SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
C U R R E N T R E P O R T
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
November 20, 1997
Date of Report (Date Of Earliest Event Reported)
NORTH FORK BANCORPORATION, INC.
(Exact Name Of Registrant As Specified In Its Charter)
Delaware
(State Or Other Jurisdiction Of Incorporation)
0-1280 36-315468
(Commission File Number) (IRS Employer Identification No.)
275 Broad Hollow Road
Melville, NY 11747
(Address Of Principal Executive Offices) (Zip Code)
(516) 844-1004
(Registrant's Telephone Number, including Area Code)
NOT APPLICABLE
(Former Name Or Former Address, If Changed Since Last Report)
Item 5. Other Events.
On October 7, 1997, North Fork Bancorporation, Inc. ("North
Fork") entered into an agreement and plan of merger with New York
Bancorp Inc. ("New York Bancorp") pursuant to which New York Bancorp
will be merged (the "New York Bancorp Merger") with and into North Fork.
The New York Bancorp Merger is expected to be consummated in the first
quarter of 1998 and to be accounted for under the pooling of interests
accounting method.
On July 24, 1997, North Fork entered in an agreement and plan
of merger with Branford Savings Bank ("Branford") pursuant to which
Branford will be merged (the "Branford Merger") with a newly formed
wholly-owned subsidiary of North Fork. The Branford Merger is expected
to be consummated prior to December 31, 1997 and to be accounted for
under the purchase method of accounting.
Exhibit 99.1 hereto includes certain historical financial
statements of New York Bancorp. Exhibit 99.2 hereto includes certain
pro forma condensed combined financial information for North Fork.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of the Business Acquired.
See Exhibit 99.1.
(b) Pro Forma Financial Information.
See Exhibit 99.2.
(c) Consent of Independent Certified Public Accountants.
See Exhibit 99.3.
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 under signed hereunder duly authorized.
Dated: November 20, 1997
NORTH FORK BANCORPORATION, INC.
By: /s/ DANIEL M. HEALY
Name: Daniel M. Healy
Title: Executive Vice President
and Chief Financial Officer
EXHIBIT 99.1
New York Bancorp Inc. and Subsidiary
consolidated statement of financial condition
- ----------------------------------------------
(Unaudited)
June 30,
1997
----------
Assets
Cash and due from banks....................................... $ 28,413
Money market investments...................................... --
Investment in debt and equity securities, net:
Held to maturity (estimated market value of
$604 and $641 at June 30, 1997 and
September 30, 1996, respectively) .................... 606
Available for sale........................................ 135,553
Mortgage-backed securities, net:
Held to maturity (estimated market value of
$591,620 and $534,602 at June 30, 1997
and September 30, 1996, respectively)................ 602,828
Available for sale ...................................... 397,118
Federal Home Loan Bank stock................................. 52,641
Loans receivable, net:
First mortgage loans..................................... 1,769,701
Other loans.............................................. 254,425
-----------
2,024,126
Less allowance for possible loan losses.................. (19,613)
Total loans receivable, net.......................... 2,004,513
Accrued interest receivable.................................. 23,784
Premises and equipment, net.................................. 12,485
Other assets................................................. 25,712
-----------
Total assets............................................. $ 3,283,653
===========
Liabilities and Shareholders' Equity
Liabilities:
Deposits................................................. $ 1,690,993
Borrowed funds........................................... 1,347,230
Mortgagors' escrow payments.............................. 10,302
Accrued expenses and other liabilities................... 68,256
-----------
Total liabilities.................................... 3,116,781
Commitments, contingencies and contracts (note 3)
Shareholders' Equity (notes 2 and 4) (1):
Preferred stock, $.01 par value, 2,000,000
shares authorized; none issued....................... --
Common stock, $.01 par value, 30,000,000
shares authorized; 29,493,425 and
29,493,700 shares issued at June 30, 1997
and September 30, 1996, respectively;
21,591,247 and 22,197,600 shares outstanding
at June 30, 1997 and September 30, 1996,
respectively......................................... 295
Additional paid-in capital............................... 66,502
Retained earnings, substantially restricted.............. 171,847
Treasury stock, at cost, 7,902,178 and
7,296,100 shares at June 30, 1997 and
September 30, 1996, respectively..................... (72,480)
Unrealized appreciation (depreciation) on
securities available for sale, net of
tax effect........................................... 708
-----------
Total shareholders' equity........................... 166,872
-----------
Total liabilities and shareholders' equity........... 3,283,653
===========
- -----------------
(1) Share information has been restated to fully reflect the 3-for-2
stock split effective January 23, 1997 and the 4-for-3 stock split
effective July 24, 1997.
See accompanying notes to consolidated financial statements.
New York Bancorp Inc. and Subsidiary
consolidated statements of income
- ------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
------------------------ -----------------------
1997 1996 1997 1996
---------- ---------- --------- ---------
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
Interest Income:
Interest and fees on loans:
First mortgage loans .............. $ 35,809 $ 29,952 $ 103,101 $ 86,814
Other loans ....................... 5,543 6,085 16,887 18,799
--------- --------- --------- ---------
Total interest and fees on loans .. 41,352 36,037 119,988 105,613
Mortgage-backed securities ............ 17,164 14,708 47,024 42,874
Debt and equity securities - taxable .. 3,403 1,626 9,377 4,423
Money market investments .............. -- 21 13 219
Trading account securities ............ -- -- -- 13
--------- --------- --------- ---------
Total interest income ............. 61,919 52,392 176,402 153,1442
--------- --------- --------- ---------
Interest Expense:
Deposits .............................. 13,808 14,804 41,569 46,048
Borrowed funds ........................ 17,222 11,682 45,788 33,1770
--------- --------- --------- ---------
Total interest expense ............ 31,030 26,486 87,357 79,218
--------- --------- --------- ---------
Net interest income ............... 30,889 25,906 89,045 73,924
Provision for possible loan losses .... (300) (300) (1,800) (900)
--------- --------- --------- ---------
Net interest income after provision
for possible loan losses .......... 30,589 25,606 87,245 73,024
--------- --------- --------- ---------
Non-interest Income:
Loan fees and service charges ......... 738 673 2,254 2,094
Banking service fees .................. 1,677 1,444 4,726 3,862
Fees from sale of investment products . 488 432 1,422 1,069
Net gain on the sale of mortgage loans
and securities available for sale . 117 742 747 2,778
Other ................................. 53 132 4,689 368
--------- --------- --------- ---------
Total non-interest income ......... 3,073 3,423 13,838 10,171
--------- --------- --------- ---------
Non-interest Expense:
General and administrative:
Compensation and benefits ......... 5,917 5,588 19,042 16,538
Occupancy, net .................... 2,164 2,123 6,474 6,363
Advertising and promotion ......... 600 761 1,676 2,210
Federal deposit insurance premiums 484 931 1,725 2,828
Other ............................. 2,498 2,311 8,323 7,316
--------- --------- --------- ---------
Total general and administrative .. 11,663 11,714 37,240 35,255
Real estate operations, net ........... 164 253 899 340
--------- --------- --------- ---------
Total non-interest expense ........ 11,827 11,967 38,139 35,595
--------- --------- --------- ---------
Income before income tax expense .. 21,835 17,062 62,944 47,600
--------- --------- --------- ---------
Income Tax Expense:
Federal expense ....................... 7,132 5,154 19,126 14,385
State and local expense ............... 1,539 2,278 6,477 6,581
--------- --------- --------- ---------
Total income tax expense .......... 8,671 7,432 25,603 20,966
--------- --------- --------- ---------
Net income ........................ $ 13,164 $ 9,630 $ 37,341 $ 26,634
========= ========= ========= =========
Earnings Per Common Share (1) (note 2) .... $ .58 $ .41 $ 1.63 $ 1.10
</TABLE>
(1) Per share amounts have been restated to fully reflect the 3-for-2
stock split effective January 23, 1997 and the 4-for-3 stock split
effective July 24, 1997.
See accompanying notes to consolidated financial statements.
New York Bancorp Inc. and Subsidiary
consolidated statement of changes in shareholders' equity
- ---------------------------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended June 30, 1997
-----------------------------------------------------------------------------
Unrealized
Appreciation
(Depreciation)
Additional on Securities
Common Paid-in Retained Treasury Available
Stock Capital Earnings Stock for Sale Total
------------------------------------------------------------------------------
(Dollars in Thousands, Except Per Share Date)
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996 $ 295 $ 65,355 $ 145,686 $ (58,871) $ (562) $ 151,903
Net income for the nine months
ended June 30, 1997 ........ -- -- 37,341 -- -- 37,341
Dividends declared on common
stock ...................... -- -- (8,190) -- -- (8,190)
Cash paid in lieu of 275
fractional shares in the
aggregate, resulting from
3-for-2 stock split ........ -- (5) -- -- -- (5)
Purchase of 858,986 shares of
treasury stock ............. -- -- -- (18,101) -- (18,101)
Issuance of 252,907 shares
upon exercise of stock
options .................... -- 1,152 (2,990) 4,492 -- 2,654
Change in unrealized
appreciation (depreciation)
on securities available for
sale, net of taxes ......... -- -- -- -- 1,270 1,270
------------------------------------------------------------------------------
Balance at June 30, 1997 ..... $ 295 $ 66,502 $ 171,847 $ (72,480) $ 708 $ 166,872
------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
New York Bancorp Inc. and Subsidiary
consolidated statements of cash flows
- -------------------------------------
(Unaudited)
Nine Months Ended
June 30,
------------------------
1997 1996
--------- ---------
(In thousands)
Cash Flows from Operating Activities:
Net income .......................... $ 37,341 $ 26,634
--------- ---------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization ..... 1,727 1,611
Amortization and accretion of
deferred fees, discounts and
premiums ........................ 18 1,381
Provision for possible loan losses 1,800 900
Provision for losses on foreclosed
real estate ..................... 259 488
Net loss on sale of foreclosed
real estate ..................... 186 89
Net gain on sale of mortgage loans
and securities available for sale (747) (2,778)
Payment of SAIF recapitalization .. (9,432) --
Deferred income taxes ............. 3,571 769
Net decrease in trading account ... -- 2,003
Increase in accrued interest
receivable ...................... (1,922) (411)
Increase (decrease) in accrued
interest payable ................ 2,892 (452)
Increase in accrued expenses and
other liabilities ............... 24,799 3,050
(Increase) decrease in other assets 2,355 (846)
--------- ---------
Total adjustments ................. 25,506 5,804
--------- ---------
Net cash provided by operating
activities ........................ 62,847 32,438
--------- ---------
Cash Flows from Investing Activities:
Principal payments on loans ........... 251,250 216,640
Principal payments on mortgage-backed
securities .......................... 92,789 74,770
Principal payments, maturities and
calls on debt and equity securities . 25,037 56,427
Proceeds on sales of loans ............ 36,057 41,858
Proceeds on sales of mortgage-backed
securities available for sale ....... -- 83,767
Proceeds on sales of debt and equity
securities available for sale ....... 20,815 2,719
Investment in first mortgage loans .... (398,507) (453,763)
Investment in other loans ............. (42,829) (45,157)
Investment in mortgage-backed
securities held to maturity ......... (89,973) --
Investment in mortgage-backed
securities available for sale ....... (171,110) (82,445)
Investment in debt and equity
securities available for sale ....... (44,138) (91,708)
Proceeds on sales of foreclosed
real estate ......................... 3,398 2,206
Net purchases of Federal Home Loan
Bank stock .......................... (24,703) (10,656)
Net purchases of premises and
equipment ........................... (1,285) (1,599)
--------- ---------
Net cash used in investing activities . (343,199) (206,941)
--------- ---------
Cash Flows from Financing Activities:
Net increase in non-interest bearing
demand, savings, money market, and
NOW accounts ........................ 9,612 15,017
Net decrease in time deposits ......... (34,578) (16,916)
Net increase (decrease) in borrowings
with original maturities of three
months or less ...................... 161,882 (155,176)
Proceeds from long-term borrowings .... 558,046 532,625
Repayment of long-term borrowings ..... (381,484) (185,675)
Purchase of common stock for treasury . (18,101) (18,090)
Payment of common stock dividends ..... (7,169) (7,129)
Exercise of stock options ............. 1,502 991
Cash paid for fractional shares
resulting from stock split .......... (5) --
Decrease in mortgagors' escrow accounts (4,685) (7,048)
--------- ---------
Net cash provided by financing
activities ......................... 285,020 158,599
--------- ---------
Net increase (decrease) in cash and
cash equivalents ..................... 4,668 (15,904)
Cash and cash equivalents at beginning
of period ............................ 23,745 45,104
--------- ---------
Cash and cash equivalents at end of
period ............................... $ 28,413 $ 29,200
========= =========
Supplemental Cash Flow Disclosures:
Interest paid ......................... $ 89,693 $ 81,619
========= =========
Income taxes paid ..................... $ 18,612 $ 19,183
========= =========
Noncash investing and financing
activities:
Transfer of loans to real estate
owned ............................. $ 2,590 $ 3,380
========= =========
Transfer of mortgage-backed
securities available for sale to
mortgage-backed securities
held to maturity .................. $ -- $ 15,421
========= =========
Transfer of mortgage-backed
securities held to maturity to
mortgage-backed securities
available for sale ................ $ -- $ 84,109
========= =========
Transfer of debt and equity
securities held to maturity to
debt and equity securities
available for sale ................ $ -- $ 15,000
========= =========
Securitization and transfer of loans
to mortgage-backed securities
available for sales ............... $ -- $ 65,364
========= =========
See accompanying notes to consolidated financial statements.
New York Bancorp Inc. and Subsidiary
notes to consolidated financial statements
- ------------------------------------------
(Unaudited)
NEW YORK BANCORP INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of New York Bancorp Inc. ("New York Bancorp" or the "Company")
and its wholly-owned subsidiary, Home Federal Savings Bank ("Home
Federal" or the "Bank") and Subsidiaries, as of June 30, 1997 and
September 30, 1996 and for the three and nine month periods ended June
30, 1997 and 1996.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management all necessary adjustments, consisting only of normal recurring
accruals necessary for a fair presentation, have been included. The
results of operations for the three and nine month periods ended June 30,
1997 are not necessarily indicative of the results that may be expected
for the entire fiscal year.
NOTE 2: EARNINGS PER SHARE
A 3-for-2 common stock split, effected in the form of a stock dividend,
was distributed on January 23, 1997 to shareholders of record on January
9, 1997. In addition, a 4-for-3 stock split, effected in the form of a
stock dividend, was distributed on July 24, 1997 to shareholders of
record on July 10, 1997. Accordingly, information with respect to shares
of common stock and earnings per share have been restated in all periods
presented to fully reflect the stock splits. Earnings per share is
computed by dividing net income by the weighted average number of shares
of common stock and common stock equivalents outstanding. The weighted
average number of shares of common stock and common stock equivalents
outstanding for the calculation of primary earnings per share for the
quarters ended June 30, 1997 and 1996 was 22,647,308 and 23,716,482,
respectively, and for the nine months ended June 30, 1997 and 1996 was
22,976,368 and 24,147,648, respectively.
NOTE 3: COMMITMENTS, CONTINGENCIES AND CONTRACTS
At June 30, 1997, Home Federal had commitments of $85.6 million to
originate first mortgage and cooperative residential loans. Of this
amount, adjustable rate mortgage loans represented $73.5 million and
fixed rate mortgage loans with interest rates ranging from 7.00% to
10.00%, represented $12.1 million. At June 30, 1997, Home Federal also
had commitments to sell $2.9 million of qualified fixed rate first
mortgage loans at prices which approximate the carrying value of the
loans.
The Bank is a party to $700.0 million of interest rate collar
arrangements which mature in August 1998. These interest rate collars
provide for the Bank to receive payment when three month LIBOR exceeds
7.50%, and requires the Bank to pay when three month LIBOR is less than
5.00%, thereby reducing the Bank's exposure to a rising interest rate
environment. At June 30, 1997 three month LIBOR was 5.78%.
At June 30, 1997, the Bank was servicing first mortgage loans of
approximately $586.7 million, which are either partially or wholly-owned
by others.
NOTE 4: STOCK REPURCHASE PLAN
During the quarter ended June 30, 1997, New York Bancorp repurchased
256,704 shares under its present stock repurchase plan, bringing total
purchases during the current fiscal year to 858,986 shares. At June 30,
1997, the total number of Treasury shares amounted to 7,902,178.
Additionally, at June 30, 1997, the Company had authority to repurchase
up to an additional 1,688,741 shares. Repurchases may be made from time
to time in open market transactions, subject to availability of shares at
prices deemed appropriate by New York Bancorp.
NOTE 5: RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("SFAS No. 125"). The Statement is effective for
transactions occurring after December 31, 1996. The Statement provides
accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Those standards are
based on consistent application of a financial-components approach that
focuses on control. Under that approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it
controls and the liabilities it has incurred, derecognizes financial
assets when control has been surrendered, and derecognizes liabilities
when extinguished. This Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings.
In December 1996, the FASB issued Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain Provisions
of FASB Statement No. 125" ("SFAS No. 127"). The Statement delays for one
year the implementation of SFAS No. 125, as it relates to (1) secured
borrowings and collateral, and (2) transfers of financial assets that are
part of repurchase agreement, dollar-roll, securities lending and similar
transactions.
The Company has adopted portions of SFAS No. 125 (those not deferred by
SFAS No. 127) effective January 1, 1997. Adoption of these portions did
not have a significant effect on the Company's financial condition or
results of operations. Based on its review of SFAS No. 125, management
does not believe the portions of SFAS No. 125 which have been deferred by
SFAS No. 127 will have a material effect on the Company.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). The Statement
is effective for periods ending after December 15, 1997, and will require
restatement of all prior-period earnings per share ("EPS") data
presented. The Statement establishes standards for computing and
presenting EPS. It replaces the presentation of primary EPS with basic
EPS, and requires dual presentation of basic and diluted EPS on the face
of the income statement. Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. Based on its
review of the Statement, management believes the adoption of SFAS No. 128
will result in basic earnings per share being modestly higher than the
current primary earnings per share, and at the same time will have no
material effect on diluted earnings per share of the Company.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). The Statement
establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains, and losses) in a full set
of general-purpose financial statements. Comprehensive income is defined
as the change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources.
