SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the period ended: March 31, 1997
NORTH FORK BANCORPORATION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3154608
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
275 BROAD HOLLOW ROAD, MELVILLE, NEW YORK 11747
(Address of principal executive offices) (Zip Code)
(516) 844-1004
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days: Yes (X) No ( )
Indicate the number of shares outstanding of each of
the issuer's classes of common stock, as of the latest
practicable date.
CLASSES OF COMMON STOCK NUMBER OF SHARES OUTSTANDING 05/05/97
$2.50 Par Value 32,948,382
<PAGE>
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
North Fork Bancorporation, Inc. and Subsidiaries
(1.) Consolidated Balance Sheets
(2.) Consolidated Statements of Income.
(3.) Consolidated Statements of Cash Flows.
(4.) Consolidated Statements of
Changes in Stockholders' Equity.
(5.) Notes to Consolidated Financial Statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
<PAGE>
PART II. OTHER INFORMATION (continued)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following exhibits are submitted herewith:
(a) Exhibit # Description
(11) Statement Re: Computation of per share earnings.
(27) Financial Data Schedule
(b) Current Report on Form 8-K dated February 25, 1997
(reporting that the Registrant's Board of Directors
approved a two-for-one stock split)
Current Report on Form 8-K dated April 10, 1997
(reporting the Registrant's Net Income for the 1997
First Quarter).
Current Report on Form 8-K dated April 22, 1997
(reporting that the Registrant's shareholders approved
the increase in the authorized common stock from
fifty million to two hundred million shares).
<PAGE>
<TABLE>
Consolidated Balance Sheets
<S> <C> <C> <C>
March 31, December 31, March 31,
1997 1996 1996
(in thousands, except per share amounts) (unaudited) (unaudited)
Assets
Cash & Due from Banks $111,520 $150,365 $142,050
Interest Earning Deposits 2,619 2,298 2,410
Federal Funds Sold - 115,000 180,500
Securities:
Available-for-Sale 1,580,580 857,391 1,524,238
Held-to-Maturity 1,260,755 1,300,115 1,003,435
Total Securities 2,841,335 2,157,506 2,527,673
Loans 3,310,087 3,194,086 2,637,705
Less: Unearned Income & Fees 19,679 22,561 20,752
Allowance for Loan Losses 55,066 53,894 57,713
Net Loans 3,235,342 3,117,631 2,559,240
Premises & Equipment 64,778 65,530 67,631
Accrued Income Receivable 43,004 37,392 38,711
Intangible Assets 80,233 82,073 85,914
Other Real Estate 2,587 1,898 9,392
Other Assets 31,856 20,834 35,536
Total Assets $6,413,274 $5,750,527 $5,649,057
Liabilities and Stockholders' Equity
Demand Deposits $745,726 $734,907 $647,821
Savings, N.O.W. & Money Market Deposits 1,919,215 1,974,570 2,108,557
Other Time Deposits 1,394,839 1,416,220 1,574,771
Certificates of Deposit, $100,000 & Over 358,678 343,813 304,803
Total Deposits 4,418,458 4,469,510 4,635,952
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase 1,100,895 621,789 454,516
Other Borrowings 35,000 35,000 35,000
Purchased Securities Liability 233,706 - 34,081
Accrued Expenses & Other Liabilities 58,206 67,060 59,121
Total Liabilities $5,846,265 $5,193,359 $5,218,670
Company-Obligated Mandatorily
Redeemable Capital
Securities of Subsidiary Trust $99,640 $99,637 -
Stockholders' Equity
Preferred Stock, par value $1.00;
authorized 10,000,000 shares,
unissued - - -
Common stock, par value $2.50;
authorized 200,000,000 shares;
issued & outstanding
65,866,478, 65,199,008 and 64,920,732
shares at the periods ending,
respectively 164,666 81,499 81,151
Additional Paid in Capital 107,236 180,809 177,736
Retained Earnings 224,275 206,895 184,579
Unrealized Losses on Securities
Available-for-Sale, net of taxes (14,506) (2,633) (4,511)
Deferred Compensation (13,857) (5,193) (2,445)
Treasury Stock at cost;
35,004, 306,578 and 516,074 shares
at the periods ending, respectively (445) (3,846) (6,123)
Total Stockholders' Equity 467,369 457,531 430,387
Total Liabilities and
Stockholders' Equity $6,413,274 $5,750,527 $5,649,057
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Income (Unaudited)
<S> <C> <C>
For the Three Months Ended March 31, 1997 1996
(in thousands, except per share amounts)
Interest Income
Loans $70,201 $54,020
Mortgage-Backed Securities 33,127 33,020
U.S. Treasury & Government Agency Securities 3,355 2,387
State & Municipal Obligations 1,385 747
Other Securities 1,604 1,351
Federal Funds Sold 173 1,551
Interest Earning Deposits 36 39
Total Interest Income 109,881 93,115
Interest Expense
Savings, NOW & Money Market Deposits 10,582 10,795
Other Time Deposits 17,871 17,351
Certificates of Deposit, $100,000 & Over 4,567 3,416
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase 10,069 9,475
Other Borrowings 722 724
Total Interest Expense 43,811 41,761
Net Interest Income 66,070 51,354
Provision for Loan Losses 1,500 1,700
Net Interest Income after
Provision for Loan Losses 64,570 49,654
Non-Interest Income
Fees & Service Charges on Deposit Accounts 4,391 3,205
Broker Commissions & Trust Fees 1,947 1,209
Mortgage Banking Operations 411 666
Other Operating Income 1,056 1,137
Net Securities Gains 161 1,397
Total Non-Interest Income 7,966 7,614
Non-Interest Expense
Compensation & Employee Benefits 14,257 12,590
Occupancy 3,187 2,530
Equipment 1,861 1,541
Amortization of Intangible Assets 1,840 518
Other Real Estate 46 782
Other Operating Expense 8,837 6,623
Total Non-Interest Expense 30,028 24,584
Income Before Income Taxes 42,508 32,684
Provision for Income Taxes 16,793 13,961
Net Income $25,715 $18,723
Per Share:
Net Income $.39 $.28
Cash Dividends (1) $.125 $.100
