, 1996 December 31, 1995 June 30, 1995
<S> <C> <C> <C>
Loans Ninety Days Past Due
and Still Accruing $2,265 $1,088 $1,367
Non-Accrual Loans 24,943 31,506 35,846
Non-Performing Loans 27,208 32,594 37,213
Other Real Estate 6,519 4,805 4,047
Non-Performing Assets 33,727 37,399 41,260
Restructured, Accruing Loans $14,367 $31,875 $41,869
</TABLE>
Loans are classified as restructured loans when management has
granted, for economic or legal reasons related to the borrower's
financial difficulties, concessions to the customer that would
not otherwise be considered. Generally, this occurs when the
cash flow of the borrower is insufficient to service the loan
under its original terms. The $17.5 million decline in
restructured, accruing loans to $14.4 million at June 30, 1996,
when compared to December 31, 1995 levels, is primarily
attributable to the repayment of three multi-family mortgages
which were acquired by the Registrant in its 1994 merger with
Metro Bancshares Inc.
Management determines what it deems to be the appropriate level
of the allowance for loan losses on an ongoing basis by
reviewing individual loans, as well as the composition of and
trends in the loan portfolio. Management considers, among other
things, concentrations within segments of the loan portfolio,
delinquency trends, as well as recent charge-off experience and
third party evidentiary matter (such as appraisals) when
assessing the degree of credit risk in the portfolio. Various
appraisals and estimates of current value influence the
estimation of the required allowance at any point in time.
During the 1996 second quarter, the provision for loan losses
was $1.5 million as compared to $2.0 million in the 1995
comparable period. Net charge-offs aggregated $2.0 million, or
.35% of average net loans, as compared with $.6 million or .14%
of average net loans during 1995. The allowance for loan
losses at June 30, 1996 was $50.4 million, or 185.2% of
non-performing loans and 2.19% of net loans. This compares to
an allowance for loan losses of $50.2 million, or 154.1% of
non-performing loans, and 2.55% of net loans at December 31,
1995. While management uses available information in estimating
possible loan losses, future additions to the allowance may be
necessary based on future changes in economic conditions. In
addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for
loan losses. Such agencies may require the Registrant to
recognize additions to the allowance based on their judgment of
information available to them at the time of their examinations.
Based on current economic conditions, management considers the
allowance at June 30, 1996 adequate to cover the possible
credit losses inherent in the loan portfolio.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Securities
A) Held-to-Maturity Securities
The amortized cost, gross unrealized gains, gross unrealized
losses, and estimated fair values of Held-to-Maturity Securities
were as follows at June 30, 1996 (in thousands):
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
Mortgage-Backed Securities $257,103 $480 ($6,677) $250,906
State and Municipal Obligations 120,280 317 (2,591) 118,006
Other Securities 500 - - 500
$377,883 $797 ($9,268) $369,412
</TABLE>
B) Available-for-Sale Securities
The amortized cost, gross unrealized gains, gross unrealized
losses and estimated fair values of Available-for-Sale
Securities were as follows at June 30, 1996 (in thousands):
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains (Losses) Value
<S> <C> <C> <C> <C>
Mortgage-Backed Securities $875,855 $419 ($15,132) $861,142
U.S. Treasury Securities 137,258 1 (3,135) 134,124
U.S. Government Agencies'
Obligations 53,658 - (897) 52,761
SBA Securities 27,768 121 (14) 27,875
Equity Securities 44,849 1,262 (170) 45,941
$1,139,388 $1,803 ($19,348) $1,121,843
</TABLE>
Mortgage-backed securities classified as held-to-maturity
included $.8 million in collateralized mortgage obligations
("CMO") at June 30, 1996. Mortgage-backed securities ("MBS")
classified as available-for-sale included $335.1 million in
collateralized mortgage obligations at June 30, 1996. These CMO
securities, collateralized by either U.S. Government Agency
MBS's or whole loans, are principally conservative current pay
sequential or PAC structures with a current weighted average
life of 3.5 years.
The prepayment of MBS's, including CMO's, is actively monitored
through the portfolio management function. The Registrant
typically invests in MBS's with stable cash flows and relatively
short duration, thereby limiting the impact of interest rate
fluctuations on the portfolio. Management regularly performs
simulation testing to assess the impact that interest and market
rate changes would have on its MBS portfolio.
At June 30, 1996, held-to-maturity securities and
available-for-sale securities carried at $626.9 million were
pledged for various purposes as required by law and to secure
securities sold under agreements to repurchase and other
borrowings.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Capital
The Federal Reserve Board has formal capital guidelines which
bank holding companies are required to meet. The risk based
capital guidelines are designed to make regulatory capital
requirements more sensitive to differences in risk profiles
among banks and bank holding companies to account for
off-balance sheet exposure and to minimize disincentives for
holding liquid assets. Under these guidelines, assets and
off-balance sheet items are assigned to broad risk categories,
each with appropriate weights. The resulting capital ratios
represent capital as a percentage of total risk weighted assets
and off balance sheet items. The guidelines currently require
all bank holding companies to maintain a minimum ratio of total
risk based capital to total risk weighted assets of 8.00%,
including a minimum ratio of Tier I capital to risk weighted
assets of 4.00%.