SFAS No. 130 requires that all items that are required to be recognized
under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS No. 130 also requires than
an enterprise (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance
of other comprehensive income separately from retained earnings and
additional paid-in-capital in the equity section of a statement of
financial position. SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997. Reclassification of prior periods will be
required. Management has not completed its review of SFAS No. 130, and
has not determined the impact, if any, that adoption of SFAS No. 130 will
have on the Company.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"). The Statement establishes standards for
the way an enterprise reports information about operating segments in
annual financial statements and requires that enterprises report selected
information about operating segments in interim financial reports issued
to shareholders. Operating segments are components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. The Statement requires a
reconciliation of total segment revenue and expense items and segment
assets to the amounts in the enterprise's financial statements. The
Statement also requires a descriptive report on how the operating
segments were determined, the products and services provided by the
operating segments, and any measurement differences used for segment
reporting and financial statement reporting. SFAS No. 131 is effective
for fiscal years beginning after December 15, 1997. In the initial year
of application, comparative information for earlier years is to be
restated. Management has not completed its review of SFAS No. 131, but
does not anticipate that the adoption of SFAS No. 131 will have a
significant effect on the Company.
New York Bancorp Inc. and Subsidiary
consolidated statements of financial condition
- ----------------------------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
September 30,
-----------------------------
1996 1995
----------- ----------
<S> <C> <C>
Assets
Cash and due from banks.............................. $ 13,045 $ 31,189
Money market investments (note 3).................... 10,700 13,915
Trading account securities........................... -- 2,003
Investment in debt and equity securities, net:
Held to maturity (estimated market value of
$641 and $21,107 at September 30, 1996
and 1995, respectively)--(notes 4 and 14)...... 643 21,179
Available for sale (note 5)........................ 136,133 46,273
Mortage-backed securities, net:
Held to maturity (estimated market value of
$534,602 and $637,503 at September 30,
1996 and 1995, respectively)--(notes 6
and 14)........................................ 550,817 664,726
Available for sale (notes 7, 14 and 21)............ 280,429 206,794
Federal Home Loan Bank stock (note 14)............... 27,938 20,288
Loans receivable, net (notes 8, 9 and 14):
First mortgage loans............................... 1,603,769 1,389,776
Other loans........................................ 268,779 296,439
----------- -----------
1,872,548 1,686,215
Less allowance for possible loan losses............ (19,386) (21,272)
----------- -----------
Total loans receivable, net.................... 1,853,162 1,664,943
Accrued interest receivable (note 10)................ 21,862 21,723
Premises and equipment, net (note 11)................ 12,927 12,851
Other assets (notes 12 and 16)....................... 33,251 25,708
----------- -----------
Total assets....................................... $ 2,940,907 $ 2,731,592
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Deposits (note 13)................................. $ 1,715,959 $ 1,748,874
Borrowed funds, including securities sold
under agreements to repurchase of
$453,698 and $344,860 at September 30,
1996 and 1995, respectively (note 14).......... 1,008,786 767,138
Mortgagors' escrow payments........................ 14,987 16,520
Accrued expenses and other liabilities
(notes 15 and 18).............................. 49,272 42,674
----------- -----------
Total liabilities.............................. 2,789,004 2,575,206
----------- -----------
Commitments, contingencies and contracts
(notes 8, 16 and 20)
Shareholders' equity (notes 16, 17 and 19):
Preferred stock, $.01 par value, 2,000,000
shares authorized; none issued................. -- --
Common stock, $.01 par value, 30,000,000
shares authorized; 14,746,850 shares
issued at September 30, 1996 and 1995;
11,098,800 and 12,138,974 shares
outstanding at September 30, 1996 and
1995, respectively............................. 147 147
Additional paid-in capital......................... 65,503 63,575
Retained earnings, substantially restricted........ 145,686 125,593
Treasury stock, at cost, 3,648,050 and
2,607,876 shares at September 30, 1996
and 1995, respectively......................... (58,871) (33,740)
Unrealized appreciation (depreciation) on
securities available for sale, net of
tax effect..................................... (562) 811
----------- -----------
Total shareholders' equity..................... 151,903 156,386
----------- -----------
Total liabilities and shareholders' equity..... $ 2,940,907 $ 2,731,592
=========== ===========
See accompanying notes to consolidated financial statements.
New York Bancorp Inc. and Subsidiary
consolidated statements of income
- -------------------------------------
(In thousands, except per share data)
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans:
First mortgage loans....................................... $ 118,792 $ 104,042 $ 93,373
Other loans................................................ 24,735 25,916 24,094
--------- --------- ---------
Total interest and fees on loans........................ 143,527 129,958 117,467
Mortgage-backed securities..................................... 56,921 60,331 52,521
Debt and equity securities - - taxable......................... 6,774 4,877 2,976
Money market investments....................................... 256 1,080 2,113
Trading account securities..................................... 13 726 453
--------- ---------- ---------
Total interest income................................... 207,491 196,972 175,530
--------- ---------- ---------
Interest expense:
Deposits (notes 13 and 21)..................................... 60,470 62,394 56,996
Borrowed funds (notes 14 and 21) .............................. 46,276 39,336 22,952
--------- ---------- ---------
Total interest expense.................................. 106,746 101,730 79,948
--------- ---------- ---------
Net interest income........................................ 100,745 95,242 95,582
Provision for possible loan losses (note 9).................... (1,200) (1,700) (2,650)
--------- ---------- ---------
Net interest income after provision for
possible loan losses.................................... 99,545 93,542 92,932
--------- ---------- ---------
Non-interest income:
Loan fees and service charges.................................. 2,770 2,566 3,292
Net gain (loss) on the sales of mortgage loans and
securities available for sale (notes 5, 7 and 8) .......... 4,750 (1,088) 214
Other.......................................................... 7,147 5,134 4,494
--------- ---------- ---------
Total non-interest income............................... 14,667 6,612 8,000
--------- ---------- ---------
Non-interest expenses:
General and administrative:
Compensation and benefits (notes 18 and 19)................ 22,741 21,809 25,197
Occupancy, net (notes 11 and 20) .......................... 8,397 8,751 8,346
Advertising and promotion.................................. 2,565 2,565 2,370
Federal deposit insurance premiums......................... 3,759 4,464 4,756
Other...................................................... 10,073 11,379 10,176
--------- ---------- ---------
Total general and administrative........................ 47,535 48,968 50,845
Merger and restructuring (note 2)............................. -- 19,024 --
Real estate operations, net (note 12).......................... 463 883 880
SAIF recapitalization (note 13)................................ 9,432 -- --
--------- ---------- ---------
Total non-interest expense.............................. 57,430 68,875 51,725
--------- ---------- ---------
Income before income tax expense and cumulative
effect of change in accounting principle................ 56,782 31,279 49,207
--------- ---------- ---------
Income tax expense (note 16):
Federal expense................................................ 16,676 13,460 14,214
State and local expense........................................ 8,100 6,257 7,526
--------- ---------- ---------
Total income tax expense................................ 24,776 19,717 21,740
--------- ---------- ---------
Income before cumulative effect of change in
accounting principle.................................... 32,006 11,562 27,467
Cumulative effect of change in accounting for income taxes....... -- -- 5,685
--------- ---------- ---------
Net income................................................. $ 32,006 $ 11,562 $ 33,152
--------- ---------- ---------
Earnings per common share (note 17):
Income before cumulative effect of change in
accounting principle....................................... $ 2.68 $ .87 $ 2.02
Cumulative effect of change in accounting for income taxes..... $ -- $ -- $ .42
Net income................................................. $ 2.68 $ .87 $ 2.44
</TABLE>
New York Bancorp Inc. and Subsidiary
consolidated statements of changes in shareholders' equity
- ----------------------------------------------------------
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Unrealized
Appreciation
Common Common (Depreciation)
Additional Stock Stock on Securities
Common Paid-in Retained Treasury Acquired Acquired Available
Stock Capital Earnings Stock by ESOP by RRP for Sale Total
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1993 ...... $144 $53,854 $111,160 $ (7,194) $(2,717) $(1,478) $ -- $153,769
Net income for the year ended
September 30, 1994 ............... -- -- 33,152 -- -- -- -- 33,152
Dividends declared on common stock.. -- -- (5,720) -- -- -- -- (5,720)
Distribution of 10% stock dividend.. 7 12,133 (12,140) -- -- -- -- --
Cash paid in lieu of 221 fractional
shares in the aggregate,
resulting from stock dividend .... -- (3) -- -- -- -- -- (3)
Compensation amortized to expense... -- 600 -- -- 543 348 -- 1,491
Purchase of 339,280 shares of
treasury stock ................... -- -- -- (4,544) -- -- -- (4,544)
Purchase and retire 283,030 shares.. (4) (3,772) -- -- -- -- -- (3,776)
Exercise of 92,791 shares of
stock options .................... -- -- (924) 1,743 -- -- -- 819
Unrealized appreciation on
securities available for sale
at October 1, 1993, net of
taxes of $377..................... -- -- -- -- -- -- 449 449
Change in unrealized depreciation
on securities available for
sale, net of taxes of $3,428 ..... -- -- -- -- -- -- (4,346) (4,346)
-------------------------------------------------------------------------------------------
Balance at September 30, 1994 ...... 147 62,812 125,528 (9,995) (2,174) (1,130) (3,897) 171,291
Net income for the year ended
September 30, 1995 ............... -- -- 11,562 -- -- -- -- 11,562
Dividends declared on common stock.. -- -- (9,114) -- -- -- -- (9,114)
Exercise of 385,464 shares of
stock options .................... 3 -- (603) 1,544 -- -- -- 944
Purchase of 1,453,016 shares of
treasury stock ................... -- -- -- (28,784) -- -- -- (28,784)
Purchase and retire 196,643 shares.. (2) (3,710) -- -- -- -- -- (3,712)
Net proceeds from sale of 298,375
shares of treasury stock
(note 2).......................... -- 1,035 -- 3,495 -- -- -- 4,530
ESOP and RRP activity, including
tax benefit (note 2) ............. (1) 3,438 -- -- 2,174 1,130 -- 6,741
Hamilton Bancorp's net income for
the three months ended December
31, 1994 (note 2) ................ -- -- (1,780) -- -- -- -- (1,780)
Change in unrealized appreciation
on securities available for
sale, net of taxes of $3,690 ..... -- -- -- -- -- -- 4,708 4,708
-------------------------------------------------------------------------------------------
Balance at September 30, 1995 ...... 147 63,575 125,593 (33,740) -- -- 811 156,386
Net income for the year ended
September 30, 1996 ............... -- -- 32,006 -- -- -- -- 32,006
Dividends declared on common stock.. -- -- (9,218) -- -- -- -- (9,218)
Exercise of 174,038 shares of
stock options .................... -- 1,928 (2,695) 3,897 -- -- -- 3,130
Purchase of 1,214,212 shares of
treasury stock ................... -- -- -- (29,028) -- -- -- (29,028)
Unrealized depreciation on
securities transferred from
held to maturity to available
for sale, net of taxes of $97
(notes 4 and 6) .................. -- -- -- -- -- -- (126) (126)
Change in unrealized appreciation
(depreciation) on securities
available for sale, net of
taxes of $968 .................... -- -- -- -- -- -- (1,247) (1,247)
Balance at September 30, 1996 ...... $147 $65,503 $145,686 $(58,871) $ -- $ -- $ (562) $151,903
===========================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
New York Bancorp Inc. and Subsidiary
consolidated statements of cash flows
- --------------------------------------
(In thousands)
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------------
1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income before cumulative effect of change in
accounting principle............................. $ 32,006 $ 11,562 $ 27,467
Cumulative effect of change in accounting for
income taxes..................................... -- -- 5,685
-------------------------------------------
Net income.............................................. 32,006 11,562 33,152
-------------------------------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization....................... 2,153 2,064 1,817
Amortization and accretion of deferred fees,
discounts and premiums........................... 1,823 1,538 8,414
Provision for possible loan losses.................. 1,200 1,700 2,650
Provision for losses on foreclosed real estate...... 346 361 --
Net (gain) loss on sale of foreclosed real
estate........................................... 147 82 (190)
Net (gain) loss on sale of mortgage loans and
securities available for sale.................... (4,750) 1,088 (214)
SAIF recapitalization............................... 9,432 -- --
Deferred income taxes............................... (3,520) (1,965) (6,832)
Amortization of ESOP and RRP compensation
expense.......................................... -- 464 1,491
Termination of ESOP and RRP......................... -- 4,992 --
Net (increase) decrease in trading account.......... 2,003 10,936 (452)
Increase in accrued interest receivable............. (139) (2,579) (5,446)
Increase in accrued interest payable................ 1,476 838 1,161
Increase (decrease) in accrued expenses and
other liabilities................................ (6,290) 3,779 (1,981)
(Increase) decrease in other assets................. 1,806 2,812 (491)
-------------------------------------------
Total adjustments................................... 5,687 26,110 (73)
-------------------------------------------
Net cash provided by operating activities............... 37,693 37,672 33,079
-------------------------------------------
Cash flows from investing activities:
Principal payments on loans............................. 296,727 201,852 211,300
Principal payments on mortgage-backed securities........ 102,091 80,169 350,694
Principal payments, maturities and calls on debt
and equity securities................................ 56,938 30,987 1,477
Proceeds on sales of loans.............................. 76,349 38,799 109,063
Proceeds on sales of mortgage-backed securities
available for sale................................... 83,766 77,279 39,058
Proceeds on sales of debt and equity securities
for sale............................................. 17,083 7,737 181
Investment in first mortgage loans...................... (571,989) (432,050) (341,555)
Investment in other loans............................... (59,045) (71,057) (49,798)
Investment in mortgage-backed securities available
for sale............................................. (82,445) (45,789) (80,978)
Investment in mortgage-backed securities held to
maturity............................................. -- -- (589,083)
Investment in debt and equity securities available
for sale............................................. (142,048) (52,221) (135)
Investment in debt securities held to maturity.......... -- -- (49,985)
Investment in interest rate collar and floor
agreements........................................... (915) (2,265) --
Proceeds on sales of foreclosed real estate............. 2,856 8,035 3,896
Proceeds from sale of interest rate floor and
interest rate swap agreements........................ 1,512 10,835 --
Purchases of Federal Home Loan Bank stock, net.......... (7,650) (2,879) 4,325
Net purchases of premises and equipment................. (2,229) (1,374) (2,466)
-------------------------------------------
Net cash used in investing activities................... (228,999) (151,942) (394,006)
-------------------------------------------
Cash flows from financing activities:
Net increase (decrease) in non-interest bearing
demand, savings, money market, and NOW accounts...... $ 14,341 $(187,214) $ (56,591)
Net increase (decrease) in time deposits................ (47,256) 152,542 90,003
Net increase (decrease) in borrowings with
original maturities of three months or less.......... (93,936) 248,715 160,304
Proceeds from long-term borrowings...................... 691,459 10,000 200,000
Repayment of long-term borrowings....................... (355,875) (66,517) (75,100)
Purchase of common stock for treasury or
retirement........................................... (29,028) (32,496) (8,320)
Payment of common stock dividends....................... (9,427) (8,156) (5,582)
Exercise of stock options............................... 1,202 872 819
Proceeds from sale of treasury stock.................... -- 4,530 --
Cash paid in lieu of fractional shares resulting
from stock dividend.................................. -- -- (3)
Increase (decrease) in mortgagors' escrow accounts...... (1,533) 1,004 (810)
-------------------------------------------
Net cash provided by financing activities............... 169,947 123,280 304,720
-------------------------------------------
Net increase (decrease) in cash and cash
equivalents.......................................... (21,359) 9,010 (56,207)
Hamilton's net cash flows for the three months
ended December 31, 1994 (note 2)..................... -- (5,771) --
Cash and cash equivalents at beginning of year.......... 45,104 41,865 98,072
-------------------------------------------
Cash and cash equivalents at end of year................ $ 23,745 $ 45,104 $ 41,865
-------------------------------------------
Supplemental Cash Flow Disclosures:
Interest paid........................................... $ 108,096 $ 99,797 $ 78,908
-------------------------------------------
Income taxes paid....................................... $ 26,328 $ 20,599 $ 23,992
-------------------------------------------
Noncash Investing and Financing Activities:
Transfer of loans to real estate owned.............. $ 4,462 $ 4,455 $ 5,784
-------------------------------------------
Transfer of mortgage-backed securities
available for sale to mortgage-backed
securities held to maturity (note 6) ............ $ 15,421 $ -- $ 71,492
-------------------------------------------
Transfer of mortgage-backed securities
held to maturity to mortgage-backed
securities available for sale
(notes 2 and 6).................................. $ 84,109 $ 69,817 $ 78,067
-------------------------------------------
Securitization and transfer of loans to
mortgage-backed securities available
for sale ........................................ $ 65,364 $ 11,418 $ 18,817
-------------------------------------------
Transfer of debt securities held to maturity
to debt and equity securities available
for sale (notes 2 and 4)......................... $ 15,000 $ 7,465 $ --
-------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
New York Bancorp Inc. and Subsidiary
notes to Consolidated Financial Statements
- ------------------------------------------
September 30, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
New York Bancorp Inc. ("New York Bancorp" or the "Holding
Company") is a savings and loan holding company under the savings and
loan holding company act, as amended ("SLHCA"). The Holding Company,
through its savings bank subsidiary, Home Federal Savings Bank (the
"Bank") operates as a community savings bank. On January 27, 1995,
Hamilton Bancorp, Inc. ("Hamilton"), the parent company of Hamilton
Federal Savings F.A. ("Hamilton Savings"), was merged with and into New
York Bancorp (see note 2) and Hamilton Savings was merged into the Bank.
The merger was accounted for as a pooling of interests and, accordingly,
all prior periods include the consolidated accounts of Hamilton. The more
significant accounting and reporting policies are summarized below.
(A) Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements are prepared
on the accrual basis of accounting and include the accounts of New York
Bancorp and its wholly owned subsidiary, Home Federal Savings Bank
(collectively the "Company"). All material intercompany transactions and
balances have been eliminated.
The Company reports its financial results on a fiscal year basis
ending September 30, whereas Hamilton had reported its financial results
on a calendar year basis. The consolidated financial statements for
fiscal year 1995 reflect Hamilton's year-end conformed with that of the
Company. The consolidated financial statements for fiscal year 1994
reflect the combination of the Company at and for the year ended December
31.
In preparing the consolidated 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 consolidated
statements of condition and income for the years presented. Estimates
that are susceptible to change include, among other things, the
determination of the allowance for possible loan losses and the valuation
of real estate acquired in connection with foreclosures. Certain
reclassifications have been made to prior year amounts to conform to the
current year presentation.
For purposes of reporting cash flows, cash and cash equivalents
include cash and due from banks and money market investments.
(B) Money Market Investments
Money market investments represent short-term instruments
(generally ninety days or less), which are generally held to maturity.
These investments are carried at cost or, if applicable, at cost adjusted
for accretion of discount or amortization of premium using a method which
approximates the level-yield method over the period to maturity. Carrying
values of these investments approximate current market values.
(C) Trading Account Securities
Trading account securities are carried at estimated market value.
Net realized and unrealized gains (losses) are included in non-interest
income. Interest on trading account securities is included in interest
income.