(1) Cash dividends do not reflect dividends declared by North
Side prior to the merger.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
<S> <C> <C>
For the Period Ended March 31, 1997 1996
(in thousands)
Cash Flows from Operating Activities:
Net Income 25,715 18,723
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Loan Losses 1,500 1,700
Depreciation and Amortization 2,089 1,784
Amortization of Intangible Assets 1,840 518
Accretion of Discounts and Net Deferred Loan Fees (1,214) (1,177)
Amortization of Premiums 1,836 3,251
Net Securities Gains (161) (1,397)
Changes in
Prepaid Expenses and Other Assets (7,651) 9,455
Accrued Expenses and Other Liabilities (8,973) (8,379)
Net Cash Provided by Operating Activities 14,981 24,478
Cash Flows from Investing Activities:
Maturities, Redemptions, Calls and
Principal Repayments on
Securities Held-to-Maturity 38,670 46,896
Purchases of Securities Held-to-Maturity - (118,836)
Proceeds from Sales of Securities Available-for-Sale 5,161 69,258
Maturities and Principal Repayments on
Securities Available-for-Sale 34,191 86,529
Purchases of Securities Available-for-Sale (550,482) (360,738)
Loans Originated and Principal Repayments
on Loans and Other Real Estate Owned, Net (125,192) (39,285)
Proceeds from the Sale of Loans and
Other Real Estate Acquired
in Settlements of Loans 6,241 10,063
Purchases of Premises and Equipment, Net (1,060) (1,823)
Purchase Acquisitions, Net of Cash Paid - 601,596
Net Cash (Used in)/Provided by Investing Activities (592,471) 293,660
Cash Flows from Financing Activities:
Net Decrease in Deposits (51,052) (37,314)
Net Increase/(Decrease) in Borrowings 479,106 (156,143)
Purchase of Treasury Shares - (6,084)
Common Stock Sold for Cash 4,078 1,735
Dividends Paid to Shareholders (8,166) (4,928)
Net Cash Provided by/(Used in)
Financing Activities 423,966 (202,734)
Net (Decrease)/Increase in Cash and
Cash Equivalents (153,524) 115,404
North Side Activity for the Three Months
Ended December 31, 1995 - 60,747
Cash and Cash Equivalents at Beginning of Year 267,663 148,809
Cash and Cash Equivalents at End of Year 114,139 324,960
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows, Continued
<S> <C> <C>
For the Period Ended March 31, 1997 1996
(in thousands)
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest Expense 40,955 44,187
Income Taxes 17,017 7,439
Supplemental Schedule of Noncash Investing and Financing
Activities:
Real Estate Acquired in Settlement of Loans 720 2,200
Loans to Facilitate the Sale of Other Real Estate - 1,007
During the Period the Registrant Purchased Various Securities
which Settled in the Subsequent Month 233,706 34,081
During March 1996, the Company acquired the domestic commercial
banking business of Extebank and assumed $572 million in deposit
liabilities from First
Nationwide Bank. In connection with these acquisitions, the
following assets were acquired and liabilities assumed:
Fair Value of Assets Acquired 928,481
Intangible Assets 58,584
Cash Paid for the Common Stock (47,000)
Liabilities Assumed 940,065
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Additional Unrealized
Common Paid in Retained Securities Deferred Treasury
Stock Capital Earnings Gains/(Losses) Compensation Stock Total
Balance, December 31, 1995 $80,862 $175,617 $167,379 $4,509 ($1,585) ($653) $426,129
Net Income - - 18,723 - - - 18,723
Cash Dividends (The Registrant
$.10 per share) - - (4,952) - - - (4,952)
Cash Dividends-North Side Pre-Merger - - (2,405) - - - (2,405)
Issuance of Common Stock (230,926 shares) 289 1,688 - - - - 1,977
Deferred Compensation Activity:
Restricted Stock Activity,
net (69,300 shares) - 431 - - (925) 614 120
Amortization of Other Deferred
Compensation Plans - - - - 65 - 65
Purchase of Treasury Stock (513,000 shares) - - - - - (6,084) (6,084)
North Side Net Income for the
Three Months Ended
December 31, 1995 - - 5,834 - - - 5,834
Adjustment to Unrealized Gains/(Losses)
on Securities
Available-for-Sale, Net of taxes - - - (9,020) - - (9,020)
Balance, March 31, 1996 $81,151 $177,736 $184,579 ($4,511) ($2,445) ($6,123) $430,387
Balance, December 31, 1996 $81,499 $180,809 $206,895 ($2,633) ($5,193) ($3,846) $457,531
Net Income - - 25,715 - - - 25,715
Cash Dividends ($.125 per share) - - (8,283) - - - (8,283)
Issuance of Common Stock (667,470 shares) 834 3,244 - - - - 4,078
Restricted Stock Activity,
net (271,574 shares) - 5,516 - - (8,664) 3,401 253
Amortization of Permanent Unrealized
Loss upon Transfer
from Available-for-Sale to
Held-to-Maturity, Net of taxes - - (52) (493) - - (545)
Adjustment to Unrealized Gains/(Losses)
on Securities
Available-for-Sale, Net of taxes - - - (11,380) - - (11,380)
Assumed Issuance of Common Stock
for the Two-for-One
Stock Split (32,933,239 shares) 82,333 (82,333)
Balance, March 31, 1997 $164,666 $107,236 $224,275 ($14,506) ($13,857) ($445) $467,369
</TABLE>
<PAGE>
North Fork Bancorporation, Inc.
and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
March 31, 1997 and 1996
Basis of Presentation
The accounting and reporting policies of North Fork
Bancorporation, Inc. (the "Registrant"), and its Bank (the
"Bank") and non-bank subsidiaries, are in conformity with
generally accepted accounting principles and prevailing
practices within the financial services industry. The
preparation of financial statements in conformity with generally
accepted accounting principles requires that management make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting
period. Such estimates are subject to change in the future as
additional information becomes available or previously existing
circumstances are modified. Actual results could differ from
those estimates.
