<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION FILE NUMBER 1-10458
NORTH FORK BANCORPORATION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-3154608
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
275 BROAD HOLLOW ROAD, MELVILLE, NEW YORK 11747
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (516) 844-1004
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -----------------------------------------
<S> <C>
COMMON STOCK, PAR NEW YORK STOCK EXCHANGE
VALUE $2.50
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE
(TITLE OF CLASS)
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. (X) Yes ( ) No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X )
As of March 13, 1998, there were 67,665,785 shares of the Registrant's
common stock outstanding. The aggregate market value of the Registrant's common
stock (based on the average stock price on March 13, 1998) held by
non-affiliates was approximately $2,414,823,000.
1
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the following documents are incorporated by reference into the
specified parts of this Annual Report:
North Fork Bancorporation, Inc. 1997 Annual Report to Shareholders -
Parts I, II and IV.
North Fork Bancorporation, Inc. 1998 Definitive Proxy Statement - Part
III
CAUTIONARY STATEMENT UNDER FEDERAL SECURITIES LAWS: The information
contained in this Annual Report on Form 10-K and in certain sections of the
Registrant's 1997 Annual Report to Shareholders incorporated herein by reference
contains forward-looking statements that are based on management's beliefs,
certain assumptions made by management and current expectations, estimates and
projections about the Registrant's financial condition and results of
operations. Words such are "expects," "believes," "should," "plans," "will,"
"estimates," and variations of such words and similar expressions are intended
to identify such forward-looking statements. These statements are not guarantees
of future performance and involve certain risks and uncertainties that are
difficult to quantify or, in some cases, to identify. Therefore, actual outcomes
and results may differ materially from what is expected or forecasted in such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, changes in economic and market
conditions, including unanticipated fluctuations in interest rates, effects of
state and federal regulation and risks inherent in banking operations. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The Registrant undertakes no obligation
to revise or update these forward-looking statements to reflect the occurrence
of unanticipated events.
2
<PAGE> 3
PART I
ITEM 1 BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
North Fork Bancorporation, Inc. (the "Registrant"), with its executive
headquarters located in Melville, New York, is a bank holding company organized
under the laws of the State of Delaware in 1980 and registered under the Bank
Holding Company Act of 1956, as amended. The Registrant's primary subsidiary,
North Fork Bank ("North Fork"), operates 80 retail banking facilities throughout
Suffolk and Nassau Counties on Long Island, New York, as well as in the New York
City boroughs of Manhattan, Queens, and the Bronx and in Westchester and
Rockland Counties, North of New York City.
In December 1997, the Registrant completed its purchase acquisition of
Branford Savings Bank ("Branford"), a Connecticut chartered savings bank. At
December 31, 1997, Branford had total assets of $179 million, deposits of $160
million, and stockholder's equity of $16.6 million. Branford, which will
continue to operate as a separate subsidiary, operates five retail banking
facilities in the Connecticut county of New Haven. The Registrant issued
1,282,901 shares of its common stock to Branford shareholders and paid cash in
the amount of $3 million to the holder of Branford's outstanding warrants.
On October 7, 1997, the Registrant entered into an agreement and plan
of merger with New York Bancorp, the parent company of Home Federal Savings Bank
("Home Federal"), whereby it would acquire New York Bancorp in a stock-for-stock
merger. Under the terms of the agreement, each share of New York Bancorp common
stock will be converted into the Registrant's common stock at a fixed exchange
ratio of 1.19. The transaction is expected to be treated as a tax-free
reorganization and accounted for using the pooling-of-interests method of
accounting. On January 30, 1998, the shareholders of both companies voted to
approve merger. The Registrant has received the requisite regulatory approvals
from the Federal Reserve Bank, the Federal Deposit Insurance Corporation, and
the New York State Banking Department. It is anticipated that the transaction
will close on March 27, 1998, following receipt of all required regulatory
approvals and certain other customary closing conditions.
In anticipation of its merger with New York Bancorp, the Registrant
enhanced its regulatory capital ratios through the issuance of $100 million of
8.0% Capital Pass-Through Securities ("Capital Securities") in December 1997. At
December 31, 1997, the Registrant's total risk adjusted and leverage capital
ratios were 18.61% and 10.08%, respectively.
At December 31, 1997, New York Bancorp had total assets of $3.3
billion, net loans of $2.0 billion, deposits of $1.7 billion, and stockholders'
equity of $178 million. Home Federal operates 35 branch offices in the New York
City boroughs of Kings, Queens, and Richmond and Nassau and Suffolk Counties on
Long Island, New York. Additional information is set forth on "Note 2 - Business
Combinations" (pages 33-35) of the Registrants' 1997 Annual Report to
Shareholders included as exhibit 13 herewith and incorporated by reference.
On December 31, 1996, North Side Savings Bank ("North Side") was merged
with and into North Fork. North Side had $1.6 billion in total assets, $1.2
billion in deposit liabilities, $124.4 million in capital and operated seventeen
full-service banking facilities in the New York City boroughs of Bronx and
Queens, as well as Nassau and Suffolk Counties on Long Island, New York.
Pursuant to the merger agreement, the Registrant issued 15.1 million shares of
its common stock to North Side shareholders. The merger was accounted for under
the pooling-of-interests method of accounting.
In March 1996, North Fork completed its purchase of the domestic
commercial banking business of Extebank ("Extebank"). Extebank had $388 million
in total assets, $200 million in net loans, $348 million in deposit liabilities,
$30 million in capital and operated eight full-service banking facilities in the
metropolitan New York area, including Manhattan. Additionally, in March 1996
North Fork acquired ten Long Island branches of First Nationwide Bank, and
assumed $572 million of deposit liabilities for which it paid a deposit premium
of 6.35%.
3
<PAGE> 4
PART I (CONTINUED)
ITEM 1 BUSINESS (CONTINUED)
GENERAL DEVELOPMENT OF BUSINESS (CONTINUED)
In July 1995, the Registrant consummated its purchase of Great Neck
Bancorp, parent company of Bank of Great Neck, a Long Island based commercial
bank ("Great Neck"). Great Neck had net assets of $91 million, including $49.4
million in net loans and $90.3 million in deposits and was merged into North
Fork.
In November 1994, Metro Bancshares Inc. ("Metro"), parent company of
Bayside Federal Savings Bank ("Bayside"), was merged with and into the
Registrant. Simultaneously, Bayside was merged with and into North Fork. Bayside
had $1.0 billion in total assets, $.9 billion in deposit liabilities, $83.5
million in capital, and operated thirteen full-service banking facilities in the
New York City borough of Queens and Nassau and Suffolk Counties on Long Island,
New York. The merger was accounted for under the pooling-of-interests method of
accounting.
North Fork itself is the result of the 1992 merger of the Registrant's
two former banking subsidiaries, the North Fork Bank & Trust Company ("Bank &
Trust"), which was the Registrant's original subsidiary bank, and Southold
Savings Bank ("Southold"), which the Registrant acquired by merger in 1988. In
1992, Bank & Trust was merged with and into Southold; Southold then converted
its charter from that of a state savings bank to a state commercial bank and
changed its name to North Fork Bank.
Additionally, the Registrant has several active non-bank subsidiaries,
none of which accounted for a significant portion of the Registrant's
consolidated assets, nor contributed significantly to the Registrant's
consolidated results of operations, at and for the year ended December 31, 1997.
DESCRIPTION OF BUSINESS
The Registrant, through its primary subsidiary North Fork Bank,
provides a variety of banking and financial services to middle market and small
business organizations, local governmental units, and retail customers in the
metropolitan New York area. North Fork's major competitors across the entire
line of its products and services are local branches of large money-center banks
headquarters in New York City and other major commercial banks headquarters in
New York State. North Fork also competes with other independent commercial banks
in its marketplace for loans and deposits; with local savings and loan
associations and savings banks for deposits and mortgage loans; with credit
unions for deposits and consumer loans; with insurance companies and money
market funds for deposits; and with local consumer finance organizations and the
financing affiliates of consumer goods manufacturers (especially automobile
manufacturers) for consumer loans. In setting rate structures for North Fork's
loan and deposit products, management refers to a wide variety of financial
information and indices, including the rates charged or paid by the major
money-center banks, both locally and in the commercial centers, and the rates
fixed periodically by smaller, local competitors.
The Registrant and its subsidiaries, in their normal course of
business, are subject to various regulatory statutes and guidelines. Additional
information is set forth under the caption "Capital" (pages 21 - 22) in
Management's Discussion and Analysis and "Note 14 - Regulatory Matters" (pages
49 - 50) of the Registrant's 1997 Annual Report to Shareholders included as
Exhibit 13 herewith and incorporated herein by reference.
As of December 31, 1997, the Registrant and its consolidated
subsidiaries had approximately 1,273 full-time equivalent employees.
4
<PAGE> 5
PART I (CONTINUED)
ITEM 2 PROPERTIES
The executive and administrative offices of the Registrant and its bank
subsidiaries are located at 275 Broad Hollow Road, Melville, New York 11747. The
Registrant currently leases 63,000 square feet of the building, representing
approximately 60% of the building's rentable space.
North Fork maintains its data processing and operations center in a
44,900 square foot owned facility, located at 9025 Main Road, Mattituck, New
York 11952.
At December 31, 1997, the Registrants' bank subsidiaries owned 49 of
their branch banking offices (see "Note 6 - Premises and Equipment" (page 39) of
the Registrant's 1997 Annual Report to Shareholders included as Exhibit 13
herewith and incorporated herein by reference) and leased 58 branch banking
offices under various lease arrangements expiring at various times through 2016
(see "Note 15 - Other Commitments and Contingent Liabilities (B) Lease
Commitments" (page 51) of the Registrant's 1997 Annual Report to Shareholders
included as Exhibit 13 herewith and incorporated herein by reference). North
Fork and Branford are also obligated under several other leases for facilities,
which are either used in conducting banking and non-banking activity, or have
been vacated by North Fork and Branford, as a result of its consolidation of
operations following its recent mergers and acquisitions. The facilities owned
or occupied under lease by the Registrant and its bank subsidiaries are
considered by management to be well located and suitably equipped to serve as
banking and financial services facilities.
ITEM 3 LEGAL PROCEEDINGS
The information required by this item is set forth under the caption
"Note 15 - Other Commitments and Contingent Liabilities (C) Other Matters" (page
51) in the Registrant's 1997 Annual Report to Shareholders included herein as
Exhibit 13, and incorporated herein by reference.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant held a special meeting of its stockholders on January
30, 1998 to approve the merger with New York Bancorp. The Registrant's
stockholders approved the merger with 47,533,967 affirmative votes cast, 93,568
negative votes cast and 201,869 votes abstaining.
ITEM 4A EXECUTIVE OFFICERS OF THE REGISTRANT
The name, age, position and business experience during the past five years of
each of the executive officers of the Registrant as of January 1, 1998, are
presented in the following table. The officers are elected annually by the Board
of Directors.
<TABLE>
<CAPTION>
Name Age Positions Held in Most Recent 5 Years
- ---- --- -------------------------------------
<S> <C> <C>
John A. Kanas 51 Chairman, President and Chief Executive Officer of the Registrant and
North Fork, throughout the past five years.
John Bohlsen 55 Vice Chairman of the Registrant and North Fork. Mr. Bohlsen also has
been President of The Helm Development Corp., a real estate
company, throughout the past five years.
Thomas M. O'Brien 47 Vice Chairman of the Registrant and North Fork (since January 1997).
Mr. O'Brien was Chairman, President and Chief Executive Officer of
North Side Savings Bank, throughout the preceding five years.
Daniel M. Healy 55 Executive Vice President and Chief Financial Officer of the Registrant
(since March 1992). Previously, Mr. Healy was a partner with the
accounting firm of KPMG Peat Marwick LLP.
</TABLE>
5
<PAGE> 6
PART II
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Registrant's common stock is traded on the New York Stock Exchange
under the symbol NFB. As of February 26, 1998, there were 6,161 shareholders of
record of the Registrant's common stock.
On February 25, 1997, the Registrants' Board of Directors approved a
two-for-one common stock split. The additional shares were issued on May 15,
1997 to shareholders of record on April 25, 1997. Additionally, during 1997, the
Registrant declared dividends of $.125 per share for the first quarter and $.15
per share for the second, third, and fourth quarters, respectively. During 1996,
the Registrant declared dividends of $.10 per share for the first, second, and
third quarters, respectively, and $.125 per share for the fourth quarter.
For additional information regarding dividends and restrictions
thereon, and market price information, refer to the "Selected Financial Data"
(page 9), the "Liquidity" section of Management's Discussion and Analysis (pages
17-18), the "Selected Statistical Data" (page 25), "Note 8 - Other Borrowings"
(page 41), and "Note 14 - Regulatory Matters" (page 49-50) of the Registrant's
1997 Annual Report to Shareholders included herewith as Exhibit 13 and
incorporated herein by reference.
ITEM 6 SELECTED FINANCIAL DATA
The information required by this item is set forth in "Selected
Financial Data" (page 9) of the Registrant's 1997 Annual Report to Shareholders
included herewith as Exhibit 13 and incorporated herein by reference.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is set forth in Management's
Discussion and Analysis, (pages 10 - 25) of the Registrant's 1997 Annual Report
to Shareholders included herewith as Exhibit 13 and incorporated herein by
reference.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following information is set forth in the Registrant's 1997 Annual
Report to Shareholders included herewith as Exhibit 13 and incorporated herein
by reference:
Unaudited Quarterly Financial Information (page 25); the Consolidated
Financial Statements (pages 26-29); the Notes to the Consolidated Financial
Statements (pages 30-53); the Independent Auditors' Report (page 54); and the
Report of Management (page 55).
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no changes in or disagreements with accountants on
accounting and financial disclosure as defined in Item 304 of Regulation S-K.
6
<PAGE> 7
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is set forth under the caption
"Election of Directors and Information with Respect to Directors and Officers"
(pages 3 - 6) in the Registrant's Definitive Proxy Statement for its Annual
Meeting of Stockholders to be held on Tuesday, April 28, 1998, which is
incorporated herein by reference, and in Part I of this report under the caption
Item 4A "Executive Officers of the Registrant".
ITEM 11 EXECUTIVE COMPENSATION
The information required by this item is set forth under the captions
"Compensation of Directors" (page 8), "Executive Compensation" (pages 8 - 25),
and "Retirement Plans" (pages 25-26) in the Registrant's Definitive Proxy
Statement for its Annual Meeting of Stockholder's to be held April 28, 1998,
which is incorporated herein by reference.
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth under the caption
"Certain Beneficial Ownership" and "Nominees for Director and Directors
Continuing in Office" (pages 2 - 6) in the Registrant's Definitive Proxy
Statement for its Annual Meeting of Stockholder's to be held April 28, 1998,
which is incorporated herein by reference.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth under the caption
"Transactions with Directors, Executive Officers and Associated Persons" (page
26) in the Registrant's Definitive Proxy Statement for its Annual Meeting of
Stockholders to be held April 28, 1998, which is incorporated herein by
reference.
7
<PAGE> 8
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The consolidated financial statements, including notes thereto, and
financial schedules of the Registrant, required in response to this item as set
forth in response to Part II, Item 8 of this Annual Report are incorporated
herein by reference to the Registrant's 1997 Annual Report to Shareholders filed
herewith as Exhibit 13.
<TABLE>
<CAPTION>
1. Financial Statements Page No.
-------------------- --------
<S> <C> <C>
Consolidated Statements of Income 26
Consolidated Balance Sheets 27
Consolidated Statements of Cash Flows 28
Consolidated Statements of Changes
in Stockholders' Equity 29
Notes to Consolidated Financial Statements 30-53
Report of Independent Public Accountants 54
Report of Management 55
</TABLE>
2. Financial Statement Schedules
-----------------------------
Schedules to the consolidated financial statements required by
Article 9 of Regulation S-X and all other schedules to the
consolidated financial statements of the Registrant have been
omitted because they are either not required, are not applicable
or are included in the consolidated financial statements or
notes thereto, which is incorporated herein by reference.
3. Exhibits
--------
The exhibits listed on the Exhibit Index page of this Annual
Report are incorporated herein by reference or filed herewith as
required by Item 601 of Regulation S-K (each management contract
or compensatory plan or arrangement listed therein is
identified).
(b) Current Report on Form 8-K filed during the fourth quarter of 1997
are as follows:
On October 8, 1997, the Registrant filed a current report
stating that it had entered into an agreement and plan of merger
dated October 7, 1997 with New York Bancorp.
On October 31, 1997, the Registrant filed a current report
stating that it had issued a press release regarding its third
quarter and year-to-date 1997 financial results.
On December 9, 1997, the Registrant filed a current report
stating that it had issued a press release announcing that the
shareholders of Branford Savings Bank had approved the merger
with the Registrant.
On December 10, 1997, the Registrant filed a current report
stating that it had sold through North Fork Capital Trust II, a
newly formed special purpose subsidiary, $100 million of 8%
Capital Trust Pass-Through Securities.
On December 12, 1997, the Registrant filed a current report
stating that it had completed its acquisition of Branford
Savings Bank.
8
<PAGE> 9
Pursuant to the requirements of Section 13 or 15(d) of this Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NORTH FORK BANCORPORATION, INC.
BY: /s/ John A. Kanas
-----------------
JOHN A. KANAS
President and Chief Executive Officer
Dated: March 17, 1998
<PAGE> 10
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John A. Kanas Director, President, March 17, 1998
- ----------------- Chief Executive Officer,
John A. Kanas and Chairman of the Board
(Principal Executive Officer)
/s/ Daniel M. Healy March 17, 1998
- ------------------- Executive Vice President and
Daniel M. Healy Chief Financial Officer
(Principal Accounting Officer)
/s/ John Bohlsen Director March 17, 1998
- ---------------- Vice Chairman of the Board
John Bohlsen
/s/ Thomas M. O'Brien March 17, 1998
- --------------------- Director
Thomas M. O'Brien Vice Chairman of the Board
/s/ Irvin L. Cherashore Director March 17, 1998
- -----------------------
Irvin L. Cherashore
/s/ Allan C. Dickerson Director March 17, 1998
- ----------------------
Allan C. Dickerson
/s/ Lloyd A. Gerard Director March 17, 1998
- -------------------
Lloyd A. Gerard
/s/ James F. Reeve Director March 17, 1998
- ------------------
James F. Reeve
/s/ George H. Rowsom Director March 17, 1998
- --------------------
George H. Rowsom
/s/ Dr. Kurt R. Schmeller Director March 17, 1998
- -------------------------
Dr. Kurt R. Schmeller
/s/ Raymond W. Terry, Jr. Director March 17, 1998
- -------------------------
Raymond W. Terry, Jr.
</TABLE>
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------ ----------- ----------------
<S> <C> <C>
2.1 Stock Purchase Agreement dated as Previously filed on Form 10-K, for the year ended
of September 19, 1995, among North December 31, 1995 dated March 26, 1996, as
Fork Bank and Banco Exterior de Exhibit 2.1 and incorporated herein by reference.
Espana, S.A.
2.2 Asset Purchase and Sale Agreement Previously filed on Form 10-K, for the year ended
dated as of September 28, 1995, December 31, 1995 dated March 26, 1996, as
among North Fork Bank and First Exhibit 2.2 and incorporated herein by reference.
Nationwide Bank.
2.3 Agreement and Plan of Merger by Previously filed as Exhibit 2.1 in Current Report
and among North Fork Bancorporation, on Form 8-K, dated July 15, 1996, and
Inc., Merger Bank, and North Side incorporated herein by reference.
Savings Bank, dated as of July 15, 1996.
2.4 Amended and Restated Agreement Previously filed as Annex A to the Joint Proxy
and Plan of Merger, dated as of Statement - Prospectus contained in the
October 7, 1997, between North Registrant's registration statement on Form S-4,
Fork Bancorporation, Inc. and dated December 17, 1997 (Registration No. 333-
New York Bancorp, Inc. 42515) and incorporated herein by reference.
2.5 Agreement and Plan of Merger by Previously filed as Annex A to the Joint Proxy
and among North Fork Bancorporation, Statement - Prospectus contained in the
Inc. and Branford Savings Bank, Registrant's registration statement on Form S-4,
dated July 24, 1997. effective November 7, 1997 (Registration No. 333-
35111) and incorporated herein by reference.
3.1 Articles of Incorporation of North Previously filed on Form S-3 dated, August 16,
Fork Bancorporation, Inc. 1991 as Exhibit 4(b) (Registration No. 33-42294)
and incorporated herein by reference.
3.2 By-Laws of North Fork Bancorporation, Previously filed on Form 10-K, for the year
Inc., as amended, effective July 28, 1992. ended December 31, 1993 dated March 9, 1994,
as Exhibit 3(b) and incorporated herein by
reference.
4.1 Rights Agreement dated February 28, Incorporated by reference to Form 8-A
1989, between North Fork Bancorporation, Registration Statement, dated March 21, 1989.
Inc. and North Fork Bank, as rights agent.
4.2 North Fork Capital Trust I offer to Previously filed with Post-Effective Amendment
exchange its 8.70% Capital Trust No. 1 to the Registrants' registration statement
Pass-Through Securities, which have Form S-4, dated May 2, 1997 (Registration No.
been registered under the Securities on 333-24419) and incorporated herein by reference.
Act of 1933 for and all of its outstanding
8.70% original Capital Trust Pass-
Through Securities.
</TABLE>
<PAGE> 12
EXHIBIT INDEX (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------ ----------- ----------------
<S> <C> <C>
4.3 Prospectus for North Fork Capital Previously filed with Post-Effective Amendment
Trust II issuance of Capital Trust No. 1 to the Registrants' registration statement or
Pass-Through Securities. Form S-3, dated November 21, 1997 (Registration
No. 333-40311) and incorporated herein by
reference.