(D) Debt and Equity and Mortgage-Backed Securities
Debt and mortgage-backed securities which the Company has the
positive intent and ability to hold until maturity are carried at cost,
adjusted for amortization of premiums and accretion of discounts on a
level yield method. Debt and mortgage-backed securities to be held for
indefinite periods of time and not intended to be held to maturity and
marketable equity securities are classified as available for sale
securities and are recorded at fair value, with unrealized appreciation
and depreciation, net of tax, reported as a separate component of
shareholders' equity.
Gains and losses on the sale of securities are determined using
the specific identification method.
(E) Loans Receivable
Loans are carried at amortized cost. Interest on loans is
recognized on the accrual basis. The accrual of income on loans is
discontinued when certain factors, such as contractual delinquency of
ninety days or more, indicate reasonable doubt as to the timely
collectibility of such income. Interest previously recognized on past due
loans is charged to the allowance for loan losses when in the opinion of
management such interest is deemed to be uncollectible. Loans on which
the accrual of income has been discontinued are designated as nonaccrual
loans and income is recognized subsequently only in the period collected.
Loan origination fees, less certain direct origination costs, are
deferred and recognized as an adjustment of the loan's yield over the
life of the loan by the interest method, which results in a constant rate
of return. When loans are sold, any remaining unaccreted deferred fees
are recognized as income at the time of sale.
Discounts (premiums) on mortgage loans purchased are deferred and
accreted (amortized) to income over the life of the loans using the
level-yield method.
On October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan" ("SFAS No. 114") and Statement of Financial Accounting Standards
No. 118, "Accounting by Creditors for Impairment of a Loan--Income
Recognition and Disclosures" ("SFAS No. 118") which amended SFAS No. 114
(collectively the "Statements"). Under the Statements, a loan is
considered impaired when it is probable that the Company, based upon
current information, will not collect all amounts due, both principal and
interest, according to the contractual terms of the loan agreement.
Certain loans are exempt from the provisions of the Statements, including
large groups of smaller-balance homogenous loans that are collectively
evaluated for impairment which, for the Company, include one-to-four
family first mortgage loans and consumer and commercial loans whose
principal balance is less than $500,000, other than those modified in a
troubled debt restructuring (TDR). A loan is considered a TDR by the
Company when modifications of a concessionary nature are made to the
loan's original contractual terms due to the borrower's financial
difficulties. The Statements require that impaired loans that are within
the scope of these Statements be measured based on the present value of
expected future cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market price
or the fair value of the collateral if the loan is collateral dependent.
Loans reviewed for impairment by the Company are limited to
one-to-four family first mortgage loans and consumer and commercial loans
in excess of $500,000, loans modified in a TDR, and commercial real
estate loans. At September 30, 1996, the measurement value of the
Company's impaired loans was based upon the estimated market value of the
underlying collateral. The Company's impaired loan identification and
measurement processes are conducted in conjunction with the Company's
review of classified assets and adequacy of its allowance for possible
loan losses. Specific factors utilized in the impaired loan
identification process include, but are not limited to, delinquency
status, loan-to-value ratio, and debt coverage. Cash receipts on an
impaired loan are applied to principal and interest in accordance with
the contractual terms of the loan unless full payment of principal is not
expected, in which case the full payment is applied as a reduction of the
carrying value of the loan. If the estimated market value of the
underlying collateral, including guarantees, is less than the principal
balance of an impaired loan, a loss is either charged to the allowance
for possible loan losses or an impairment reserve is allocated to reduce
the book value of the loan to the estimated market value of the
underlying collateral.
Interest income on impaired loans is recorded on a cash basis,
except for a TDR which has performed under its restructured terms for at
least six months, at which time the accrual basis is utilized.
The adoption of SFAS Nos. 114 and 118 did not have a significant
effect on the Company's financial condition or results of operations.
Provisions for possible loan losses are charged to operations
based on management's periodic review and evaluation of the loan
portfolio in relation to the Company's past loan loss experience, known
and inherent risks in the portfolio, adverse situations which may affect
the borrower's ability to repay, overall portfolio quality, and
underlying collateral values and cash flow values. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for possible 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 possible
loan losses is adequate.
(F) Loan Servicing
Fees earned for servicing loans owned by investors are reported
as income when the related mortgage loan payments are collected. Loan
servicing costs are charged to expense as incurred.
On October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights"
("SFAS No. 122"). The Statement establishes accounting standards for
mortgage servicing rights, which are the contractual right to service
loans owned by others, typically for a fee. Prior to this Statement, only
purchased mortgage servicing rights were capitalized as an asset. SFAS
No. 122 requires originated mortgage servicing rights ("OMSR") to be
capitalized as an asset. OMSR represents mortgage servicing rights
acquired when an institution originates and subsequently sells or
securitizes mortgage loans but retains the servicing rights. The
Statement also requires all capitalized mortgage servicing rights ("MSR")
to be evaluated for impairment based on their value. In evaluating for
impairment, the Company stratifies its MSR by adjustable or fixed rate
loans, by interest rate, and by year of origination. The Company uses
current market assumptions for prepayment speeds and discounts, and a
4.5% annual inflation factor for servicing costs. The adoption of SFAS
No. 122 did not have a significant effect on the Company's operating
results or financial position.
The Company amortizes its MSR in proportion to, and over the
period of, estimated servicing income.
(G) Premises and Equipment
Land is carried at cost. Buildings and building improvements,
leasehold improvements and furniture, fixtures and equipment are carried
at cost, less accumulated depreciation and amortization. Buildings,
building improvements and furniture, fixtures and equipment are
depreciated using the straight-line method over the estimated useful
lives of the respective assets. Leasehold improvements are amortized
using the straight-line method over the terms of the related leases.
(H) Real Estate Owned
Real estate owned consists of real estate acquired in
satisfaction of loans, and is carried at the lower of cost or estimated
fair value less estimated selling costs. When a property is acquired in
satisfaction of a loan, the excess of the carrying amount over the fair
value, if any, is charged to the allowance for loan losses. Subsequent to
acquisition, an allowance for real estate owned is established to
maintain these properties at the lower of cost or fair value less
estimated costs to sell. Real estate owned is shown net of the allowance.
The allowance is established through charges to income which are
included in real estate operations, net. Operating results of real estate
owned, including rental income, operating expenses, and gains and losses
realized from the sales of properties owned, are also recorded in real
estate operations, net.
(I) Reverse Repurchase Agreements
Reverse repurchase agreements are accounted for as financing
transactions. Accordingly, the collateral securities continue to be
carried as assets and a borrowing liability is established for the
transaction proceeds.
(J) Income Taxes
The Holding Company and its subsidiary file consolidated income
tax returns. The subsidiary pays to or receives from the Holding Company,
as appropriate, an allocated portion of the consolidated income taxes or
benefits based upon the effective current income tax rate.
Deferred taxes are provided for temporary differences between the
tax basis and financial statement carrying amounts of existing assets and
liabilities, which is measured by applying enacted tax laws and rates. A
valuation allowance is provided for deferred tax assets which are deemed
not likely to be realized.
(K) Retirement Plans
The Company has a pension plan covering substantially all
employees who have attained minimum service requirements. The Company's
policy is to contribute annually an amount sufficient to meet Employee
Retirement Income Security Act ("ERISA") funding standards.
Postretirement and postemployment benefits are recorded on an
accrual basis with an annual provision that recognizes the expense over
the service life of the employee, determined on an actuarial basis.
(L) Off-Balance Sheet Financial Instruments
Interest rate swaps, caps, floors, collars, options and financial
futures agreements are periodically used to manage the Company's interest
rate risk. Generally, the net settlements on such transactions used as
hedges of non- trading assets or liabilities are accrued as an adjustment
to interest income or interest expense over the lives of the agreements.
Further, gains or losses on terminated contracts used as hedges of
non-trading assets or liabilities are generally deferred and amortized
over the life of the original hedge. Contracts which are not matched
against specific assets, liabilities, or the repricing of interest rate
floor arrangements or do not meet correlation criteria are accounted for
at market value with the resulting gain or loss recognized in operations.
(M) Earnings Per Common Share
Earnings per common share is computed by dividing net income by
the weighted average number of shares of common stock and common stock
equivalents outstanding. The weighted average number of shares of common
stock and common stock equivalents used in the computation of earnings
per common share for the years ended September 30, 1996, 1995 and 1994
was 11,944,393, 13,327,915 and 13,609,867, respectively.
(2) Business Combination
On January 27, 1995, New York Bancorp acquired Hamilton in a
transaction accounted for under the pooling of interests method of
accounting. Pursuant to the merger agreement, New York Bancorp issued
1.705 shares of common stock for each outstanding share of Hamilton
common stock and reserved for issuance 182,824 shares of common stock for
Hamilton's stock options outstanding as of the merger consummation date.
In addition, 306,392 shares of common stock were issued to holders of
Hamilton stock options who received stock for the options calculated in
accordance with the formula contained in the merger agreement. As a
condition to the merger, Hamilton, immediately prior to the consummation
of the merger, reissued in an underwritten offering 175,000 shares of
Hamilton treasury stock amounting to net proceeds of $4,530,000 after
underwriting commission and offering costs. As a result of the above,
6,224,921 shares of common stock were issued in connection with the
merger.
The Company reports its financial results on a fiscal year basis
ending September 30, whereas Hamilton had reported its financial results
on a calendar year basis. Accordingly, the accompanying Consolidated
Statements of Income, Changes in Shareholders' Equity and Cash Flows for
the year ended September 30, 1994 includes the operations of Hamilton for
its year ended December 31, 1994. The consolidated financial statements
for 1995 reflect Hamilton's year-end conformed with that of the Company.
The effect on the accompanying consolidated financial statements arising
from the inclusion of the $1,780,000 of net income of Hamilton for the
three months ended December 31, 1994 in the Company's results of
operations for both fiscal year 1995 and 1994 is presented in the
accompanying Consolidated Statement of Changes in Shareholders' Equity as
an adjustment for change in fiscal year of Hamilton. Additionally, the
accompanying Consolidated Statements of Income for both fiscal year 1995
and 1994 each include $7,948,000 and $1,780,000 representing net interest
income after provision for possible loan losses and net income,
respectively, reflecting those results of Hamilton's operations for the
three months ended December 31, 1994.
The following is a summary of Hamilton Bancorp's cash flows for
the three months ended December 31, 1994 (in thousands):
Net cash provided by operating activities.............. $ 678
Net cash used by investing activities.................. (4,389)
Net cash provided by financing activities.............. 9,482
---------
Net increase in cash and cash equivalents.............. $ 5,771
=========
In connection with the merger, during fiscal year 1995 the
Company recorded certain non-recurring merger-related and restructuring
expenses of approximately $19.0 million and reclassified $77.3 million of
Hamilton's held to maturity securities to available for sale securities.
Of these securities, $66.8 million were subsequently sold, resulting in a
$1.2 million loss. The non-recurring merger-related and restructuring
charges reflected $4.3 million in investment banking, legal and
accounting fees, $6.3 million in severance costs, $5.1 million related to
the termination of Hamilton's ESOP and the accelerated vesting of shares
of the RRP pursuant to the requirements of such plans upon a change in
control, and $3.3 million in certain back-office and facilities consolidation
costs and signage costs.
The following table summarizes the activity with respect to the
merger-related and restructuring expenses, on a pre-tax basis:
Merger-Related
and
Restructuring
Accrual
==================
(In Thousands)
Balance at December 31, 1994................... $ --
Provision charged against operations........... 19,024
Cash outlays................................... (12,287)
Non-cash items................................. (6,395)
-----------
Balance at September 30, 1995.................. 342
Cash outlays................................... (342)
-----------
Balance at September 30, 1996.................. $ --
===========
(3) Money Market Investments
Money market investments are summarized as follows:
September 30,
-----------------------
1996 1995
=======================
(In Thousands)
Securities purchased under
agreements to resell........... $10,700 $ 8,400
FHLP overnight deposits........... -- 4,997
Federal funds sold................ -- 500
Other............................. -- 18
-----------------------
$10,700 $13,915
=======================
During the years ended September 30, 1996, 1995 and 1994, the
Company entered into purchases of securities under agreements to resell.
The amounts advanced under these agreements represented short-term loans
and are reflected as money market investments in the consolidated
statements of financial condition. Securities representing collateral for
these transactions were delivered by appropriate entry into the Company's
account maintained at a third-party custodian. At September 30, 1996 and
1995, these agreements matured within thirty days. Securities purchased
under agreements to resell averaged $.3 million. $1.2 million and $16.2
million for the years ended September 30, 1996, 1995 and 1994,
respectively. The maximum amount of such agreements outstanding at any
month-end during the years ended September 30, 1996, 1995 and 1994 was
$11.4 million, $8.4 million and $30.0 million, respectively.
(4) Debt Securities Held to Maturity
The amortized cost and estimated market values of debt securities
held to maturity are summarized as follows:
September 30, 1996
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
================================================
(In Thousands)
Bonds and notes:
corporate notes....... $ 643 $ -- $ (2) $ 641
================================================
September 30, 1995
------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
=================================================
(In Thousands)
Bonds and notes:
U.S. Government and
Agency Obligations.... $20,000 $ -- $ (75) $19,925
Corporate notes....... 1,179 5 (2) 1,182
------------------------------------------------
Total................ $21,179 $ 5 $ (77) $21,107
================================================
The amortized cost and contractual maturity of debt securities at
September 30, 1996 and 1995 are shown below. Expected maturities may
differ from contractual maturities because borrowers have the right to
call or prepay obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
September 30,
---------------------------------------------
1996 1995
=============================================
Estimated Estimated
Amortized Market Amortized Market
Cost Value Cost Value
=============================================
(In Thousands)
<S> <C> <C> <C> <C>
Due in one year or less.......... $ -- $ -- $ 502 $ 507
Due after one year through
five years.................... -- -- 20,000 19,925
Due after five years through
ten years -- -- -- --
Due after ten years.............. 643 641 677 675
---------------------------------------------
Total............................ $ 643 $ 641 $21,179 $21,107
=============================================
</TABLE>
There were no sales of debt securities held to maturity during
the years ended September 30, 1996, 1995 and 1994. (See note 2 regarding
the transfer of securities in connection with the Hamilton merger.)
As permitted under guidance issued by the Financial Accounting
Standards Board in November 1995, during the quarter ended December 31,
1995, the Company transferred $15.0 million of its debt securities,
previously classified as held to maturity, to the available for sale
classification.
(5) Debt and Equity Securities Available for Sale
The amortized cost and estimated market values of debt and equity
securities available for sale are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1996
--------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
====================================== ============
(In Thousands)
<S> <C> <C> <C> <C>
Equity securities:
Common stocks........... $ 5,326 $ -- $ (508) $ 4,818
Stock in FNMA........... 2 40 -- 42
--------------------------------------------------
5,328 40 (508) 4,860
--------------------------------------------------
Bonds and notes:
U.S. Government and
Agency obligations.... 131,245 -- (1,007) 130,238
Other.................. 1,028 7 -- 1,035
--------------------------------------------------
132,273 7 (1,007) 131,273
--------------------------------------------------
$137,601 $ 47 $(1,515) $136,133
==================================================
September 30, 1995
--------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
==================================================
(In Thousands)
Equity securities:
Common stocks........... $ 4,082 $407 $ -- $ 4,489
Stock in FNMA........... 2 29 -- 31
--------------------------------------------------
4,084 436 -- 4,520
Bonds and notes:
U.S. Government and
Agency obligations.... 41,740 13 -- 41,753
--------------------------------------------------
$ 45,824 $449 $ -- $ 46,273
==================================================
</TABLE>
Gains and losses were realized on sales of debt and equity
securities available for sale as follows:
Year ended September 30,
------------------------------------------
1996 1995 1994
==========================================
(In Thousands)
Gross gains........... $3,143 $304 $ --
Gross losses.......... (2) (168) (3)
-----------------------------------------
Net gains (losses)..... $3,141 $136 $ (3)
=========================================
(6) Mortgage-Backed Securities Held to Maturity
The amortized cost and the estimated market values of
mortgage-backed securities held to maturity are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1996
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
=====================================================
(In Thousands)
<S> <C> <C> <C> <C>
FHLMC............................... $ 14,710 $ -- $ (59) $ 14,651
FNMA................................ 6,333 -- (129) 6,204
GNMA................................ 1,409 59 -- 1,468
Private-issue pass-through.......... 1,264 25 -- 1,289
REMIC & CMO......................... 527,101 -- (16,111) 510,990
-----------------------------------------------------
Total............................... $550,817 $ 84 $(16,299) $534,602
=====================================================
September 30, 1995
-----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
=====================================================
(In Thousands)
FHLMC............................... $ 21,858 $100 $ (137) $ 21,821
FNMA................................ 35,662 20 (618) 35,064
REMIC & CMO......................... 607,206 532 (27,120) 580,618
-----------------------------------------------------
Total............................... $664,726 $652 $(27,875) $637,503
=====================================================
</TABLE>
The amortized cost and estimated market values of mortgage-backed
securities held to maturity, all of which have pre-payment provisions,
are distributed to a maturity category based on the estimated average
life as shown below. These principal prepayments are not scheduled over
the life of the investment, but are reflected as adjustments to the final
maturity distribution.
September 30,
------------------------
1996
------------------------
Estimated
Amortized Market
Cost Value
========================
(In Thousands)
Due in one year or less.................... $ 24,919 $ 24,735
Due after one year through five years...... 236,722 233,632
Due after five years through ten years..... 248,864 238,583
Due after ten years........................ 40,312 37,652
-------------------------
$550,817 $534,602
=========================
There were no sales of mortgage-backed securities held to
maturity during the years ended September 30, 1996, 1995 and 1994. (See
note 2 regarding the transfer of securities in connection with the
Hamilton merger.)
In connection with the adoption of SFAS No. 115, effective
October 1, 1993, mortgage-backed securities previously classified as held
for sale, and carried at the lower of cost or market, were classified as
available for sale. The carrying value of these mortgage-backed
securities was adjusted to their market value, which resulted in
increasing the carrying value by $826,000, and increasing shareholders'
equity by $449,000, which was net of taxes of $377,000. In addition, the
Bank reclassified $71.5 million of mortgage-backed securities available
for sale to mortgage-backed securities held to maturity, and reclassified
$78.1 million of mortgage-backed securities held to maturity to
mortgage-backed securities available for sale. At the time of the
reclassifications, the carrying value of such mortgage-backed securities
approximated market value.
As permitted under guidance issued by the Financial Accounting
Standards Board in November 1995, during the quarter ended December 31,
1995, the Company transferred $84.1 million of its mortgage-backed
securities previously classified as held to maturity to the available for
sale classification. Additionally, mortgage-backed securities with a
carrying value and market value of approximately $15.4 million,
previously classified as available for sale, were transferred to the held
to maturity portfolio.
At September 30, 1996 and 1995, $10,241,000 and $17,568,000,
respectively, of the mortgage-backed securities held to maturity
portfolio consists of securities with underlying adjustable rate loans.