These statements should be read in conjunction with the
Registrant's summary of significant accounting policies which
are incorporated herein by reference in its 1996 Annual Report
on Form 10-K.
Results of operations for the first quarter ended March 31,
1997 are not necessarily indicative of the results of operations
which may be expected for the full year 1997 or any other
interim periods.
Business Combinations
On December 31, 1996, North Side Savings Bank ("North Side")
was merged with and into the Registrant in a transaction
accounted for under the pooling-of-interests method of
accounting. Accordingly, the financial results for all prior
periods presented include the accounts of North Side.
The Registrant's previously reported components of consolidated
income and the amounts reflected in the accompanying
consolidated statement of income for the three months ended
March 31, 1996, are as follows (in thousands):
<TABLE>
<S> <C>
Net Interest Income
As Previously Reported 38,737
North Side 12,617
Combined 51,354
Net Income
As Previously Reported 14,425
North Side 4,298
Combined 18,723
</TABLE>
North Side's reporting period had been as of and for the year
ended September 30, whereas the Registrant utilizes a calendar
year basis. North Side's results for 1996 have been conformed
to the calendar year reporting period of the Registrant. See
"Note 2(a) - Business Combinations" of the Registrant's 1996
Annual Report on Form 10-K for further discussion of this
transaction.
In March 1996, the Bank completed its purchase of the domestic
commercial banking business of Extebank ("Extebank") and ten
Long Island branch locations of First Nationwide Bank ("First
Nationwide"). These transactions were accounted for under the
purchase method of accounting and, accordingly, the Registrant's
consolidated results of operations only reflect activity
subsequent to the acquisition dates. The impact of these
acquisitions on the Registrant's operating results for the
quarter ended March 31, 1996 were insignificant. See "Note 2(b)
- - - Business Combinations" of the Registrant's 1996 Annual Report
on Form 10-K for further discussion of these transactions.
<PAGE>
Common Stock Split
On February 25, 1997, the Board of Directors approved a
two-for-one common stock split subject to shareholder approval
of an increase in the Registrant's authorized common stock. At
the Annual Meeting of Stockholders held on April 22, 1997,
shareholders overwhelmingly approved the amendment of the
Registrant's Certificate of Incorporation to increase the number
of authorized shares of common stock from fifty million to two
hundred million. The new shares will be issued on May 15, 1997
to shareholders of record on April 25, 1997. The par value of
the Registrant's common stock remains unchanged at $2.50. As a
result, $82.3 million was transferred from Additional Paid in
Capital to Common Stock at March 31, 1997 to reflect the assumed
issuance. All per share, weighted average shares outstanding
and option data presented in the consolidated financial
statements have been retroactively adjusted to reflect the
effects of the split.
RECENT ACCOUNTING DEVELOPMENTS
Earnings Per Share
In February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standard No. 128 ("SFAS
128") "Earnings Per Share". SFAS 128 simplifies the standards
for computing and presenting earnings per share (EPS)
previously found in APB Opinion No. 15, Earnings Per Share, and
makes them comparable to international EPS standards. It
replaces the presentation of primary EPS with a presentation of
basic EPS. It also requires dual presentation of basic and
diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of
the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation.
Basic EPS excludes dilution and 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 or resulted in the issuance of
common stock that then shared in the earnings of the entity.
Diluted EPS is computed similarly to fully diluted EPS pursuant
to Opinion 15.
Management is currently assessing the financial implications of
implementing SFAS 128 and believes the adoption will not have a
material adverse effect on reported earnings per share.
Management's Discussion & Analysis
Overview
<TABLE>
<S> <C> <C>
For the Three Months Ended
(in thousands, except ratios & per share amounts) March 31,1997 March 31, 1996
Earnings:
Net Income $25,715 $18,723
Per Share:
Net Income $.39 $.28
Cash Dividends $.125 $.100
Book Value $7.10 $6.68
Average Equivalent Shares 65,827 65,700
Selected Ratios:
Return on Average Total Assets 1.77% 1.48%
Return on Average Stockholders' Equity 22.09% 17.42%
Core Efficiency Ratio 39.80% 40.97%
Net Interest Margin 4.95% 4.32%
</TABLE>
North Fork Bancorporation, Inc. recognized net income of $25.7
million, or $.39 per share, for the first quarter ended March
31, 1997, as compared with net income of $18.7 million, or $.28
per share, for the first quarter ended March 31, 1996. Return
on average total assets was 1.77% and the return on average
stockholders' equity was 22.09% for the comparable prior year
period. Return on average total assets was 1.48% and the return
on average stockholders'' equity was 17.42% for the comparable
prior year period.
The 1997 first quarter results, when compared with the
comparable prior year period, reflect a $14.7 million increase
in net interest income, a $1.6 million increase in non-interest
income, exclusive of net securities gains, and a $.2 million
decrease in the provision for loan losses. This activity was
partially offset by a $5.4 million increase in non-interest
expense, a $1.2 million decrease in net securities gains and a
$2.8 million increase in the provision for income taxes.
<PAGE>
Net Interest Income
Net interest income, which represents the difference between
interest earned on interest earning assets and interest incurred
on interest bearing liabilities, is the Registrant's primary
source of earnings. Net interest income is affected by the
level and composition of assets, liabilities and equity, as well
as changes in market interest rates.