10.1 North Fork Bancorporation, Inc. Previously filed with Post-Effective Amendment
Dividend Reinvestment and Stock No. 1 to the Registrant's registration statement on
Purchase Plan, as amended. Form S-3, dated May 16, 1995 (Registration No.
33-54222) and incorporated herein by reference.
10.2(a) North Fork Bancorporation, Inc. Previously filed on Form S-8, dated August 29,
1985 Incentive Stock Option Plan. 1995 (Registration No. 2-99984) and incorporated
herein by reference.
10.3(a) North Fork Bancorporation, Inc. Previously filed on Form S-8, dated June 12, 1987
1987 Long Term Incentive Plan. (Registration No. 33-14903) and incorporated
herein by reference.
10.4(a) North Fork Bancorporation, Inc. Previously filed on Form S-8, dated April
1989 Executive Management 17, 1990 (Registration No. 33-34372) and
Compensation Plan. incorporated herein by reference.
10.5(a) North Fork Bancorporation, Inc. Previously filed on Form S-8, dated September 28,
401(k) Retirement Savings Plan, 1992 (Registration No. 33-52504) as amended by
as amended. Exhibit 4 to the Registrant's Registration Statement
on Form S-8 dated February 2, 1996 (Registration
No. 333-00675) and incorporated herein by
reference.
10.6(a) North Fork Bancorporation, Inc. Previously filed on Form S-8, dated May 4, 1994
1994 Key Employee Stock Plan. (Registration No. 33-53467), as amended by the
filing of Form S-8 dated June 7, 1996 (Registration
No. 333-05513) and incorporated herein by
reference.
10.7(a) North Fork Bancorporation, Inc. Previously filed on Form S-8, dated December 5,
The Secondary Stock Option Plan, 1994 (Registration No. 33-56743) and incorporated
the Secondary Incentive Stock herein by reference.
Option Plan, the Secondary 1993
Stock Option Plan, and the Secondary
1993 Incentive Stock Option Plan
resulting from the
merger with Metro Bancshares Inc.
10.8(a) North Fork Bancorporation, Inc. Previously filed on Form S-8, dated December 31,
Long-Term Incentive Capital 1996 (Registration No. 333-19047) and
Accumulation Plan resulting incorporated herein by reference.
from the merger with North Side
Savings Bank.
</TABLE>
<PAGE> 13
EXHIBIT INDEX (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- ------ ----------- ----------------
<S> <C> <C>
10.9(a) North Fork Bancorporation, Inc. Previously filed on Form 10-K for the year
Performance Plan. ended December 31, 1994, dated March 28, 1995,
as Exhibit 10.9 and incorporated herein by
reference.
10.10(a) Form of Change-in-Control Previously filed as Exhibit 10.2 to the Quarterly
Agreement, as entered into between Report on Form 10-Q for the quarter ended
North Fork Bancorporation, Inc. March 31, 1995, and incorporated herein by
and each of John A. Kanas, John reference.
Bohlsen and Daniel M. Healy, each
dated December 20, 1994.
10.11(a) Form of Change-in-Control Previously filed on Form 10-K for the year ended
Agreement, as entered into between December 31, 1996, dated March 25, 1997 as
North Fork Bancorporation, Inc. Exhibit 10.12(a) and incorporated herein by
and Thomas M. O'Brien dated reference.
December 31, 1996.
10.12(a) Form of Employment Agreement, Previously filed a Form 10-K for the year ended
as entered into between North December 31, 1996, dated March 25, 1997 as
Fork Bancorporation, Inc. and Exhibit 10.13(a) and incorporated herein by
Thomas M. O'Brien, dated reference.
December 31, 1996.
11 Statement re: Computation of Filed herewith.
earnings per share.
13 All portions of the Registrant's Filed herewith.
1997 Annual Report to Share-
holders that are incorporated
herein by reference.
21 Subsidiaries of Registrant. Filed herewith.
22 Registrant's Definitive Proxy Previously filed on March 17, 1998 Pursuant to
Statement for its Annual Meeting Section 14(a) of the Securities Exchange
of Stockholders. Act of 1934 and incorporated herein by
reference.
23 Accountants' Consent. Filed herewith.
27 Financial Data Schedule. Only included in electronic filing.
</TABLE>
(a) Management contract or compensatory plan or arrangement.
<PAGE> 1
EXHIBIT 11 STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
<S> <C>
Net Income $ 119,310
Weighted Average Shares:
Weighted Average Shares - Basic 65,914,124
Common Stock Equivalents (1) 481,153
Weighted Average Shares - Diluted 66,395,277
Earnings Per Share - Basic $ 1.81
Earnings Per Share - Diluted $ 1.80
</TABLE>
(1) Represents options.
<PAGE> 1
--------------------------------
NORTH FORK
BANCORPORATION
----------
1997
ANNUAL REPORT
--------------------------------
<PAGE> 2
CORPORATE PROFILE
Headquartered in Melville, New York, North Fork Bancorporation, Inc. (NYSE:NFB),
the commercial bank holding company for North Fork Bank and Branford Savings
Bank, which operates 85 branch locations in the states of New York and
Connecticut.
North Fork continues to focus on providing superior customer service while
remaining the most efficient bank in the Nation and among the top ten most
profitable banks. In addition to personal, commercial and financial services,
North Fork offers its customers the convenience of telephone banking through the
Telephone Express Banking Center, as well as, brokerage services through Compass
Investment Services Corp.
At December 31, 1997, North Fork has a pending acquisition with New York Bancorp
that would increase its size to $10.1 billion in assets and 108 branch
locations.
<PAGE> 3
[Map omitted]
<PAGE> 4
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996
-------------------------
(in thousands, except ratios and per share amounts)
<S> <C> <C>
Net Interest Income ................................ $ 278,351 $ 230,946
Provision for Loan Losses .......................... 6,000 6,800
Non-Interest Income ................................ 35,397 29,245
Net Securities Gains ............................... 6,227 1,878
Merger Related Restructure Charge .................. -- 21,613
SAIF Recapitalization Charge ....................... -- 8,350
Other Non-Interest Expense ......................... 122,736 113,034
Net Income ......................................... 119,310 62,442
Return on Average Total Assets (b) ................. 1.86% 1.55%
Return on Average Stockholders' Equity (b) ......... 23.65% 19.85%
Net Interest Margin ................................ 4.69% 4.50%
Core Efficiency Ratio .............................. 38.14% 42.53%
Per Share:
Net Income-Basic (c) ............................... $ 1.81 $ .98
Net Income-Diluted (c) ............................. 1.80 .97
Dividends (d) ...................................... .575 .425
Book Value (e) ..................................... 8.90 7.05
Market Value of the Company at Year End ............ $ 33.75 $ 17.82
At December 31,
Loans, Net of Unearned Income ...................... $3,700,020 $3,171,525
Securities Available-for-Sale ...................... 1,660,714 857,391
Securities Held-to-Maturity ........................ 1,118,468 1,300,115
Total Assets ....................................... 6,829,432 5,750,527
Total Deposits ..................................... 4,637,191 4,469,510
Capital Securities ................................. 199,264 99,637
Stockholders' Equity ............................... 601,826 457,531
Tier I Capital Ratio ............................... 16.67% 15.12%
Risk Adjusted Capital Ratio ........................ 18.61% 16.38%
Leverage Ratio ..................................... 10.08% 8.61%
</TABLE>
(a) On December 31, 1996, North Side Savings Bank ("North Side") was merged
with and into the Company. The merger has been accounted for as a
pooling-of-interests and, accordingly, the financial results for all
periods reported have been retroactively restated to include North Side
(See Note 2(a) of Notes to Consolidated Financial Statements.)
(b) Excludes the effect of the non-recurring SAIF Recapitalization and the
Merger Related Restructure charges for 1996. The actual return on average
total assets was 1.13% and the actual return on average stockholders'
equity was 14.48% for 1996.
(c) Diluted net income per share exclusive of the non-recurring SAIF
Recapitalization and Merger Related Restructure charges was $1.33 for
1996.
(d) Dividends per share represent amounts for the Company, exclusive of North
Side for 1996.
(e) Based on actual shares outstanding of 67,616,348 and 64,892,430 at
December 31, 1997 and 1996, respectively.
[BAR GRAPH OMITTED]
[BAR GRAPH OMITTED]
[BAR GRAPH OMITTED]
1 NORTH FORK BANCORPORATION
<PAGE> 5
[PHOTO OMITTED]
President's
Message
OUR COMPANY'S PRAGMATIC APPROACH TOWARDS MARKET EXPANSION CONTINUED to produce
superior economic results during 1997. Net income rose by 39% to $119.3 million
or $1.80 per share from $85.6 million or $1.33 per share adjusted retroactively
for a 2 for 1 stock split declared on February 25, 1997. Fueled by this
performance and buoyed by continued economic growth in the tri-state region,
North Fork Bancorporation's market capitalization rose to over $2 billion this
past year and is expected to eclipse $3 billion upon the closing of our newest
acquisition, New York Bancorp, in the first quarter of 1998. The achievement of
these new milestones continues to lift our Company's profile in the New York
market and serves to distinguish it as a recognized market leader. A 24% return
on equity, coupled with a 1.9% return on assets, establishes North Fork
Bancorporation once again as being among the country's top performing bank
holding companies.
On their face, these economic results serve as a "report card" for our combined
work efforts in the past 12 months. As is usually true, however; the more
colorful and telling parts of our story can be found by examining the details
leading up to and culminating in these new benchmarks.
The North Side Savings Bank acquisition was totally integrated into the core
bank over the last year. As expected, access to these new markets helped push
the whole company to outperform our already aggressive expectations. Owing
measurably to that acquisition, and to our expansion strategy, loans grew by
more than 16% during 1997 while non-interest bearing demand balances rose over
23% to over $900 million at year end. Spurred on by aggressive incentive
compensation programs,
2 NORTH FORK BANCORPORATION
<PAGE> 6
our retail bankers took these new markets by storm, armed with highly
competitive products and services never before available to these new customers.
This infectious attitude of teamwork, prevalent in our entire organization,
spread quickly to our newly-acquainted co-workers in the Bronx and Queens as
they cooperatively helped us to produce a 38% core efficiency ratio for all of
1997. Further validating this effort, non-interest income rose 21% during the
period while non-interest expense climbed by 8.6%.
- --------------------------------------------------------------------------------
A 24% RETURN ON EQUITY COUPLED WITH A 1.9% RETURN ON ASSETS ESTABLISHES NORTH
FORK BANCORPORATION ONCE AGAIN AS BEING AMONG THE COUNTRY'S TOP PERFORMING BANK
HOLDING COMPANIES.
- --------------------------------------------------------------------------------
It is fully expected that the yield from these new markets will continue to grow
as we gain familiarity with them and our momentum grows. We will continue to
expand this portion of our franchise, as well as our core market area on Long
Island, by selectively adding traditional branches as well as by continuing to
augment our delivery system through less traditional means.
The big news for 1997 arrived with the announcement in October of our
acquisition of New York Bancorp, parent company for Home Federal Savings Bank
headquartered in Douglaston, Queens. Expected to close by the end of March 1998,
Home will add thirty-five branch offices to our network which will total 120
locations. The usual opportunities for cost savings and revenue improvements
from this new purchase are even further enhanced by several unique opportunities
it brings along. Nine of Homes' branches are located in supermarkets throughout
our market area which will provide yet another convenient delivery mechanism to
all of North Fork's customers. Home has proven a highly efficient company on its
own, providing its nearly 220,000 customers with several unique and clever loan
and deposit products. These products will now be available to North Fork's
entire customer base. Finally, Home brings us nine locations in Brooklyn, a
market we have sought after in the past and one we believe represents fertile
territory for the expansion of our unique brand of commercial banking service.
Our first experience in venturing out of New York State manifested itself in the
form of our purchase of Branford Savings Bank in Branford, Connecticut in late
December. This relatively small transaction will serve as a platform for our
entry into the coveted banking market of New England, using technology and
electronic delivery systems to their fullest. We expect to launch our unique
marketing approach into that market early in the second quarter this year.
While the pundits muse and wait around for the shoe to drop on this seemingly
flawless economic expansion, we intend to move cautiously, yet decisively, to
expand our enviable franchise both within our footprint and contiguous to it. We
remain inspired by the endless stream of change enveloping ours and related
industries. The invaluable experience our management team has acquired along the
way renders them uniquely qualified to compete successfully in the new age of
banking.
/s/ John Adam Kanas
John Adam Kanas
Chairman, President and
Chief Executive Officer
<PAGE> 7
[PHOTO OMITTED]
Consumer
Banking
HAVING ASSIMILATED SEVENTEEN new banking branches through the North Side
acquisition, retail banking grew dramatically in the past 12 months. The Bronx,
our newest frontier, added a new dimension to our network which was expanded
further by opening a de novo location in the South Bronx in July. Significant
time and energy was devoted to improving upon and enhancing our newly acquired
branches adding night drops, ATMs and other user friendly conveniences designed
to enhance consumer service and encourage commercial banking clients to these
locations.
- --------------------------------------------------------------------------------
SIGNIFICANT TIME AND ENERGY WAS DEVOTED TO IMPROVING UPON AND ENHANCING OUR
NEWLY ACQUIRED BRANCHES.
- --------------------------------------------------------------------------------
As a result, demand balances from our traditional branches grew to over $900
million, exceeding our targeted budget by $126 million. Over 2,400 technical and
sales training sessions were completed by our new employees, helping to ready
them for the highly competitive world of commercial banking.
Private banking was developed this past year, growing out of our Manhattan
customer base and aimed at tending to the specific service needs of specialized
segments of that marketplace. Nearly $10 million in new deposits have already
been added by this new effort along with several dozen new relationships that
have been attracted to our bank because of this service. Augmenting our New York
City effort, we also intend to add our second Manhattan branch location on West
72nd Street and Broadway. A spring 1998 opening is expected.
Through retail banking our company reaches out to give back to our communities
moral as well as financial support to a host of charities and good will efforts.
Holding itself out as a major sponsor several times during the year, our company
helped to channel millions of dollars back into the communities it serves.
Hundreds of our employees extend thousands of individual efforts throughout the
year in the furtherance of this goal.
4 NORTH FORK BANCORPORATION
<PAGE> 8
UNDER THE UMBRELLA of what was formerly referred to as the bank's trust
division, an emerging new business is taking shape before our eyes. In total,
$8.3 million in fee income was contributed to the company's income this year
from the Financial Services area. Investment management and trust as well as our
discount brokerage company and our insurance division all underwent remarkable
growth in 1997.
- --------------------------------------------------------------------------------
IN TOTAL $8.3 MILLION IN FEE INCOME WAS CONTRIBUTED TO THE COMPANY'S INCOME.
- --------------------------------------------------------------------------------
With over $650 million of investments being managed for our customers, this
component of financial services contributed $2.2 million in fee income. As a
result of this effort, new relationships are constantly being forged with
attorneys, accountants and other professionals, as well as directly with high
net worth individuals that continue to perpetuate further profitable
opportunities for this as well as all other service areas of the bank. Our
recent expansion into Manhattan continues to quicken the pace of growth in this
area which is expected to be further accelerated by the opening of a second
Manhattan office in 1998.
Compass, our discount brokerage company, sold over $100 million in alternative
investment products in 1997. Because of the Home Federal and Branford
acquisitions, we expect this volume to exceed $150 million in 1998. $5.3 million
in fee income was contributed by Compass last year.
First Settler Corp., the bank's insurance agency subsidiary, acts as a conduit
for the sale of all insurance products. Over $800,000 in fees came from this
activity in 1997. Serious efforts are under consideration to dramatically expand
this activity in the near future. As the lines separating the financial needs of
our widely varied customer base continue to blur, the need to become much more
proactive in this area is evident. We expect to announce significant new
initiatives in the insurance arena in the first half of the coming year.
Financial
Services
[PHOTO OMITTED]
<PAGE> 9
[PHOTO OMITTED]
Commercial
Lending
LEVERAGING OFF OUR newly acquired customer base and expanded geographic reach,
commercial and industrial loans grew by 25% in 1997. A contingent of seventeen
sales managers have exclusive responsibility to work in conjunction with our
retail customer relationship managers in order to cultivate this highly
profitable but labor intensive sector of our business. We continued to reap the
benefit of money center bank consolidations in Nassau and Suffolk counties as
significant gains in market share were recorded during the past twelve months.
Simultaneously, over two hundred new commercial borrowing relationships were
added in Queens, Westchester and Manhattan as our highly targeted business
development efforts helped us further penetrate these lucrative markets.
- --------------------------------------------------------------------------------
WE CONTINUE TO REAP THE BENEFIT OF MONEY CENTER BANK CONSOLIDATIONS IN NASSAU
AND SUFFOLK COUNTIES.
- --------------------------------------------------------------------------------
Revenues from our newly formed Trade Finance Department more than doubled this
year, attesting to the successful efforts of our experienced staff as well as to
the obvious opportunities that lie ahead in this area. We established trade
relationships with over 300 banks around the world this past year and intend to
employ these new partnerships to aggressively market trade finance services to a
growing population of commercial customers in and around the New York City
market.
Competitive pressures in the commercial lending area continue to mount in the
tri-state region as a growing pool of investable dollars pursue a finite number
of worthwhile opportunities. As such, we will continue to invoke a cautious and
deliberate attitude toward this business.
6 NORTH FORK BANCORPORATION
<PAGE> 10
NORTH FORK BANK CONTINUED to lead the way towards the development of
specifically designed and somewhat less traditional banking products and
services within our marketplace during this past year. Having developed a set of
unique cash management products ideally suited for our commercial customers,
income from this area nearly doubled in 1997 with sales amounting to $1.3
million. Our ability to provide this menu of PC based products continues to give
a meaningful competitive advantage over our larger as well as our smaller
competitors. We are vigorously expanding the sale of these products into Queens
and the Bronx where our reception has been remarkable. These products were
enhanced throughout the year by adding new capabilities such as Inter-Day
Balance and Activity Reports by fax and touch-tone telephone.
- --------------------------------------------------------------------------------
OUR ABILITY TO PROVIDE THIS MENU OF PC BASED PRODUCTS CONTINUES TO GIVE US
MEANINGFUL COMPETITIVE ADVANTAGE.
- --------------------------------------------------------------------------------
Further distinguishing ourselves from the competition, we successfully designed
and implemented PC based programs specifically designed to fit the needs of the
many landlords already using other services of the bank. As a result, tenant
security balances have grown 80% to over $21 million and are targeted to double
again in the coming year.
Many of these same developments have aided us in cultivating our correspondent
and municipal banking capabilities. With 240 financial institutions as
customers, $1 million in fee income was earned in correspondent banking while
balances generated from municipal relationships exceeded $225 million.
Customer needs in this arena are expanding exponentially. Our highly capable
technical staff, complemented by sales oriented customer service
representatives, form an impressive team of professionals destined to compound
our success in the Corporate Products area.
Corporate
Products
[PHOTO OMITTED]
<PAGE> 11
[PHOTO OMITTED]
The
Future
While many of our competitors are tripping over each other in a desperate
attempt to be first at something, we at North Fork Bank continue to encourage a
more focused and less frenzied attitude toward our future. With over one half
million customer relationships, the key to increased success in our business
lies within our ability to assess carefully our customer's specific needs and
move quickly and accurately to fill those needs profitably.
- --------------------------------------------------------------------------------
WHILE SOME WOULD ARGUE THAT TECHNOLOGY IS LEADING THE WAY IN THE FINANCIAL
SERVICE BUSINESS, WE BELIEVE THE CUSTOMER IS LEADING THAT WAY.
- --------------------------------------------------------------------------------
While some would argue that technology is leading the way in the financial
service business, we believe the customer is leading that way. Staying away from
"bleeding edge" efforts to fill a need that may not even exist, we have chosen a
somewhat more conservative approach by using technology to stay close to our
customers. Rather than force change into the laps of our customers, we take
great pains and spare no effort to put technology into the hands of our
employees, thereby improving upon their delivery capability while preserving a
user friendly atmosphere.
Elaborate experiments are being undertaken by forward thinking institutions
ranging from supermarket branches to banking in cyberspace. Debit card access,
bill paying capabilities, investment management and the sales of a wider variety
of insurance instruments will undoubtedly play an increasingly important role in
the future of all successful institutions. As a result of the growing efficiency
of electronic technology, the development of these products, as well as the
technical systems to support them, are within reach of all financial
institutions regardless of size. We at North Fork Bank believe that size, though
significant, is secondary to the commitment of a team of managers who have the
capability to analyze accurately the probability of success from a confusing
list of choices. The managers of North Fork Bank possess that capability.
8 NORTH FORK BANCORPORATION
<PAGE> 12
SELECTED FINANCIAL DATA
Selected financial data for each of the years in the five year period ended
December 31, 1997 are set forth below. The Company's consolidated financial
statements and notes thereto as of December 31, 1997 and 1996 and for each of
the years in the three year period ended December 31, 1997, are included
elsewhere herein. All prior years' financial information has been conformed to
the current year presentation.