Such securities had an estimated market value of $10,077,000 and
$17,474,000, respectively.
The privately-issued REMICs and CMOs and privately-issued
pass-through mortgage-backed securities contained in the Bank's held to
maturity and available for sale portfolios have generally been
underwritten by large investment banking firms with the timely payment of
principal and interest on these securities supported (credit enhanced) in
varying degrees by either insurance issued by a financial guarantee
insurer, letters of credit or subordination techniques. Substantially all
such securities are rated AAA by one or more of the nationally recognized
securities rating agencies. These securities are subject to certain
credit-related risks normally not associated with U.S. Government Agency
mortgage-backed securities. Among such risks is the limited loss
protection generally provided by the various forms of credit enhancements
as losses in excess of certain levels are not protected. Furthermore, the
credit enhancement itself is subject to the creditworthiness of the
enhancer. Thus, in the event a credit enhancer does not fulfill its
obligations, the mortgage-backed securities holder could be subject to
risk of loss similar to a purchaser of a whole loan pool. Management
believes that the credit enhancements are adequate to protect the Company
from losses, thus the Company has not provided an allowance for losses on
its privately issued mortgage-backed securities.
(7) Mortgage-Backed Securities Available for Sale
The amortized cost and the estimated market value of
mortgage-backed securities available for sale are summarized as follows:
<TABLE>
<CAPTION>
September 30, 1996
----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
====================================================
(In Thousands)
<S> <C> <C> <C> <C>
FHLMC............................... $ 59,872 $ 491 $ (518) $ 59,845
FNMA................................ 47,596 313 -- 47,909
GNMA................................ 7,336 355 -- 7,691
REMIC & CMO......................... 139,262 261 (626) 138,897
Private-issue pass-through.......... 25,886 201 -- 26,087
----------------------------------------------------
Total............................... $279,952 $1,621 $(1,144) $280,429
====================================================
September 30, 1995
----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
====================================================
(In Thousands)
FHLMC............................... $ 72,968 $1,139 $ (695) $ 73,412
FNMA................................ 35,191 901 -- 36,092
GNMA................................ 10,578 486 (7) 11,057
REMIC & CMO......................... 56,676 82 (999) 55,759
Private-issue pass-through.......... 30,383 162 (71) 30,474
----------------------------------------------------
Total............................... $205,796 $2,770 $(1,772) $206,794
====================================================
</TABLE>
The amortized cost and estimated market values of mortgage-backed
securities available for sale, all of which have pre-payment provisions,
are distributed to a maturity category based on the estimated average
life as shown below. These principal prepayments are not scheduled over
the life of the investment, but are reflected as adjustments to the final
maturity distribution.
September 30,
------------------------
1996
------------------------
Estimated
Amortized Market
Cost Value
========================
(In Thousands)
Due in one year or less.................... $ 27,038 $ 26,980
Due after one year through five years...... 168,880 169,088
Due after five years through ten years..... 77,726 77,736
Due after ten years........................ 6,308 6,625
------------------------
$279,952 $280,429
========================
Gains and losses were realized on sales of mortgage-backed
securities available for sale as follows:
Year Ended September 30,
---------------------------------------
1996 1995 1994
=======================================
(In Thousands)
Gross gains............... $1,205 $ 60 $608
Gross losses.............. -- (1,044) (3)
--------------------------------------
Net gains (losses)........ $1,205 $ (984) $605
=======================================
(8) Loans Receivable
Loans receivable are summarized as follows (in thousands):
<TABLE>
<CAPTION>
September 30,
-----------------------------
1996
-----------------------------
1996 1995
=============================
<S> <C> <C>
First mortgage loans:
One-to-four family conventional residential,
including loans with adjustable rates of
$843,860 and $632,036 in 1996 and 1995,
respectively........................................ $1,029,636 $ 906,436
Multifamily residential............................... 171,099 101,065
Commercial real estate................................ 383,181 355,507
Partially guaranteed by Veterans Administration
or insured by the Federal Housing Administration.... 14,836 18,812
Participation in loans fully guaranteed by the
Agency for International Development................ 26 30
Construction loans, net of undisbursed portion of
approximately $5,470 and $4,025 in 1996 and 1995,
respectively........................................ 4,369 8,902
Reverse annuity loans, net of undisbursed portion
of approximately $4,416 and $2,734 in 1996 and
1995, respectively.................................. 2,265 2,251
--------------------------
1,605,412 1,393,003
Unamortized purchase accounting premiums.............. 1,645 2,426
Unearned purchase accounting discounts................ (1,993) (2,757)
Unamortized premiums.................................. 3,677 1,433
Unearned discounts.................................... (27) (42)
Deferred loan fees.................................... (4,945) (4,287)
---------------------------
1,603,769 1,389,776
---------------------------
Other loans:
Consumer loans........................................ 9,227 8,580
Cooperative residential loans......................... 123,034 141,902
Home improvement loans................................ 1,035 1,526
Guaranteed student loans.............................. 51,151 56,673
Commercial business loans............................. 12,351 11,214
Loans secured by deposit accounts..................... 8,078 7,917
Second mortgage loans................................. 2,211 2,147
Home equity loans, net of unused lines of credit
of approximately $9,462 and $12,312 in 1996
and 1995, respectively.............................. 44,277 46,845
Purchased auto leasing................................ 18,702 21,063
--------------------------
270,066 297,867
Unamortized purchase accounting premiums.............. 52 72
Unearned purchase accounting discounts................ (52) (70)
Unamortized premiums.................................. 319 423
Unearned discounts.................................... (1,391) (1,621)
Deferred loan fees.................................... (215) (232)
--------------------------
268,779 296,439
--------------------------
Less allowance for possible loan losses.................. (19,386) (21,272)
--------------------------
$1,853,162 $1,664,943
==========================
</TABLE>
The yield on the average investment in first mortgage loans was
8.07%, 8.28% and 8.42% for the years ended September 30, 1996, 1995 and
1994, respectively.
At September 30, 1996 and 1995, the Bank had commitments of
$80,950,000 and $61,369,000, respectively, to originate first mortgage,
cooperative residential and home equity loans. Such commitments generally
have fixed expiration date and may require payment of a fee. Since many
of the commitments may expire without being used, the total commitment
amounts do not necessarily represent future cash requirements. Of the
$80,950,000 commitments outstanding at September 30, 1996, $16,258,000
represent fixed rate loans with interest rates ranging from 5.25% to
10.25% and $64,692,000 represent adjustable rate loans.
At September 30, 1996 and 1995, the Company had commitments of
$6,016,000 and $5,414,000, respectively, to sell qualified fixed rate
first mortgage loans. The commitment prices approximated the carrying
value of the loans.
During the years ended September 30, 1996, 1995 and 1994, the
Company recognized net gains (losses) of $.4 million, $(.2) million and
$(.4) million, respectively, on sales of newly originated first mortgage
loans.
Substantially all of the Bank's business activity is through
originations of loans secured by real estate with customers located in
the New York metropolitan area. The risk inherent in this portfolio is
dependent not only upon regional and general economic stability which
affects property values, but also financial well-being and
creditworthiness of the borrowers. In order to minimize the credit risk
related to this concentration, the Company utilizes conservative
underwriting standards as well as diversifying the type and locations of
real estate projects underwritten in the area.
(9) Allowance for Possible Loan Losses
Activity in the allowance for possible loan losses is summarized
as follows:
<TABLE>
<CAPTION>
As of and for the
Year Ended September 30,
------------------------------------------
1996 1995 1994
==========================================
(In Thousands)
<S> <C> <C> <C>
Allowance for possible loan losses,
beginning of year............................. $21,272 $25,705 $26,828
Charge-offs:
Commercial real estate......................... (974) (2,889) (879)
Residential real estate........................ (730) (1,422) (1,572)
Multifamily residential........................ -- (546) (853)
Other loans.................................... (1,441) (1,442) (901)
------------------------------------------
Total charge-offs............................ (3,145) (6,299) (4,205)
------------------------------------------
Less recoveries:
Commercial real estate....................... -- -- 349
Residential real estate...................... -- 4 47
Other loans.................................. 59 75 36
------------------------------------------
Total recoveries........................... 59 79 432
------------------------------------------
Net charge-offs.......................... (3,086) (6,220) (3,773)
Hamilton's net activity for the quarter
ended December 31, 1994........................ -- 87 --
Addition to allowance, charged to expense........ 1,200 1,700 2,650
------------------------------------------
Allowance at end of year......................... $19,386 $21,272 $25,705
==========================================
</TABLE>
The following table sets forth the Bank's nonaccrual loans at the
date indicated:
<TABLE>
<CAPTION>
September 30,
----------------------------------------
1996 1995 1994
========================================
(In Thousands)
First mortgage loans:
<S> <C> <C> <C>
One-to-four family conventional residential.... $12,092 $13,391 $14,642
Multifamily residential........................ 155 131 1,966
Commercial real estate......................... 11,758 14,316 18,208
----------------------------------------
24,005 27,838 34,816
Other loans--cooperative residential loans..... 1,547 2,534 1,717
----------------------------------------
Total nonaccrual loans........................... $25,552 $30,372 $36,533
========================================
</TABLE>
Additionally, at September 30, 1996, 1995 and 1994 the Bank had
$4.4 million, $5.0 million and $4.0 million, respectively, of consumer
and other loans which are past due 90 days and still accruing interest at
the dates indicated. Of the $4.4 million at September 30, 1996, $3.5
million represents loans guaranteed by the United States Department of
Education through the New York Higher Education Services Corporation.
The amount of interest income on nonaccrual loans that would have
been recorded had these loans been current in accordance with their
original terms, was $2,654,000, $3,097,000 and $2,972,000 for the years
ended September 30, 1996, 1995 and 1994, respectively. The amount of
interest income that was recorded on these loans was $924,000, $1,083,000
and $441,000 for the years ended September 30, 1996, 1995 and 1994,
respectively.
At September 30, 1996, 1995 and 1994 the Bank had $5.8 million,
$9.1 million and $9.5 million, respectively, in loans whose terms had
been modified in trouble debt restructurings. The amount of interest
income that would have been recognized for the years ended September 30,
1996, 1995 and 1994 had these loans remained current in accordance with
their original terms was $598,000, $952,000 and $968,000, respectively.
The amount of interest income that was recorded on these loans was
$473,000, $725,000 and $740,000 for the years ended September 30, 1996,
1995 and 1994, respectively.
At September 30, 1996, the Bank's recorded investment in impaired
loans was $11.9 million. Due to charge-offs, or the crediting of interest
payments to principal, the loans do not have an impairment reserve at
September 30, 1996. Interest income recognized on impaired loans, which
was not materially different from cash-basis interest income, amounted to
approximately $.4 million for the year ended September 30, 1996. The
average recorded investment in impaired loans during the current fiscal
year was approximately $14.5 million. The allowance for possible loan
losses contains additional amounts for impaired loans, as deemed
necessary, to maintain reserves at levels considered adequate by
management.
(10) Accrued Interest Receivable
Accrued interest receivable is summarized as follows:
September 30,
-----------------------
1996 1995
=======================
(In Thousands)
Debt and equity securities................ $ 1,806 $ 821
Mortgage-backed securities................ 5,324 5,978
Loans receivable.......................... 13,554 12,912
Interest rate swap arrangements........... 1,178 2,012
-----------------------
$21,862 $21,723
=======================
(11) Premises and Equipment
Premises and equipment are summarized as follows:
September 30,
-----------------------
1996 1995
=======================
(In Thousands)
At cost:
Land...................................... $ 651 $ 651
Office buildings and improvements......... 10,395 9,928
Leasehold improvements.................... 5,898 5,320
Furniture, fixtures and equipment......... 10,970 9,786
------------------------
27,914 25,685
Accumulated depreciation and amortization... (14,987) (12,834)
------------------------
$ 12,927 $12,851
========================
Depreciation and amortization of premises and equipment, included
in occupancy expense, was approximately $2,153,000, $2,064,000 and
$1,817,000 for the years ended September 30, 1996, 1995 and 1994,
respectively.
(12) Other assets
Other assets are summarized as follows:
September 30,
----------------------
1996 1995
=======================
(In Thousands)
Net deferred tax asset.......................... $ 19,393 $ 14,806
Mortgage servicing rights....................... 1,088 137
Real estate owned, net of allowance for
losses of $266,000 in 1996 and $220,000
in 1995....................................... 3,197 1,967
Investment in the Bank's subsidiaries........... 679 919
Prepaid expenses................................ 1,270 1,417
Other........................................... 7,624 6,462
-----------------------
$ 33,251 $ 25,708
=======================
At September 30, 1996, 1995 and 1994, the Bank was servicing
first mortgage loans of approximately $597,017,000, $523,664,000 and
$530,317,000, respectively, which are either partially or wholly owned by
others.
The Bank's risk at September 30, 1996 with respect to servicing
loans for others is minimized due to the fact that loans serviced for
others are all without recourse to the originator/servicer. To date, the
Bank has not suffered significant losses from its mortgage servicing
activities.
An analysis of the changes in the Company's mortgage servicing
rights is as follows:
As of and For the
Year Ended September 30,
----------------------------------
1996 1995 1994
==================================
(In Thousands)
Balance at beginning of year..... $137 $248 $647
Additions........................ 1,217 -- --
Amortization..................... (266) (111) (399)
----------------------------------
Balance at end of year........... $1,088 $137 $248
==================================
Activity in the allowance for losses on real estate owned is
summarized as follows:
As of and For the
Year Ended September 30,
---------------------------------
1996 1995 1994
================================
(In Thousands)
Balance at beginning of year...... $220 $390 $750
Provision charged to operations... 346 361 --
Charge-offs....................... (300) (531) (360)
---------------------------------
Balance at end of year............ $266 $220 $390
=================================
The Bank has six wholly owned subsidiaries, three of which are
inactive. Of the subsidiaries, one subsidiary, Alameda Advantage Corp.
("AAC"), is a limited partner in the partnership which owns the property
used for the Bank's executive and administrative offices. At September
30, 1996 and 1995, the Bank's investment in AAC amounted to $524,000 and
$455,000, respectively.
Two of the subsidiaries, Home Fed Services, Inc. and HF
Investors, Inc., were primarily established for the Bank's entry into
offering annuities and other insurance products through its branch
system. At September 30, 1996 and 1995, the Bank's investment in these
subsidiaries amounted to $77,000 and $386,000, respectively.
The combined financial condition and results of operations of the
Bank's subsidiaries are not significant to the accompanying consolidated
financial statements.
(13) Deposits
Deposits are summarized as follows:
<TABLE>
<CAPTION>
September 30,
----------------------------------------------------------
1996 1995
-------------------------- -------------------------
Amount Percent Amount Percent
========================== =========================
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Non-interest bearing demand deposits....... $37,013 2.16% $32,821 1.88%
NOW accounts............................... 130,831 7.63 116,726 6.67
Passbook accounts.......................... 716,827 41.77 751,374 42.96
Variable rate money market deposit
accounts................................. 133,528 7.78 102,937 5.89
-------------------------- ------------------------
1,018,199 59.34 1,003,858 57.40
-------------------------- ------------------------
Certificate accounts: 64
Original term of six months.............. 83,943 4.89 98,674 5.
Original term of 2 1/2 years............... 34,784 2.03 46,807 2.68
Other certificates (various original
terms)................................... 579,033 33.74 599,535 34.28
-------------------------- -------------------------
697,760 40.66 745,016 42.60
-------------------------- ------------------------
$1,715,959 100.00% $1,748,874 100.00%
========================== =======================
</TABLE>
Included in deposits are accounts with denominations of $100,000 or
more totaling approximately $164,720,000 and $137,337,000 at September 30,
1996 and 1995, respectively. The Bank does not use brokered certificates of
deposit as a funding source.
Scheduled remaining maturities of certificate accounts are
summarized as follows:
<TABLE>
<CAPTION>
September 30,
-----------------------------------------------------------------
1996 1995
---------------------------- -----------------------------
Amount Percent Amount Percent
============= ============== ============= ===============
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Within 12 months........... $458,856 65.76% $509,750 68.42%
12 to 24 months............ 134,031 19.21 86,590 11.62
24 to 36 months............ 51,192 7.34 64,480 8.66
36 to 48 months............ 43,271 6.20 41,081 5.52
48 to 60 months............ 9,552 1.37 41,908 5.63
Over 60 months............. 858 .12 1,207 .15
-------------------------------- ----------------------------
$697,760 100.00% $745,016 100.00%
================================ ============================
</TABLE>
Weighted average stated interest rates on interest-bearing
deposits, including the effect of related interest rate floors, interest
rate collars, and interest rate swaps, as of the respective dates were as
follows:
September 30,
----------------------
1996 1995
======================
NOW accounts.................................. 1.33% 1.41%
---------- -----------
Passbook accounts............................. 2.36% 2.29%
---------- -----------
Variable rate money market deposit accounts... 2.98% 2.83%
---------- -----------
Certificate accounts.......................... 4.86% 5.50%
----------------------
Total deposits................................ 3.30% 3.59%
=======================
The average cost of deposits, including the effect of related
interest rate floors, interest rate collars, and interest rate swaps (net
of early withdrawal penalties) approximated 3.47%, 3.55% and 3.18% for the
years ended September 30, 1996, 1995 and 1994, respectively.
Interest expense on deposits, including the effect of related
interest rate floors, interest rate collars, and interest rate swaps, is
summarized as follows:
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------
1996 1995 1994
=========== =========== ==============
(In Thousands)
<S> <C> <C> <C>
NOW accounts................................. $ 1,925 $ 2,673 $ 2,610
Passbook accounts............................ 17,509 19,964 23,846
Variable rate money market deposit accounts.. 3,357 4,054 3,926
Certificate accounts......................... 37,679 35,703 26,614
----------- ----------- --------------
$60,470 $62,394 $56,996
=========== =========== ==============
</TABLE>
On September 30, 1996, Congress passed, and the President signed,
legislation that recapitalized the Savings Association Insurance Fund (the
"SAIF"). Under the major provisions of the legislation, savings
institutions, such as the Bank, are being assessed a one-time assessment of
65.7 basis points per $100 of insured SAIF-assessable deposits as of March
31, 1995. Since approximately 80.8% of the Bank's deposits are insured by
the SAIF (the remainder are insured by the Bank Insurance Fund ("BIF")),
the Company recorded a one-time charge of $9.4 million during the fourth
quarter of fiscal year 1996 which is payable in the first quarter of fiscal
year 1997.