Net interest income increased $14.7 million, or 28.7%, to $66.1
million for the 1997 first quarter, as compared to $51.4 million
for the comparable prior year period. This improvement was
attributable to an overall increase in the level of average
interest earning assets to $5.5 billion in 1997 when compared to
$4.8 billion during the comparable period in 1996 due in part to
the acquisitions of Extebank and First Nationwide.
Additionally, net interest income was positively impacted by an
improvement in the net interest margin, on a taxable equivalent
basis, to 4.95% during the first quarter of 1997 when compared
to 4.32% during the 1996 comparable period. Factors
contributing to the widening in the net interest margin
included: (a) an improvement in the mix of average interest
earning assets as evidenced by the increase in yield on such
assets to 8.16% as compared to 7.79%; (b) a decline in the
overall cost of funds to 3.98% as compared to 4.11% resulting
from the implementation of the Registrant's pricing strategy on
acquired customer deposit liabilities; (c) higher levels of
non-interest bearing customer deposit liabilities; (d) the
issuance of $100 million in capital securities on December 31,
1996, and (e) increased levels of capital.
Interest income increased 18% to $109.9 million in the
first quarter of 1997 when compared to $93.1 million for the
comparable prior year period. This increase is principally
attributable to the $702 million or 14.5% increase in average
interest earning assets to $5.5 billion for the 1997 first
quarter, as compared to $4.8 billion during the comparable 1996
period, and to a lesser extent, an increase in the yield on
average interest earning assets to 8.16% when compared to 7.79%.
Average loans increased $777.3 million to $3.2 billion for
the 1997 first quarter, representing 58% of average interest
earning assets, when compared to $2.4 billion, or 50% of average
interest earning assets, for the comparable prior year period.
This level of growth was achieved through continued strong
demand in virtually all loan categories and the acquisition of
Extebank. The corresponding yield on average loans declined
modestly to 8.89% during the most recent quarter when compared
to 8.93% from the 1996 comparable period.
Interest expense increased to $43.8 million in the first
quarter of 1997, reflecting a 3.98% average cost of funds, as
compared with $41.8 million, reflecting a 4.11% cost of funds in
1996. This increase resulted from the $377.1 million increase
in the level of average interest bearing liabilities, primarily
customer deposit liabilities, partially offset by a decline in
the overall cost of funds.
Average total savings and time deposits increased $347.1
million or 10.3% to $3.7 billion during 1997, when compared to
$3.4 billion during 1996. The increase is principally
attributable to customer deposit liabilities assumed in the
Extebank and First Nationwide acquisitions. The overall cost of
funds on average savings and time deposits declined to 3.59%
during the most recent quarter from 3.75% during the comparable
1996 period, principally as a result of management implementing
its pricing strategy on customer deposit liabilities assumed in
its merger and acquisition transactions.
Average demand deposits increased $257.2 million or 51.4%
to $757.2 million during the first quarter of 1997 as compared
to $500 million for 1996. At March 31, 1997, demand deposits
represented 16.9% of total deposits as compared to 14.0% at
March 31, 1996.
<PAGE>
The following table sets forth a summary analysis of the
relative impact on net interest income of changes in the average
volume of interest earning assets and interest bearing
liabilities and changes in average rates on such assets and
liabilities. Due to the numerous simultaneous volume and rate
changes during the period analyzed, it is not possible to
precisely allocate changes between volumes and rates. For
presentation purposes, changes which are not solely due to
volume changes or rate changes have been allocated to these
categories based on the respective percentage changes in average
volume and average rates as they compare to each other. In
addition, average interest earning assets include non-accrual
loans.
<TABLE>
Three Months Ended March 31, 1997 vs. 1996
(in thousands )
<S> <C> <C> <C>
Change in
Average Average Net Interest
Volume Rate Income
Interest Income from Earning Assets:
Interest Earning Deposits ($3) - ($3)
Securities 468 2,302 2,770
Loans, net of unearned income & fees 16,651 (342) 16,309
Federal Funds Sold (1,407) 29 (1,378)
Total Interest Income 15,709 1,989 17,698
Interest Expense on Liabilities:
Savings, N.O.W & Money Market Deposits 543 (756) (213)
Time Deposits 2,994 (1,323) 1,671
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase 380 214 594
Other Borrowings - (2) (2)
Total Interest Expense 3,917 (1,867) 2,050
Net Change in Net Interest Income $11,792 $3,856 $15,648
The above table is presented on a tax equivalent basis.