<TABLE>
<CAPTION>
(in thousands, except ratios and per share amounts) 1997 1996 1995(1) 1994(1) 1993(1)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Interest Income (tax equivalent basis)(2) ......... $ 491,929 $ 409,125 $ 334,462 $ 296,924 $ 290,534
Interest Expense .................................. 206,170 174,361 140,399 112,576 117,153
----------------------------------------------------------------------
Net Interest Income (tax equivalent basis) ........ 285,759 234,764 194,063 184,348 173,381
Less: Tax Equivalent Adjustment ................... 7,408 3,818 1,970 1,862 1,489
----------------------------------------------------------------------
Net Interest Income ............................. 278,351 230,946 192,093 182,486 171,892
Provision for Loan Losses ......................... 6,000 6,800 11,825 6,825 26,608
Non-Interest Income ............................... 35,397 29,245 23,010 21,674 21,868
Net Securities Gains/(Losses) ..................... 6,227 1,878 6,734 (9,189) 1,321
Other Real Estate Expense ......................... 240 753 1,255 4,929 25,246
Other Non-Interest Expense ........................ 122,496 112,281 91,565 99,338 117,316
Merger Related Restructure Charge ................. -- 21,613 -- 14,338 --
SAIF Recapitalization Charge ...................... -- 8,350 -- -- --
----------------------------------------------------------------------
Income Before Income Taxes ...................... 191,239 112,272 117,192 69,541 25,911
Provision for Income Taxes ........................ 71,929 49,830 49,850 26,502 13,015
----------------------------------------------------------------------
Net Income ...................................... $ 119,310 $ 62,442 $ 67,342 $ 43,039 $ 12,896
======================================================================
Average Balance Sheet Data:
Securities ........................................ $2,674,517 $2,386,493 $1,874,624 $1,832,327 $1,675,583
Loans, net of unearned income ..................... 3,397,753 2,778,663 2,358,636 2,313,419 2,288,712
Total Assets ...................................... 6,426,991 5,518,016 4,470,920 4,417,627 4,315,839
Total Deposits .................................... 4,484,109 4,373,570 3,634,149 3,600,686 3,671,336
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase ........................ 1,180,153 610,960 350,393 378,198 220,120
Other Borrowings .................................. 47,603 38,934 36,397 49,044 36,559
Capital Securities ................................ 105,646 281 -- -- --
Stockholders' Equity .............................. 504,559 431,376 389,095 338,826 304,108
Balance Sheet Data at December 31:
Securities ........................................ 2,779,182 2,157,506 2,235,339 1,766,235 1,782,271
Loans, net of unearned income ..................... 3,700,020 3,171,525 2,400,282 2,303,920 2,128,808
Total Assets ...................................... 6,829,432 5,750,527 4,890,866 4,258,827 4,268,034
Total Deposits .................................... 4,637,191 4,469,510 3,739,720 3,538,768 3,633,619
Federal Funds Purchased and Securities Sold Under
Agreements to Repurchase ........................ 1,263,705 621,789 642,369 246,875 255,643
Other Borrowings .................................. 36,000 35,000 35,000 75,000 33,000
Capital Securities ................................ 199,264 99,637 -- -- --
Stockholders' Equity .............................. $ 601,826 $ 457,531 $ 426,129 $ 355,921 $ 314,263
Per Share:(4)
Net Income-Basic(3) ............................... $ 1.81 $ .98 $ 1.05 $ .72 $ .22
Net Income-Diluted(3) ............................. $ 1.80 $ .97 $ 1.05 $ .69 $ .21
Cash Dividends(5) ................................. $ .575 $ .425 $ .275 $ .175 $ --
Dividend Payout Ratio(5) .......................... 32% 36% 26% 25% --
Book Value at December 31 ......................... $ 8.90 $ 7.05 $ 6.60 $ 5.84 $ 5.28
Market Price at December 31 ....................... $ 33.75 $ 17.82 $ 12.63 $ 6.88 $ 6.44
Selected Ratios:
Return on Average Total Assets(3) ................. 1.86% 1.13% 1.51% .97% .30%
Return on Average Stockholders' Equity(3) ......... 23.65% 14.48% 17.31% 12.70% 4.24%
Core Efficiency Ratio(6) .......................... 38.14% 42.53% 42.18% 48.22% 55.97%
Net Interest Margin ............................... 4.69% 4.50% 4.56% 4.38% 4.26%
Average Stockholders' Equity to Average Assets .... 7.85% 7.82% 8.70% 7.67% 7.05%
Tier I Capital Ratio .............................. 16.67% 15.12% 15.64% 14.44% 12.25%
Risk Adjusted Capital Ratio ....................... 18.61% 16.38% 16.90% 15.71% 13.52%
Leverage Ratio .................................... 10.08% 8.61% 8.25% 7.73% 6.56%
Allowance for Loan Losses/Non-Performing Loans .... 362% 265% 151% 109% 89%
Non-Performing Assets to Total Assets ............. .29% .39% .92% 1.62% 2.26%
Weighted Average Shares-Basic(4) .................. 65,914 63,640 63,945 59,855 58,638
Weighted Average Shares-Diluted(4) ................ 66,395 64,277 64,431 62,312 61,126
Number of Branch Offices of the Company ........... 85 82 67 63 52
</TABLE>
(1) On December 31, 1996, North Side Savings Bank ("North Side") was merged
with and into the Company. On November 30, 1994, Metro Bancshares Inc.
("Metro") was merged with and into the Company. These mergers have been
accounted for as pooling-of-interests transactions and, accordingly, the
financial results for all prior periods reported have been retroactively
restated to include North Side and Metro.
(2) Interest income on a tax equivalent basis includes the additional amount
of interest income that would have been earned if the Company's investment
in state and municipal obligations, preferred stock issues, and tax-exempt
loans had been made in investment securities and loans subject to New York
State and City, and Federal income taxes yielding the same after tax
income.
(3) Diluted net income per share exclusive of the non-recurring SAIF
Recapitalization and Merger Related Restructure charges was $1.33 for
1996. The return on average total assets and the return on average
stockholders' equity, as adjusted for the aforementioned charges, would
have been 1.55% and 19.85%, respectively.
(4) Amounts have been restated to give effect for the 2-for-1 common stock
split issued on May 15, 1997.
(5) Cash dividends and the dividend payout ratios have not been restated for
the mergers with North Side and Metro.
(6) The core efficiency ratio is defined as the ratio of non-interest expense
net of other real estate expenses and other non-recurring charges, to net
interest income on a tax equivalent basis and other non-interest income
net of net securities gains/(losses).
9 NORTH FORK BANCORPORATION
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
This section presents management's discussion and analysis of the
consolidated results of operations and financial condition of North Fork
Bancorporation, Inc. (the "Company"), a $6.8 billion multi-bank holding company.
The Company's primary bank subsidiary, North Fork Bank ("North Fork"), operates
through 80 full-service retail banking facilities located in the metropolitan
New York area. In December 1997, the Company purchased and continues to operate
as a separate banking subsidiary, Branford Savings Bank ("Branford"), a
Connecticut charted savings bank. In December 1996, North Side Savings Bank
("North Side"), was merged with and into the Company. The North Side merger was
accounted for as a pooling-of-interests transaction. Accordingly, the financial
results for all prior year periods reported in the accompanying management's
discussion and analysis include the results of North Side.
The discussion and analysis that follows should be read in conjunction
with the consolidated financial statements and supplementary data contained
elsewhere in this 1997 Annual Report to Shareholders.
OVERVIEW
During 1997, the Company reported substantial achievements in all key measures
of operating performance, highlighted by record earnings of $119.3 million or
diluted earnings per share of $1.80. Return on average total assets and return
on average stockholders' equity , which ranks among the industry's highest
performers, were 1.9% and 23.7%, respectively. The Company's core efficiency
ratio declined to 38.1% in 1997, as compared to 42.5% during 1996, demonstrating
once again, management's ability to successfully assimilate significant
acquisitions in a timely and efficient manner.
Loans outstanding totaled $3.7 billion at December 31, 1997, an increase
of $521 million, or 16% from 1996 year-end levels, as demand remained strong.
Performance of the Company's loan portfolio remained solid as demonstrated by a
10% decline in non-performing assets to $20.0 million and asset quality ratios
of net charge-offs to total loans and allowance for loan losses to
non-performing loans of .20% and 362%, respectively, at December 31, 1997.
Demand deposits increased 23% to $905.7 million and represent 19.5% of
total deposits at December 31, 1997, as compared to $734.9 million or 16.4% of
total deposits at December 31, 1996.
The 1997 acquisition of Branford represents the Company's first
out-of-market transaction and will provide the Company with an expanded
geographic presence through which to offer its full complement of financial
services products. At December 31, 1997, Branford had total assets of $179
million, deposits of $160 million, stockholders' equity of $16.6 million, and
operates through five branches in the Connecticut County of New Haven.
In October 1997, the Company entered into an agreement and plan of merger
with New York Bancorp, the parent company of Home Federal Savings Bank ("Home
Federal"), whereby it would acquire New York Bancorp in a stock-for-stock
exchange. New York Bancorp had total assets of $3.3 billion, net loans of $2.0
billion, deposits of $1.7 billion, and stockholders' equity of $178 million at
December 31, 1997 (see Note 2 of the Consolidated Financial Statements). Home
Federal operates 35 branch offices throughout Kings, Queens, Richmond, Nassau
and Suffolk counties. This transaction is scheduled to close March 27, 1998 and
will provide approximately 220 thousand new customers and a much sought after
presence in the Brooklyn market area with its nine branch locations.
In anticipation of its merger with New York Bancorp, the Company enhanced
its regulatory capital ratios through the issuance of $100 million of 8.0%
Capital Pass-Through Securities ("Capital Securities") in December 1997. At
December 31, 1997, the Company's total risk adjusted and leverage capital ratios
were 18.61% and 10.08%, respectively.
Additionally, during 1997 the Company issued a 2-for-1 common stock split,
increased its quarterly dividend 20% to $.15 per share, and had its stock price
increase by approximately 90%, resulting in a market capitalization in excess of
$2 billion.
10 NORTH FORK BANCORPORATION
<PAGE> 14
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 Company'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 $47.5 million or 20.5% to $278.4 million in
1997, as compared to $230.9 million in 1996. This growth was achieved through a
significant increase in the level and composition of average interest earning
assets and an improvement in the net interest margin. The net interest margin on
a taxable equivalent basis grew to 4.69% during 1997 when compared to 4.50%
during 1996. Factors contributing to the widening of the net interest margin
included: (a) a change in the composition combined with a significant increase
in average interest earning assets; (b) higher levels of non-interest bearing
customer deposit liabilities; (c) the issuance of $200 million in capital
securities, of which $100 million was issued in December 1997; and (d) increased
levels of capital. The positive impact of these factors was offset by an
increase in the level of higher costing wholesale liabilities.
Interest income increased $79.2 million or 19.5% to $484.5 million in
1997. This accomplishment is attributable to: (1) an $874.5 million or 16.8%
increase in average interest earning assets to $6.1 billion in 1997 and; (2) a
change in the composition of average interest earning assets as evidenced by the
increase in yield on such assets to 8.07% in 1997 as compared to 7.84% during
1996.
During 1997, management entered into a capital management strategy,
whereby it leveraged its excess capital to generate additional net interest
income. As a result of the increase in the level of interest earning assets,
which were funded principally with repurchase agreements of varied maturities,
additional net interest income was generated.
Average loans, net of unearned income increased $619.1 million or 22.3% to
$3.4 billion in 1997, representing 55.8% of average interest earning assets, as
compared to 53.2% in 1996. This level of growth was achieved through continued
strong demand in virtually all loan categories. The corresponding yield on
average loans declined modestly to 8.80% in 1997 compared to 8.87% in 1996.
Average loans, net of unearned income, represented 75.8% of average deposits in
1997 as compared to 63.5% in 1996.
Average securities increased $288.0 million or 12.1% in 1997 with a
corresponding increase in the overall yield on the securities portfolio to 7.17%
as compared to 6.69% in 1996. These improvements during 1997 were achieved
principally through the investment of the proceeds generated from the
aforementioned leverage strategy into higher yielding securities, which
reflected market interest rates at the time of investment.
Interest expense increased to $206.2 million in 1997 reflecting an average
cost of funds of 4.21% as compared with $174.4 million or 3.99% in 1996. This
increase principally resulted from a $569.2 million increase in the level of
average securities sold under agreements to repurchase. Overall interest expense
was positively impacted by the modest decline in average customers savings and
time deposit liabilities. The overall cost of funds on average savings and time
deposits declined modestly to 3.60% in 1997 from 3.67% in 1996. Both interest
bearing customer deposit liability levels and the corresponding cost of funds
declined principally as a result of management implementing its pricing strategy
on customer deposit liabilities assumed in its 1996 acquisitions.
Average demand deposits increased $160.5 million or 24.6% in 1997. The
growth in the level of demand deposits has resulted from management's emphasis
on converting its acquired savings bank locations into full service commercial
banking locations, and an emphasis on developing deposit relationships with its
borrowers. At December 31, 1997, demand deposits represented 19.5% of total
deposits as compared to 16.4% at December 31, 1996.
11 NORTH FORK BANCORPORATION
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
The following table sets forth a summary analysis of the relative impact
on net interest income of changes in the average volume of interest earning
assets and interest bearing liabilities and changes in average rates on such
assets and liabilities. Because of the numerous simultaneous volume and rate
changes during the periods analyzed, it is not possible to precisely allocate
changes to volume or rate. For presentation purposes, changes which are not
solely due to volume changes or rate changes have been allocated to these
categories based on the respective percentage changes in average volume and
average rates as they compare to each other.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1997 VS. 1996 1996 VS. 1995
--------------------------------------------------------------
CHANGE IN CHANGE IN
AVERAGE AVERAGE NET INTEREST AVERAGE AVERAGE NET INTEREST
(in thousands) VOLUME RATE INCOME VOLUME RATE INCOME
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Income from Earning Assets:
Interest Earning Deposits..................... $ (80) $ 6 $ (74) $ 113 $ (30) $ 83
Securities.................................... 20,213 11,734 31,947 34,541 1,467 36,008
Loans, net of unearned income................. 54,524 (1,999) 52,525 37,386 (75) 37,311
Federal Funds Sold and Securities Purchased
Under Agreements to Resell.................. (1,700) 106 (1,594) 1,400 (139) 1,261
--------------------------------------------------------------
Total Interest Income...................... 72,957 9,847 82,804 73,440 1,223 74,663
--------------------------------------------------------------
Interest Expense on Liabilities:
Savings, N.O.W. & Money Market Deposits....... (1,136) (1,516) (2,652) 3,296 (2,322) 974
Time Deposits................................. 31 (1,599) (1,568) 19,807 (819) 18,988
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase.............. 33,844 1,679 35,523 14,883 (1,015) 13,868
--------------------------------------------------------------
Other Borrowings.............................. 668 (162) 506 205 (73) 132
--------------------------------------------------------------
Total Interest Expense..................... 33,407 (1,598) 31,809 38,191 (4,229) 33,962
--------------------------------------------------------------
Net Change in Net Interest Income............. $39,550 $11,445 $50,995 $35,249 $ 5,452 $40,701
==============================================================
</TABLE>
(1) The above table is presented on a tax equivalent basis.
(2) Non-accrual loans are included in the average outstanding loan balances.
12 NORTH FORK BANCORPORATION
<PAGE> 16
The following table presents an analysis of net interest income by each
major category of interest earning assets and interest bearing liabilities for
the years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
(dollars in thousands) BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Earning Deposits............. $ 2,718 $ 146 5.37% $ 4,222 $ 220 5.21% $ 2,126 $ 137 6.44%
Securities Agreements................. 2,674,517 191,675 7.17% 2,386,493 159,728 6.69% 1,874,624 123,720 6.60%
Loans, net of unearned income(1)...... 3,397,753 299,045 8.80% 2,778,663 246,520 8.87% 2,358,636 209,209 8.87%
Federal Funds Sold and Securities
Purchased Under Agreements to Resell 19,394 1,063 5.48% 50,482 2,657 5.26% 24,098 1,396 5.80%
-------------------- -------------------- --------------------
Total Interest Earning Assets...... 6,094,382 491,929 8.07% 5,219,860 409,125 7.84% 4,259,484 334,462 7.85%
-------- -------- --------
Non Interest Earning Assets:
Cash and Due from Banks............... 125,893 141,648 99,941
Other Assets(2)....................... 206,716 156,508 111,495
---------- ---------- ----------
Total Assets....................... $6,426,991 $5,518,016 $4,470,920
========== ========== ==========
Interest Bearing Liabilities:
Savings, N.O.W & Money Market
Deposits............................ $1,929,973 $ 42,478 2.20% $1,980,540 $ 45,129 2.28% $1,838,922 $ 44,155 2.40%
Time Deposits......................... 1,739,780 89,740 5.16% 1,739,192 91,309 5.25% 1,362,092 72,321 5.31%
-------------------- -------------------- --------------------
Total Savings and Time Deposits....... 3,669,753 132,218 3.60% 3,719,732 136,438 3.67% 3,201,014 116,476 3.64%
Federal Funds Purchased and
Securities Sold Under Agreements
to Repurchase....................... 1,180,153 70,319 5.96% 610,960 34,796 5.70% 350,393 20,928 5.97%
Other Borrowings...................... 47,603 3,633 7.63% 38,934 3,127 8.03% 36,397 2,995 8.23%
-------------------- -------------------- --------------------
Total Interest Bearing Liabilities 4,897,509 206,170 4.21% 4,369,626 174,361 3.99% 3,587,804 140,399 3.91%
-------- -------- --------
Rate Spread........................... 3.86% 3.85% 3.94%
Non-Interest Bearing Liabilities:
Demand Deposits....................... 814,356 653,838 433,135
Other Liabilities..................... 104,921 62,895 60,886
---------- ---------- ----------
Total Liabilities................. 5,816,786 5,086,359 4,081,825
Capital Securities ................... 105,646 281 --
Stockholders' Equity.................. 504,559 431,376 389,095
---------- ---------- ----------
Total Liabilities and
Stockholders' Equity.............. $6,426,991 $5,518,016 $4,470,920
========== ========== ==========
Net Interest Income and Net
Interest Margin(3).................. 285,759 4.69% 234,764 4.50% 194,063 4.56%
Less: Tax Equivalent Adjustment....... (7,408) (3,818) (1,970)
-------- -------- --------
Net Interest Income................. $278,351 $230,946 $192,093
======== ======== ========
</TABLE>
(1) For purposes of these computations, non-accrual loans are included in the
average outstanding loan balances.
(2) For purposes of these computations, unrealized gains/(losses) on
available-for-sale securities are recorded in other assets.
(3) The above table is presented on a taxable equivalent basis.
13 NORTH FORK BANCORPORATION
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
ASSET/LIABILITY MANAGEMENT
The Company'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 Company'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 Company's strategic plans. This approach also
considers the impact of pending merger transactions, and the attendant impact on
the Company's strategic plan. The balance sheet structure today and with New
York Bancorp 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 approach also considers the impact of pending
merger transactions, and the attendant impact on the Company's strategic plan.
This model measures net interest income sensitivity and volatility to interest
rate changes. This model 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 Company'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. Management has established certain limits for the
potential volatility of net interest income, assuming certain levels of change
in market interest rates with the objective of maintaining a stable level of net
interest income under various probable rate scenarios.
14 NORTH FORK BANCORPORATION
<PAGE> 18
The traditional gap analysis is prepared based on the maturity and
repricing characteristics of interest earning assets and liabilities for
selected time periods. The mismatch between repricings or maturities within a
time period is commonly referred to as the "gap" for that period. A positive gap
(asset sensitive), where interest-rate sensitive assets exceed interest-rate
sensitive liabilities, generally will result in the net interest margin
increasing in a rising rate environment and decreasing in a falling rate
environment. A negative gap (liability sensitive) will generally have the
opposite results on the net interest margin. However, the traditional gap
analysis does not assess the relative sensitivity of assets and liabilities to
changes in interest rates. Management utilizes the gap analysis to complement
its income simulation modeling, primarily focusing on the longer term structure
of the balance sheet.
Management's strategy, similar to that of New York Bancorp, is for the
securities portfolios 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 December
31, 1997 was 4.3 years. The portfolios of New York Bancorp are similar in nature
with an identical weighted average life of 4.3 years.
The following table reflects the repricing of the balance sheet, or "gap"
position at December 31, 1997.
<TABLE>
<CAPTION>
0-90 91-180 181-365 1-5 OVER 5
(dollars in thousands) DAYS DAYS DAYS YEARS YEARS TOTAL
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Earning Deposits ................. $ 7,787 $ -- $ -- $ -- $ -- $ 7,787
Securities(1) ............................. 312,614 165,443 331,329 1,594,733 347,094 2,751,213
Loans, net of unearned income(2)(3) ....... 680,671 150,584 330,617 1,916,328 608,128 3,686,328
Federal Funds Sold and Securities Purchased
Under Agreements to Resell .............. 4,000 -- -- -- -- 4,000
-----------------------------------------------------------------------------------
Total Interest Earning Assets .......... $ 1,005,072 $ 316,027 $ 661,946 $ 3,511,061 $ 955,222 $ 6,449,328
-----------------------------------------------------------------------------------
Interest Bearing Liabilities:
Savings, N.O.W. and Money Market
Deposits(4) ............................. $ 68,763 $ 68,763 $ 137,527 $ 757,612 $ 975,301 $ 2,007,966
Time Deposits ............................. 640,857 344,747 253,506 483,972 493 1,723,575
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase ..... 121,355 -- 200,000 942,350 -- 1,263,705
Other Borrowings .......................... 1,000 -- -- 35,000 -- 36,000
-----------------------------------------------------------------------------------
Total Interest Bearing Liabilities ..... $ 831,975 $ 413,510 $ 591,033 $ 2,218,934 $ 975,794 $ 5,031,246
-----------------------------------------------------------------------------------
Gap ....................................... $ 173,097 $ (97,483) $ 70,913 $ 1,292,127 $ (20,572)
-----------------------------------------------------------------------------------
Cumulative Difference Between
Interest Earning Assets and
Interest Bearing Liabilities ............ $ 173,097 $ 75,614 $ 146,527 $ 1,438,654 $ 1,418,082
====================================================================
Cumulative Difference as a Percentage
of Total Assets ......................... 2.53% 1.11% 2.15% 21.07% 20.76%
====================================================================
</TABLE>
(1) Based upon (a) contractual maturity, (b) repricing date, if applicable,
and (c) projected repayments of principal based upon experience. Amounts
exclude the unrealized gains/(losses) on securities available-for-sale.