(14) Borrowed Funds
Borrowed funds are summarized as follows:
September 30,
------------------------------
1996 1995
==============================
(In Thousands)
Notes payable-fixed-rate advances
from the Federal Home Loan
Bank of New York:
4.13% to 8.45%, due in 1996............ $ -- $ 22,375
8.10%, due in 1997..................... 375 375
-------------- --------------
375 22,750
-------------- --------------
Notes payable-variable rate advances
from the Federal Home Loan
Bank of New York:
5.883% to 6.625%, due in 1996.......... -- 363,000
5.369% to 5.986%, due in 1997.......... 542,000 20,000
-------------- --------------
542,000 383,000
-------------- --------------
Securities sold under agreements
to repurchase:
Fixed rate agreements:
5.79% to 6.00%, due in 1996............ -- 190,160
5.370% to 6.150%, due in 1997.......... 353,698 --
-------------- --------------
353,698 190,160
-------------- --------------
Variable rate agreements:
5.7925% to 6.025%, due in 1996......... -- 150,000
5.09%, due in 1998..................... 100,000 --
-------------- --------------
100,000 150,000
-------------- --------------
Other collateralized borrowings:
Fixed rate flexible reverse
repurchase agreements:
7.85%, due in 1996..................... -- 4,700
-------------- --------------
Subordinated capital notes,
fixed rate--10.84%:
Due in 1996............................ -- 3,800
Due in 1997............................ 3,800 3,800
Due in 1998............................ 3,800 3,800
Due in 1999............................ 3,800 3,800
-------------- --------------
11,400 15,200
-------------- --------------
Treasury, Tax and Loan Notes--
5.84% callable........................... 1,313 1,328
-------------- --------------
$1,008,786 $767,138
============== ==============
New York Bancorp Inc. and Subsidiary
notes to Consolidated Financial Statements
September 30, 1996, 1995 and 1994
Under the terms of a collateral agreement, indebtedness to and
outstanding commitments from the Federal Home Loan Bank of New York (the
"FHLB-NY") are secured by qualifying assets principally in the form of
first mortgage loans and mortgage-backed securities having estimated market
values at least equal to 125% of the amount of total indebtedness and
outstanding commitments.
At September 30, 1996, all securities sold under agreements to
repurchase were delivered to the primary dealers who arranged the
transactions. The securities remained registered in the name of the Bank
and are returned upon maturity of the agreement. Securities sold under
agreements to repurchase averaged $328,405,000, $307,657,000 and
$232,916,000 during the years ended September 30, 1996, 1995 and 1994,
respectively. The maximum amounts outstanding at any month-end were
$453,698,000, $351,855,000 and $271,978,000 during the years ended
September 30, 1996, 1995 and 1994, respectively.
At September 30, 1996, the Bank had outstanding $353.7 million of
fixed rate reverse repurchase agreements with a weighted average interest
rate of 5.61% and remaining maturities of one to twelve months. The Bank
may substitute collateral in the form of U.S. Treasury or mortgage-backed
certificates. At September 30, 1996, the borrowings were collateralized by
FNMA, FHLMC, REMIC and non-agency pass-through certificates having a
carrying value of approximately $378.0 million and a market value of
approximately $372.8 million.
At September 30, 1996, the Bank had outstanding a $100.0 million
reverse repurchase agreement with an interest rate of 5.09% and a remaining
maturity of 16 months. The rate on this reverse repurchase agreement is
subject to repricing by the counterparty in January 1997 to a LIBOR based
rate, with monthly adjustments thereafter. The Bank may substitute
collateral in the form of U.S. Treasury, GNMA, FNMA, FHLMC, REMIC, CMO or
non-agency pass-through certificates rated no less than AA. At September
30, 1996, the borrowings were collateralized by REMIC and non-agency
pass-through certificates having a carrying vlaue of approximately $113.7
million and a market value of approximately $111.6 million.
On November 18, 1988, the Bank issued $25,000,000 in 10.95% (Series
A Notes) and $5,000,000 in 10.52% (Series B Notes) subordinated capital
notes (collectively as the "Notes"). Interest on the Notes is payable in
semiannual installments, commencing May 30, 1989. The remaining principal
on the Series A Notes and Series B Notes is payable in annual installments
of $2,800,000 and $1,000,000, respectively. The Notes are fully
subordinated to savings deposit accounts and other general liabilities of
the Bank. Further, a portion of the Notes qualify as capital for purposes
of meeting the regulatory risk based capital requirements. The Notes are
redeemable in whole or in part, with a prepayment premium, at the option of
the Bank, subject to regulatory approval, at any time. Deferred issuance
costs are being amortized over the period to maturity of the notes.
On February 3, 1989 the Bank established a Mortgage-Backed
Medium-Term Note, Series A (the "Medium-Term Notes") program. The
Medium-Term Notes can be issued from time to time in designated principal
amounts, up to a total remaining aggregate amount of $180,000,000, with
interest rates to be established at the time of issuance, and with
maturities to be set ranging from nine months to fifteen years from the
date of issuance. No amounts were outstanding under this program at
September 30, 1996 and 1995.
Weighted average interest rates on borrowed funds at September 30,
1996 and 1995, including the effect of related interest rate collars,
interest rate caps, and interest rate swaps, amounted to 5.25% and 6.14%,
respectively.
The average cost of borrowed funds for the years ended September
30, 1996, 1995 and 1994, including the effect of related interest rate
collars, interest rate caps, and interest rate swaps, was 5.62%, 5.88% and
4.85%, respectively.
Interest expense on borrowed funds, including the effect of related
interest rate collars, interest rate caps, and interest rate swaps, is
summarized as follows:
New York Bancorp Inc. and Subsidiary
notes to Consolidated Financial Statements
September 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Year ended September 30,
==============================================
1996 1995 1994
(In Thousands)
<S> <C> <C> <C>
Notes payable...................................... $26,764 $19,920 $10,897
Securities sold under agreements to repurchase..... 18,175 17,619 9,812
Subordinated capital notes......................... 1,304 1,716 2,059
Other.............................................. 33 81 184
-------------- -------------- ----------------
$46,276 $39,336 $22,952
============== ============== ================
</TABLE>
(15) Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities are summariezed as follows:
<TABLE>
<CAPTION>
September 30,
-------------------------------
1996 1995
=============== ===============
(In Thousands)
<S> <C> <C>
Federal, state and local income taxes payable.................... $ 411 $ --
Accrued interest payable......................................... 6,633 5,157
Negative goodwill................................................ 1,068 1,262
Deferred gain on interest rate floor and swap agreements......... 5,819 7,395
Accrued SAIF recapitalization assessment......................... 9,432 --
Accrued expenses and other....................................... 25,909 28,860
--------------- ---------------
$49,272 $42,674
=============== ===============
</TABLE>
(16) Federal, State and Local Taxes
Federal Income Taxes
The Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS No. 109") effective October 1,
1993. Prior to October 1, 1993, deferred income taxes were provided for
timing differences in the recognition of revenues and expenses for tax
reporting and financial statement purposes (an income statement approach),
pursuant to Accounting Principles Board Opinnion No. 11.
SFAS No. 109 adopts a balance sheet approach (or liability method)
in place of the income statement approach. The liability method requires
that an asset or a liability, as appropriate, be recorded for financial
statement purposes for the deferred tax consequences of all temporary
differences between the tax basis and financial statement carrying amounts
of existing assets and liabilities, which is measured by applying enacted
tax laws and rates. Additionally, SFAS No. 109 permits the recognition of
net deferred tax assets based upon the likelihood of realization of tax
benefits in the future. The cumulative effect at October 1, 1993 of the
change in accounting for income taxes which was implemented on a
prospective basis amounted to $5.7 million and is included in the
consolidated statement of income for the year ended September 30, 1994.
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are presented below:
<TABLE>
<CAPTION>
September 30,
------------------------------
1996 1995
==============================
(In Thousands)
Deferred tax assets:
<S> <C> <C>
Allowance for possible loan losses............................. $7,976 $8,921
SAIF recapitalization.......................................... 4,020 --
Nonaccrual interest............................................ 2,477 2,987
Excess tax over book basis of loans............................ 1,009 --
Deferred loan fees............................................. 977 1,831
Real estate owned.............................................. 109 742
Premises and equipment......................................... 720 445
Unrealized loss on available for sale securities............... 428 --
Other 2,645 2,972
--------------- ---------------
Total gross deferred tax assets.............................. 20,361 17,898
--------------- ---------------
Deferred tax liabilities:
Excess book over tax basis of loans............................ -- 684
Unrealized gain on available for sale securities............... -- 639
Other.......................................................... 968 1,769
--------------- ---------------
Total gross deferred tax liabilities......................... 968 3,092
--------------- ---------------
Net deferred tax asset....................................... $19,393 $14,806
=============== ===============
</TABLE>
Under SFAS No. 109, the Company has a net deferred tax asset of
$19.4 million at September 30, 1996. This represents the anticipated
Federal, state and local tax benefits expected to be realized in future
years upon the utilization of the underlying tax attributes comprising this
balance. The Company has reported taxable income for Federal, state and
local income tax purposes in each of the past three years and in management's
opinion, in view of the Company's previous, current and projected future
earnings trend, such net deferred tax asset will be fully realized.
Accordingly, no valuation allowance was deemed necessary for the net
deferred tax asset at September 30, 1996.
Total income tax expense was allocated as follows:
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------
1996 1995 1994
============== ============== ================
(In Thousands)
<S> <C> <C> <C>
Income from operations............................. $24,776 $19,717 $21,740
Shareholders' equity--
compensation expense for tax purposes
in excess of amounts recognized for
financial reporting purposes..................... (1,928) (1,488) --
Shareholders' equity--
unrealized appreciation (depreciation)
on securities available for sale................. (1,067) 3,690 (3,051)
-------------- -------------- ----------------
Total.............................................. $21,781 $21,919 $18,689
============== ============== ================
</TABLE>
The components of income tax expense on operations are as follows:
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------
1996 1995 1994
============== ============== =============
(In Thousands)
Current:
<S> <C> <C> <C>
Federal.......................................... $19,599 $13,917 $15,690
State and local.................................. 8,697 7,765 7,197
-------------- -------------- ----------------
28,296 21,682 22,887
-------------- -------------- ----------------
Deferred:
Federal.......................................... (2,923) (457) (1,476)
State and local.................................. (597) (1,508) 329
-------------- -------------- ----------------
(3,520) (1,965) (1,147)
-------------- -------------- ----------------
Total........................................ $24,776 $19,717 $21,740
============== ============== ================
</TABLE>
The effective income tax rates for the years ended September 30,
1996, 1995 and 1994 were 43.6%, 63.0% and 44.2%, respectively. The
reconciliation between the statutory Federal income tax rate and the
effective tax rate is as follows:
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------
1996 1995 1994
============== ============== ================
<S> <C> <C> <C>
Tax on income at statutory rate.................... 35.0% 35.0% 35.0%
Tax effects of:
State and local income tax, net of Federal
income tax benefit............................. 9.3 13.0 9.9
Nondeductible costs associated with
Hamilton merger................................ .-- 15.0 .--
Other, net....................................... (.7) .-- (.7)
--------------------------------------
Tax at effective rate.............................. 43.6% 63.0% 44.2%
======================================
</TABLE>
New York Bancorp files consolidated Federal income tax returns on a
calendar-year basis with the Bank and its subsidiaries. Prior to January 1,
1996, if certain definitional tests and other conditions were met, the Bank
was allowed a special bad debt deduction based on a percentage of taxable
income or on a specified experience formula.
The Bank used the specified experience formula for 1993 and 1995
and the percentage of taxable income method in 1994. The statutory
percentage of the special bad debt deduction was 8% and was allowable only
if the Bank maintained at least 60% of its total assets in qualifying
assets, as defined. If qualifying assets fall below 60%, the Bank would be
required to recapture essentially all of its bad debt reserve for Federal
income tax purposes into taxable income. The Bank's qualifying assets at
September 30, 1996 and 1995 exceeded 60%.
Under legislation enacted in August 1996, the Bank will no longer
be permitted to use the percentage of taxable income method for Federal tax
purposes, but will be permitted to deduct bad debts only as they are
incurred. The legislation also requires the recapture of the excess of tax
bad debt reserves at December 31, 1995 over those established as of
December 31, 1987 (the "base year"). The Bank's tax bad debt reserves of
$27.9 million as of December 31, 1995 do not exceed those of the base year.
Therefore, the Bank will not be required to recapture any of its bad debt
reserves.
Such reserve reflects the cumulative Federal income tax bad debt
deductions to that date. The base year reserves will continue to be subject
to recapture, and the Bank could be required to recognize a tax liability,
under certain circumstances, including (1) the Bank fails to qualify as a
"bank" for Federal income tax purposes; (2) certain distributions are made
with respect to the stock of the Bank; (3) the bad debt reserves are used
for any purpose other than to absorb bad debt losses; and (4) there is a
change in Federal tax law. However, management is currently not aware of
the occurrence of any such circumstances.
State and Local Taxes
New York Bancorp files combined New York State franchise and New
York City financial corporation tax returns with the Bank and its
subsidiaries on a calendar-year basis. The Company's annual tax liability
for each tax was the greater of a tax based on "entire net income,"
"alternative entire net income," "taxable assets" or a minimum tax.
Further, the Company is subject to a temporary surcharge based upon New
York State tax liability. The Company's provision for New York State and
New York City taxes is based on "entire net income" for the calendar years
1995, 1994 and 1993 and for the nine months ended September 30, 1996. New
York State and New York City do not allow for the utilization of net
operating loss carrybacks or carryforwards for banks.
In response to the aforementioned Federal legislation enacted in
August 1996, the New York State tax law has been amended to prevent a
recapture of existing tax bad debt reserves and to allow for the continued
use of the percentage of taxable income method to determine the bad debt
deduction in computing the New York State tax liability. However, no such
amendments have been made to date with respect to the New York City tax
law; therefore, the Company cannot predict whether such changes will be
made or as to the form of any changes.
(17) Shareholders' Equity
Dividend Restrictions
In connection with the Bank's conversion to stock form in February
1988, and Hamilton Savings' conversion to stock form in April 1993, special
liquidation accounts were established at the time of conversions, pursuant
to regulations of the Federal Home Loan Bank Board (the "FHLBB"), the
predecessor to the Office of Thrift Supervision ("OTS"), based on the
amount of the Bank's regulatory capital as of September 30, 1987 and
Hamilton Savings' regulatory capital as of September 30, 1992. In the
unlikely event of a future liquidation, eligible depositors who continue to
maintain accounts would be entitled to receive a distribution from the
liquidation accounts. The total amount of the liquidation account will be
decreased as the balances of eligible deposits are reduced on annual
determination dates subsequent to the conversions. The balance of the
liquidation accounts aggregated to approximately $16.9 million at September
30, 1996.
The ability of New York Bancorp to pay dividends depends upon
dividend payments by the Bank to New York Bancorp, which is New York
Bancorp's primary source of income. The Bank is not permitted to pay
dividends on its capial stock or repurchase shares of its stock if its
shareholders' equity would be reduced below the amount required for the
liquidation account or applicable regulatory capital requirements. The Bank
is currently allowed under regulation to pay cash dividends to New York
Bancorp in an amount not to exceed 100% of its net income to date, during a
calendar year, plus an amount not to exceed one-half of its surplus capital
ratio at the beginning of the calendar year. Additionally, under terms of
its subordinated capital note agreements, the Bank is permitted to pay, on
a cumulative basis, cash dividends to New York Bancorp in an amount not to
exceed 75% of its net income from November 30, 1988 to date, plus $5.0
million.
3-for-2 Stock Split and Stock Dividend
The Company declared a 3-for-2 common stock split which was
distributed on July 29, 1993 in the form of a stock dividend. Additionally,
the Company declared a ten percent stock dividend which became effective on
February 14, 1994. Accordingly, information with respect to shares of
common stock fully reflects the stock split and the stock dividend.
Treasury Stock Transactions
During the year ended September 30, 1996, New York Bancorp
repurchased 1,214,212 shares. On September 26, 1996 the Board of Directors
approved the repurchase of up to an additional 10% of the Company's
outstanding common stock, bringing the total then current authority for
repurchase to 1,265,604 shares.
At September 30, 1996, the Company has 3,648,050 shares of Treasury
stock which, among other things, could be held to satisfy obligations under
the Company's stock option plans. Treasury stock is being accounted for
using the cost method.
Regulatory Capital
As required by regulation of the OTS, savings institutions are
required to maintain regulatory capital, in the form of a "tangible capital
requirement," a "core capital requirement" and a "risk-based capital
requirement."
The Bank must meet specific capital guidelines that involve
quantitive measures of the Bank's assets, liabilities and certain
off-balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
As of September 30, 1996 the Bank has been categorized as
"adequately capitalized" by the OTS under the prompt corrective action
regulations and continues to exceed all regulatory capital requirements as
detailed in the following table (dollars in thousands):
<TABLE>
<CAPTION>
Tangible Capital Core Capital(1) Risk-Based Capital(2)
-------------------------------------------------------------------------
Amount Percentage(3) Amount Percentage(3) Amount Percentage(3)
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Total Bank equity..................... $138,195 4.70% $138,195 4.70% $138,195 9.86%
Add:
* Allowable portion of
subordinated capital notes..... -- -- -- -- 1,634 .11
* Other............................. 278 .01 278 .01 7,806 1.27
--------------------------------------------------------------------------
Capital for regulatory purposes....... 138,473 4.71 138,473 4.71 157,635 11.24
Minimum regulatory requirement........ 44,117 1.50 88,234 3.00 112,180 8.00
--------------------------------------------------------------------------
Excess................................ $ 94,356 3.21% $ 50,239 1.71% $ 45,455 3.24%
==========================================================================
</TABLE>
(1) Under the OTS's prompt corrective action regulations, the core capital
requirement was effectively increased to 4.00% since OTS regulations
stipulate that as of that date an institution with less than 4.00% core
capital will be deemed to be classified as "undercapitalized."
(2) The OTS adopted a final regulation which incorporates an interest rate
risk component into its existing risk-based capital standard. The
regulation requires certain institutions with more than a "normal
level" of interest rate risk to maintain capital in addition to the
8.0% risk-based capital requirement. The Bank does not anticipate that
its risk-based capital requirement will be materially affected as a
result of the new regulation.
(3) For tangible and core capital the ratio is to adjusted total assets.
For risk-based capital, the ratio is to total risk-weighted assets.
(18) Benefits
Pension Plan
All eligible employees of the Bank are included in a defined
benefit pension plan (the "Plan"). Benefits contemplated by the Plan are
funded through a group annuity insurance contract. The Bank contributes to
the Plan an amount sufficient to meet ERISA funding standards.
Hamilton had maintained a noncontributary defined benefit plan for
all eligible employees. The plan was funded through a deposit
administration contract with an insurance company. As of May 1, 1994, the
plan was curtailed and all future benefit accruals ceased. The plan
curtailment resulted in a net gain of approximately $181,000. Subsequent to
the merger, all former Hamilton employees retained by the Bank meeting plan
requirements became eligible for participation in the Plan. Effective
December 31, 1995, the former Hamilton plan was merged with that of the
Bank.