</TABLE>
<PAGE>
The following tables present an analysis of net interest
income by each major category of interest earning assets and
interest bearing liabilities for the three month periods ended
March 31, 1997 and 1996, respectively:
<TABLE>
For the Three Months Ended March 31, 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Average Average Average Average
(dollars in thousands ) Balance Interest Rate Balance Interest Rate
Interest Earning Assets:
Interest Earning Deposits $2,686 $36 5.44% $2,863 $39 5.48%
Securities 2,308,499 40,745 7.16% 2,279,086 37,975 6.70%
Loans, net of unearned income & fees 3,211,758 70,385 8.89% 2,434,483 54,076 8.93%
Federal Funds Sold 12,954 173 5.42% 117,480 1,551 5.31%
Total Interest Earning Assets 5,535,897 111,339 8.16% 4,833,912 93,641 7.79%
Allowance for Loan Losses (54,539) (58,541)
Cash and Due from Banks 136,377 110,404
Other Non-Interest Earning Assets (1) 271,337 212,451
Total Assets $5,889,072 $5,098,226
Interest Bearing Liabilities:
Savings, N.O.W & Money Market Deposits $1,950,216 $10,582 2.20% $1,846,106 $10,795 2.35%
Time Deposits 1,778,008 22,438 5.12% 1,535,059 20,767 5.44%
Total Savings and Time Deposits 3,728,224 33,020 3.59% 3,381,165 31,562 3.75%
Federal Funds Purchased & Securities Sold
Under Agreements to Repurchase 696,704 10,069 5.86% 666,707 9,475 5.72%
Other Borrowings 35,000 722 8.37% 35,000 724 8.32%
Total Interest Bearing Liabilities 4,459,928 43,811 3.98% 4,082,872 41,761 4.11%
Rate Spread 4.17% 3.68%
Non-Interest Bearing Deposits 757,184 500,011
Other Non-Interest Bearing Liabilities 100,247 83,175
Total Liabilities 5,317,359 4,666,058
Company-Obligated Mandatorily Redeemable Capital
Securities of Subsidiary Trust 99,639 -
Stockholders' Equity 472,074 432,168
Total Liabilities and Stockholders' Equity $5,889,072 $5,098,226
Net Interest Income and Net Interest Margin 67,528 4.95% 51,880 4.32%
Less: Tax Equivalent Basis Adjustment (1,458) (526)
Net Interest Income $66,070 $51,354
(1) Unrealized gains/(losses) on available-for-sale securities
are recorded in other non-interest earning assets.
</TABLE>
Non-Interest Income
Non-interest income, exclusive of net securities gains was
$ 7.8 million in the 1997 first quarter, compared with $6.2
million in the comparable prior year period. Net securities
gains were $.2 million during the current period, as compared
with $1.4 million in the corresponding 1996 period.
Fees and service charges on deposit accounts increased $1.2
million, or 37.0% to $4.4 million during the 1997 first quarter
when compared to $3.2 in the corresponding 1996 period. The
Registrant has been successful in converting single service
relationship accounts acquired into full service relationships.
This growth was achieved as the Registrant expanded its customer
base and entered new markets as a result of its recent
acquisitions.
Broker commissions and trust fees increased 61.0% to $1.9
million as compared to $1.2 million, reflecting continued growth
in the core business of the Registrant's broker/dealer
subsidiary (Compass Investment Services Corp.), and the expanded
number of retail outlets through which it operates resulting
from its recent acquisitions. As of March 31, 1997, the Bank
operated eighty-two full service retail banking locations.
Prior to its merger with the Registrant, North Side did not
offer alternative investment products to its customers at its
seventeen retail banking locations.
<PAGE>
Non-Interest Expense
Non-interest expense increased $5.4 million, or 22.1%
during the 1997 first quarter to $30.0 million as compared with
$24.6 million during the comparable prior year period.
The increase in non-interest expense reflects the increased
operating costs associated with the Extebank and First
Nationwide acquisitions completed during the first quarter of
1996. As a result of the aforementioned acquisitions, the
amortization of intangible assets increased $1.3 million during
first quarter of 1997 to $1.8 million as compared to $.5 million
during the corresponding 1996 period. Additionally, on December
31, 1996, the Registrant issued $100 million in 8.70% capital
securities. The carrying costs associated with these
securities, which is reflected as a component on non-interest
expense, amounted to $2.2 million during the first quarter of
1997. This increase was partially offset by a $.7 million
decline in costs associated with the maintenance and liquidation
of other real estate.
The Registrant's core efficiency ratio, which represents
the ratio of non-interest expense, net of other real estate
costs and other non-recurring charges, to net interest income on
a taxable equivalent basis and net-interest income net of
securities gains, was 39.8% for the 1997 first quarter as
compared to 40.97% for the comparable prior year period. The
reduction in the core efficiency ratio resulted from
management's ability to successfully reduce operating costs post
merger. Additionally, management continually monitors its
operating costs in order to ensure a high degree of customer
service in the most efficient manner possible.
Income Taxes
The Registrant's effective tax rate was 39.5% for the first
quarter of 1997, as compared to 42.7% for the comparable prior
year period. The decline in the effective tax rate is primarily
attributable to the Registrant's implementation of certain tax
planning strategies.
Loan Portfolio
The following table represents the components of the loan
portfolio for the periods indicated (dollars in thousands):
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
March 31, % of December 31, % of March 31, % of
1997 Total 1996 Total 1996 Total
Mortgage Loans-Multi-family $997,813 30% $956,718 30% 711,753 27%
Mortgage Loans-Residential 994,652 30% 985,983 31% 826,459 31%
Mortgage Loans-Commercial 655,618 20% 635,042 20% 541,009 21%
Commercial & Industrial 372,771 11% 347,437 11% 346,912 13%
Consumer Loans and Leases 241,498 7% 219,127 7% 151,970 6%
Construction and Land Loans 47,735 2% 49,779 1% 59,602 2%
$3,310,087 100% $3,194,086 100% $2,637,705 100%
</TABLE>
The loan portfolio is concentrated primarily in loans secured
by real estate 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 the financial well-being and creditworthiness of the
borrowers.
Total loans increased $116 million from $3.2 billion at
December 31, 1996 to $3.3 billion at March 31, 1997,
representing an annualized increase of 14.7%, due to continued
steady demand in virtually all loan categories.
Asset Quality
The components of non-performing assets and restructured,
accruing loans are detailed in the table below (in thousands):
<TABLE>
<S> <C> <C> <C>
March 31, December 31, March 31,
1997 1996 1996
Loans Ninety Days Past Due and Still Accruing $3,264 $2,596 $855
Non-Accrual Loans 17,961 17,745 34,971
Non-Performing Loans 21,225 20,341 35,826
Other Real Estate 2,587 1,898 9,392
Non-Performing Assets $23,812 $22,239 $45,218
Restructured, Accruing Loans $12,803 $13,734 $43,406
<PAGE>
At March 31, 1997, non-performing assets, which include loans
past due ninety days and still accruing interest, non-accrual
loans and other real estate, was $23.8 million in comparison to
$22.2 million at December 31, 1996. Non-performing assets
declined $21.4 million at March 31, 1997 when compared to $45.2
at March 31, 1996. Non-performing loans at March 31, 1997
consisted of $6.5 million in commercial loans, $6.0 million in
commercial mortgages, $5.5 million in residential mortgages,
$2.2 million in construction and land loans, $.6 million in
consumer loans and leases, and $.4 million in multi-family
mortgages.