(2) Based upon (a) contractual maturity, (b) repricing date, if applicable,
and (c) management's estimate of principal prepayments.
(3) Excludes non-accrual loans totaling $13.7 million.
(4) Estimated 60% of Money Market Deposit run-off in less than one year with
the remaining balance withdrawn evenly through year three. Estimated 60%
of Savings and N.O.W. deposit run-off in the first two years with
remaining balance withdrawn evenly through five years.
15 NORTH FORK BANCORPORATION
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
The tables that follow depict the amortized cost, contractual maturities
and approximate weighted average yields (on a tax equivalent basis) of the
held-to-maturity and available-for-sale securities portfolios at December 31,
1997, respectively:
Held-to-Maturity
<TABLE>
<CAPTION>
U.S.
(dollars in thousands) STATE & GOVERNMENT
MUNICIPAL AGENCIES' OTHER
MATURITY OBLIGATIONS YIELD OBLIGATIONS YIELD SECURITIES YIELD TOTAL YIELD
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Within 1 Year ................ $ 10,121 6.28% $ -- -- $ -- -- $ 10,121 6.28%
After 1 But Within 5 Years ... 42,305 6.74% 96 8.87% 1,162 7.90% 43,563 6.78%
After 5 But Within 10 Years .. 61,837 6.99% -- -- 8,567 6.57% 70,404 6.94%
After 10 Years ............... 248 6.84% -- -- -- -- 248 6.84%
--------------------------------------------------------------------------------
Subtotal .................. 114,511 6.83% 96 8.87% 9,729 6.73% 124,336 6.83%
Mortgage-Backed Securities ... -- -- -- -- -- -- 403,646 6.56%
CMO's ........................ -- -- -- -- -- -- 590,486 6.75%
--------------------------------------------------------------------------------
Total Securities .......... $114,511 6.83% $ 96 8.87% $ 9,729 6.73% $1,118,468 6.69%
================================================================================
</TABLE>
<TABLE>
<CAPTION>
Available-for-Sale(1)
U.S.
(dollars in thousands) U.S. GOVERNMENT
TREASURY AGENCIES' OTHER
MATURITY SECURITIES YIELD OBLIGATIONS YIELD SECURITIES YIELD TOTAL YIELD
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Within 1 Year ................ $ 12,235 5.92% $ -- -- $ -- -- $ 12,235 5.92%
After 1 But Within 5 Years ... 19,916 6.27% -- -- -- -- 19,916 6.27%
After 5 But Within 10 Years .. -- -- 136,441 7.34% -- -- 136,441 7.34%
Due After 10 Years ........... -- -- -- -- 58,784 9.83% 58,784 9.83%
--------------------------------------------------------------------------------
Subtotal .................. 32,151 6.14% 136,441 7.34% 58,784 9.83% 227,376 7.81%
Mortgage-Backed Securities ... -- -- -- -- -- -- 686,574 7.11%
CMO's ........................ -- -- -- -- -- -- 605,491 7.22%
Equity Securities ............ -- -- -- -- -- -- 113,304 6.32%
--------------------------------------------------------------------------------
Total Securities .......... $ 32,151 6.14% $136,441 7.34% $ 58,784 9.83% $1,632,745 7.17%
================================================================================
</TABLE>
(1) Unrealized gains/(losses) have been excluded for presentation purposes.
The following table presents the composition of the carrying value of the
securities portfolio in each of the last three years at December 31,
(in thousands) 1997 1996 1995
------------------------------------
Mortgage-Backed Securities .............. $1,096,278 $1,078,833 $1,414,953
CMO Private Issuances ................... 1,064,047 563,809 352,130
CMO Agency Issuances .................... 136,780 166,997 145,496
U.S. Government Agencies' Obligations ... 140,100 95,852 121,617
Equity Securities ....................... 122,157 40,325 61,611
State & Municipal Obligations ........... 114,511 121,945 60,725
Other Securities ........................ 72,190 12,755 58,664
U.S. Treasury Securities ................ 33,119 76,990 20,143
------------------------------------
$2,779,182 $2,157,506 $2,235,339
====================================
The securities portfolio of New York Bancorp at December 31, 1997 which
aggregated $1.1 billion, is comprised principally of mortgage backed securities
and CMOs. Approximately, $505.4 million of New York Bancorp's portfolio was
identified as available-for-sale with the balance of $619.4 million identified
as held-to-maturity.
16 NORTH FORK BANCORPORATION
<PAGE> 20
The following are approximate contractual maturities and sensitivities to
changes in interest rates of certain loans, exclusive of non-commercial real
estate mortgages, consumer loans and leases and non-accrual loans as of December
31, 1997:
<TABLE>
<CAPTION>
MATURITY
-------------------------------------------------
DUE AFTER
ONE BUT
DUE WITHIN WITHIN FIVE DUE AFTER
(in thousands) ONE YEAR YEARS FIVE YEARS TOTAL
-------------------------------------------------
<S> <C> <C> <C> <C>
Types of Loans:
Mortgage Loans-Multi-family ............. $ 74,524 $ 875,598 $ 219,177 $1,169,299
Mortgage Loans-Commercial ............... 327,017 359,633 146,976 739,793
Commercial and Industrial ............... 326,694 88,311 15,006 430,334
Construction and Land Loans ............. 41,035 2,023 -- 43,058
-------------------------------------------------
Total .................................. $675,760 $1,325,565 $ 381,159 $2,382,484
=================================================
Rate Provisions:
Amounts with Fixed Interest Rates ....... $ 70,762 $ 802,043 $ 369,294 $1,242,099
Amounts with Adjustable Interest Rates .. 604,998 523,522 11,865 1,140,385
-------------------------------------------------
Total .................................. $ 675,760 $1,325,565 $ 381,159 $2,382,484
=================================================
</TABLE>
The following table shows the classification of the average daily deposits
for each of the last three years ended December 31,
(in thousands) 1997 1996 1995
--------------------------------------
Demand Deposits ...................... $ 814,356 $ 653,838 $ 433,135
Savings Deposits ..................... 1,406,018 1,470,781 1,437,412
N.O.W. and Money Market Deposits ..... 523,955 509,759 401,510
Time Deposits ........................ 1,739,780 1,739,192 1,362,092
--------------------------------------
Total Deposits ..................... $4,484,109 $4,373,570 $3,634,149
======================================
The average cost of funds for time deposits were 5.16%, 5.25% and 5.31%
for the period ended December 31, 1997, 1996, and 1995, respectively.
At December 31, 1997, the remaining maturities of certificate of deposits
in amounts of $100,000 and over were as follows:
(in thousands) 1997
--------
3 months and less .................................................... $215,641
3 to 6 months ........................................................ 38,296
6 to 12 months ....................................................... 26,196
Greater than one year ................................................ 58,008
--------
$338,141
========
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 at contractual maturity, to
repay other borrowings as they mature and to make new loans and investments as
opportunities arise.
The Company's sources of liquidity include dividends from its
subsidiaries, borrowings, and funds available through the capital markets.
Dividends from the Company's primary subsidiary, North Fork 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,
North Fork Bank had $157.8 million of retained earnings available for dividends
to the Company as of January 1, 1998.
In December 1997, the Company enhanced its liquidity position and
strengthened its regulatory capital ratios with the issuance of $100 million of
8.00% Capital Trust Pass-Through Securities ("Capital Securities") and received
cash proceeds of $99.6 million. These securities, which mature on December 15,
2027, are non-callable at any time, in whole or in part, prior to December 15,
2007, except in certain circumstances. They may be redeemed annually thereafter,
in whole or in part, at declining premiums to maturity. The net cash proceeds
from the issuance of these Capital Securities were invested by the Company in
short-term repurchase agreements with North Fork, thereby providing North Fork
with additional liquidity.
17 NORTH FORK BANCORPORATION
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
The Company's bank subsidiaries have 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 their unpledged securities portfolio, the sale of
securities from their available-for-sale portfolio, the securitization of loans
within the portfolio, whole loan sales, and growth in their core deposit base.
The Banks have the ability, as members of the Federal Home Loan Bank
("FHLB") system, to borrow $615.2 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 December 31, 1997, North Fork
had $10 million in such advances with an original maturity of greater than one
year, and Branford had $1 million in short-term advances.
The Company and its banking subsidiaries liquidity positions are monitored
daily to ensure the maintenance of an optimum level and efficient use of
available funds. Management believes that the Company and its banking
subsidiaries both today and after its pending acquisition have sufficient
liquidity to meet their operating requirements.
LOAN PORTFOLIO
The loan portfolio is concentrated primarily in loans secured by real estate in
the New York metropolitan area. Loans outstanding totaled $3.7 billion at
December 31, 1997, an increase of $520.6 million or 16.3% from the 1996 year end
level of $3.2 billion. Approximately $114 million of this increase was acquired
from Branford. Branford's loan portfolio was comprised primarily of residential
and commercial mortgage loans. Aggregate loan growth during 1997 consisted of a
22.2% increase in multi-family mortgage loans to $1.2 billion, a 2.7% increase
in residential mortgage loans to $1.0 billion, a 17.0% increase in commercial
mortgage loans to $742.9 million, a 24.7% increase in commercial and industrial
loans to $433.4 million, and a 42.4% increase in consumer loans and leases to
$312.1 million at December 31, 1997. The Company's loan portfolio will increase
by approximately $2.0 billion to $5.7 billion upon completion of the merger with
New York Bancorp. New York Bancorp's loan portfolio is comprised principally of
residential, multi-family and commercial mortgages. Management anticipates that
in the near term the loan portfolio growth will be driven by multi-family
lending, residential mortgage lending and consumer loans.
The following table represents the components of the loan portfolio at
December 31,
<TABLE>
<CAPTION>
(dollars in thousands) 1997 1996 1995 1994 1993
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans-Multi-family .. $1,169,299 32% $ 956,718 30% $ 687,671 28% $ 554,276 24% $ 421,133 20%
Mortgage Loans-Residential ... 1,012,792 27% 985,983 31% 848,060 35% 935,524 40% 865,477 40%
Mortgage Loans-Commercial .... 742,881 20% 635,042 20% 470,479 20% 448,751 19% 462,058 21%
Commercial & Industrial ...... 433,388 12% 347,437 11% 248,662 10% 245,436 11% 262,907 12%
Consumer Loans and Leases .... 312,113 8% 219,127 7% 114,669 5% 75,377 3% 67,669 3%
Construction and Land Loans .. 44,177 1% 49,779 1% 49,759 2% 64,314 3% 77,324 4%
---------------------------------------------------------------------------------------------
Total ..................... $3,714,650 100% $3,194,086 100% $2,419,300 100% $2,323,678 100% $2,156,568 100%
=============================================================================================
</TABLE>
ASSET QUALITY
At December 31, 1997, non-performing assets, which includes loans past due 90
days and still accruing interest, non-accrual loans and other real estate,
declined $2.2 million to $20.0 million, in comparison to $22.2 million at
December 31, 1996. This reduction was achieved principally through the sale of
approximately $4.8 million in non-performing assets, against which the Company
recognized a $1.7 million charge to the allowance for loan losses. This
reduction was partially offset by $1.2 million in non-performing assets acquired
in the Branford acquisition. Non-performing loans at December 31, 1997 consisted
of $5.7 million in residential mortgages, $4.1 million in commercial mortgages,
$3.4 million in commercial loans, $1.2 million in construction and land loans,
and $1.0 million in consumer loans and leases.
The components of non-performing assets and restructured, accruing loans
are detailed below at December 31, 1997.
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995 1994 1993
-------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans Ninety Days Past Due and Still Accruing .. $ 1,713 $ 2,596 $ 1,088 $ 1,597 $ 2,265
Non-Accrual Loans .............................. 13,692 17,745 36,411 54,376 73,939
-------------------------------------------
Non-Performing Loans ......................... 15,405 20,341 37,499 55,973 76,204
Other Real Estate .............................. 4,580 1,898 7,320 13,230 20,115
-------------------------------------------
Non-Performing Assets ........................ $19,985 $22,239 $44,819 $69,203 $96,319
===========================================
Restructured, Accruing Loans ................... $ 9,552 $13,734 $41,316 $43,659 $49,028
===========================================
</TABLE>
18 NORTH FORK BANCORPORATION
<PAGE> 22
Loans are classified as restructured loans when management has granted,
for economic or legal reasons related to the borrower's financial difficulties,
concessions to the customer that 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 to $9.6 million at December 31, 1997, as compared with $13.7
million at December 31, 1996. The decline in the level of restructured accruing
loans was achieved through principal repayments, maturities, and the
satisfaction of the performance requirements on certain of these loans during
1997. At December 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.
Management determines what it deems to be the appropriate level of the
allowance for loan losses on an ongoing basis by reviewing individual loans, as
well as the composition of and trends in the loan portfolio. Management
considers, among other things, concentrations within segments of the loan
portfolio, delinquency trends, as well as recent charge-off experience and third
party evidentiary matter (such as appraisals) when assessing the degree of
credit risk in the portfolio. Various appraisals and estimates of current value
influence the estimation of the required allowance at any point in time. 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 and consumer loans and leases.
Multi-family loans generally are for $1--$5 million and are secured by
properties located in the metropolitan New York area, where demand for such
housing is strong. 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.
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--$25 thousand for periods ranging from 36-60 months. The
Company accepts substantially only "A" rated paper or higher, which are
borrowers without past credit history problems. A substantial portion of the
loan portfolio have adjustable rate features and the credit risk inherent in
these loans will increase with an increase in the underlying indices.
During 1997, the provision for loan losses declined to $6.0 million as
compared to $6.8 million in 1996. Net charge-offs in 1997 aggregated $6.7
million, or .20% of average net loans, as compared with $12.8 million or .46% of
average net loans during 1996. The allowance for loan losses at year end 1997
was $55.7 million, or 362% of non-performing loans and 1.51% of net loans. This
compares to an allowance for loan losses of $53.9 million, or 265% of
non-performing loans and 1.70% of net loans at December 31, 1996. While
management uses available information in estimating possible loan losses, future
additions to the allowance may be necessary based on future changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses.
Such agencies may require the Company to recognize additions to the allowance
based on their judgment of information available to them at the time of their
examinations. Based on current economic conditions, management considers the
allowance for loan losses at December 31, 1997 adequate to cover the possible
credit losses inherent in the loan portfolio.
19 NORTH FORK BANCORPORATION
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
Transactions in the Allowance for Loan Losses are summarized as follows
for the years ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995 1994 1993
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans (net of unearned income):
Average Balance ......................... $3,397,753 $2,778,663 $2,358,636 $2,313,419 $2,288,712
End of Year ............................. 3,700,020 3,171,525 2,400,282 2,303,920 2,128,808
==============================================================
Analysis of Allowance for Loan Losses:
Balance at Beginning of Year ............ $ 53,894 $ 56,627 $ 61,247 $ 67,670 $ 84,595
Loans Charged-Off:
Mortgage Loans-Commercial ............... $ 3,234 $ 6,048 $ 4,779 $ 3,889 $ 9,536
Consumer Loans and Leases ............... 2,818 971 401 822 1,726
Commercial & Industrial ................. 1,888 2,623 3,215 8,319 14,913
Mortgage Loans Residential .............. 842 3,998 2,915 1,785 4,973
Mortgage Loans-Multi-family ............. 191 548 3,910 1,601 13,373
Construction and Land Loans ............. 121 1,237 5,631 2,031 2,970
--------------------------------------------------------------
Total Charge-Offs ...................... $ 9,094 $ 15,425 $ 20,851 $ 18,447 $ 47,491
Recoveries of Loans Charged-Off:
Mortgage Loans-Commercial ............... $ 563 $ 513 $ 1,660 $ 611 $ 452
Consumer Loans and Leases ............... 569 448 450 429 679
Commercial & Industrial ................. 1,114 544 1,377 2,621 2,563
Mortgage Loans-Residential .............. 44 97 233 495 50
Mortgage Loans-Multi-family ............. 19 724 100 55 81
Construction and Land Loans ............. 95 284 94 624 133
--------------------------------------------------------------
Total Recoveries ....................... $ 2,404 $ 2,610 $ 3,914 $ 4,835 $ 3,958
Net Loans Charged-Off: .................... $ 6,690 $ 12,815 $ 16,937 $ 13,612 $ 43,533
Provision for Loan Losses ............... 6,000 6,800 11,825 6,825 26,608
Additional Allowance Acquired in
Purchase Acquisitions .................. 2,494 3,092 492 -- --
North Side Net Activity for the Three
Months Ended December 31, 1995 ......... -- 190 -- -- --
Metro Net Activity for the Three Months
Ended December 31, 1993 ................ -- -- -- 364 --
--------------------------------------------------------------
Balance at End of Year .................. $ 55,698 $ 53,894 $ 56,627 $ 61,247 $ 67,670
==============================================================
Ratio of Net Charge-Offs to Average Loans 0.20% 0.46% 0.72% 0.59% 1.90%
==============================================================
Ratio of Allowance for Loan Losses to
Non-performing Loans ................... 362% 265% 151% 109% 89%
==============================================================
</TABLE>
Management considers the entire allowance for loan losses to be adequate,
however , to comply with regulatory reporting requirements, management has
allocated the allowance for loan losses, as shown in the table below, into
components by loan type at each year end. Through such allocation, management
does not intend to imply that actual future charge-offs will necessarily follow
the same pattern or that any portion of the allowance is restricted.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE PERCENTAGE
OF LOANS OF LOANS OF LOANS OF LOANS OF LOANS
1997 TO TOTAL 1996 TO TOTAL 1995 TO TOTAL 1994 TO TOTAL 1993 TO TOTAL
(dollars in thousands) AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans-Multi-family ... $20,957 32% $17,606 30% $16,611 28% $18,087 24% $ 7,401 20%
Mortgage Loans-Residential .... 3,117 27% 2,929 31% 2,893 35% 3,783 40% 6,397 40%
Mortgage Loans-Commercial ..... 14,523 20% 16,075 20% 15,885 20% 16,083 19% 23,808 21%
Commercial & Industrial ....... 9,354 12% 9,188 11% 9,575 10% 10,139 11% 18,830 12%
Consumer Loans and Leases ..... 3,121 8% 1,965 7% 1,925 5% 1,514 3% 1,117 3%
Construction and Land Loans ... 1,025 1% 1,138 1% 2,048 2% 6,548 3% 6,286 4%
Unallocated ................... 3,601 -- 4,993 -- 7,690 -- 5,093 -- 3,831 --
---------------------------------------------------------------------------------------------
Total ...................... $55,698 100% $53,894 100% $56,627 100% $61,247 100% $67,670 100%
=============================================================================================
</TABLE>
20 NORTH FORK BANCORPORATION
<PAGE> 24
NON-INTEREST INCOME
Non-interest income, exclusive of net securities gains, increased 21% to $35.4
million in 1997, compared with $29.2 million in 1996. Net securities gains in
1997 were $6.2 million, compared with net securities gains of $1.9 million in
1996.
The increase in non-interest income during 1997 resulted from a $2.6
million, or 16.2% increase in fees and service charges on deposit accounts to
$18.9 million, a $2.6 million or 46.7% increase in broker commissions and trust
fees to $8.3 million, a $1.2 million or 23.5% increase in other operating income
to $6.3 million. The growth in non-interest income is attributable to
management's success in delivering a full compliment of financial services and
products to its new market areas and expanded customer base through its past
acquisitions.
Net securities gains recognized during 1997 were principally due to the
Company selling certain equity investments in other financial institutions.
The Company's pending acquisition of New York Bancorp, which is expected
to close on March 27, 1998, will provide the Company with an expanded geographic
presence and significantly large customer base, which should result in increased
fee income during 1998.
NON-INTEREST EXPENSE
Non-interest expense increased $9.7 million or 8.6% in 1997, exclusive of the
non-recurring merger and related restructuring charge of $21.6 million and the
SAIF recapitalization charge of $8.4 million. This increase is attributable to
the costs associated with the $200 million in capital securities issued in
December 1997 and 1996 and the amortization of the intangible assets associated
with the Company's purchase acquisitions of Extebank and First Nationwide during
the first quarter of 1996. This increase was partially offset by a $1.9 million
reduction in the FDIC insurance premiums during 1997.
The Company'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 tax equivalent basis and non-interest
income net of securities gains, improved to 38.1% in 1997, as compared with
42.5% in 1996 and 42.2% in 1995. This improvement was achieved principally
through the efficient integration of the Company's 1996 acquisition into North
Fork Bank.
Upon consummation of the merger with New York Bancorp, the Company will
recognize a non-recurring merger and related restructuring charge of
approximately $34.4 million, net of taxes. Management anticipates that during
1998 the Company's core efficiency ratio, exclusive of this charge, will be
further reduced, and again place the Company amongst the most efficient banks in
the country.
CAPITAL
The Company and its bank subsidiaries 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 I capital to total risk weighted assets of 4%
and a Tier I 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 Company's financial statements. As of December 31, 1997,
the most recent notification from the various banking regulators categorized the
Company and its bank subsidiaries 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 I capital to
total risk weighted assets ratio of at least 6%, a minimum leverage ratio of at
least 5% and not subject to any written order, agreement or directive. There are
no conditions or events since such notification that management believes have
changed this classification.
21 NORTH FORK BANCORPORATION
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
The following table sets forth the Company's regulatory capital at
December 31, 1997, under the rules applicable at such date. At such date,
management believes that the Company meets all capital adequacy requirements to
which it is subject.