The following table sets forth the funded status of the Bank's and
Hamilton's plans and amounts recognized in the Company's consolidated
financial statements at September 30 (in thousands):
1996 1995
===========================
Acturial present value of benefit obligation
Accumulated benefit obligation,
including vested benefits of $10,423
in 1996 and $9,781 in 1995............. $10,929 $10,352
===========================
Projected benefit obligations for $10,978 $10,380
service rendered to date............... 10,166 10,284
---------------------------
Projected benefit obligation in
excess of plan assets.................. (812) (96)
Unrecognized net loss from past
experience different from that assumed
and effects of changes in assumptions.. 1,972 1,246
Unrecognized prior service cost.......... (971) (1,072)
Unrecognized net obligation at transition
being recognized over fifteen years.... 261 292
Additional liability..................... (1,213) (334)
--------------------------
Prepaid (accrued) pension cost........... $ (763) $ 36
==========================
Net pension cost for the years ended September 30, 1996, 1995 and
1994 included the following components (in thousands):
1996 1995 1994
==============================
Service cost--benefits earned during
the period.......................... $ 46 $ 131 $ 467
Interest cost on projected benefit
obligation.......................... 838 844 878
Actual return on plan assets (593) (583) (546)
Net amortization and deferral............... (371) (439) (233)
Additional liability........................ 879 -- --
-----------------------------
Net pension cost (benefit) included $ 799 $ (47) $ 566
in non-interest expenses--
compensation and benefits...........
=============================
Assumptions used in 1996, 1995 and 1994 to develop the net periodic
pension cost were:
1996 1995 1994
====================================================================
Weighted average
discount rate.......... 8.00% 9.00% 9.00% to 9.25%
Rate of increase in future
compensation levels.... 4.00% 4.00% 4.00%
Expected long-term rate 9.50% 9.50% 9.00%
of return on assets....
====================================================================
In conjunction with its pension plan, the Bank maintains a
Supplemental Executives Retirement Plan (the "SERP Plan") to provide
retirement benefits which would have been provided under the Plan except
for limitations imposed by Section 415 of the Internal Revenue Code.
The following sets forth the SERP Plan's status and amounts
recognized in the Company's consolidated financial statements at September
30 (in thousands):
1996 1995
==========================
Actuarial present value of benefit obligation:
Accumulated benefit obligation,
including vested benefits of $485 in
1996 and $821 in 1995.................. $824 $1,120
==========================
Projected benefit obligations for
service rendered to date............... $950 $1,122
Plan assets at fair value................ -- --
-------------------------
Projected benefit obligation in
excess of plan assets.................. (950) (1,122)
Unrecognized net (gain) loss from past
experience different from that assumed
and effects of changes in assumptions.. 50 (500)
Unrecognized prior service cost
being recognized over fifteen years.... 322 350
Additional liability..................... (247) --
------------------------
Accrued SERP Plan cost included in $(825) $(1,272)
other liabilities......................
========================
Net SERP Plan cost for the years ended September 30, 1996, 1995 and
1994 included the following components (in thousands):
1996 1995 1994
==============================
Service cost--benefits earned during
the period............................ $ 35 $ 52 $ 271
Interest cost on projected benefit
obligation............................ 118 90 113
Actual return on plan assets ........... -- -- --
Net amortization and deferral........... 27 (7) 45
Settlement loss......................... 49 -- --
------------------------------
Net pension cost included $ 229 $ 135 $ 429
in non-interest expenses--
compensation and benefits.............
==============================
Assumptions used in 1996, 1995 and 1994 to develop the net periodic
SERP Plan cost were:
1996 1995 1994
============================================================================
Weighted average
discount rate................ 7.50% to 8.00% 7.50% to 8.00% 9.00%
Rate of increase in future
compensation levels.......... 4.00% 4.00% 4.00%
Expected long-term rate N/A N/A N/A
of return on assets..........
============================================================================
Hamilton had also maintained a SERP. On January 27, 1995, as a
result of the merger, Hamilton's SERP was terminated in accordance with the
plan's change in control provision and distributions in the aggregate
amount of $307,000 were made to all eligible participants. Included in
compensation and benefit expense is $179,000 for the year ended September
30, 1994. Fiscal year 1995 includes $63,000 in merger and restructuring
expenses related to the termination of Hamilton's SERP.
401(k) Plan
The Bank maintains a 401(k) Savings Plan (the "401(k) Plan") for
all qualified employees. The terms of the 401(k) Plan provide for employee
contributions on a pre-tax basis up to a maximum of 10% of total
compensation, with matching contributions to be made by the Bank equal to a
minimum of 50% of employee contributions.
Hamilton also had a qualified 401(k) savings plan for its employees
in which Hamilton matched a portion of the employee's contribution.
Hamilton's employees immediately became fully vested in Hamilton's
contributions at the time they were made. Effective December 31, 1995, the
former Hamilton plan was merged with that of the Bank.
Retirees' Benefit Plan
The Bank, as part of its overall benefits, provides to its eligible
retirees health coverage and life insurance coverage. Eligible participants
are retired employees of the Bank who retire with a minimum age of 55 and 5
years of service. The Company has elected to defer and amortize to expense
over a twenty year period the accumulated postretirement benefit obligation
of $3.2 million at the October 1, 1993 date of adoption of SFAS No. 106
"Employers' Accounting for Postretirement Benefits Other Than Pensions."
The plan is non-contributory for those retirees who retired prior to July
1992. The plan was amended during fiscal year 1995. The amendment included
an increase in the cost for future retirees and placing a cap on the Bank's
share of plan costs. Former Hamilton employees became covered under this
amended plan effective February 1, 1995.
The following table sets forth the plan's status and amounts
recognized in the Company's consolidated financial statements at September
30 (in thousands):
1996 1995
=======================
Accumulated postretirement benefit obligation:
Retirees including covered dependents
and beneficiaries...................... $1,693 $2,169
Eligible active participants............. 100 536
Other active participants................ 753 401
----------------------
Total accumulated postretirement
benefit obligation................... 2,546 3,106
Plan assets................................. -- --
----------------------
Accumulated benefit obligation in excess
of plan assets........................... (2,546) (3,106)
Unrecognized transition obligation....... 2,274 2,408
Unrecognized prior service cost.......... (503) (555)
Unrecognized gain........................ (2,062) (1,538)
-----------------------
Accrued benefit obligation............... $(2,837) $(2,791)
=======================
Net periodic postretirement benefit cost included the following
components for the years ended September 30 (in thousands):
1996 1995 1994
============================
Service cost................................... $ 59 $ 51 $ 247
Interest cost.................................. 190 267 390
Amortization of transition obligation of
$3.2 million over 20 years..................... 134 146 162
Amortization of prior service cost............. (52) (39) --
Amortization of gain........................... (131) (87) (293)
---------------------------
Total postretirement benefit expense........... $ 200 $ 338 $ 506
===========================
The above plan does not have any assets and the Company presently
intends to maintain the plan as unfunded. The assumed long-term health care
cost trend used to measure the expected cost of benefits under the plan for
1996 is 5.00%. The discount rate used in determining the accumulated
postretirement benefit obligation is 8.00%. The effect of raising the
health care trend by 1% will increase the service and interest cost and the
accumulated benefit obligation by approximately $34,400 and $300,000,
respectively.
The amounts included in compensation and benefit expense for the
above plans are as follows for the years ended September 30 (in thousands):
1996 1995 1994
================================
Pension plan............................... $ 799 $ (47) $ 566
Supplemental executives retirement plan.... 229 135 608
401(k) plan................................ 549 408 424
Retirees' benefit plan..................... 200 338 506
--------- ---------- -----------
$ 1,777 $ 834 $ 2,104
========= ========== ===========
Hamilton had also maintained a noncontributory retirement plan for
its outside directors. The plan provided benefits for participants upon
reaching age 65, and required at least 5 years of service, but not
exceeding 10 years of service. On January 27, 1995, the plan was terminated
in accordance with the plan's change in control provisions and
distributions, in the aggregate amount of $1,039,600 were made to all
eligible participants. Included in compensation and benefit expense is
$25,000 and $100,000 for the years ended September 30, 1995 and 1994,
respectively. Fiscal year 1995 also includes $638,000 in merger and
restructuring expense related to the plan.
(19) Stock Plans
Stock Option Plans
The stock option plans permit New York Bankcorp common stock to be
issued to key employees and directors of the Holding Company and its
subsidiary. The options granted under the plans are intended to be either
incentive stock options or non-qualified options.
Options have been granted to purchase common stock at the fair
market value of the stock at the date of grant. Options generally vest over
a three year period from the date of grant and generally expire ten years
from the date of grant for employees and five years from the date of grant
for directors.
Hamilton maintained incentive stock option plans for its officers,
directors and other key employees. Generally, these plans granted options
to individuals at a price equivalent to the fair market value at the date
of grant and were exercisable over a ten year period from the date of
grant. In accordance with the plans' change in control provisions, the
individuals became fully vested in their stock option grants on the merger
date, January 27, 1995. The options were exchanged for options of the
Company, and are set forth separately in the table below.
Additionally, stock appreciation rights ("SARs") have been granted
to key employees of the Holding Company and its subsidiary. SARs entitle
the grantee to receive cash equal to the excess of the market value of the
shares at the date the right is exercised over the exercise price. An
expense is accrued for the earned portion of the amount by which the market
value of the stock exceeds the exercise price for each SAR outstanding. The
expense related to the SARs for the years ended September 30, 1996, 1995
and 1994 was approximately $1,775,000, $171,000 and $360,000 respectively.
The following table summarizes certain information regarding the
option plans and has been prepared after giving effect to the 3-for-2
common stock split and the ten percent stock dividend.
<TABLE>
<CAPTION>
Number of shares of
------------------------------------
Non-
qualified Weighted
Incentive Options Average
Stock Non-statutory to Exercise
SARs Options Stock Options Directors Plan
============================================================
<S> <C> <C> <C> <C> <C>
Balance outstanding at September 30, 1993 153,000 155,585 189,630 90,000 $12.11
Effect of 10% stock dividend............ 15,300 15,559 18,962 9,000 N/A
Forfeited............................... -- (2,888) -- -- $ 7.88
Granted................................. -- 52,637 152,568 -- $17.95
Exercised............................... -- (59,891) (32,900) -- $ 8.02
--------------------------------------------
Balance outstanding at September 30, 1994 168,300 161,002 328,260 99,000 $13.27
Hamilton options outstanding at
January 27, 1995....................... -- -- 306,392 182,824 $ 2.37
Forfeited............................... (9,900) (34,178) (48,033) -- $16.51
Granted................................. -- 81,031 148,969 -- $19.34
Exercised............................... (19,800) (60,470) (324,994) -- $ 2.08
--------------------------------------------
Balance outstanding at September 30, 1995 138,600 147,385 410,594 281,824 $13.39
Forfeited............................... -- (2,891) -- (24,750) $ 5.88
Granted................................. -- 74,238 79,012 24,750 $22.24
Exercised............................... -- (31,318) -- (142,720) $ 7.32
---------------------------------------------
Balance outstanding at September 30, 1996 138,600 187,414 489,606 139,104 $16.36
=============================================
</TABLE>
Recognition and Retention Plan ("RRP")
Hamilton maintained a RRP, under which restricted stock awards were
made to officers, directors and other key employees, and an Employee Stock
Ownership Plan (the "ESOP"). In accordance with the plans' change in
control provisions, the participants became fully vested on the merger
date, January 27, 1995. Distributions of the shares in the plans have been
made to participants. Included in compensation and benefit expense is
$464,000 and $1,491,000 for the years ended September 30, 1995 and 1994,
respectively. Fiscal year 1995 also includes $4,992,000 in merger and
restructuring expense related to these plans.
(20) Commitments, Contingencies and Contracts
In the normal course of its business, the Company is a defendant in
certain claims and legal actions arising in the ordinary course of
business. In addition, on July 1, 1994, a purported class action complaint
was filed in the Delaware Chancery Court on behalf of the shareholders of
Hamilton by Adar Equities, Ltd. as plaintiff, naming, among others, New
York Bancorp as a defendant. An identical complaint was filed by the
Serious Software Corporation on July 7, 1994 in the Delaware Chancery
Court. Plaintiffs allege that certain directors and senior officers of
Hamilton breached their fiduciary duties to Hamilton shareholders. New York
Bancorp is alleged to have aided and abetted this breach by allegedly
providing them the promise of continued employment and monetary incentives
in exchange for entering into a merger agreement. Plaintiffs claimed that
if the merger was approved by shareholders of New York Bancorp and
Hamilton, the consideration that Hamilton shareholders would receive in
exchange for their Hamilton common stock would be "grossly inadequate."
Plaintiffs seek various remedies, including an injunction to prevent the
consummation of the merger and compensatory damages in an unspecified
amount. On September 19, 1994, defendants moved to dismiss the complaints
on the ground that they fail to state a claim upon which relief could be
granted. In the opinion of management, after consultation with legal
counsel, the ultimate disposition of these matters will not have a material
adverse effect on the consolidated financial condition of the Company.
The Company has obligations under a number of noncancellable leases
on property used for banking purposes. These leases contain escalation
clauses which provide for increased rental expense based on a percentage of
increases in real estate taxes. Rental expense under these leases, included
in non-interest expense--occupancy, for the years ended September 30, 1996,
1995 and 1994 approximated $2,096,000, $2,040,000 and $2,025,000,
respectively. The projected minimum rentals under existing operating leases
are as follows:
Year ending September 30, Amount
- ------------------------------------------------------------------
(In Thousands)
1997........................................... $ 1,814
1998........................................... 1,802
1999........................................... 1,632
2000........................................... 971
2001........................................... 572
later years.................................... 3,643
----------
$10,434
==========
(21) Off-Balance Sheet Financial Instruments
The Company enters into a variety of financial instruments with
off-balance sheet risk in the normal course of business.
Interest Rate Swap Arrangements
The Company enters into interest rate swap arrangements to manage
the repricing characteristics of its interest-bearing liabilities. Such
agreements provide for the concurrent exchange of its current and future
interest payments on either short-term money market certificates of deposit
accounts or variable rate borrowed funds for another party's obligations
for interest payments on an equivalent amount of fixed-rate indebtedness.
The principal or notional amounts of these arrangements are not reflected
in the consolidated statements of financial condition. The incremental
revenue or expense associated with interest rate swaps is recognized over
the term of the swap arrangement and is presented as a component of the
interest expense of the related liability. Gains and losses resulting from
the early termination of swap arrangements are amortized over the remaining
term of the swap arrangement.
The effect of interest rate swap arrangements at September 30, 1996
was to fix the Company's interest cost at a weighted average rate of 4.79%
on the agreed-upon amount of funds for approximately six months, the
remaining weighted average terms of the arrangements. Outstanding notional
amounts of interest rate swap arrangements were $600.0 million and $205.0
million at September 30, 1996 and 1995, respectively. At September 30,
1996, mortgage-backed securities with a market value of $10.2 million were
pledged as collateral on these arrangements. The Bank's credit risk with
respect to the interest rate swap agreements is in the risk of
nonperformance by the other party to the agreements. However, the Bank does
not anticipate nonperformance by the counterparty and controls the risk
through its usual monitoring procedures.
Interest rate swaps outstanding at September 30, 1996 are
summarized as follows (in thousands):
Fixed Variable
Notional Interest Rate Interest Rate
amount Paying Receiving Maturity
- ---------------------------------------------------------------
$100,000 5.260% 5.438% December 1996(1)
100,000 5.265% 5.438% December 1996(1)
50,000 4.785% 5.438% June 1997(2)
50,000 4.780% 5.438% June 1997
50,000 4.770% 5.438% June 1997
50,000 4.774% 5.438% June 1997(2)
50,000 4.748% 5.438% June 1997
50,000 4.743% 5.438% June 1997(2)
50,000 4.700% 5.438% June 1997
50,000 4.700% 5.438% June 1997(2)
- --------
$600,000
(1) These $200 million in interest rate swaps have been extended
through June 1997 whereby the fixed interest pay rate will be 4.69%
beginning in December 1996.
(2) In an effort to secure the hedge position provided against interest
rate risk, the Bank in July 1996 terminated its position as a party
to $200.0 million of interest rate swaps for the six month period
December 1996 through June 1997. The gain of $1.5 million from
these terminated interest rate swaps is being deferred, and will be
amortized as a reduction of interest expense over the period
December 1996 through June 1997.
At September 30, 1996 the Company's interest rate swaps had an
unrealized gain amounting to $2.9 million. Further, at September 30, 1996
there was $1.5 million of net deferred gains relating to terminated
interest rate swap contracts.
Interest Rate Collar, Interest Rate Floor, and Interest Rate Cap Arrangements
The Company uses interest rate collar, interest rate floor, and
interest rate cap arrangements to protect the Bank against interest rate
risk associated with the repricing of its interest-bearing liabilities.
Premiums paid for interest rate collar, interest rate floor, and interest
rate cap arrangements are amortized to interest expense of the related
liability over the contractual terms of these arrangements using the
straight-line method. When a liability is prepaid, any related interest
rate collar, interest rate floor, or interest rate cap is re-designated to
another interest-bearing liability at the lower of cost or estimated market
value and the loss, if any, is included in the gain or loss on early
extinguishment of the liability. Interest received or paid under the terms
of these arrangements is accrued and recorded as a reduction or increase of
interest expense of the related interest-bearing liability.
At September 30, 1996, the Bank was a party to $700.0 million of
interest rate collar agreements which mature in August 1998. These
agreements are intended to reduce the interest rate risk associated with
certain short-term borrowings and certificates of deposit. Under the terms
of these agreements, the Bank receives interest when the three month LIBOR
index is in excess of 7.50%, and pays interest when the three month LIBOR
index is less than 5.00%. At September 30, 1996, the three month LIBOR was
5.625%. At September 30, 1996 mortgage-backed securities with a market
value of $10.5 million were pledged as collateral on these arrangements.
The Bank's credit risk with respect to these interest rate collar
arrangements is in the risk of nonperformance by the other party to the
agreements. However, the Bank does not anticipate nonperformance by the
counterparty and controls the risk through its usual monitoring procedures.
At September 30, 1996, the unamortized premium on the Bank's interest rate
collars amounted to $.8 million which approximated the current market
value.
During fiscal year 1995 the Bank was a party to $1.0 billion of
interest rate floor agreements which were scheduled to expire on February
22, 1998. During fiscal year 1995, in an effort to secure the hedge
position provided against the aforementioned interest rate risk, the Bank
terminated its position as a party to the $1.0 billion of interest rate
floor agreements. Accordingly, and in conformity with general accepted
accounting principles, the Company deferred recognition of the gain on the
terminated interest rate floor agreements and is amortizing such gain as an
adjustment to the cost of interest-bearing deposit liabilities over the
original contractual life of the interest rate floor agreements. At
September 30, 1996 the amount of the unamortized gain was $4.3 million.