Loans are classified as restructured when management has
granted, for economic or legal reasons related to the borrower's
financial difficulties, concessions to the customer that it
would not otherwise consider. Generally, this occurs when the
cash flow of the borrower is insufficient to service the loan
under its original terms. Loans restructured are reported as
such in the year of restructuring. In subsequent reporting
periods, if the loan was restructured to yield a market rate of
interest, is performing in accordance with the restructure terms
and management expects such performance to continue, the loan is
then removed from its restructured status. Restructured,
accruing loans declined modestly to $12.8 million at March 31,
1997, as compared with $13.7 million at December 31, 1996, and
declined $30.6 million from $43.4 million at March 31, 1996.
The decline in the level of restructured accruing loans was
achieved through principal repayments, maturities and renewals
at market terms, and the satisfaction of the performance
requirements on certain of these loans during the past year. At
March 31, 1997, the portfolio of restructured, accruing loans is
comprised primarily of loans which have demonstrated performance
in accordance with the terms of their restructure agreements,
however, did not yield a market rate of interest at the time of
restructuring.
The following table represents a summary of the changes in the
allowance for loan losses:
</TABLE>
<TABLE>
<S> <C> <C>
For the Three Months Ended March 31, 1997 1996
(dollars in thousands)
Balance at Beginning of Year 53,894 56,627
Provision for Loan Losses 1,500 1,700
Recoveries Credited to the Allowance 377 291
55,771 58,618
Losses Charged to the Allowance (705) (4,187)
Additional Allowance Acquired in Purchase Acquisitions - 3,092
North Side Net Activity for the Three
Months Ended December 31,1995 - 190
Balance at End of Period 55,066 57,713
Ratio of Net Charge-Offs to Average Loans, Net of Unearned
Income & Fees .04% .65%
Ratio of Allowance of Loan Losses to Period End Loans, Net of
Unearned Income & Fees 1.67% 2.21%
Ratio of Allowance for Loan Losses to Non-performing Loans
Inclusive of 90 day Delinquencies 259% 161%
</TABLE>
Management determines what it deems to be the appropriate level
of the allowance for loan losses on an ongoing basis by
reviewing individual loans, as well as the composition of and
trends in the loan portfolio. Management considers, among other
items, concentrations within segments of the loan portfolio,
delinquency trends, as well as recent charge-off experience and
third party evidentiary matter (such as appraisals) when
assessing the degree of credit risk in the portfolio. Various
appraisals and estimates of current value influence the
estimation of the required allowance at any point in time.
There has been significant growth in the loan portfolio over
the past two years from both originations and acquisitions.
Loan growth through originations has principally been in
multi-family lending, commercial mortgages, and consumer loans
and leases. Multi-family mortgage loans generally are for $1 -
$2 million and are secured by properties located in working
class neighborhoods within the Bank's market place with a strong
demand for such housing. Commercial mortgage loans generally
are originated in amounts up to $5 million and are secured by a
wide variety of collateral types ranging from owner occupied to
investment properties with strong cash flows. To mitigate
credit risk, management utilizes prudent underwriting standards,
including loan-to-value ratios of 70% or less, and monitors
operating results and value of collateral carefully.
Consumer loan growth represents the growth of the auto loan
business, principally new car loans originated through an
expanded dealer network. The credit risk in auto lending is
dependent upon the creditworthiness of the borrower and the
value of the collateral. The average loan originated is
generally between $15 - $20 thousand for periods ranging from 24
- - - 48 months. The Bank accepts substantially only "A" rated
paper or higher, which are borrowers without past credit history
problems.
Residential 1-4 family mortgage loan growth has resulted from
both new originations and the purchase of approximately $150
million in mortgages by North Side during the middle of 1996.
The provision for loan losses declined to $1.5 million during
the current quarter, as compared to $1.7 million in the 1996
comparable period. While management uses available information
in estimating possible loan losses, future additions to the
allowance may be necessary based on future changes in economic
conditions. Based on current economic conditions, management
considers the allowance for loan losses at March 31, 1997
adequate to cover the possible credit losses inherent in the
loan portfolio.
<PAGE>
Securities Portfolio
The composition of and the amortized cost and estimated
fair values of held-to-maturity and available-for-sale
securities portfolios were as follows (in thousands):
<TABLE>
March 31, 1997 December 31, 1996 March 31, 1996
<S> <C> <C> <C> <C> <C> <C>
Held-to-Maturity Securities Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
Mortgage-Backed Securities $1,125,396 $1,106,065 $1,162,814 $1,156,310 $878,348 $865,655
State & Municipal Obligations 120,832 120,097 121,945 121,664 $101,450 $100,865
U.S. Government Agencies'
Obligations 2,544 2,476 2,601 2,601 $2,742 $2,742
Other Securities 11,983 12,035 12,755 12,897 $20,895 $20,615
$1,260,755 $1,240,673 $1,300,115 $1,293,472 $1,003,435 $989,877
</TABLE>
<TABLE>
March 31, 1997 December 31, 1996 March 31, 1996
<S> <C> <C> <C> <C> <C> <C>
Available-for-Sale Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
Mortgage-Backed Securities $1,273,414 $1,256,595 $648,302 $646,825 $1,243,110 $1,237,056
U.S. Government Agencies'
Obligations 127,362 124,068 94,262 93,251 $87,995 $88,247
U.S. Treasury Securities 78,770 74,901 78,760 76,990 $146,095 $144,464
Equity Securities 125,618 125,016 39,728 40,325 $54,395 $54,471
$1,605,164 $1,580,580 $861,052 $857,391 $1,531,595 $1,524,238
</TABLE>
Management's strategy for the securities portfolio is to
maintain a short-weighted average life to minimize the exposure
to future rises in interest rates and to provide cash flows that
may be reinvested at current market interest rates. The
combined weighted average lives of the held-to-maturity and
available-for-sale securities portfolios at March 31, 1997 was
5.6 years.