<TABLE>
<CAPTION>
(dollars in thousands) Amount Ratio
---------------------
<S> <C> <C>
Tier 1 Capital ....................................... $ 662,089 16.67%
Regulatory Requirement ............................... 158,831 4.00%
---------------------
Excess ............................................... $ 503,258 12.67%
=====================
Total Risk Adjusted Capital .......................... $ 738,792 18.61%
Regulatory Requirement ............................... 317,661 8.00%
---------------------
Excess ............................................... $ 421,131 10.61%
=====================
Risk Weighted Assets ................................. $3,970,768
==========
</TABLE>
The Company's leverage ratio at December 31, 1997 was 10.08%. The pro
forma Tier 1, total risk based and leverage capital ratios of the Company
combined with New York Bancorp were 14.86%, 16.09%, and 8.39%, respectively at
December 31, 1997.
OTHER MATTERS
The Company continues its preparation for the "Year 2000 issue", that is, the
technological and computer program modifications that may be required to ensure
a smooth transition of the Company's information systems into the twenty-first
century. The Company and its subsidiaries are subject to regulatory guidelines
to ensure compliance with the Year 2000 issue. The Company has initiated a
review of its computer systems and programs to determine which, if any, systems
and programs are not capable of recognizing the year 2000 date. Communication
has been initiated with all of the Company's vendors that supply the Company
with these systems and programs. This communication and assessment is on-going.
Management is utilizing the regulatory guidelines to assure compliance within
the prescribed time frame (i.e. critical applications updated and tested by
December 31, 1998). Management does not anticipate the costs associated with the
resolution of the year 2000 issue to be material to its financial condition.
RECENT ACCOUNTING DEVELOPMENTS
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES
In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 125 "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on consistent
application of a financial-components approach that focuses on control. Under
this approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognized the financial assets when control has been surrendered, and
derecognized liabilities when extinguished. This statement provides consistent
standards for distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996.
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 127"). SFAS 127 delays for one year the implementation
of SFAS 125, as it relates to (1) secured borrowings and collateral, and (2)
transfers of financial assets that are part of repurchase agreements,
dollar-rolls, securities lending and similar transactions. The Company has
adopted portions of SFAS 125 (those not deferred by SFAS 127) effective January
1, 1997. Adoption of these portions did not have a material effect on the
Company. Based on its review of SFAS 125, management believes the portions of
SFAS 125, which have been deferred by SFAS 127, will not have a material effect
on the Company.
22 NORTH FORK BANCORPORATION
<PAGE> 26
REPORTING COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 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 non-owner sources. SFAS 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 130 also requires that
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
130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of prior periods will be required. Management is currently
assessing the financial implications of implementing SFAS 130 and believes that
adoption will not have a material adverse effect on the Company.
DISCLOSURE ABOUT SEGMENTS FOR AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the FASB issued statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS
131"). SFAS 131 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 are
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. SFAS 131 requires a
reconciliation of total segment revenues, total segment profit or loss, total
segment assets, and other amounts disclosed for segments to the amounts in the
enterprise's financial statements. It also requires an enterprise to report
descriptive information about the way the operating segments were determined,
the products and services provided by the operating segments, and any
differences between the measurements used for segment reporting and financial
statement reporting. SFAS 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 is currently assessing the
financial implication of implementing SFAS 131 and believes that the adoption
will not have a material adverse effect on the Company.
COMPARISON BETWEEN 1996 AND 1995
OVERVIEW
During 1996, the Company completed three strategic in-market acquisitions,
culminating with its December 31, 1996 merger with North Side. In March 1996,
North Fork Bank completed its purchase of its domestic commercial banking
business of Extebank. Extebank had approximately $388 million in total assets,
$200 million in net loans, $348 million in deposit liabilities, and $30 million
in capital. Additionally, in March 1996, North Fork Bank acquired ten Long
Island branches of First Nationwide Bank, and assumed $572 million in deposit
liabilities, for which it paid in deposit premium of 6.35%.
The Company enhanced its Tier I Capital in 1996 through the issuances of
$100 million in 8.70% Capital Securities on December 31, 1996.
EARNINGS SUMMARY
The Company's net income for the year ended December 31, 1996 was $62.4 million
or $.97 per share, as compared with $67.3 million or $1.05 per share in 1995.
Net income and earnings per share during 1996 was impacted by the recognition of
a $21.6 million merger related restructure charge, associated with the North
Side merger, and a $8.4 million charge for the recapitalization of the Savings
Association Insurance Fund ("SAIF").
Net income and earnings per share exclusive of the aforementioned
non-recurring charges, less the related tax effect, would have been $85.6
million or $1.33 per share in 1996. Return on average total assets and return on
average stockholders' equity, excluding these charges, would have been 1.55% and
19.85%, respectively for 1996, as compared to 1.51% and 17.31%, respectively for
1995.
23 NORTH FORK BANCORPORATION
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS continued
NET INTEREST INCOME
Net interest income increased $38.8 million to $230.9 million in 1996, as
compared to $192.1 million in 1995. The components of this increase include a
$72.8 million increase in interest income which was partially offset by a $34.0
million increase in interest expense.
Interest income increased 21.9% to $405.3 million in 1996 from $332.5
million in 1995. This increase is attributable to the $960.4 million or 22.6%
increase in average interest earning assets to $5.2 billion, as compared to $4.3
billion during 1995. The rise in the level of interest earning assets was due
principally to the Extebank and First Nationwide acquisitions and the investment
of the liquidity generated through an increased level of borrowings. Average
mortgage-backed securities increased $453.1 million or 29.0% to $2.0 billion
during 1996, as compared to $1.6 billion during 1995. This increase resulted
from the investment of the cash proceeds received in the aforementioned
acquisitions.
Average loans increased $420.0 million or 17.8% to $2.8 billion during
1996, when compared to $2.4 billion during 1995. This level of growth was
achieved through the acquisition of approximately $200 million in loans from
Extebank, North Side's purchase of $150 million in residential mortgage loans
and strong loan demand during the second half of 1996. The corresponding yield
on average loans of 8.87% during 1996 was unchanged from 1995.
Interest expense increased to $174.4 million in 1996, reflecting a 3.99%
average cost of funds, as compared with $140.4 million or 3.91% in 1995. This
increase resulted from a $781.8 million increase in the level of interest
bearing liabilities, due principally to the aforementioned acquisitions and
increased levels of borrowings, and a modest rise in the Company's overall cost
of funds due to relative changes in composition of the funding base.
Average total savings and time deposits increased $518.7 million or 16.2%
to $3.7 billion during 1996 when compared to $3.2 billion during 1995. This
increase is principally attributable to customer deposit liabilities assumed in
these acquisitions.
Average demand deposits increased $220.7 million or 51.0% to $653.8
million during 1996, as compared to $433.1 million during 1995. Demand deposits
acquired from Extebank were approximately $105 million. At December 31, 1996,
demand deposits represented 16.4% of total deposits as compared to 13.1% at
December 31, 1995.
The Company's overall cost of funds during 1996 was negatively impacted by
the increased level of borrowings under repurchase agreements. Average Federal
Funds Purchased and Securities Sold Under Agreements to Repurchase increased
74.4% to $611.0 million, as compared with $350.4 million in 1995. The impact of
this increase was offset in part by a decline in the corresponding yield on
these borrowings to 5.70% during 1996 from 5.97% during 1995.
PROVISION FOR LOAN LOSSES
The provision for loan losses declined during 1996 to $6.8 million when compared
to $11.8 million during 1995. Net charge-offs in 1996 aggregated $12.8 million
or .46% of average net loans, as compared with $16.9 million or .72% of average
net loans during 1995. The allowance for loan losses to non-performing loans
improved to 265% at December 31, 1996, as compared to 151% at December 31, 1995.
NON-INTEREST INCOME
Non-interest income, exclusive of net securities gains, was $29.2 million in
1996, compared with $23.0 million in 1995. Net securities gains in 1996 were
$1.9 million as compared with net securities gains of $6.7 million in 1995.
Fees and service charges on deposit accounts increased $4.5 million, or
38.3% to $16.3 million during 1996, as compared to $11.8 million during 1995.
This increase was achieved through the Company's ability to convert
single-service relationship accounts acquired into full-service relationships
and its access to new markets through these acquisitions.
Broker commissions and trust fees increased 56.2% to $5.6 million during
1996, as compared to $3.6 million during 1995, reflecting continued growth in
the core business of the Company's broker/dealer subsidiary and the expanded
number of retail outlets through which it operates resulting from the
aforementioned acquisitions.
Net securities gains recognized during 1996 were principally due to the
Company selling its equity investments in certain financial institutions. These
gains were partially offset by securities losses recognized on the repositioning
of the Company's available-for-sale securities portfolio in connection with the
North Side merger.
24 NORTH FORK BANCORPORATION
<PAGE> 28
NON-INTEREST EXPENSE
Non-interest expense increased $20.2 million or 22% in 1996, exclusive the
non-recurring merger and related restructuring charge of $21.6 million and the
SAIF recapitalization charge of $8.4 million to $113.0 million, as compared with
$92.8 million for 1995.
The increase in non-interest expense during 1996 reflects the increased
operating costs and the amortization of the intangible assets associated with
the Company's purchase acquisitions of Extebank and First Nationwide during the
first quarter of 1996. This increase was partially offset by a $2.6 million
reduction in FDIC insurance premiums during 1996 and a modest decline in other
real estate related expenses.
INCOME TAXES
The effective tax rate on income before income taxes was 44.4% for 1996, as
compared to 42.5% for 1995. The increase in the Company's effective tax rate
during 1996 resulted from the non-deductible amortization of intangible assets
created in the Extebank acquisition, the recognition of certain non-deductible
merger related costs and the recapture of North Side's state and local tax bad
debt reserves. These increases were partially offset through the implementation
of certain tax planning strategies during 1996.
SELECTED STATISTICAL DATA
<TABLE>
<CAPTION>
Quarterly Financial Information
(unaudited) 1997 1996
-------------------------------------------------------------------------------------
(in thousands, except 1ST 2ND 3RD 4TH 1ST 2ND 3RD 4TH
per share amounts) QTR QTR QTR QTR QTR QTR QTR QTR
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income ................... $109,881 $123,245 $126,332 $125,063 $ 93,115 $101,177 $105,800 $105,215
Interest Expense .................. 43,811 53,025 55,140 54,194 41,761 43,073 45,843 43,684
-------------------------------------------------------------------------------------
Net Interest Income ............... 66,070 70,220 71,192 70,869 51,354 58,104 59,957 61,531
Provision for Loan Losses ......... 1,500 1,500 1,500 1,500 1,700 1,700 1,700 1,700
-------------------------------------------------------------------------------------
Net Interest Income after Provision
for Loan Losses ................. 64,570 68,720 69,692 69,369 49,654 56,404 58,257 59,831
Non-Interest Income ............... 7,966 10,791 9,548 13,319 7,614 8,196 9,035 6,278
Non-Interest Expense .............. 30,028 30,718 30,591 31,399 24,584 28,791 29,466 30,193
Merger Related Restructure Charge . -- -- -- -- -- -- -- 21,613
SAIF Recapitalization Charge ...... -- -- -- -- -- -- 8,350 --
-------------------------------------------------------------------------------------
Income Before Income Taxes ........ 42,508 48,793 48,649 51,289 32,684 35,809 29,476 14,303
Provision for Income Taxes ........ 16,793 19,122 18,756 17,258 13,961 13,974 11,681 10,214
-------------------------------------------------------------------------------------
Net Income ...................... $ 25,715 $ 29,671 $ 29,893 $ 34,031 $ 18,723 $ 21,835 $ 17,795 $ 4,089
=====================================================================================
Per Share:
Earnings Per Share--Basic ......... $ 0.39 $ 0.45 $ 0.45 $ 0.51 $ 0.29 $ 0.34 $ 0.28 $ 0.06
Earnings Per Share--Diluted ....... $ 0.39 $ 0.45 $ 0.45 $ 0.51 $ 0.28 $ 0.34 $ 0.28 $ 0.06
Common Stock Price Range
of the Company
High ........................... $ 21.25 $ 23.00 $ 29.00 $ 33.75 $ 12.94 $ 13.06 $ 16.00 $ 17.94
Low ............................ $ 17.06 $ 18.13 $ 22.44 $ 28.06 $ 11.63 $ 11.44 $ 13.06 $ 15.44
</TABLE>
On December 31, 1996, North Side Savings Bank ("North Side") was merged with and
into the Company. The merger has been accounted for as a pooling-of-interests
and, accordingly, the quarterly selected data above has been retroactively
restated to include the results of North Side.
25 NORTH FORK BANCORPORATION
<PAGE> 29
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Interest Income
Loans ................................................. $298,326 $245,960 $208,813
Mortgage-Backed Securities ............................ 155,389 135,462 103,208
U.S. Treasury & Government Agency Securities .......... 13,318 11,398 11,267
State & Municipal Obligations ......................... 5,365 4,773 2,488
Other Securities ...................................... 10,914 4,837 5,183
Federal Funds Sold & Securities Purchased Under
Agreements to Resell ................................ 1,063 2,657 1,396
Interest Earning Deposits ............................. 146 220 137
------------------------------
Total Interest Income ............................. 484,521 405,307 332,492
------------------------------
Interest Expense
Savings, N.O.W. & Money Market Deposits ............... 42,478 45,129 44,155
Other Time Deposits ................................... 69,975 75,946 62,498
Certificates of Deposit, $100,000 & Over .............. 19,765 15,363 9,823
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase ............................ 70,319 34,796 20,928
Other Borrowings ...................................... 3,633 3,127 2,995
------------------------------
Total Interest Expense ............................ 206,170 174,361 140,399
------------------------------
Net Interest Income ............................... 278,351 230,946 192,093
Provision for Loan Losses ............................. 6,000 6,800 11,825
------------------------------
Net Interest Income after Provision for Loan Losses 272,351 224,146 180,268
------------------------------
Non-Interest Income
Fees & Service Charges on Deposit Accounts ............ 18,943 16,303 11,788
Broker Commissions & Trust Fees ....................... 8,269 5,638 3,609
Mortgage Banking Operations ........................... 1,883 2,202 2,662
Other Operating Income ................................ 6,302 5,102 4,951
Net Securities Gains .................................. 6,227 1,878 6,734
------------------------------
Total Non-Interest Income ......................... 41,624 31,123 29,744
------------------------------
Non-Interest Expense
Compensation & Employee Benefits ...................... 57,593 55,741 45,494
Occupancy ............................................. 12,436 11,809 8,945
Equipment ............................................. 7,587 6,910 5,661
Capital Securities Costs .............................. 9,463 25 --
Amortization of Intangible Assets ..................... 7,292 6,364 1,688
FDIC Insurance Premiums ............................... 1,183 3,106 5,737
Other Operating Expenses .............................. 27,182 29,079 25,295
Merger Related Restructure Charge ..................... -- 21,613 --
SAIF Recapitalization Charge .......................... -- 8,350 --
------------------------------
Total Non-Interest Expense ........................ 122,736 142,997 92,820
------------------------------
Income Before Income Taxes ............................ 191,239 112,272 117,192
Provision for Income Taxes ............................ 71,929 49,830 49,850
------------------------------
Net Income ........................................ $119,310 $ 62,442 $ 67,342
==============================
Earnings Per Share--Basic ............................. $ 1.81 $ 0.98 $ 1.05
Earnings Per Share--Diluted ........................... $ 1.80 $ 0.97 $ 1.05
</TABLE>
See accompanying notes to consolidated financial statements.
26 NORTH FORK BANCORPORATION
<PAGE> 30
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
--------------------------
(in thousands, except per share amounts)
<S> <C> <C>
Assets
Cash & Due from Banks .............................................................. $ 152,963 $ 150,365
Interest Earning Deposits .......................................................... 7,787 2,298
Federal Funds Sold ................................................................. 4,000 115,000
Securities:
Available-for-Sale ............................................................... 1,660,714 857,391
Held-to-Maturity (Fair value $1,120,660 in 1997; $1,293,472 in 1996) ............ 1,118,468 1,300,115
--------------------------
Total Securities ................................................................. 2,779,182 2,157,506
--------------------------
Loans .............................................................................. 3,714,650 3,194,086
Less: Unearned Income ............................................................ 14,630 22,561
Allowance for Loan Losses ...................................................... 55,698 53,894
--------------------------
Net Loans ...................................................................... 3,644,322 3,117,631
--------------------------
Intangible Assets .................................................................. 96,398 82,073
Premises & Equipment ............................................................... 64,514 65,530
Accrued Income Receivable .......................................................... 45,379 37,392
Other Real Estate .................................................................. 4,580 1,898
Other Assets ....................................................................... 30,307 20,834
--------------------------
Total Assets ................................................................... $ 6,829,432 $ 5,750,527
==========================
Liabilities and Stockholders' Equity
Demand Deposits .................................................................... $ 905,650 $ 734,907
Savings, N.O.W. & Money Market Deposits ........................................... 2,007,966 1,974,570
Other Time Deposits ................................................................ 1,385,434 1,416,220
Certificates of Deposit, $100,000 & Over ........................................... 338,141 343,813
--------------------------
Total Deposits ................................................................. 4,637,191 4,469,510
--------------------------
Federal Funds Purchased & Securities Sold Under Agreements to Repurchase ........... 1,263,705 621,789
Other Borrowings ................................................................... 36,000 35,000
Accrued Expenses & Other Liabilities ............................................... 91,446 67,060
--------------------------
Total Liabilities .............................................................. $ 6,028,342 $ 5,193,359
--------------------------
Capital Securities ................................................................. $ 199,264 $ 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;
67,619,044 shares in 1997; 65,199,008 shares in 1996 ............................. 169,048 81,499
Additional Paid in Capital ......................................................... 148,805 180,809
Retained Earnings .................................................................. 287,765 206,895
Unrealized Gains/(Losses) on Securities Available-for-Sale, net of taxes ........... 15,610 (2,633)
Deferred Compensation .............................................................. (19,361) (5,193)
Treasury Stock at cost; 2,696 shares in 1997; 306,578 shares in 1996 ............... (41) (3,846)
--------------------------
Total Stockholders' Equity ..................................................... 601,826 457,531
--------------------------
Total Liabilities and Stockholders' Equity ..................................... $ 6,829,432 $ 5,750,527
==========================
</TABLE>
See accompanying notes to consolidated financial statements.
27 NORTH FORK BANCORPORATION
<PAGE> 31
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
-----------------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income ......................................................... $ 119,310 $ 62,442 $ 67,342
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Provision for Loan Losses .......................................... 6,000 6,800 11,825
Depreciation and Amortization ...................................... 8,153 8,377 5,850
Amortization of Intangible Assets .................................. 7,292 6,364 1,688
Amortization of Securities Premiums ................................ 7,887 9,938 9,556
Accretion of Discounts and Net Deferred Loan Fees .................. (5,089) (3,797) (4,021)
Proceeds from Sales of Securities Held-for-Trading ................. 10,125 -- 40,920
Purchases of Securities Held-for-Trading ........................... (9,670) -- (40,853)
Net Securities Gains ............................................... (6,227) (1,878) (6,734)
Change in Other Assets and Liabilities ............................. (1,025) 30,078 10,535
-----------------------------------------------
Net Cash Provided by Operating Activities ........................ 136,756 118,324 96,108
-----------------------------------------------
Cash Flows from Investing Activities:
Maturities, Redemptions, Calls and Principal Repayments
on Securities Held-to-Maturity ................................... 197,187 134,640 229,299
Purchases of Securities Held-to-Maturity ........................... (17,749) (235,939) (87,631)
Proceeds from Sales of Securities Available-for-Sale ............... 214,748 634,588 103,510
Maturities and Principal Repayments on Securities Available-for-Sale 234,405 338,524 132,352
Purchases of Securities Available-for-Sale ......................... (1,216,436) (824,248) (812,271)
Loans Originated and Principal Repayments on Loans, Net ............ (460,410) (463,874) (81,145)
Proceeds from the Sale of Loans .................................... 42,536 35,148 22,595
Purchases of Loans ................................................. -- (161,777) --
Transfers to and Sales of Other Real Estate, Net ................... (2,956) 5,376 4,556
Purchases of Premises and Equipment ................................ (4,395) (5,413) (11,263)
Purchase Acquisitions, Net of Cash Paid ............................ 56,147 595,650 10,868
-----------------------------------------------
Net Cash (Used in)/Provided by Investing Activities .............. (956,923) 52,675 (489,130)
-----------------------------------------------
Cash Flows from Financing Activities:
Net Increase/(Decrease) in Customer Deposit Liabilities ............ 8,103 (206,825) 110,116
Net Increase in Borrowings ......................................... 641,916 11,130 355,494
Proceeds from the Issuance of Capital Securities ................... 99,614 99,637 --
Treasury Stock Activity, net ....................................... (38) (22,566) (1,316)
Common Stock Sold for Cash ......................................... 3,855 28,906 11,723
Dividends Paid to Shareholders ..................................... (36,196) (23,174) (15,435)
-----------------------------------------------
Net Cash Provided by/(Used in) Financing Activities .............. 717,254 (112,892) 460,582
-----------------------------------------------
Net (Decrease)/Increase in Cash and Cash Equivalents ............. (102,913) 58,107 67,560
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 81,249
-----------------------------------------------
Cash and Cash Equivalents at End of Year ........................... $ 164,750 $ 267,663 $ 148,809
===============================================
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest Expense ................................................. $ 201,454 $ 178,392 $ 130,386
===============================================
Income Taxes ..................................................... $ 36,597 $ 20,669 $ 39,696
===============================================
Non-Cash investing and financing transactions related
to the Company's purchase acquisitions that are not
reflected in the Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996, and
1995 are as follows:
Fair Value of Assets Acquired .................................. $ 177,085(1) $ 920,047(2) $ 105,483(3)
Intangible Assets .............................................. 21,515 61,072 5,948
Cash Paid ...................................................... (3,009) (47,000) (8,512)
Common Stock Issued ............................................ (34,420) -- --
Other Non-Monetary Consideration ............................... -- -- (11,695)
-----------------------------------------------
Liabilities Assumed ............................................ $ 161,171 $ 934,119 $ 91,224
===============================================
</TABLE>
See accompanying notes to consolidated financial statements.