Stock Indexed Call Options
The Bank uses stock indexed call options for purposes of hedging
its MarketSmart CDs and MarketSmart I.R.A. CDs. The call options hedge the
interest rate paid on these 5 year CD deposits which is an annual
percentage yield based on the changes in the Standard & Poor's 500
Composite Stock Price Index ("S&P Index") during each of the 5 year terms
of the CDs. Premiums paid on the call options are amortized to interest
expense over the terms of the underlying CD using the straight line method.
Gains and losses, if any, resulting from the early termination of the call
option are deferred and amortized to interest expense over the remaining
term of the underlying CD.
At September 30, 1996 the Company had approximately $2.6 million in
contracts for purposes of hedging the S&P Index. The call options
maturities range from March 1999 through August 1999. The Company carries
stock indexed call options at market value. Further, at September 30, 1996
there were no deferred gains or losses relating to terminated contracts.
The Bank ceased offering MarketSmart CDs during fiscal year 1995 due to its
inability to purchase stock indexed call options.
Financial Futures Transactions
The Company from time to time may enter into various financial
futures contracts to protect against changes in the market value of various
interest-earning assets and interest-bearing liabilities, including the
repricing of interest rate floor arrangements. Realized gains and losses on
these contracts are deferred and accounted for as premiums or discounts on
the related assets, liabilities or interest rate floor resets to the extent
such contracts are matched against specific assets, liabilities or interest
rate floor resets and meet specific hedge correlation criteria. Contracts
which are not matched against specific assets, liabilities, or the
repricing of interest rate floor arrangements or do not meet correlation
criteria are accounted for at market value with the resulting gain or loss
recognized in operations. At September 30, 1996 and 1995 the Company had no
outstanding financial future transactions.
During the years ended September 30, 1996, 1995 and 1994, the
Bank's net interest income increased (decreased) by $3.5 million, $1.2
million and $(1.5) million, respectively, as a net result of off-balance
sheet financial instruments.
(22) Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the
asset or obligation could be exchanged in a current transaction between
willing parties, other than in a forced or liquidation sale. Fair value
estimates are made at a specific point in time based on relevant market
information and information about the financial instrument. These estimates
do not reflect any premium or discount that could result from offering for
sale at one time the entire holdings of a particular financial instrument.
Because no market value exists for a significant portion of the financial
instruments, fair value estimates are based on judgments regarding future
expected loss experience, current economic conditions, risk characteristics
of various financial instruments, and other factors. These estimates are
subjective in nature, involve uncertainties and matters of judgment and,
therefore, cannot be determined with precision. Changes in assumptions
could significantly affect the estimates.
Fair value estimates are determined for on and off-balance sheet
financial instruments, without attempting to estimate the value of
anticipated future business, and the value of assets and liabilities that
are not considered financial instruments. Additionally, tax consequences
related to the realization of the unrealized gains and losses can have a
potential effect on fair value estimates and have not been considered in
many of the estimates.
The following table summarizes the carrying values and estimated
fair values of the Company's on-balance sheet financial instruments:
<TABLE>
<CAPTION>
September 30,
================================================================
1996 1995
============================== =============================
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
------------------------------ -----------------------------
(In Thousands)
Financial Assets:
<S> <C> <C> <C> <C>
Cash and cash equivalents........ $ 23,745 $ 23,745 $ 45,104 $ 45,104
Trading account securities....... --- --- 2,003 2,003
Debt and equity securities....... 136,776 136,774 67,452 67,380
Federal Home Loan Bank stock..... 27,938 27,938 20,288 20,288
Mortgage-backed securities....... 831,246 815,031 871,520 844,297
Loans receivable, net............ 1,853,162 1,872,423 1,664,943 1,690,532
Financial Liabilities:
Deposits......................... 1,715,959 1,721,433 1,748,874 1,755,704
Borrowed funds................... 1,008,786 1,008,136 767,138 767,735
============================== =============================
</TABLE>
The following methods and assumptions were utilized in estimating
the fair values of its on-balance sheet financial instruments at September
30, 1996 and 1995:
Cash and Cash Equivalents
The estimated fair values are assumed to equal the carrying values
as these financial instruments are either due on demand or mature within 90
days.
Debt and Equity Securities and Mortgage-Backed Securities
Estimated fair values of debt and equity securities and
mortgage-backed securities, both available for sale and held to maturity,
are generally predicated upon quoted market prices or dealer quotes, or in
the absence of such quotes, on quoted market prices for securities with
similar credit, maturity and interest rate characteristics.
Loans Receivable, net
Estimated fair values are calculated for pools of loans with
similar characteristics. The loans are first segregated by type, such as
one-to-four family residential, other residential, commercial, and
consumer, and then further segregated into fixed and adjustable rate
categories and seasoned and non-seasoned categories.
Estimated fair values are derived by discounting expected future
cash flows. Expected future cash flows are based on contractual cash flows,
adjusted for prepayments. Prepayment estimates are based on a variety of
factors including the Bank's experience with respect to each loan category,
the effect of current economic and lending conditions, and regional
statistics for each loan category, if available. The discount rates used
are based on market rates for new loans of similar type and purpose,
adjusted, when necessary, for factors such as servicing cost, credit risk,
and term.
As mentioned previously, this technique of estimating fair value is
extremely sensitive to the assumptions and estimates used. While management has
attempted to use assumptions and estimates which are the most reflective of the
loan portfolio and the current market, a greater degree of subjectivity is
inherent in these values than those determined in formal trading marketplaces.
As such, readers are cautioned in using this information for purposes of
evaluating the financial condition and/or value of the Company in and of itself
or in comparison with any other company.
Deposits
The fair value of deposit liabilities with no stated maturity (NOW,
money market, savings accounts and non-interest bearing accounts, which
represent 59.3% of all deposit liabilities) are equal to the carrying
amounts payable on demand. The fair value of certificates of deposit
represent contractual cash flows discounted using interest rates currently
offered on deposits with similar characteristics and remaining maturities.
Under generally accepted accounting principles, these estimated
fair values do not include the intangible value of core deposit
relationships which comprise a significant portion of the Bank's deposit
base. However, management believes that the Bank's core deposit
relationships provide a relatively stable, low cost funding source which
has a substantial intangible value separate from the deposit balances.
Borrowed Funds
The estimated fair value of borrowed funds is calculated based on
the discounted value of contractual cash flows using interest rates
currently in effect for borrowings with similar maturities and collateral
requirements.
Off-Balance Sheet Financial Instruments
The fair values of interest rate swap agreements, interest rate
collars, interest rate floors, interest rate caps and stock indexed call
options are obtained from dealer quotes and represent the cost of
terminating the agreements. The estimated fair value of open off-balance
sheet financial instruments results in an unrealized gain (loss) of $2.9
million and $(.5) million at September 30, 1996 and 1995, respectively.
Further, the estimated fair value of commitments to extend credit
is estimated using the fees charged to enter into similar agreements,
taking into account the remaining terms of the agreements and the present
creditworthiness of the counterparties. Generally, for fixed-rate loan
commitments, fair value also considers the difference between current
levels of interest rates and the committed interest rates. The fair value
of commitments to purchase mortgage-backed securities is based on the
estimated cost to terminate them or otherwise settle the obligations with
the counterparties. The estimated fair value of these off-balance sheet
financial instruments results in no unrealized gain or loss at September
30, 1996 and 1995.
(23) Recent Accounting Pronouncements
In March 1995, the FASB issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-lived Assets and
for Long-lived Assets To Be Disposed Of" ("SFAS No. 121"). The Statement is
effective for financial statements issued for fiscal years beginning after
December 15, 1995. The Statement establishes accounting standards for,
among other things, the impairment of long-lived assets. The Statement
requires that long-lived assets be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company adopted SFAS No. 121 on October 1,
1996. Adoption of SFAS No. 121 did not have a significant effect on the
Company's financial condition or results of operations.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No.
123"). The Statement is effective for fiscal years beginning after December
15, 1995. The Statement establishes accounting and reporting standards for
stock-based employee compensation awards granted in fiscal years that begin
after December 15, 1994. Examples of such plans are stock purchase plans,
stock options, restricted stock, and stock appreciation rights. The
Statement defines a fair value based method of accounting for employee
stock options or similar equity instruments and encourages all entities to
adopt that method of accounting. Entities may elect, however, to remain
with previous accounting standards which do not require the fair value
method of accounting. Those entities electing not to adopt the fair value
method of accounting must make pro forma disclosures of net income and
earnings per share as if the fair value method of accounting defined in the
Statement were adopted. Under the fair value based method, compensation
cost is measured at the grant date based on the value of the award and is
recognized over the service period, which is usually the vesting period.
The Company has adopted SFAS No. 123 effective October 1, 1996 and has
elected to remain with the previous accounting standard which does not
require the fair value method of accounting. Pro forma disclosures as if
the fair value method were adopted will be presented in future financial
statements. Based on this method of adoption, SFAS No. 123 will not have a
significant effect on the Company's financial condition or results of
operations.
In June 1996, the FASB issued Statement of Financial Accounting
Standards No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities" ("SFAS No. 125"). The Statement
is effective for transactions occurring after December 31, 1996. The
Statement provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities. Those
standards are based on consistent application of a financial--components
approach that focuses on control. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets
it controls and the liabilities it has incurred, derecognizes financial
assets when control has been surrendered, and derecognizes liabilities when
extinguished. This Statement provides consistent standards for
distinguishing transfers of financial assets that are sales from transfers
that are secured borrowings. The Company plans to adopt SFAS No. 125 on
January 1, 1997. Based on its review of the Statement, management does not
believe that adoption of SFAS No. 125 will have a material effect on the
Company.
(24) Parent Company Only Financial Information
New York Bancorp operates a wholly owned subsidiary, Home Federal
Savings Bank. The earnings of the Bank are recognized by the Holding
Company using the equity method of accounting. Accordingly, earnings of the
Bank are recorded as increases in the Holding Company's investment and any
dividends would reduce the Holding Company's investment in the Bank. The
following is the condensed financial statements for New York Bancorp Inc.
(parent company only) as of September 30, 1996 and 1995 and for the years
ended September 30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
Condensed Statements of Financial Condition
September 30,
-------------------------------------------
1996 1995
===========================================
Assets (In Thousands)
<S> <C> <C>
Cash and due from banks............................ $ 236 $ 112
Money market investments........................... 10,700 8,418
Debt and equity securities available for sale...... 4,841 4,489
Investment in Bank, at equity...................... 138,195 146,169
Other 195 80
-------------------------------------------
$154,167 $159,268
===========================================
Liabilities and Shareholders' Equity
Accrued expenses and other liabilities............. $ 2,264 $ 2,882
Shareholders' equity............................... 151,903 156,386
-------------------------------------------
$154,167 $159,268
===========================================
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Income
Year ended September 30,
-------------------------------------------
1996 1995 1994
===========================================
(In Thousands)
<S> <C> <C> <C>
Dividend from Bank................................. $37,352 $ 26,200 $ 11,879
Interest income.................................... 509 720 685
Interest expense................................... --- (48) (182)
Non-interest income (loss)......................... 3,141 353 (4)
Non-interest expense............................... (410) (649) (697)
-------------------------------------------
Income before income taxes and equity
in undistributed earnings of Bank................ 40,592 26,576 11,681
Income tax benefit (expense)....................... (1,471) (154) 90
-------------------------------------------
Income before equity in undistributed
earnings of Bank................................. 39,121 26,422 11,771
Excess of dividends over current year earnings..... (7,115) (14,860) ---
Equity in undistributed earnings of Bank........... --- --- 21,381
-------------------------------------------
Net income......................................... $32,006 $11,562 $33,152
===========================================
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
Year ended September 30,
-------------------------------------------
1996 1995 1994
===========================================
(In Thousands)
Cash flows from operating activities:
<S> <C> <C> <C>
Net income......................................... $ 32,006 $ 11,562 $ 33,152
Adjustments to reconcile net income to net
cash provided by operating activities:
Undistributed earnings of the Bank............. 7,115 14,860 (21,381)
Gain on sale of debt and equity
securities available for sale................ (3,141) (295) ---
Amortization of premiums....................... --- 48 150
Amortization of ESOP and RRP................... --- 464 1,491
Termination of ESOP and RRP.................... --- 4,992 ---
(Increase) decrease in other assets............ 281 392 (338)
Increase (decrease) in other liabilities....... 1,519 (241) (227)
-------------------------------------------
Total adjustments........................ 5,774 20,220 (20,305)
-------------------------------------------
Net cash provided by operating activities 37,780 31,782 12,847
-------------------------------------------
Cash flows from investing activities:
Proceeds from sale of mortgage-backed
securities available for sale.................. --- 6,957 ---
Proceeds from sale of debt and equity
securities available for sale.................. 16,336 1,159 ---
Investment in Bank............................... --- (105) (1,000)
Investment in mortgage-backed securities
available for sale............................. --- --- (2,112)
Investment in debt and equity securities
available for sale............................. (14,457) (4,812) (480)
Principal payments on mortgage-backed
securities available for sale.................. --- 2,273 5,512
-------------------------------------------
Net cash provided by investing activities: 1,879 5,472 1,920
-------------------------------------------
Cash flows from financing activities:
Purchases of common stock for treasury
or retirement.................................. (29,028) (32,496) (8,320)
Proceeds from sale of treasury stock............. --- 4,530 ---
Repayment of long term debt...................... --- (217) (543)
Payment of common stock dividends................ (9,427) (8,156) (5,582)
Cash paid in lieu of fractional shares
resulting from stock split and dividend........ --- --- (3)
Exercise of stock options........................ 1,202 872 819
-------------------------------------------
Net cash used by financing activities.... (37,253) (35,467) (13,629)
-------------------------------------------
Net increase in cash and cash equivalents.......... 2,406 1,787 1,138
Cash and cash equivalents at beginning of year..... 8,530 8,187 7,049
Hamilton's net cash flows for the three
months ended December 31, 1994................... --- (1,444) ---
-------------------------------------------
Cash and cash equivalents at end of year........... $ 10,936 $ 8,530 $ 8,187
Supplemental schedule of non-cash investing
activities:
Transfer of mortgage-backed securities held to $ --- $ --- $ 11,630
maturity to mortgage-backed securities
available for sale...............................
===========================================
</TABLE>
(25) Quarterly Financial Data (Unaudited)
Selected quarterly financial data for fiscal years ended September
30, 1996 and 1995 is presented below:
<TABLE>
<CAPTION>
Fiscal 1996 Fiscal 1995
----------------------------------- ---------------------------------
Quarter Ended
----------------------------------------------------------------------
September June March December 31, September June March December 31,
30, 1996 30, 1996 31, 1996 1995 30, 1995 30, 1995 31, 1995 1994
============================================================================================
Quarterly Operating Data:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $54,349 $52,392 $50,091 $50,659 $50,843 $49,714 $48,990 $47,425
Interest expense........ 27,528 26,486 25,741 26,991 27,546 26,514 24,860 22,810
--------------------------------------------------------------------------------------------
Net interest income..... 26,821 25,906 24,350 23,668 23,297 23,200 24,130 24,615
Provision for possible
loan losses........... (300) (300) (300) (300) (400) (400) (400) (500)
--------------------------------------------------------------------------------------------
Net interest income
after provision for
possible loan losses.. 26,521 25,606 24,050 23,368 22,897 22,800 23,730 24,115
---------------------------------------------------------------------------------------------
Non interest income (loss):
Loan fees and service
charges............. 676 673 790 631 605 610 588 763
Net gain (loss) on sales
of mortgage loans and
securities available
for sale.............. 1,972 742 1,529 507 303 125 (1,177) (339)
Other................. 1,848 2,008 1,727 1,564 1,421 1,316 1,280 1,117
---------------------------------------------------------------------------------------------
Total non-interest income 4,496 3,423 4,046 2,702 2,329 2,051 691 1,541
---------------------------------------------------------------------------------------------
Non-interest expense:
General and
administrative....... 12,280 11,714 11,631 11,910 10,720 12,533 12,858 12,857
Merger and restructuring --- --- --- --- --- --- 19,024 ---
Real estate operations, net 123 253 (46) 133 223 (59) 345 374
SAIF recapitalization. 9,432 --- --- --- --- --- --- ---
-----------------------------------------------------------------------------------------
Total non-interest
expense 21,835 11,967 11,585 12,043 10,943 12,474 32,227 13,231
--------------------------------------------------------------------------------------------
Income (loss) before
income tax expense.... 9,182 17,062 16,511 14,027 14,283 12,377 (7,806) 12,425
Income tax expense...... 3,810 7,432 7,335 6,199 6,303 5,458 1,998 5,958
--------------------------------------------------------------------------------------------
Net income (loss)....... $ 5,372 $ 9,630 $ 9,176 $ 7,828 $ 7,980 $ 6,919 $(9,804) $ 6,467
============================================================================================
Earnings (loss) per
common share $ .47 $ .81 $ .76 $ .64 $ .63 $ .51 $ (.73) $ .48
</TABLE>
Summation of the quarterly earnings per common share, due to the average
effect of the number of shares and share equivalents throughout the year,
does not necessarily equal the annual amount.
independent auditors' report
- ----------------------------------------------------------------------
To The Board of Directors and Shareholders of
New York Bancorp Inc.:
We have audited the accompanying consolidated statements of
financial condition of New York Bancorp Inc. and Subsidiary as of September
30, 1996 and 1995 and the related consolidated statements of income,
changes in shareholders' equity and cash flows for each of the years in the
three-year period ended September 30, 1996. These consolidated financial
statements are the responsibility of the Company'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 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
New York Bancorp Inc. and Subsidiary as of September 30, 1996 and 1995 and
the results of their operations and their cash flows for each of the years
in the three-year period ended September 30, 1996, in conformity with
generally accepted accounting principles.
As discussed in note 16 to the consolidated financial statements,
effective October 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109 (Accounting for Income Taxes).
KPMG Peat Marwick LLP
October 29, 1996
Jericho, New York
EXHIBIT 99.2
North Fork Bancorporation, Inc. - New York Bancorp Inc.