During the first quarter of 1997, securities
available-for-sale increased $723.2 million to $1.6 billion when
compared to $.9 billion at December 31, 1996. This increase
resulted from management's decision to leverage its excess
capital through the purchase of principally mortgage backed
securities funded with repurchase agreements of varying
maturities. At March 31, 1997, $233.7 million in securities
purchased were recorded with settlement occurring in April. The
settlement of these securities was funded through additional
repurchase agreements.
The net unrealized loss on securities available-for-sale
increased $20.9 million to $24.6 million at March 31, 1997 when
compared to $3.7 million at December 31, 1996 due to increases
in market interest rates experienced during the most recent
quarter.
Mortgage-backed securities ("MBS") classified as
held-to-maturity included $678.2 million in collateralized
mortgage obligations ("CMO") at March 31, 1997. Mortgage-backed
securities classified as available-for-sale included $449.1
million in CMO's at March 31, 1997. These CMO securities,
collateralized by either U.S. Government Agency MBS's or whole
loans, are principally conservative current pay sequentials or
PAC structures with a current weighted average life of 3.8 years.
The prepayment of MBS's, including CMO's, is actively monitored
through the portfolio management function. Management typically
invests in MBS's with stable cash flows and relatively short
duration, thereby limiting the impact of interest rate
fluctuations on the portfolio. Management regularly performs
simulation testing to assess the impact that interest and market
rate changes would have on its MBS portfolio.
At March 31, 1997, Equity securities maintained in the
available-for-sale portfolio were comprised principally of
common stock, preferred stock, and capital securities of other
financial institutions.
At March 31, 1997, held-to-maturity securities carried at
$421.4 million and available-for-sale securities carried at
$1,036.6 million were pledged for various purposes as required
by law and to secure securities sold under agreements to
repurchase and other borrowings.
<PAGE>
Borrowings
Federal funds purchased and securities sold under
agreements to repurchase increased $479.1 million from $621.8
million at December 31, 1996 to $1.1 billion at March 31, 1997.
These increased borrowing arrangements were entered into to fund
the purchases of mortgage-backed securities placed in the
available-for-sale securities portfolio.
At March 31, 1997, total federal funds purchased and
securities sold under agreements to repurchase were comprised of
$365.4 million in short-term arrangements at a 5.69% cost of
funds and $735.5 million in long term arrangements at 5.99% cost
of funds, for an overall cost of funds of 5.86%.
Asset/Liability Management
The Registrant's primary earnings source is the net
interest margin, which is affected by changes in the level of
interest rates, the relationship between rates, the impact of
interest rate fluctuations on asset prepayments, the level and
composition of deposits, and the credit quality of the
portfolio. Management's asset/liability objectives are to
maintain a strong, stable net interest margin, to utilize its
capital effectively without taking undue risks and to maintain
adequate liquidity.
The Registrant's risk assessment program includes a
coordinated approach to the management of liquidity, capital and
interest rate risk. This risk assessment process is governed by
policies and limits established by senior management which are
reviewed and approved by the Asset/Liability Committee of the
Board of Directors ("ALCO"). ALCO, comprised of members of
senior management and the Board, meets periodically to evaluate
the impact of changes in market interest rates on assets and
liabilities, net interest margin, capital and liquidity, and to
evaluate the Registrant's strategic plans.
The balance sheet structure is primarily short-term with
most assets and liabilities repricing or maturing in less than
five years. Management monitors the sensitivity of net interest
income by utilizing a dynamic simulation model complemented by
traditional gap analysis. This model measures net interest
income sensitivity and volatility to interest rate changes; it
involves a degree of estimation based on certain assumptions
that management believes to be reasonable. Factors considered
include actual maturities, estimated cash flows, repricing
characteristics, deposit growth/retention and, primarily, the
relative sensitivity of assets and liabilities to changes in
market interest rates. Utilizing this process, management can
project the impact of changes in interest rates on net interest
income. This relative sensitivity is important to consider
since the Bank's core deposit base is not subject to the same
degree of interest rate sensitivity as its assets. Core deposit
costs are internally controlled and generally exhibit less
sensitivity to changes in interest rates than the adjustable
rate assets whose yields are based on external indices and
change in concert with market interest rates.
Liquidity
The objective of liquidity management is to ensure the
availability of sufficient resources to meet all financial
commitments and to capitalize on opportunities for business
expansion. Liquidity management addresses the ability to meet
deposit withdrawals either on demand or contractual maturity, to
repay other borrowings as they mature and to make new loans and
investments as opportunities arise.
The Registrant's sources of liquidity include dividends from
its subsidiaries, borrowings, and funds available through the
capital markets. Dividends from the Bank are limited by New
York State Banking Department regulations to the current year's
earnings plus the prior two years' retained net profits.
Pursuant to this regulation, the Bank had $81.6 million of
retained earnings available for dividends to the Registrant as
of March 31, 1997.
The Bank has numerous sources of liquidity including loan and
security principal repayments and maturities, lines of credit
with other financial institutions, the ability to borrow under
repurchase agreements utilizing its unpledged securities
portfolio, the sale of securities from its available-for-sale
portfolio, the securitization of loans within the portfolio,
whole loan sales and growth in its core deposit base.