(1) In December 1997, the Company acquired all of the outstanding common stock
of Branford Savings Bank. Each share of Branford's common stock was
exchanged for .1957 shares of the Company's common stock and the Company
made a cash payment to the holder of Branford's outstanding warrants.
(2) In March 1996, the Company acquired the domestic commercial banking
business of Extebank and assumed $572 million in deposit liabilities from
First Nationwide Bank.
(3) In July 1995, the Company acquired all the outstanding common stock of
Great Neck Bancorp for cash and other consideration.
28 NORTH FORK BANCORPORATION
<PAGE> 32
CONSOLIDATED STATEMENTS OF CHANGES
IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNREALIZED
ADDITIONAL SECURITIES
COMMON PAID IN RETAINED GAINS/
THREE YEARS ENDED DECEMBER 31, 1997 STOCK CAPITAL EARNINGS (LOSSES)
----------------------------------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Balance, January 1, 1995 ................................... $ 75,288 $ 163,144 $ 121,778 $ (3,307)
Net Income ................................................. -- -- 67,342 --
Cash Dividends (The Company $.275 per share) ............... -- -- (13,648) --
Cash Dividends--North Side (1) ............................. -- -- (3,209) --
North Side Payment of 5% Stock Dividend (708,428 shares) (2) 886 3,998 (4,884) --
Issuance of Stock (1,775,516 shares) ....................... 2,218 4,952 -- --
Exercise of Warrants (1,975,714 shares) .................... 2,470 3,138 -- --
Deferred Compensation Activity:
Restricted Stock Activity, net (83,196 shares) ........... -- 135 -- --
Other Deferred Compensation Plans Activity,
net (113,606 shares) ..................................... -- 250 -- --
Purchase of Treasury Stock (151,680 shares) ................ -- -- -- --
Adjustment to Unrealized Gains/(Losses) on Securities
Available-for-Sale, net of taxes ......................... -- -- -- 7,816
----------------------------------------------
Balance, December 31, 1995 ................................. $ 80,862 $ 175,617 $ 167,379 $ 4,509
Net Income ................................................. -- -- 62,442 --
Cash Dividends (The Company $.425 per share) ............... -- -- (22,721) --
Cash Dividends--North Side (1) ............................. -- -- (6,039) --
Issuance of Stock (2,607,362 shares) ....................... 1,574 11,300 -- --
Deferred Compensation Activity:
Restricted Stock Activity, net (263,984 shares) .......... -- 1,450 -- --
Amortization of Other Deferred Compensation Plans ........ -- -- -- --
Purchase of Treasury Stock (1,845,800 shares) .............. -- -- -- --
North Side Common Stock Retirement (749,992 shares) (3) .... (936) (7,549) -- --
North Side Fractional Shares Adjustment .................... (1) (9) -- --
North Side Net Income for the Three Months
Ended December 31, 1995 .................................. -- -- 5,834 --
Adjustment to Unrealized Gains/(Losses) on Securities
Available-for-Sale, net of taxes ......................... -- -- -- (7,142)
----------------------------------------------
Balance, December 31, 1996 ................................. $ 81,499 $ 180,809 $ 206,895 $ (2,633
Net Income ................................................. -- -- 119,310 --
Cash Dividends ($.575 per share) ........................... -- -- (38,226) --
Issuance of Stock for the Two-for-One Stock Split
(32,976,384 shares) ...................................... 82,441 (82,441) -- --
Issuance of Stock--Branford Acquisition (1,282,901 shares) . 3,207 31,213 -- --
Issuance of Stock (967,935 shares) ......................... 1,478 7,688 -- --
Restricted Stock Activity, net (474,768 shares) ............ 423 11,536 -- --
Amortization of Unrealized Loss Upon Transfer of Securities
from Available-for-Sale to Held-to-Maturity, net of taxes -- -- (214) (331)
Adjustment to Unrealized Gains/(Losses) on Securities
Available-for-Sale, net of taxes ......................... -- -- -- 18,574
----------------------------------------------
Balance, December 31, 1997 ................................. $ 169,048 $ 148,805 $ 287,765 $ 15,610
==============================================
<CAPTION>
DEFERRED
COMPEN- TREASURY
THREE YEARS ENDED DECEMBER 31, 1997 SATION STOCK TOTAL
-----------------------------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Balance, January 1, 1995 ................................... $ (955) (27) $ 355,921
Net Income ................................................. -- -- 67,342
Cash Dividends (The Company $.275 per share) ............... -- -- (13,648)
Cash Dividends--North Side (1) ............................. -- -- (3,209)
North Side Payment of 5% Stock Dividend (708,428 shares) (2) -- -- --
Issuance of Stock (1,775,516 shares) ....................... -- -- 7,170
Exercise of Warrants (1,975,714 shares) .................... -- -- 5,608
Deferred Compensation Activity:
Restricted Stock Activity, net (83,196 shares) ........... (712) 690 113
Other Deferred Compensation Plans Activity,
net (113,606 shares) .................................... 82 -- 332
Purchase of Treasury Stock (151,680 shares) ................ -- (1,316) (1,316)
Adjustment to Unrealized Gains/(Losses) on Securities
Available-for-Sale, net of taxes ......................... -- -- 7,816
-----------------------------------
Balance, December 31, 1995 ................................. $ (1,585) (653) $ 426,129
Net Income ................................................. -- -- 62,442
Cash Dividends (The Company $.425 per share) ............... -- -- (22,721)
Cash Dividends--North Side (1) ............................. -- -- (6,039)
Issuance of Stock (2,607,362 shares) ....................... -- 16,477 29,351
Deferred Compensation Activity:
Restricted Stock Activity, net (263,984 shares) .......... (4,174) 2,896 172
Amortization of Other Deferred Compensation Plans ........ 566 -- 566
Purchase of Treasury Stock (1,845,800 shares) .............. -- (22,566) (22,566)
North Side Common Stock Retirement (749,992 shares) (3) .... -- -- (8,485)
North Side Fractional Shares Adjustment .................... -- -- (10)
North Side Net Income for the Three Months
Ended December 31, 1995 .................................. -- -- 5,834
Adjustment to Unrealized Gains/(Losses) on Securities
Available-for-Sale, net of taxes ......................... -- -- (7,142)
-----------------------------------
Balance, December 31, 1996 ................................. $ (5,193) (3,846) $ 457,531
Net Income ................................................. -- -- 119,310
Cash Dividends ($.575 per share) ........................... -- -- (38,226)
Issuance of Stock for the Two-for-One Stock Split
(32,976,384 shares) ...................................... -- -- --
Issuance of Stock--Branford Acquisition (1,282,901 shares) . -- -- 34,420
Issuance of Stock (967,935 shares) ......................... -- -- 9,166
Restricted Stock Activity, net (474,768 shares) ............ (14,168) 3,805 1,596
Amortization of Unrealized Loss Upon Transfer of Securities
from Available-for-Sale to Held-to-Maturity, net of taxes -- -- (545)
Adjustment to Unrealized Gains/(Losses) on Securities
Available-for-Sale, net of taxes ......................... -- -- 18,574
-----------------------------------
Balance, December 31, 1997 ................................. $ (19,361) (41) $ 601,826
===================================
</TABLE>
See accompanying notes to consolidated financial statements.
(1) Represents dividends declared by North Side prior to merger.
(2) Represents North Side's 5% stock dividend declared prior to merger.
(3) Reflects the retirement of North Side common shares previously held by the
Company.
29 NORTH FORK BANCORPORATION
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BASIS OF PRESENTATION
North Fork Bancorporation, Inc. (the "Company"), through its banking
subsidiaries, North Fork Bank ("North Fork") and Branford Savings Bank
("Branford"), provides a variety of banking and financial services to middle
market and small business organizations, local governmental units, and retail
customers in the metropolitan New York area and the Connecticut county of New
Haven.
The consolidated financial statements include the accounts of the Company
and its banking and non-bank subsidiaries. In December 1996, North Side Savings
Bank ("North Side"), was merged with and into the Company in a
pooling-of-interests transaction and, accordingly, the Company's consolidated
financial statements include the consolidated accounts of North Side for all
periods reported. The Company reports its financial results on a calendar year
basis, whereas North Side had reported its financial results on a fiscal year
basis which ended September 30. The consolidated financial results for 1996 were
adjusted to conform North Side's year-end with that of the Company. The
consolidated financial results for years prior to 1996 reflect the combination
of the Company at and for the years ended December 31 with North Side at and for
the years ended September 30.
The accounting and reporting policies of the Company 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.
Certain reclassification have been made to prior year amounts to conform to the
current year presentation.
(B) CASH EQUIVALENTS
For purposes of the Consolidated Statement of Cash Flows, cash and cash
equivalents includes Cash and Due from Banks, Interest Earning Deposits, Federal
Funds Sold and Securities Purchased Under Agreements to Resell, with a
contractual maturity of less than 90 days.
(C) SECURITIES AND TRADING ACCOUNT ASSETS
Securities that the Company has the positive intent and ability to hold to
maturity are classified as held-to-maturity and carried at amortized cost. Debt
securities that may be sold in response to, or in anticipation of, changes in
interest rates and resulting prepayment risk, or other factors, and marketable
equity securities, are classified as available-for-sale and carried at fair
value. The unrealized gains and losses on these securities are reported, net of
applicable taxes, as a separate component of stockholders' equity. Debt and
equity securities that are purchased and held principally for the purpose of
selling them in the near term are classified as trading account assets and
reported at fair value. The unrealized gains and losses on these securities are
reported as a component of other non-interest income. Management determines the
appropriate classification of securities at the time of purchase and at each
reporting date, management reassesses the appropriateness of the classification.
Interest income on securities, including amortization of premiums and
accretion of discounts, is recognized using the level yield method over the
lives of the individual securities. Realized gains and losses on sales of
securities are computed using the specific identification method. The cost bases
of individual held-to-maturity and available-for-sale securities are reduced
through write-downs to reflect other-than-temporary impairments in value.
(D) LOANS
Loans are generally carried at the principal amount outstanding, net of unearned
income and net deferred loan fees. Mortgage loans held-for-sale are valued at
the lower of aggregate cost or market value. Interest income is recognized using
the interest method or a method that approximates a level rate of return over
the loan term. Unearned income and net deferred loan fees are accreted into
interest income over the loan term as a yield adjustment.
(E) NON-ACCRUAL AND RESTRUCTURED LOANS
Loans are placed on non-accrual status when, in the opinion of management, there
is doubt as to the collectibility of interest or principal, or when principal
and interest is past due 90 days or more, the loan is not well secured and in
the process of collection. Interest and fees previously accrued, but not
collected, are reversed and charged against interest income at the time a loan
is placed
30 NORTH FORK BANCORPORATION
<PAGE> 34
on non-accrual status. Interest payments received on non-accrual loans are
recorded as reductions of principal if, in management's judgment, principal
repayment is doubtful. Loans may be reinstated to an accrual or performing
status if future payments of principal and interest are reasonably assured and
the loan has a demonstrated period of performance.
Loans are classified as restructured loans when the Company has granted,
for economic or legal reasons related to the borrower's financial difficulties,
concessions to the borrower that it would not otherwise consider. Generally,
this occurs when the cash flows of the borrower are insufficient to service the
loan under its original terms. Restructured loans 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 restructured status.
(F) ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses is based on a periodic analysis of the loan
portfolio and reflects an amount which, in management's judgment, is adequate to
provide for possible loan losses in the existing portfolio. In evaluating the
portfolio, management takes into consideration numerous factors, such as present
and potential risks of the loan portfolio, loan growth, prior loss experience,
current economic conditions and periodic examinations conducted by regulatory
agencies. Additionally, management utilizes the guidelines established under
Statement of Financial Accounting Standards No.114 to assess loan impairment.
The allowance is maintained at a level considered by management to be adequate
to cover reasonably foreseeable loan losses. While management uses available
information to estimate possible loan losses, future additions to the allowance
may be necessary based on adverse changes in economic conditions.
(G) PREMISES AND EQUIPMENT
Premises and equipment, including leasehold improvements, are stated at cost,
net of accumulated depreciation and amortization. Depreciation and amortization
are computed using the straight-line method over the estimated useful life of
the owned asset and, for leasehold improvements, over the estimated useful life
of the related asset or the lease term, whichever is shorter. Premises and
equipment are periodically reviewed for possible impairment when events or
changes in circumstances occur that may affect the underlying basis of the
assets.
(H) OTHER REAL ESTATE
Other real estate consists of property acquired through foreclosure or deed in
lieu of foreclosure. Other real estate is carried at the lower of the recorded
amount of the loan or the fair value of the property based on the current
appraised value adjusted for estimated disposition costs. Prior to foreclosure,
the recorded amount of the loan is written down, if necessary, to the fair value
of the real estate to be acquired by a charge to the allowance for loan losses.
Subsequent to foreclosure, gains and losses on the periodic revaluation of
real estate acquired, and gains and losses on the disposition of such
properties, are credited or charged to other real estate expense.
(I) INCOME TAXES
The Company provides for income taxes under the asset and liability method
whereby deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred
taxes of a change in tax rates is recognized in income in the period the change
occurs. Deferred tax assets are reduced, through a valuation allowance, if
necessary, by the amount of such benefits that are not expected to be realized
based on current available evidence.
The Company files consolidated income tax returns with substantially all
of its subsidiaries. Income tax expense and benefits are allocated among members
in the consolidated group based on a separate return basis.
(J) RETIREMENT AND BENEFIT PLANS
The Company has a non-contributory defined benefit pension plan covering
substantially all full-time employees. Annual pension expense is recognized over
the employee's expected service life utilizing the projected unit cost actuarial
method. Supplemental retirement benefits are provided for selected employees
where income tax limitations have been placed on the amount of retirement
benefits otherwise earned.
31 NORTH FORK BANCORPORATION
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
Post-retirement and post-employment benefits are recorded on an accrual
basis with an annual provision that considers an actuarially determined future
obligation.
(K) EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("SFAS 128") in December 1997. 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
with international EPS standards. SFAS 128 replaces the presentation of primary
and fully diluted EPS with basic and diluted 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 converted into common stock that then shared in the
earnings of the entity.
The weighted average number of common shares outstanding used in the
computation of Basic EPS was 65,914,124, 63,640,020, and 63,944,758 for the
years ended 1997, 1996, and 1995, respectively. The weighted average number of
common shares outstanding used in the computation of Diluted EPS was 66,395,227,
64,277,292, and 64,431,175 for the years ended 1997, 1996 and 1995,
respectively. The differential in the weighted average number of common shares
outstanding used in the computation of Basic and Diluted EPS represents the
average common stock equivalents of employee stock options. During 1995, a
portion of the aforementioned differential represented the average common stock
equivalents of outstanding warrants.
On February 25, 1997, the Company's Board of Directors approved a
two-for-one common stock split. The additional shares were issued on May 15,
1997 to shareholders of record on April 25, 1997. The par value of the Company's
common stock remained unchanged at $2.50. As a result, $82.4 million was
transferred from additional paid-in-capital to common stock to reflect this
issuance.
(L) INTANGIBLE ASSETS
Intangible assets consist of goodwill and core deposit intangibles associated
with purchase acquisitions. The Company records the acquired assets and
liabilities at fair value. The excess of the Company's cost over the fair value
of the net assets acquired is recorded as an intangible asset. The Company's
cost includes the consideration paid, the direct costs of the acquisition, such
as legal and investment banking fees, and qualifying costs to exit certain
activities and to terminate employees related to the acquisition. Indirect and
general expenses relating to the acquisition are expensed as incurred.
Goodwill is amortized on a straight line basis over the estimated periods
to be benefited, ranging from 15 to 25 years. Core deposit intangibles are
amortized on an accelerated method over the estimated benefit period which
approximates fourteen years. Intangible assets are reviewed for possible
impairment when certain events, such as significant business combinations, or
changes in strategy or other business developments occur that may affect the
underlying basis of the assets.
(M) OFF BALANCE-SHEET INSTRUMENTS
Periodically, the Company enters into interest rate contracts, including
interest rate caps, floors and swap agreements as part of its management of
interest rate exposure. These instruments are entered into as hedges against
interest rate risk and are designated against specific assets and liabilities.
To qualify as a hedge, the instrument must be designated as a hedge and
effective in reducing the market risk of an existing asset, liability or firm
commitment. The effectiveness of the hedge is evaluated on an initial and
ongoing basis using statistical calculations of correlation. The premium paid or
received for any of these instruments is amortized over the term of the
agreement. These instruments are accounted for on an accrual basis in the
interest income or expense category of the related hedged asset or liability. If
the asset or liability being hedged is disposed of, the market value of the
interest rate contract is included in the determination of the gain or loss from
disposition. At December 31, 1997 and 1996, the Company had no contracts or
agreements outstanding.
32 NORTH FORK BANCORPORATION
<PAGE> 36
NOTE 2 -- BUSINESS COMBINATIONS
COMPLETED ACQUISITIONS
(A) NORTH SIDE SAVINGS BANK
On December 31, 1996, the Company acquired North Side Savings Bank in a
transaction accounted for under the pooling-of-interests method of accounting.
Pursuant to the merger agreement, the Company issued 15.1 million shares of its
common stock to North Side shareholders. North Side had $1.6 billion in total
assets, $1.2 billion in deposit liabilities, and $124.4 million in capital at
December 31, 1996.
In connection with the merger, the Company recorded a pre-tax charge for
merger and related restructure costs of $21.6 million in 1996. As of December
31, 1997, all cash payments associated with this charge have been made except
for certain rent payments due under long-term leases.
(B) BRANFORD SAVINGS BANK
In December 1997, the Company completed its purchase acquisition of Branford
Savings Bank ("Branford"), a Connecticut chartered savings bank. At December 31,
1997, Branford had total assets of $179 million, deposits of $160 million, and
stockholder's equity of $16.6 million. Branford operates through five full
service branch locations in the Connecticut county of New Haven. The Company
issued 1,282,901 shares of its common stock to Branford shareholders and paid
cash in the amount of $3 million to the holder of Branford's outstanding
warrants. The excess of cost over the fair value of net assets acquired was
$21.5 million and will be amortized on a straight-line basis over 15 years. The
operating results of Branford are not significant to the consolidated financial
statements of the Company.
PENDING ACQUISITION
(A) NEW YORK BANCORP
On October 7, 1997, the Company entered into an agreement and plan of merger
with New York Bancorp, the parent company of Home Federal Savings Bank, ("Home
Federal") whereby it would acquire New York Bancorp in a stock-for-stock
exchange. Under the terms of the agreement, each share of New York Bancorp
common stock will be converted into the Company's common stock at a fixed
exchange ratio of 1.19. The agreement permits New York Bancorp to terminate the
transaction if the average closing price of the Company's shares falls below
$25.50 for the ten consecutive trading days ending on the date on which the last
of all regulatory approvals required to consummate the transaction contemplated
by the merger agreement is obtained, unless the Company elects to increase the
exchange ratio so that the value of the Company's common stock to be received,
in respect to each New York Bancorp common share, is not less than $30.35. The
Company also received an option to acquire up to 19.9% of New York Bancorp's
outstanding shares at $30.50 per share should certain events occur as set forth
in the stock option agreement between the Company and New York Bancorp.
The transaction is expected to be treated as a tax-free reorganization and
accounted for using the pooling-of-interests method of accounting. It is
anticipated that the transaction will close on March 27, 1998, following receipt
of all required regulatory approvals and certain other customary closing
conditions. On January 30, 1998, the shareholders of both companies voted to
approve the merger.
New York Bancorp had total assets of $3.3 billion, net loans of $2.0
billion, deposits of $1.7 billion, and stockholders' equity of $178 million at
December 31, 1997. Home Federal operates 35 branch offices throughout Kings,
Queens, Richmond, Nassau, and Suffolk counties of New York.
33 NORTH FORK BANCORPORATION
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The following pro forma financial statements set forth certain selected
condensed financial information for the Company and New York Bancorp on an
unaudited combined basis, assuming the transaction was completed in 1998.
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
AT DECEMBER 31, 1997 1996
-------------------------
(in thousands)
<S> <C> <C>
Assets:
Cash & Due from Banks .................................................. $ 187,055 $ 165,708
Federal Funds Sold & Securities Purchased Under Agreements to Resell ... 4,000 125,700
Securities ............................................................. 3,919,932 3,153,466
Loans, net of Unearned Income .......................................... 5,739,131 5,044,073
Allowance for Loan Losses .............................................. 74,393 73,280
-------------------------
Net Loans .............................................................. 5,664,738 4,970,793
-------------------------
Intangible Assets ...................................................... 96,398 82,073
Other Assets ........................................................... 201,509 193,694
-------------------------
Total Assets .......................................................... $10,073,632 $ 8,691,434
=========================
Liabilities and Stockholders' Equity:
Demand Deposits ........................................................ $ 948,458 $ 771,920
Savings, N.O.W. & Money Market Deposits ................................ 3,008,839 2,970,502
Time Deposits .......................................................... 2,380,642 2,457,438
-------------------------
Total Deposits ......................................................... 6,337,939 6,199,860
-------------------------
Federal Funds Purchased & Securities Sold Under Agreements to Repurchase 2,104,036 1,075,487
Other Borrowings ....................................................... 449,600 590,088
Accrued Expenses & Other Liabilities ................................... 211,904 116,928
-------------------------
Total Liabilities ...................................................... $ 9,103,479 $ 7,982,363
-------------------------
Capital Securities ..................................................... 199,264 99,637
Stockholders' Equity ................................................... 770,889 609,434
-------------------------
Total Liabilities and Stockholders' Equity ............................ $10,073,632 $ 8,691,434
=========================
</TABLE>
34 NORTH FORK BANCORPORATION
<PAGE> 38
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1997 1996 1995
------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Interest Income ..................................... $723,370 $612,798 $529,464
Interest Expense .................................... 326,803 281,107 242,129
------------------------------
Net Interest Income ................................. 396,567 331,691 287,335
Provision for Loan Losses ........................... 8,100 8,000 13,525
------------------------------
Net Interest Income after Provision for Loan Losses 388,467 323,691 273,810
Non-Interest Income ................................. 51,970 39,566 30,470
Net Securities Gains ................................ 8,407 6,224 5,886
Non-Interest Expense ................................ 173,709 161,032 142,671
SAIF Recapitalization Charge ........................ -- 17,782 --
Merger Related Restructure Charges .................. -- 21,613 19,024
------------------------------
Income Before Income Taxes .......................... 275,135 169,054 148,471
Provision for Income Taxes .......................... 104,614 74,606 69,567
------------------------------
Net Income ........................................ $170,521 $ 94,448 $ 78,904
==============================
Earnings Per Share-Diluted .......................... $ 1.82 $ 1.02 $ 0.82
Weighted Average Shares Outstanding-Diluted ......... 93,535 92,706 96,153
</TABLE>
(1) New York Bancorp's annual reporting period is as of and for the year ended
September 30, whereas the Company utilizes a calendar year basis. The pro
forma condensed combined financial statements reflect the combination of
the Company at and for the years ended December 31 with New York Bancorp
at and for the years ended September 30 for all periods presented.