The following table sets forth the Registrant's regulatory
capital under the rules applicable as of June 30, 1996. At such
dates the Registrant was in compliance with all applicable
regulatory requirements.
<TABLE>
(dollars in thousands) Amount Ratio
<S> <C> <C>
Tier 1 Capital $224,933 9.93%
Regulatory Requirement 90,591 4.00%
Excess 134,342 5.93%
Total Risk Adjusted Capital 253,516 11.19%
Regulatory Requirement 181,182 8.00%
Excess $72,334 3.19%
Risk Weighted Assets $2,264,779
</TABLE>
The Registrant's leverage ratio at June 30, 1996 was 5.73%. The
Tier I, total risk based and leverage capital ratios of the
Registrant's bank subsidiary, were 9.68%, 10.95%, and 5.54%,
respectively, at June 30, 1996.
The Federal Deposit Insurance Corporation Improvement Act
("FDICIA") became effective December 19, 1991. FDICIA
substantially revised the depository institution regulatory and
funding provisions of the Federal Deposit Insurance Act and
makes revisions to several other banking statutes. Among other
things, FDICIA requires the federal banking regulators to take
prompt corrective action on depository institutions that do not
meet minimum capital requirements. FDICIA establishes five
categories: "well capitalized", "adequately capitalized",
"undercapitalized", "significantly undercapitalized" and
"critically undercapitalized". Under the regulations, a "well
capitalized" institution has a minimum total risk based capital
to total risk weighted assets of at least 10%, a minimum Tier I
capital to total risk weighted assets of 6%, a minimum leverage
ratio of at least 5% and is not subject to any written order,
agreement or directive. The Registrant and its bank subsidiary
are considered well capitalized.
On April 20, 1995, the Registrant's Board of Directors approved
the repurchase of up to 1.2 million shares or approximately 5%
of the Registrant's common shares outstanding. As of June 30,
1996, the Registrant had repurchased 997,492 shares. Consistent
with the intended purpose of the Stock Repurchase Program,
91,250 of these shares have been used, with the remainder
available, to fund employee common stock based compensation and
award plans. In connection with the pending acquisition
described previously, the Registrant intends to reissue
approximately 600,000 shares of treasury stock.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Liquidity
The objective of liquidity management is to ensure the
availability of sufficient resources to meet all financial
commitments and to capitalize on opportunities for business
expansion. Liquidity management addresses the ability to meet
deposit withdrawals either on demand or by contractual maturity,
to repay other borrowings as they mature and to make new loans
and investments as opportunities arise.
The Registrant's sources of liquidity include dividends from its
subsidiaries, borrowings, and funds available through the
capital markets. Dividends from the Bank are limited by New
York Sate Banking Department regulations to the current year's
earnings plus the prior two years' retained net profits.
Pursuant to this regulation, the Bank had $61.5 million of
retained earnings available for dividends to the Registrant as
of June 30, 1996.
The Bank has numerous sources of liquidity including loan and
security principal repayments and maturities, lines of credit
with other financial institutions, the ability to borrow under
repurchase agreements utilizing its unpledged securities
portfolio, the sale of securities from its available-for-sale
portfolio, the securitization of loans within the portfolio,
whole loan sales and growth in its core deposit base.
In addition, the Bank has the ability, as a member of the
Federal Home Loan Bank system, to borrow $390.6 million on a
secured basis, utilizing mortgage related loans and securities
as collateral, for a term ranging from one day to ten years at
both fixed and variable rates. As of June 30, 1996, the Bank
had $10 million in such advances with an original maturity of
greater than one year and $50 million in short term (90 days)
borrowings.
The liquidity positions are monitored daily to ensure the
maintenance of an optimum level and efficient use of available
funds. Management believes that the Registrant and Bank have
sufficient liquidity to meet their operating requirements.
On June 25, 1996, the Board of Directors declared a quarterly
cash dividend of 20.0 cents per share. The dividend is payable
August 15, 1996 to shareholders of record at the close of
business July 25, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: August 13, 1996 /s/ Daniel M. Healy
Daniel M. Healy
Executive Vice President &
Chief Financial Officer
<PAGE>
[EXHIBIT 11]
North Fork Bancorporation, Inc.
<TABLE>
COMPUTATION OF NET INCOME PER COMMON EQUIVALENT SHARE
June 30, 1996
(Unaudited)
Three Months Ended Six Months Ended
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
<S> <C> <C> <C> <C>
Net Income $17,136,428 $12,230,281 $31,561,670 $23,730,115
Common Equivalent Shares:
Weighted Average Common
Shares Outstanding 24,631,233 24,298,147 24,742,370 24,027,831
Weighted Average Common
Equivalent Shares 193,917 166,185 197,063 139,731
Weighted Average Common
and Common Equivalent Shares 24,825,150 24,464,332 24,939,433 24,167,562
Net Income per Common
Equivalent Share $0.69 $0.50 $1.27 $0.98
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 175897
<INT-BEARING-DEPOSITS> 1465
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0
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