Combined with Branford Savings Bank
Pro Forma Condensed Combined Balance Sheets
(Unaudited)
September 30, 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
All
North Combined
Pro Fork/ Trans-
Forma Branford New Pro actions
North Adjust- Pro York Forma Pro
Fork Branford ments Forma Bancorp Adjustments Forma
Assets
<S> <C> <C> <C> <C> <C> <C> <C>
Cash & Due from Banks..... $106,760 $4,237 ($2,710)(1) $108,287 $ 26,305 - $ 134,592
Federal Funds Sold........ 35,000 9,875 - 44,875 - - 44,875
Securities:
Available-for-Sale ... 1,633,737 5,132 - 1,638,869 495,910 26,400(4) 2,161,179
Held-to-Maturity...... 1,166,329 42,661 - 1,208,990 644,840 - 1,853,830
Total Securities...... 2,800,066 47,793 0 2,847,859 1,140,750 26,400 4,015,009
------------------ ----------------------------------------- ------------------
Loans, Net of Unearned
Income & Fees........... 3,509,722 120,971 - 3,630,693 2,039,111 - 5,669,804
Allowance for Loan
Losses............. 54,611 3,740 - 58,351 18,695 - 77,046
Net noans............. 3,455,111 117,231 0 3,572,342 2,020,416 0 5,592,758
------------------ ----------------------------------------- -------------------
Premises & Equipment, Net. 63,717 1,893 - 65,610 12,711 - 78,321
Accrued Interest Receivable 45,649 1,272 - 46,921 21,590 - 68,511
Intangibles............... 76,692 - 27,434(123) 104,126 - - 104,126
Other Real Estate......... 5,499 110 - 5,609 1,363 - 6,972
Other Assets.............. 27,126 457 2,052(3) 29,635 21,065 3,149(5) 53,849
Total Assets......... $6,615,620 $182,868 $26,776 $6,825,264 $3,244,200 $29,549 $10,099,013
------------------ ----------------------------------------- --------------------
Liabilities and
Stockholders' Equity
Demand Deposits........... $836,020 $10,753 - $846,773 $42,808 - $889,581
Savings N.O.W. & Money
Market Deposits.......... 1,895,804 62,749 - 1,958,553 1,000,873 - 2,959,426
Time Deposits 1,726,825 88,162 - 1,814,987 657,067 - 2,472,054
Total Deposits....... 4,458,649 161,664 0 4,620,313 1,700,748 0 6,321,061
------------------ ----------------------------------------- --------------------
Federal Funds Purchased &
Securities Sold under
Agreements to Repurchase...1,331,024 - - 1,331,024 840,331 - 2,171,355
Other Borrowings.......... 85,000 2,000 - 87,000 413,600 - 500,600
Accrued Expenses & Other
Liabilities.............. 103,020 1,592 5,878(3) 110,490 120,458 37,576(5) 268,524
Total Liabilities...$5,977,693 $165,256 $5,878 $6,148,827 $3,075,137 $37,576 $9,261,540
------------------ ----------------------------------------- ------------------
Company-Obligated Mandatorily
Redeemable Capital Securities
of Subsidiary Trust.... 99,646 - - 99,646 - - 99,646
Stockholders' Equity
Preferred Stock........... - - - - - - -
Common Stock............. 165,111 1,557 1,652(1) 168,320 295 65,508(4) 234,123
Additional Paid in Capital 109,640 31,227 4,074(1) 144,941 66,495 (120,200)(4) 91,236
Retained Earnings......... 263,931 (15,185) 15,185(1) 263,931 181,851 (34,427)(5) 411,355
Unrealized Gain on
Securities Available-for-
Sale, net of taxes........ 13,476 13 (13)(1) 13,476 1,514 - 14,990
Deferred Compensation..... (13,009) - - (13,009) - - (13,009)
Treasury Stock............ (868) - - (868) (81,092) 81,092(4) (868)
Total Stockholders'
Equity............... 538,281 17,612 20,898 576,791 169,063 (8,027) 737,827
Total Liabilities and
Stockholders' Equity..$6,615,620 $182,868 $26,776 $6,825,264 $3,244,200 $29,549 $10,099,013
------------------------------------------------------------------------------
</TABLE>
Selected Capital Ratios:
All Combined
New York Transactions
North Fork Bancorp Pro Forma
Tier 1 Capital Ratio 14.34% 10.76% 13.01%
Risk Adjusted Capital Ratio 15.59% 11.94% 14.24%
Leverage Ratio 8.38% 5.18% 7.23%
See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
North Fork Bancorporation, Inc. - New York Bancorp Inc.
Combined with Branford Savings Bank
Pro Forma Condensed Combined Statements of Income
(Unaudited)
For the Nine Months Ended September 30, 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
All Combined
North Pro Forma North Fork New York Transactions
Fork Branford Adjustments Pro Forma Bancorp Pro Forma
<S> <C> <C> <C> <C> <C> <C>
Interest Income........................ $359,458 $10,496 $369,954 $183,432 $553,386
Interest Expense....................... 151,977 4,621 156,598 93,095 249,693
-----------------------------------------------------------------------
Net Interest Income.................... 207,481 5,875 -- 213,356 90,337 303,693
Provision for Loan Losses.............. 4,500 200 4,700 1,800 6,500
-----------------------------------------------------------------------
Net Interest Income after
Provision for Loan Losses............ 202,981 5,675 -- 208,656 88,537 297,193
Non-Interest Income.................... 26,032 418 26,450 13,646 40,096
Net Securities Gains................... 2,273 -- 2,273 2,259 4,532
Other Real Estate Expense.............. 163 98 261 655 916
Non-Interest Expense................... 91,174 4,446 1,372(2) 96,992 37,890 134,882
----------------------------------- ----------- -----------------------
Income before Income Taxes............. 139,949 1,549 (1,372) 140,126 65,897 206,023
Provision for Income Taxes............. 54,670 45 - 54,715 24,950 79,665
-----------------------------------------------------------------------
Net Income............................. $85,279 $1,504 ($1,372) $85,411 $40,947 $126,358
----------------------------------- ----------- -----------------------
Weighted Average Shares Outstanding(6). 66,215 7,005 - 67,499 22,795 94,625
Earnings Per Share..................... $1.29 $ 0.21 - $1.27 $1.80 $1.34
</TABLE>
See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
North Fork Bancorporation, Inc. - New York Bancorp Inc.
Combined with Branford Savings Bank
Pro Forma Condensed Combined Statements of Income
(Unaudited)
For the Year Ended December 31, 1996 for North Fork and Branford and
September 30, 1996 for New York Bancorp
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
All Combined
North Pro Forma North Fork New York Transactions
Fork Branford Adjustments Pro Forma Bancorp Pro Forma
<S> <C> <C> <C> <C> <C> <C>
Interest Income........................ $405,307 $13,697 $419,004 $207,491 $626,495
Interest Expense....................... 174,361 6,149 180,510 106,746 287,256
-----------------------------------------------------------------------
Net Interest Income.................... 230,946 7,548 -- 238,494 100,745 339,239
Provision for Loan Losses.............. 6,800 625 7,425 1,200 8,625
----------------------------------- ----------- ----------- -----------
Net Interest Income after
Provision for Loan Losses.............. 224,146 6,923 -- 231,069 99,545 330,614
Non-Interest Income.................... 29,245 587 29,832 10,321 40,153
Net Securities Gains................... 1,878 -- 1,878 4,346 6,224
Other Real Estate Expense.............. 753 232 985 463 1,448
SAIF Recapitalization Charge........... 8,350 -- 8,350 9,432 17,782
Merger Related Restructure Charge...... 21,613 -- 21,613 - 21,613
Non-Interest Expense................... 112,281 5,418 1,829(2) 119,528 47,535 167,063
----------------------------------- ----------- ----------- -----------
Income before Income Taxes............. 112,272 1,860 (1,829) 112,303 56,782 169,085
Provision for Income Taxes............. 49,830 19 - 49,849 24,776 74,625
-----------------------------------------------------------------------
Net Income............................. $62,442 $1,841 ($1,829) $62,454 $32,006 $94,460
----------------------------------- ----------- ----------- -----------
Weighted Average Shares Outstanding(6). 64,278 6,898 - 65,562 23,889 93,990
Earnings Per Share..................... $ 0.97 $ 0.27 - $ 0.95 $1.34 $1.01
</TABLE>
See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
North Fork Bancorporation, Inc. - New York Bancorp Inc.
Pro Forma Condensed Combined Statements of Income
(Unaudited)
For the Year Ended December 31, 1995 for North Fork and
September 30, 1995 for New York Bancorp
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
New York North Fork
North Fork Bancorp Pro Forma
<S> <C> <C> <C>
Interest Income......................................... $332,492 $196,972 $529,464
Interest Expense........................................ 140,399 101,730 242,129
-----------------------------------------
Net Interest Income..................................... 192,093 95,242 287,335
Provision for Loan Losses............................... 11,825 1,700 13,525
-----------------------------------------
Net Interest Income after Provision for Loan Losses..... 180,268 93,542 273,810
Non-Interest Income..................................... 23,010 7,460 30,470
Net Securities Gains/(Losses)........................... 6,734 (848) 5,886
Other Real Estate Expense............................... 1,255 883 2,138
Merger Related Restructure Charge....................... -- 19,024 19,024
Non-Interest Expense.................................... 91,565 48,968 140,533
-----------------------------------------
Income before Income Taxes.............................. 117,192 31,279 148,471
Provision for Income Taxes.............................. 49,850 19,717 69,567
-----------------------------------------
Net Income ............................................. $67,342 $11,562 $78,904
-----------------------------------------
Pro Forma Weighted Average Shares Outstanding(6) ....... 64,432 26,656 96,153
Earnings Per Share...................................... $1.05 $ 0.43 $ 0.82
See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
</TABLE>
North Fork Bancorporation, Inc. - New York Bancorp Inc.
Pro Forma Condensed Combined Statements of Income
(Unaudited)
For the Year Ended December 31, 1994 for North Fork and
September 30, 1994 for New York Bancorp
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
New York North Fork
North Fork Bancorp Pro Forma
<S> <C> <C> <C>
Interest Income......................................... $295,062 $175,530 $470,592
Interest Expense........................................ 112,576 79,948 192,524
-----------------------------------------
Net Interest Income..................................... 182,486 95,582 278,068
Provision for Loan Losses............................... 6,825 2,650 9,475
-----------------------------------------
Net Interest Income after Provision for Loan Losses..... 175,661 92,932 268,593
Non-Interest Income..................................... 21,674 7,398 29,072
Net Security (Losses)/Gains............................. (9,189) 602 (8,587)
Other Real Estate Expense............................... 4,929 880 5,809
Merger Related Restructure Charge....................... 14,338 -- 14,338
Non-Interest Expense.................................... 99,338 50,845 150,183
-----------------------------------------
Income before Income Taxes.............................. 69,541 49,207 118,748
Provision for Income Taxes.............................. 26,502 21,740 48,242
-----------------------------------------
Income before Cumulative Effect of
Accounting Changes..................................... $43,039 $27,467 $70,506
-----------------------------------------
Pro Forma Weighted Average Shares Outstanding (6)....... 62,312 27,220 94,704
Earnings Per Share before Cumulative Effect of
Accounting Changes.................................... $ 0.69 $1.01 $ 0.74
See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
</TABLE>
NORTH FORK BANCORPORATION, INC. AND
NEW YORK BANCORP INC.
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (UNAUDITED)
(1) Reflects the issuance of 1,283,674 shares of North Fork's Common Stock
utilizing an assumed Exchange Ratio of 0.1957 shares of North Fork Common
Stock for each share of Branford Voting Common Stock and Branford
Non-Voting Common Stock outstanding at September 30, 1997 (5,179,863 shares
and 1,379,533 shares, respectively), and a cash payment to the holder of
all outstanding Branford Warrants (who has exercised a cash election right)
of $2,709,700 representing the excess of the market price as of October 22,
1997 of shares of North Fork Common Stock that such holder would receive in
the Branford Merger if Branford Warrants were exercised immediately prior
to the consummation, over the total exercise price of the Branford
Warrants.
(2) Reflects the excess of the Branford Merger consideration over the fair
value of the net assets acquired, as follows:
North Fork Common Stock (1,283,674 shares at $30.00 per share) $38,510
Cash payments for the Branford Warrants 2,710
Transaction Costs, net of taxes 3,826
--------
Total consideration $45,046
Branford stockholders' equity at September 30, 1997 (17,612)
--------
Intangible asset $27,434
========
The intangible assets will be amortized utilizing the straight line method
over a fifteen year period. Included in non-interest expense for the nine
month period ended September 30, 1997 and for the year ended December 31,
1996 is $1,372,000 and $1,829,000, respectively, of intangible
amoritization expense.
(3) Transaction Costs of approximately $3.8 million, net of taxes, will be
incurred upon consummation of the Branford Merger and will be accounted for
as part of the purchase price for financial reporting purposes. A summary
of the estimated transaction costs are as follow:
Type of Cost Expected Costs
(in thousands)
Professional Fees $1,747
Merger Related Compensation and Severance Costs 1,792
Facility and System Costs 859
Other Merger Related Costs 1,480
----------
Total Pre-Tax Transaction Costs 5,878
Less: Related Tax Benefit (2,052)
----------
Total Transaction Costs, net of taxes $3,826
===========
Refinements to the foregoing estimates may occur subsequent to the
completion of the Branford Merger.
(4) Pro forma adjustments to common stock and additional paid-in capital,
at September 30, 1997, reflect the Merger accounted for as a
pooling-of-interests through: (a) the reissuance of 800,000 shares of New
York Bancorp common stock from New York Bancorp's treasury, with an average
cost basis of $9.92, at $33.00 per share (which approximated the market
price of the New York Bancorp common stock on or about October 22, 1997),
with transaction proceeds of $26.4 million assumed to be reinvested in
securities available-for-sale; (b) the retirement of the remaining
7,374,522 shares of New York Bancorp common stock held in treasury, with an
average cost basis of $9.92, as of September 30, 1997 and (c) the exchange
of 26,321,186 shares of North Fork common stock at September 30, 1997
(using the Exchange Ratio of 1.19) for the 22,118,644 adjusted outstanding
shares of New York Bancorp common stock. Pro forma adjustments do not include
any shares of North Fork Common Stock to be received upon consummation of the
Merger by holders of New York Bancorp Options.
(5) The pro forma condensed combined balance sheet reflects a non-recurring
merger and restructuring charge of approximately $34.4 million, net of
taxes, which will be recognized upon consummation of the Merger. Such
charge will reduce earnings per share for the period in which such charge
is recognized by approximately $.36 (based on pro forma weighted average
shares outstanding of 94,624,522 on September 30, 1997). A summary of the
estimated merger and restructuring charges are as follows:
Type of Cost Expected Costs
(in thousands)
Merger Expense $9,700
Restructuring Charge:
Merger Related Compensation And Severance
Costs 15,172
Facility and System Costs 11,814
Other Merger Related Costs 890
------
Total Pre-Tax Merger and Restructuring Charge 37,576
Add: State and Local Tax Bad Debt Recapture,
Net of Federal Benefit 9,000
Less: Related Tax Benefit (12,149)
------
Total After-Tax Merger and Restructuring Charge $34,427
-------
Merger expenses consist primarily of investment banking, legal and
other professional fees, and expenses associated with shareholder
notification. Restructure related compensation and severance costs consist
primarily of employee severance, compensation arrangements, transitional
staffing and the related employee benefits expenses. Facility and system
costs consist primarily of lease termination charges and equipment
write-offs resulting from the consolidation of overlapping branch locations
and duplicate headquarters and operational facilities. Also reflected are
the costs associated with the cancellation of certain data and item
processing contracts and the deconversion of existing New York Bancorp
computer systems.
The effect of the proposed charge has been reflected in the pro
forma condensed combined balance sheet as of September 30, 1997; however,
since this charge is non-recurring, it has not been reflected in the pro
forma combined statements of income. Although no assurance can be given,
North Fork expects that cost savings will be achieved at an annual rate of
approximately $25 million on a pre-tax basis by the end of 1998 as a result
of steps to be taken to integrate operations and to achieve efficiencies in
certain combined lines of business. These anticipated merger cost savings
were determined based upon preliminary estimates provided by the management
of North Fork. The pro forma financial information does not give effect to
these expected cost savings, nor does it include any estimates of revenue
enhancements that could be realized with the Merger.
(6) The pro forma weighted average shares outstanding for the nine month
period ended September 30, 1997 and for the year ended 1996 reflect the
assumed issuance of 0.1957 shares of North Fork Common Stock for each voting
and non-voting average equivalent share of Branford common stock outstanding
during such periods (all Branford warrants having been retired under the
cash election), and the pro forma weighted average shares outstanding for
all periods presented reflect the assumed issuance of 1.19 shares of North
Fork Common Stock for each average equivalent share of New York Bancorp
Common Stock outstanding during such periods.
(7) North Fork is currently reviewing the investment securities portfolios
of New York Bancorp to determine the classification of such securities as
either available-for-sale or held-to-maturity in connection with North
Fork's existing interest-rate risk position. As a result of this review,
certain reclassifications of New York Bancorp's investment securities may
result. No adjustments have been made to either the available-for-sale or
the held-to-maturity portfolios in the accompanying pro forma condensed
combined balance sheet to reflect any such reclassification as a final
determination has not been made with respect to such matters. Any such
reclassification will be accounted for in accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," which requires that securities transferred
from held-to-maturity to available-for-sale to be transferred at fair value
with any unrealized gain or loss, net of taxes, at the date of transfer
recognized as a separate component of stockholders' equity.
(8) The pro forma financial information presented has been prepared in
conformity with generally accepted accounting principles and prevailing
practices within the financial services industry. Under generally accepted
accounting principles, the assets and liabilities of New York Bancorp will
be combined with those of North Fork at book value. In addition, the
statements of income for New York Bancorp will be combined with North Fork
as of the earliest period presented. Certain reclassifications have been
included in the pro forma financial statements to conform to North Fork's
presentation. North Fork utilizes a fiscal year which ends on December 31
for reporting purposes, whereas New York Bancorp uses a fiscal year which
ends on September 30 for such purposes. The unaudited condensed combined
statements of income for 1996, 1995, 1994 combine North Fork and New York
Bancorp at their respective year-end periods. The unaudited condensed
combined statements of income for the nine month periods ended September
30, 1997 and 1996 include New York Bancorp for the nine months then ended
to conform with the reporting periods of North Fork. Summary unaudited
operating results for the three-months ended December 31, 1996 and 1995
have not been included in the unaudited pro forma condensed combined
financial statements and are presented in the following table:
Three Months Ended
December 31,
(Unaudited)
(in thousands, except per share amounts) 1996 1995
---- ----
Interest Income $55,417 $50,659
Interest expense 27,538 26,991
Net interest income 27,879 23,668
Net income 10,264 7,828
Earnings per share $0.45 $0.32
EXHIBIT 99.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
The Board of Directors of
New York Bancorp Inc.:
We consent to the inclusion of our report dated October 29, 1996, with respect
to the consolidated statements of financial condition of New York Bancorp Inc.
as of September 30, 1996 and 1995, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for each of the years in
the three-year period ended September 30, 1996, which report appears in the
Form 8-K of North Fork Bancorporation, Inc. dated November 20, 1997. Our report
refers to a change in accounting principles.
/s/ KPMG Peat Marwick LLP
-------------------------
KPMG Peat Marwick LLP
Jericho, New York
November 20, 1997