In connection with the merger, New York Bancorp will reissue approximately
800,000 shares of its treasury stock prior to consummation of the merger, in
order that the merger will not fail to qualify for pooling-of-interest
accounting treatment by virtue of the number of shares of New York Bancorp
treasury stock. It is currently expected that the shares will be reissued on or
about the merger date. The pro forma financial statements shown above do not
give effect to the reissuance.
Additionally, the Company will recognize, at the merger date, a
non-recurring merger and related restructuring charge of approximately $34.4
million, net of taxes. Merger expenses will consist primarily of investment
banking, legal, and other professional fees. Restructure related expenses will
consist primarily of severance and other employee related costs, facility and
system costs associated with lease termination charges and equipment write-offs
resulting from the consolidation of overlapping branch locations and duplicate
headquarter and operational facilities, costs associated with the cancellation
of certain data and item processing contracts, and the recapture of New York
Bancorp's state and local tax bad debt reserves. The pro forma financial
statements shown above have not been adjusted to reflect this non-recurring
charge.
The pro forma Tier I, total risk based and leverage capital ratios of the
combined Company were 14.86%, 16.09%, and 8.39%, respectively, at December 31,
1997.
Management 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 the Company's existing
interest rate risk position.
35 NORTH FORK BANCORPORATION
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTE 3 -- SECURITIES
HELD-TO-MATURITY SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of held-to-maturity securities were as follows at December
31,
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------------------------------------------------
GROSS GROSS GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
(in thousands) COST GAINS (LOSSES) VALUE COST GAINS (LOSSES) VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-Backed
Securities ............ $ 403,646 $2,110 $(1,660) $ 404,096 $ 463,760 $2,241 $ (4,264) $ 461,737
CMO Private Issuances ... 466,100 1,752 (2,308) 465,544 546,513 883 (5,191) 542,205
CMO Agency Issuances .... 124,386 784 (115) 125,055 152,541 366 (539) 152,368
State & Municipal
Obligations ........... 114,511 1,702 (114) 116,099 121,945 583 (864) 121,664
U.S. Government Agencies'
Obligations ........... 96 -- -- 96 2,601 -- -- 2,601
Other Securities ........ 9,729 74 (33) 9,770 12,755 144 (2) 12,897
-------------------------------------------------------------------------------------------------------
$1,118,468 $6,422 $(4,230) $1,120,660 $1,300,115 $4,217 $(10,860) $1,293,472
=======================================================================================================
</TABLE>
AVAILABLE-FOR-SALE SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses and
estimated fair values of available-for-sale securities were as follows at
December 31,
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------------------------------------------------------------
GROSS GROSS GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR AMORTIZED UNREALIZED UNREALIZED FAIR
(in thousands) COST GAINS (LOSSES) VALUE COST GAINS (LOSSES) VALUE
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage-Backed
Securities ............ $ 686,574 $ 6,270 $(212) $ 692,632 $616,721 $2,435 $(4,083) $615,073
CMO Private Issuances ... 593,366 4,657 (76) 597,947 17,295 43 (42) 17,296
CMO Agency Issuances .... 12,125 269 -- 12,394 14,286 170 -- 14,456
U.S. Government Agencies'
Obligations ........... 136,441 3,563 -- 140,004 94,262 -- (1,011) 93,251
U.S. Treasury Securities 32,963 156 -- 33,119 78,760 93 (1,863) 76,990
Equity Securities ....... 113,304 9,280 (427) 122,157 39,728 721 (124) 40,325
Other Securities ........ 57,972 4,492 (3) 62,461 -- -- -- --
-------------------------------------------------------------------------------------------------------
$1,632,745 $28,687 $(718) $1,660,714 $861,052 $3,462 $(7,123) $857,391
=======================================================================================================
</TABLE>
Collateralized mortgage obligations ("CMO") securities, collateralized by
either U.S. Government agency mortgage-backed securities ("MBS") or whole loans,
are principally current pay sequentials or PAC structures with a current
weighted average life of 2.5 years.
36 NORTH FORK BANCORPORATION
<PAGE> 40
The amortized cost and estimated fair value of securities at December 31,
1997, by contractual maturity, are presented in the table below. Expected
maturities will differ from contractual maturities since issuers may have the
right to call or prepay obligations without call or prepayment penalties.
<TABLE>
<CAPTION>
HELD-TO-MATURITY AVAILABLE-FOR-SALE
-------------------------------------------------
AMORTIZED FAIR AMORTIZED FAIR
(in thousands) COST VALUE COST VALUE
-------------------------------------------------
<S> <C> <C> <C> <C>
Due in one year or less .............. $ 10,121 $ 10,120 $ 12,235 $ 12,241
Due after one year through five years 43,563 44,074 19,916 20,066
Due after five years through ten years 70,404 71,506 136,441 140,004
Due after ten years .................. 248 265 58,784 63,273
-------------------------------------------------
Subtotal ............................. 124,336 125,965 227,376 235,584
Mortgage-Backed Securities ........... 403,646 404,096 686,574 692,632
CMO's ................................ 590,486 590,599 605,491 610,341
Equity Securities .................... -- -- 113,304 122,157
-------------------------------------------------
$1,118,468 $1,120,660 $1,632,745 $1,660,714
=================================================
</TABLE>
The prepayment of MBS's and CMO's is actively monitored through the
portfolio management function. Management typically invests in MBS's and CMO'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.
The proceeds, gross realized gains and gross realized losses on the sale
of securities available-for-sale were as follows at December 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
--------------------------------------
<S> <C> <C> <C>
Proceeds from Sales ............... $214,748 $634,588 $103,510
======================================
Gross Realized Gains .............. 7,163 4,491 7,102
Gross Realized (Losses) ........... (936) (2,613) (368)
--------------------------------------
Net Realized Gains/(Losses) ....... $ 6,227 $ 1,878 $ 6,734
======================================
</TABLE>
Gross realized gains in 1997 and 1996 resulted principally from the sale
of equity positions in certain financial institutions. At December 31, 1997,
held-to-maturity securities carried at $418.3 million and available-for-sale
securities carried at $1.2 billion were pledged for various purposes as required
by law and to secure securities sold under agreements to repurchase and other
borrowings. At December 31, 1996, held-to-maturity securities carried at $358.0
million and available-for-sale securities carried at $603.5 million were
similarly pledged as collateral.
NOTE 4 -- LOANS
The composition of the loan portfolio is summarized as follows at December 31,
<TABLE>
<CAPTION>
% %
(dollars in thousands) 1997 of Total 1996 of Total
---------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Loans-Multi-family ... $1,169,299 32% $ 956,718 30%
Mortgage Loans-Residential .... 1,012,792 27% 985,983 31%
Mortgage Loans-Commercial ..... 742,881 20% 635,042 20%
Commercial & Industrial ....... 433,388 12% 347,437 11%
Consumer Loans and Leases ..... 312,113 8% 219,127 7%
Construction and Land Loans ... 44,177 1% 49,779 1%
---------------------------------------------
Total ....................... $3,714,650 100% $3,194,086 100%
Less: Unearned Income ......... 14,630 22,561
---------- ----------
Loans, net of unearned income $3,700,020 $3,171,525
========== ==========
</TABLE>
37 NORTH FORK BANCORPORATION
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The loan portfolio is principally located in the metropolitan New York
area and to a lesser extent, the Connecticut county of New Haven. The risk
inherent in this portfolio is dependent not only upon regional and general
economic stability which affects property values, but also the financial
well-being and creditworthiness of the borrowers. Loans outstanding totaled $3.7
billion at December 31, 1997, an increase of $521 million or 16% from the 1996
year end level of $3.2 billion, of which approximately $114 million was acquired
from Branford. Branford's loan portfolio is comprised primarily of residential
and commercial mortgages. Aggregate loan growth during 1997 consisted of a 22.2%
increase in multi-family mortgage loans to $1.2 billion, a 42.4% increase in
consumer loans and leases to $312.1 million, a 17% increase in commercial
mortgage loans to $742.8 million, a 24.7% increase in commercial loans to $433.3
million, and a 2.7% increase in residential mortgage loans to $1.0 billion at
December 31, 1997.
To minimize the credit risk related to the portfolio's real estate
concentration, management utilizes prudent underwriting standards as well as
diversifying the type and locations of loan placements. The multi-family lending
business includes loans on various types and geographically diverse apartment
complexes. Multi-family mortgages are dependent largely on sufficient income to
cover operating expenses and may be affected by government regulation, such as
rent control regulations, which could impact the future cash flows of the
property. Most multi-family mortgages do not fully amortize. Therefore, the
principal outstanding is not significantly reduced prior to contractual
maturity. The residential mortgage portfolio is comprised primarily of first
mortgage loans on owner occupied 1-4 family residences located in the
metropolitan New York area. The commercial mortgage portfolio contains loans
secured by professional office buildings, retail stores, shopping centers and
industrial developments. Land loans are used to finance the acquisition of
vacant land for future residential and commercial development. Construction
loans principally finance the construction of industrial developments and
single-family subdivisions. Commercial loans consist primarily of loans to small
and medium size businesses. Consumer loans and leases represent credit to
individuals for household, family, and other personal expenditures and consist
primarily of loans to finance new and used automobiles.
The Company's real estate underwriting standards include various limits on
the loan to value ratios based on the type of property, and management considers
among other things, the creditworthiness of the borrower, the location of the
real estate, the condition and value of the security property, the quality of
the organization managing the property, and the viability of the project
including occupancy rates, tenants and lease terms. Additionally, the
underwriting standards require appraisals and periodic inspections of the
properties, as well as ongoing monitoring of operating results.
Mortgage loans serviced for others aggregated $358.0 million and $427.2
million as of December 31, 1997 and 1996, respectively. At December 31, 1997,
the Company had $4.3 million in residential mortgage loans held-for-sale.
NON-PERFORMING ASSETS
Non-performing assets include loans ninety days past due and still accruing,
non-accrual loans and other real estate. Other real estate consists of property
acquired through foreclosure or deeds in lieu of foreclosure. Non-performing
assets declined to $20.0 million at December 31, 1997, as compared to $22.2
million at December 31, 1996. This reduction was achieved principally through
the sale of approximately $4.8 million in non-performing assets against which
the Company recognized a $1.7 million charge to the allowance and loan losses.
This reduction was partially offset by $1.2 million in non-performing assets
acquired in the Branford acquisition.
Non-performing assets at December 31, consisted of the following:
<TABLE>
<CAPTION>
(in thousands) 1997 1996
--------------------
<S> <C> <C>
Loans Ninety Days Past Due and Still Accruing ........ $ 1,713 $ 2,596
Non-Accrual Loans .................................... 13,692 17,745
--------------------
Non-Performing Loans ................................. 15,405 20,341
Other Real Estate .................................... 4,580 1,898
--------------------
Non-Performing Assets ................................ $19,985 $22,239
====================
</TABLE>
Non-performing loans at December 31, 1997 consisted of $5.7 million in
residential mortgages, $4.1 million in commercial mortgages, $3.4 million in
commercial loans, $1.2 million in construction and land development loans, and
$1.0 million in consumer loans and leases. Non-performing loans at December 31,
1996 consisted of $7.3 million in commercial loans, $5.1 million in residential
mortgages, $4.1 million in commercial mortgages, $2.5 million in construction
and land development loans, $.8 million in multi-family mortgages and $.5
million in consumer loans and leases.
38 NORTH FORK BANCORPORATION
<PAGE> 42
Interest foregone on non-accrual loans, or the amount of income that would
have been earned had those loans remained performing, aggregated $1.4 million,
$2.4 million, and $3.8 million in 1997, 1996, and 1995, respectively.
RESTRUCTURED LOANS
Restructured, accruing loans were $9.6 million and $13.7 million at December 31,
1997 and 1996, respectively. The decline in the level of restructured, accruing
loans was achieved through principal repayments, maturities, and the
satisfaction of the performance requirements on certain of these loans during
1997. The amount of interest income recorded on restructured loans was
approximately $.7 million, $1.0 million, and $3.1 million in 1997, 1996, and
1995, respectively. The difference between interest income included in the
results of operations under the restructured terms, and that amount which would
have been recognized had these loans performed in accordance with their original
terms, was immaterial.
At December 31, 1997, the Company had no commitments to lend additional
funds to borrowers whose loans are non-performing or whose terms have been
previously restructured.
RELATED PARTY LOANS
Loans to related parties include loans to directors and their related companies
and executive officers of the Company and its subsidiaries. Such loans are made
in the ordinary course of business on substantially the same terms as loans to
other individuals and businesses of comparable risks. Related party loans
aggregated $2.6 million and $1.5 million at December 31, 1997 and 1996,
respectively.
NOTE 5 -- ALLOWANCE FOR LOAN LOSSES
A summary of changes in the allowance for loan losses is shown below for the
years ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
-------------------------------
<S> <C> <C> <C>
Balance at Beginning of Year ....................................... $53,894 $56,627 $61,247
Provisions for Loan Losses ......................................... 6,000 6,800 11,825
Recoveries Credited to the Allowance ............................... 2,404 2,610 3,914
-------------------------------
62,298 66,037 76,986
Losses Charged to the Allowance .................................... (9,094) (15,425) (20,851)
Additional Allowance Acquired in Purchase Acquisitions ............. 2,494 3,092 492
North Side Net Activity for the Three Months Ended December 31, 1995 -- 190 --
-------------------------------
Balance at End of Year ............................................. $55,698 $53,894 $56,627
===============================
</TABLE>
NOTE 6 -- PREMISES AND EQUIPMENT
The following is a summary of premises and equipment at December 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996
----------------------
<S> <C> <C>
Land ............................................. $15,478 $15,599
Bank Premises .................................... 41,924 40,861
Leasehold Improvements ........................... 16,098 13,915
Equipment ........................................ 43,073 44,278
----------------------
116,573 114,653
Accumulated Depreciation and Amortization ........ (52,059) (49,123)
----------------------
$64,514 $65,530
======================
</TABLE>
39 NORTH FORK BANCORPORATION
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTE 7 -- FEDERAL FUNDS PURCHASED & SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE
The following is a summary of federal funds purchased and securities sold under
agreements to repurchase at and for the years ended December 31,
<TABLE>
<CAPTION>
(dollars in thousands) 1997 1996 1995
----------------------------------
<S> <C> <C> <C>
Federal Funds Purchased
Period End Balance ........................ $ 40,000 $ -- $ --
Maximum Amount Outstanding at Any Month End 80,000 90,000 60,000
Average Outstanding Balance ............... 27,563 34,756 11,133
Weighted Average Interest Rate Paid ....... 5.66% 5.51% 5.89%
Weighted Average Interest Rate at Year End 6.81% -- --
Securities Sold Under Agreements
to Repurchase
Period End Balance ........................ $1,223,705 $621,789 $642,369
Accrued Interest Payable at Period End .... 4,859 1,604 2,422
Maximum Amount Outstanding at Any Month End 1,425,549 961,626 859,869
Average Outstanding Balance ............... 1,152,590 576,204 339,260
Weighted Average Interest Rate Paid ....... 5.97% 5.71% 5.88%
Weighted Average Interest Rate at Year End 5.95% 5.79% 5.97%
</TABLE>
Qualifying repurchase agreements are treated as financings and the
obligations to repurchase securities sold are reflected as a liability in the
balance sheet. The dollar amount of securities underlying the agreements remains
in the asset accounts, although the securities underlying the agreements are
delivered to the brokers who arranged the transactions. In certain instances,
the broker may have sold, loaned, or disposed of the securities to other parties
in the normal course of their operations, and have agreed to resell to the
Company substantially similar securities at the maturity of the agreements.
The following is a summary of the amortized cost and fair value of assets
sold under agreements to repurchase, in addition to the amounts of and interest
rates on the related borrowings.
<TABLE>
<CAPTION>
MORTGAGE-BACKED SECURITIES(1) U.S. GOVERNMENT AGENCIES(1)
---------------------------------------------------------------------------------------------------
AMORTIZED FAIR REPURCHASE AVERAGE AMORTIZED FAIR REPURCHASE AVERAGE
(dollars in thousands) COST VALUE LIABILITY(2) RATE COST VALUE LIABILITY(2) RATE
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Up to 30 Days ..... $ 85,059 $ 85,832 $ 81,355 5.97% $ -- $ -- $ -- --
30 to 90 Days ..... -- -- -- -- -- -- -- --
90 Days to 1 Year . 205,648 206,912 200,000 5.99% -- -- -- --
In Excess of 1 Year 856,739 862,917 814,000 5.95% 135,030 138,565 128,350 5.90%
---------------------------------------------------------------------------------------------------
Total ........... $1,147,446 $1,155,661 $1,095,355 5.98% $135,030 $138,565 $128,350 5.90%
===================================================================================================
</TABLE>
(1) Excludes accrued interest receivable of $7.0 million and $2.1 million in
mortgage-backed securities and U.S. government agencies, respectively,
securing the related repurchase agreements.
(2) Excludes accrued interest payable.
40 NORTH FORK BANCORPORATION
<PAGE> 44
NOTE 8 -- OTHER BORROWINGS
The Company has outstanding a $25.0 million, 7.56% Senior Note (the "Note") due
April 20, 1999. The Note imposes certain restrictions on the Company. These
restrictions include, but are not limited to, the maintenance of certain capital
levels, limitations on the payment of dividends, limitations on the repurchase
of common stock, and additionally, the Note contains certain prepayment
penalties. At December 31, 1997, the Company was in compliance with the
covenants of the Note.
At December 31, 1997 and 1996, the Company had $10 million in long-term
Federal Home Loan Bank advances outstanding. These advances bear an interest
rate of 10% and mature on April 28, 1999.
During 1997, the Company entered into short-term borrowing arrangements
with Federal Home Loan Bank. At December 31, 1997, there was $1.0 million
outstanding. Average borrowings during 1997 were $12.6 million at a weighted
average interest rate of 5.69%. The maximum outstanding at any month end during
1997 was $50 million.
The Company's bank subsidiaries have arrangements with various
correspondent banks providing short-term credit for regulatory liquidity
requirements. These lines of credit aggregated $150.0 million and $145.0 million
at December 31, 1997 and 1996, respectively.
NOTE 9 -- CAPITAL SECURITIES
Company obligated mandatorily redeemable capital securities of subsidiary trusts
("Capital Securities") are summarized as follows at December 31,
<TABLE>
<CAPTION>
(dollars in thousands) 1997 1996
---------------------
<S> <C> <C>
8.00% Capital Securities due December 15, 2027 ....... $ 99,615 $ --
8.70% Capital Securities due December 15, 2026 ....... 99,649 99,637
---------------------
$199,264 $99,637
=====================
</TABLE>
The aforementioned Capital Securities were issued by the Company in
December 1997 and 1996 through wholly-owned statutory business trust
subsidiaries (collectively, the "Trusts"). The Trusts were formed with initial
capitalizations in common stock and for the exclusive purpose of issuing the
Capital Securities and using the proceeds to acquire Junior Subordinated Debt
Securities ("Debt Securities") issued by the Company. The Debt Securities are
due at maturity, are non-callable at any time in whole or in part for ten years
from the date of issuance, except in certain circumstances, but may be redeemed
annually thereafter, in whole or in part, at declining premiums to maturity.
At December 31, 1997, $172.3 million of these Capital Securities qualified
as Tier I capital with the remainder qualifying as Tier II capital for
regulatory capital purposes. Upon consummation of the merger with New York
Bancorp, it is anticipated that the full amount will qualify as Tier I Capital.
The costs associated with these issuances have been capitalized and are being
amortized using the straight-line method to maturity.