The Bank has the ability, as a member of the Federal Home Loan
Bank ("FHLB") system, to borrow $615 million on a secured basis,
utilizing mortgage related loans and securities as collateral,
for a term ranging from one day to ten years at both fixed and
variable rates. As of March 31, 1997, the Bank had $278 million
in such borrowings outstanding.
The Registrant's and the Bank's liquidity positions are
monitored daily to ensure the maintenance of an optimum level
and efficient use of available funds. Management believes that
the Registrant and Bank have sufficient liquidity to meet their
operating requirements.
On March 25, 1997, the Board of Directors declared a quarterly
cash dividend of 12.5 cents per share (on a post split basis).
This dividend is payable May 15, 1997 to shareholders of record
at the close of business April 25, 1997.
<PAGE>
Capital
The Registrant and the Bank are subject to the risk based
capital guidelines administered by the banking regulatory
agencies. The risk based capital guidelines are designed to
make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding
companies, to account for off-balance sheet exposure and to
minimize disincentives for holding liquid assets. Under these
guidelines, assets and off-balance sheet items are assigned to
broad risk categories, each with appropriate weights. The
resulting capital ratios represent capital as a percentage of
total risk weighted assets and off-balance sheet items. The
guidelines currently require all banks and bank holding
companies to maintain a minimum ratio of total risk based
capital to total risk weighted assets of 8%, including a minimum
ratio of Tier 1 capital to total risk weighted assets of 4% and
a Tier 1 capital to average assets of 4%. Failure to meet
minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators, that,
if undertaken, could have a direct material effect on the
Registrant's financial statements. As of March 31, 1997, the
most recent notification from the federal banking regulators
categorized the Registrant and the Bank as "well capitalized"
under the regulatory framework for prompt corrective action.
Under the capital adequacy guidelines, a well capitalized
institution must maintain a minimum total risk based capital to
total risk weighted assets ratio of at least 10%, a minimum Tier
1 capital to total risk weighted assets ratio of at least 6%, a
minimum leverage ratio of at least 5% and not be subject to any
written order, agreement or directive. There are no conditions
or events since such notification that management believes have
changed this classification.
The following table sets forth the Registrant's regulatory
capital at March 31, 1997 and March 31, 1996, under the rules
applicable at such date. At such date, management believes that
the Registrant meets all capital adequacy requirements to which
it is subject.
<TABLE>
March 31, 1997 March 31, 1996
<S> <C> <C> <C> <C>
(dollars in thousands ) Amount Ratio Amount Ratio
Tier 1 Capital $501,282 14.11% $348,984 12.31%
Regulatory Requirement 142,057 4.00% 113,363 4.00%
Excess $359,225 10.11% $235,621 8.31%
Total Risk Adjusted Capital $545,806 15.37% $384,685 13.57%
Regulatory Requirement 284,114 8.00% 226,725 8.00%
Excess $261,692 7.37% $157,960 5.57%
Risk Weighted Assets $3,551,422 $2,834,067
</TABLE>
The Registrant's leverage capital ratio at March 31, 1997 was
8.63%. The Tier 1, total risk based and leverage capital ratios
of the Bank were 10.94%, 12.19% and 6.55%, respectively, at
March 31, 1997.
The Registrant's capital ratios were favorably impacted by
the issuance of $100 million of 8.70% Capital Securities on
December 31, 1996, which under regulatory guidelines, qualify as
Tier 1 capital.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: May 12, 1997 /s/ Daniel M. Healy
Daniel M. Healy
Executive Vice President &
Chief Financial Officer
<PAGE>
[EXHIBIT 11]
North Fork Bancorporation, Inc.
COMPUTATION OF NET INCOME PER COMMON EQUIVALENT SHARE
March 31, 1997
(Unaudited)
<TABLE>
<S> <C> <C>
Three Months Ended March 31, 1997 1996
Net Income $25,715,289 $18,722,931
Common Equivalent Shares:
Weighted Average Common Shares Outstanding 65,432,222 64,678,132
Weighted Average Common Equivalent Shares 394,674 1,021,862
Weighted Average Common and Common Equivalent Shares 65,826,896 65,699,994
Net Income per Common Equivalent Share $0.39 $0.28
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
NORTH FORK BANCORPORATION, INC FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 1997
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 111520
<INT-BEARING-DEPOSITS> 2619
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1580580
<INVESTMENTS-CARRYING> 1260755
<INVESTMENTS-MARKET> 1240673
<LOANS> 3310087
<ALLOWANCE> 55066
<TOTAL-ASSETS> 6413274
<DEPOSITS> 4418458
<SHORT-TERM> 365395
<LIABILITIES-OTHER> 391552
<LONG-TERM> 770500
0
0
<COMMON> 164666
<OTHER-SE> 302703
<TOTAL-LIABILITIES-AND-EQUITY> 6413274
<INTEREST-LOAN> 70201
<INTEREST-INVEST> 39471
<INTEREST-OTHER> 209
<INTEREST-TOTAL> 109881
<INTEREST-DEPOSIT> 33020
<INTEREST-EXPENSE> 43811
<INTEREST-INCOME-NET> 66070
<LOAN-LOSSES> 1500
<SECURITIES-GAINS> 161
<EXPENSE-OTHER> 30028
<INCOME-PRETAX> 42508
<INCOME-PRE-EXTRAORDINARY> 42508
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25715
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
<YIELD-ACTUAL> 4.95
<LOANS-NON> 17961
<LOANS-PAST> 3264
<LOANS-TROUBLED> 12803
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 53894
<CHARGE-OFFS> 705
<RECOVERIES> 377
<ALLOWANCE-CLOSE> 55066
<ALLOWANCE-DOMESTIC> 55066
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