41 NORTH FORK BANCORPORATION
<PAGE> 45
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTE 10 -- INCOME TAXES
The components of the consolidated provision for income taxes is shown below for
the years ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
----------------------------------
<S> <C> <C> <C>
Current Tax Expense .................... $73,027 $44,384 $41,285
Deferred Tax (Benefit)/Expense ......... (1,098) 5,446 8,565
----------------------------------
Total Provision for Income Taxes ....... $71,929 $49,830 $49,850
==================================
</TABLE>
The following table reconciles the statutory Federal tax rate to the
effective tax rate on income before income taxes for the years ended December
31,
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------
<S> <C> <C> <C>
Federal Statutory Rates ............................................... 35.00% 35.00% 35.00%
Increases/(Reduction) Resulting from:
State and Local Income Taxes, Net of Federal Income Tax Benefit .... 3.39% 6.49% 8.11%
Amortization of Intangible Assets .................................. 0.62% 0.96% 0.50%
Tax Exempt Interest, net ........................................... (1.06%) (1.67%) (0.88%)
Nondeductible Merger Related Expenses .............................. -- 2.73% --
Accretion/Amortization of Purchase Accounting Premiums and Discounts 0.09% 0.15% (0.01%)
Dividend Received Deduction ........................................ (0.59%) -- --
Other, net ......................................................... 0.16% 0.72% (0.18%)
--------------------------
Effective Tax Rate ................................................. 37.61% 44.38% 42.54%
==========================
</TABLE>
RECONCILIATION OF STATUTORY RATE TO EFFECTIVE RATE
The components of the net deferred tax asset are included in "Other Assets" in
the accompanying consolidated balance sheets at December 31, and are as follows:
<TABLE>
<CAPTION>
(in thousands) 1997 1996
-------------------
<S> <C> <C>
Deferred Tax Assets
Allowance for Loan Losses .............................. $ 20,617 $20,955
Deferred Compensation and Other Employee Benefit Plans . 4,434 3,059
Net Operating Loss Carry Forward ....................... 4,011 --
Deductible Merger Related Restructure Charges .......... 1,664 3,113
Excess of Tax Basis Over Book Basis-Other Real Estate .. 190 559
Unrealized Loss on Securities Available-for-Sale ....... -- 1,986
Other .................................................. 2,752 2,185
-------------------
Gross Deferred Tax Asset .............................. $ 33,668 $31,857
Valuation Allowance .................................... (7,342) (4,567)
-------------------
Deferred Tax Asset .................................... $ 26,326 $27,290
===================
Deferred Tax Liabilities
Unrealized Gain on Securities Available For Sale ....... (12,028) --
Tax Bad Debt Recapture ................................. (929) (2,682)
Excess of Book Basis Over Tax Basis, Premises &
Equipment (248) (1,767)
Other .................................................. (3,046) (1,840)
-------------------
Gross Deferred Tax Liability .......................... (16,251) (6,289)
-------------------
Net Deferred Tax Asset ................................ $ 10,075 $21,001
===================
</TABLE>
42 NORTH FORK BANCORPORATION
<PAGE> 46
During 1997, the deferred tax asset valuation allowance increased $2.8
million to $7.3 million as a result of the Branford acquisition and management's
decision to reserve against a portion of Branford's net operating loss
carryforward, due primarily to the uncertainty regarding the ultimate
realization of the Connecticut State benefit. The Connecticut net operating loss
carryforward expires in 1999. Additionally, management continues to reserve for
a portion of the New York State and City deferred tax asset due to uncertainties
of realization, since New York State and City law do not provide for the
utilization of net operating loss carryforwards or carrybacks.
Management anticipates that the realization of the net deferred tax asset
of $10.1 million at December 31, 1997, is more likely than not, based on
existing carryback ability, available tax planning strategies, and projected
taxable income.
NOTE 11 -- RETIREMENT AND OTHER EMPLOYEE BENEFITS PLANS
RETIREMENT PLANS
The Company maintains a retirement plan (the "Plan") covering substantially all
of its full-time employees. Participants accrue a benefit each year equal to
five percent of their annual compensation, as defined, plus a rate of interest
based on one-year Treasury Bill rates, credited quarterly. Plan assets are
invested in a diversified portfolio of fixed income securities, mutual funds and
equity securities. The Company contributes to the Plan an amount sufficient to
meet Employee Retirement Income Security Act ("ERISA") funding standards. North
Side maintained a retirement plan covering substantially all of its full-time
employees, subject to certain limitations. Benefits under this plan were based
on years of service and the highest level of compensation during a specific
period. As of December 31, 1996, the North Side plan was curtailed, and all
future benefit accruals ceased. Subsequent to the merger, all former North Side
employees retained by the Company meeting Plan requirements became eligible for
participation in the Plan. Effective September 30, 1997, the former North Side
plan was merged with that of the Company. The following table sets forth the
funded status of the Plan, and amounts recognized in the accompanying
consolidated financial statements at December 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996
--------------------
<S> <C> <C>
Actuarial Present Value of Accumulated Benefit Obligation:
Vested Benefits .............................................. $(44,139) $(20,874)
Non-Vested Benefits .......................................... (917) (1,933)
--------------------
Accumulated Benefit Obligation ................................. (45,056) (22,807)
Effect of Projected Future Compensation Levels ............... (416) (230)
--------------------
Projected Benefit Obligation ................................. (45,472) (23,037)
Plan Assets at Fair Value .................................... 48,530 22,978
--------------------
Plan Assets in Excess/(Less than) Projected Benefit Obligation 3,058 (59)
Unrecognized Net Asset Value Existing at Plan Year End ....... (267) (330)
Unrecognized Net (Gain)/Loss ................................. (1,087) 3,314
Unrecognized Prior Service Cost .............................. (2,022) (2,536)
--------------------
(Accrued)/Prepaid Pension Cost ............................... $ (318) $ 389
====================
</TABLE>
43 NORTH FORK BANCORPORATION
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The following table sets forth the component of net periodic pension
expense for the years ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
--------------------------
<S> <C> <C> <C>
Components of Net Periodic Pension Expense:
Service Cost-Benefits Earned During the Year ........... $1,447 $ 991 $ 834
Interest Cost on Projected Benefit Obligation .......... 2,925 1,297 1,268
Net Amortization and Deferral .......................... 2,146 470 1,630
--------------------------
$6,518 $2,758 $3,732
Actual Return on Plan Assets ........................... 6,199 2,089 2,954
--------------------------
Net Periodic Pension Expense ........................... $ 319 $ 669 $ 778
==========================
Assumptions Used in Actuarial Computations are as follows:
Weighted Average Discount Rate ......................... 7.00% 7.75% 7.25%
Rate of Increase in Future Compensation Levels ......... 4.50% 4.50% 4.50%
Expected Long-Term Rate of Return on Assets ............ 8.50% 8.50% 8.50%
</TABLE>
The Company maintains a supplemental retirement plan which restores to
specified senior executives the full level of retirement benefits they would
have been entitled to receive absent the ERISA provision limiting maximum
payouts under tax qualified plans. The projected benefit obligation, which is
unfunded, was $168 thousand at December 31, 1997 and $45 thousand at December
31, 1996. Net periodic pension expense incurred in 1997, 1996, and 1995, for the
supplemental retirement plan was $31 thousand, $11 thousand, and $33 thousand,
respectively. The weighted average discount rate utilized to determine the
projected benefit obligation was 7.0%, 7.75%, and 7.25% for 1997, 1996 and 1995,
respectively. The assumed rate of future compensation increases was 4.50% for
1997, 1996, and 1995.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides certain health care and life insurance benefits to eligible
retired employees. Health care benefits received range between 0% and 100% of
coverage premiums based on an employee's age, years of service and retirement
date. Participants who retire after November 1, 1992 are responsible for all
premium increases after 1997. The Company's plan for its post-retirement
obligation is unfunded.
The following table sets forth information related to the Company's
post-retirement benefit obligation at December 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996
-------------------
<S> <C> <C>
Accumulated Post-Retirement Benefit Obligation (APBO):
Retirees and Beneficiaries Eligible for Benefits ..... $5,894 $6,413
Fully Eligible Active Plan Participants .............. 312 364
Other Active Plan Participants ....................... 967 914
-------------------
Accumulated Post-Retirement Benefit Obligation ....... 7,173 7,691
Unrecognized Transition Obligation ................... (1,803) (3,298)
Unrecognized Prior Service Cost ...................... 646 684
Unrecognized Net Loss ................................ (2,263) (1,885)
-------------------
Accrued Post-Retirement Benefit Obligation ........... $3,753 $3,192
===================
</TABLE>
The weighted average discount rate utilized to determine the accumulated
post-retirement benefit obligation was 7.0% and 7.75% in 1997 and 1996,
respectively. The assumed rate of future compensation increases was 5.50% for
both years. The weighted average discount rate utilized to determine the net
periodic post-retirement benefits expense was 7.75% and 7.25% for 1997 and 1996,
respectively.
44 NORTH FORK BANCORPORATION
<PAGE> 48
In measuring the APBO, a 7.0% annual trend rate for health care costs was
assumed for the year ended December 31, 1997. These rates are assumed to decline
ratably to 5.5% through 2010, and remain at that level thereafter. However, for
retirees after November 1, 1992, no increases in the annual trend rate are
assumed for after 1997. If the assumed health care cost trend rate changed by
1%, the APBO at December 31, 1997 would change by 5.1%. The effect of a 1%
change in the health care cost trend rate on the service and interest cost
components of net periodic post-retirement benefits expense would be a change of
4.9%.
The following table sets forth the components of net periodic
post-retirement benefits expense for the years ended December 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
------------------
<S> <C> <C> <C>
Service Cost (Benefits Earned During the Year) .................................... $ 60 $ 85 $ 73
Interest Cost on Accumulated Post-Retirement Benefit Obligation ................... 470 561 528
Amortization of Transition Obligation, Net Loss and Unrecognized Prior Service Cost 175 258 154
------------------
Net Periodic Post-Retirement Benefits Expense ................................... $705 $904 $755
==================
</TABLE>
401(K) SAVINGS PLAN
The Company maintains a savings plan under section 401(k) of the Internal
Revenue Code, covering substantially all current full-time and certain part-time
employees. Newly hired employees can elect to participate in the savings plan
after completing one year of service. Under the provisions of the savings plan,
employee contributions are partially matched by the Company. This matching is
fully vested for employees participating at the inception date of the plan,
however, the matching vests for all other plan participants 25% per year
beginning the second year of participation. Participant account balances are
invested at the direction of the participant into one or more investment funds,
including a fund which invests in shares of the Company's common stock. 401(k)
plan expense was $1.1 million, $1.2 million, and $1.1 million for the years
ended 1997, 1996, and 1995, respectively.
NOTE 12 -- COMMON STOCK PLANS
1994 KEY EMPLOYEE STOCK PLAN
The plan provides for three types of awards, incentive stock options,
non-qualified stock options and restricted stock, to be granted either
separately or in combination. Awards are granted to employees by the
Compensation Committee. In 1996, shareholders approved an amendment to the Plan
to increase the number of shares issuable thereunder from 1,400,000 to 2,400,000
shares, with no more than 800,000 authorized for restricted stock. Restricted
stock awarded under the plan contains similar restrictions as those under the
1987 Long Term Incentive Plan. The Compensation Committee, in its sole
discretion, may also accelerate the removal of any or all restrictions. If the
Company is a party to a merger, consolidation, sale of substantially all assets
or similar transaction and, as a result, the common stock is exchanged for stock
of another corporation, cash or other consideration, all restrictions on
unvested options outstanding and restricted stock awarded under the plan and
then outstanding will lapse and cease to be effective, as of the day on which
such corporate change is consummated. At December 31, 1997, 189,170 shares
remain authorized and unissued.
NORTH SIDE STOCK PLANS--PRE-MERGER
North Side maintained several incentive stock option and non-qualified stock
option plans for its officers and key employees. Generally, these plans granted
options to individuals at a price equivalent to the fair market value of the
stock at the date of grant. Options awarded under the plans vested and became
exercisable with respect to 20% of the shares per year beginning on the first
anniversary of each grant and were exercisable over a ten year period from the
date of grant. Pursuant to the merger agreement, options outstanding under these
plans were converted into options on the Company's stock at exercise prices
ranging from $2.78 and $9.32. North Side maintained a Management Development and
Recognition Plan (the "Plan") under which key employees participated in awards
in the form of common stock held in trusts by the Plan for the benefit of
participants pending the vesting of such shares. Participants under the Plan
became fully vested at the merger date. Compensation expense recognized under
the Plan was $566 thousand in 1996 and $94 thousand in 1995.
45 NORTH FORK BANCORPORATION
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
1997 NON-OFFICER STOCK PLAN
The Plan provides for two types of awards, non-qualified stock options and
restricted stock awards, for a broad range of full-time employees of the company
who are not officers, as defined in the Plan. The number of shares issuable
thereunder, either as restricted stock or non-qualified options, is limited to
250,000 shares. Each non-qualified stock option granted will have a minimum six
month vesting period. Restricted stock under the plan contains similar
restrictions as those under the 1987 and 1994 Plans. Awards are granted to
employees by the Compensation Committee. The Committee can, at their discretion,
accelerate the removal of any or all restrictions. If the company is a party to
the merger, consolidation, sale of substantially all assets or similar
transaction and, as a result, the common stock is exchanged for stock of another
corporation, cash or other consideration, all restrictions on unvested options
outstanding, and restricted stock awarded under the plan and then outstanding
will lapse and cease to be effective as of the day on which such corporate
changes is consummated. The right to grant awards under the plan will terminate
on November 30, 1998. At December 31, 1997, 62,700 shares remain authorized and
unissued.
The following is a summary of the activity in the stock option plans for
the three year period ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS(1) PRICE OPTIONS PRICE
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of Year 2,558,692 $ 9.55 2,698,904 $ 6.44 4,089,706 $5.07
Granted ........................ 889,176 19.91 1,102,184 13.23 160,264 6.97
Exercised ...................... (1,575,684) 8.72 (1,220,742) 6.03 (1,432,334) 2.37
Canceled ....................... (6,400) 13.53 (21,654) 7.64 (118,732) 8.97
--------------------------------------------------------------------
Outstanding at End of Year ..... 1,865,784 15.17 2,558,692 9.55 2,698,904 6.44
====================================================================
Options exercisable at Year End 1,672,579 $14.52 2,088,024 $ 8.52 2,043,186 $6.62
====================================================================
</TABLE>
(1) Includes 1995 performance awards that were granted in January 1996 and
1996 performance awards that were granted in December 1996.
The following is a summary of the information concerning currently
outstanding and exercisable options as of December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS
OUTSTANDING
- ------------------------------------------------------------------
WEIGHTED WEIGHTED
RANGE OF AVERAGE AVERAGE
EXERCISE OPTIONS REMAINING EXERCISE
PRICES OUTSTANDING LIFE PRICE
- ------------------------------------------------------------------
<S> <C> <C> <C>
$ 1.19-$ 9.52 450,196 5.40 $ 6.38
$ 9.52-$19.03 1,257,488 6.20 $16.26
$19.03-$31.72 158,100 9.90 $31.56
- ------------------------------------------------------------------
$ 1.19-$31.72 1,865,784 6.30 $15.17
==================================================================
<CAPTION>
OPTIONS
EXERCISABLE
- -------------------------------
WEIGHTED
AVERAGE
OPTIONS EXERCISE
EXERCISABLE PRICE
- -------------------------------
<S> <C>
422,296 $ 6.28
1,169,283 16.30
81,000 31.72
- -------------------------------
1,672,579 $14.52
===============================
</TABLE>
The following is a summary of the activity in the restricted stock plans
for the years ended December 31,
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
GRANT GRANT GRANT
SHARES PRICE SHARES PRICE SHARES PRICE
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of Year 522,984 $12.61 265,808 $ 8.69 190,284 $8.07
Granted ........................ 497,768 29.13 304,800 15.53 117,200 9.00
Vested ......................... (4,537) 4.82 (42,624) 9.57 (7,672) 8.42
Canceled ....................... (23,000) 13.03 (5,000) 8.29 (34,004) 6.36
-----------------------------------------------------------
Outstanding at Year End ........ 993,215 $20.92 522,984 $12.61 265,808 $8.69
===========================================================
</TABLE>
46 NORTH FORK BANCORPORATION
<PAGE> 50
The amount of compensation expense related to restricted stock awards
included in compensation and employee benefits was $1.2 million, $.5 million,
and $.1 million in 1997, 1996, and 1995, respectively.
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans other than for restricted stock awards. Had
compensation expense for the Company's stock option plans been determined based
upon the fair value at grant date for awards under these plans consistent with
the methodology prescribed under Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation", the Company's net income and
diluted earnings per share would have been reduced by approximately $2.8
million, or $.04 per share in 1997, $3.2 million, or $.05 per share in 1996, and
$68 thousand with no earnings per share impact in 1995. The estimated fair value
of the options granted during 1997 ranged from $1.09 to $11.15 and was estimated
at $4.65 in 1996 on the date of grant using the Black-Scholes option-pricing
model. The following assumptions were used in calculating the fair value of the
options granted during 1997: dividend yield 2.25%, volatility ranging from
20-35%, risk-free interest rates ranging from 5.30%-6.30%, no assumed forfeiture
rate, and an expected average life of six years for options with a ten year
original term or 60% of the options term, if its original maturity is less then
ten years. The following assumptions were used in calculating the fair value of
the options granted during 1996: dividend yield 2.75%, volatility of 42.8%,
risk-free interest rate of 5.80%, no assumed forfeiture and an expected life of
six years. The following assumptions were used in calculating the fair value of
the options granted during 1995: dividend yield 2.75%, volatility of 40%,
risk-free interest rate of 7.27%, no assumed forfeiture and an expected life of
six years.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Dividend Reinvestment and Stock Purchase Plan provides stockholders with a
method of investing cash dividends and/or optional cash payments in additional
common stock. Under the plan, cash dividends and/or optional cash payments can
be used to purchase common stock without brokerage commission. The discount can
be revised by the Board of Directors at its discretion. The amount of optional
cash payment allowed in any month is restricted, requiring a minimum optional
cash payment of $200 per month and a maximum optional cash payment for
participants of $15,000 regardless of the number of shares owned. At December
31, 1997, 573,097 shares remain authorized and unissued.
SHAREHOLDERS' RIGHTS PLAN AND CHANGE-IN-CONTROL ARRANGEMENTS
The Company maintains a shareholders' rights plan. Each right under the plan
entitles the holder, following the occurrence of certain events, to purchase a
unit, consisting of one one-hundredth of a share of Series A Junior
Participating Preferred Stock, at a purchase price of $70 per unit, subject to
adjustment. The rights will become exercisable and transferable, apart from the
common stock, 10 days after the public announcement that a person or group has
acquired 20% or more of the outstanding shares of common stock, 10 business days
following the commencement of a tender or exchange offer that would result in a
person or group beneficially owning 25% or more of the outstanding shares of
common stock, or 10 days after the Board of Directors has determined that any
person has become the beneficial owner of a substantial amount (defined as 10%
or greater) of the outstanding shares of common stock and that such beneficial
ownership is adverse to the Company in certain specified respects. Rights held
by such an acquiring person or persons may thereafter become void. Under certain
circumstances, a right may become a right to purchase common stock or assets of
the Company or common stock of an acquiring corporation, at a substantial
discount. Under certain circumstances, the Company may redeem the rights for
$.01 per right. The rights will expire at the close of business on March 13,
1999 unless earlier redeemed or exchanged by the Company.
The Company has arrangements with certain key executive officers that
provide for the payment of a multiple of base salary, should a
change-in-control, as defined, of the Company occur. These payments are limited
under guidelines for deductibility pursuant to Internal Revenue Service
regulations. Also, in connection with a potential change-in-control, the Company
adopted performance plans in which substantially all employees could participate
in a cash distribution. The amount of the performance plan cash fund is
established when a change-in-control transaction exceeds industry averages and
achieves an above average return for shareholders. A limitation is placed on the
amount of the fund and no performance pool is created if the transaction does
not exceed industry averages.
47 NORTH FORK BANCORPORATION
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
NOTE 13 -- PARENT COMPANY ONLY
CONDENSED FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS DECEMBER 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996
-------------------
<S> <C> <C>
Assets
Deposits with North Fork ...................................... $ 5,292 $ 771
Deposits with Other Financial Institutions .................... 66 160
Securities Purchased Under Agreements to Resell with North Fork 95,000 148,000
Securities Available-for-Sale ................................. 153,754 10,871
Investment in Subsidiaries .................................... 560,997 428,336
Intangible Assets ............................................. 28,367 7,291
Other Assets .................................................. 9,742 1,773
-------------------
Total Assets ................................................. $853,218 $597,202
===================
Liabilities and Stockholders' Equity
Junior Subordinated Debt (See Note 9) ......................... $205,450 $102,737
Senior Note Payable ........................................... 25,000 25,000
Dividends Payable ............................................. 10,142 8,112
Other Liabilities ............................................. 10,800 3,822
Stockholders' Equity .......................................... 601,826 457,531
-------------------
Total Liabilities and Stockholders' Equity ................... $853,218 $597,202
===================
</TABLE>
CONDENSED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
-------------------------------
<S> <C> <C> <C>
Income
Dividends from Subsidiaries ........................... $ 13,800 $70,839 $ 4,210
Net Securities Gains .................................. 6,251 2,685 5,041
Other Income .......................................... 11,294 1,113 745
-------------------------------
Total Income ......................................... 31,345 74,637 9,996
-------------------------------
Expense
Interest on Junior Subordinated Debt .................. 9,463 25 --
Interest on Other Borrowings .......................... 2,033 1,913 1,901
Compensation and Employee Benefits .................... 1,211 495 113
Amortization of Intangible Assets ..................... 440 440 440
Other Expenses ........................................ 1,222 975 1,149
-------------------------------
Total Expenses ....................................... 14,369 3,848 3,603
-------------------------------
Income before Income Taxes and Equity in Undistributed
Earnings of Subsidiaries ............................ 16,976 70,789 6,393
Income Tax Expense/(Benefit) .......................... 151 (52) 1,022
Equity in Undistributed Earnings of Subsidiaries
North Fork ........................................... 102,172 (7,867) 61,886
Non-Bank Subsidiaries ................................ 313 (532) 85
-------------------------------
Net Income ......................................... $119,310 $62,442 $67,342
===============================
</TABLE>
48 NORTH FORK BANCORPORATION
<PAGE> 52
CONDENSED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
(in thousands) 1997 1996 1995
-----------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income .......................................... $ 119,310 $62,442 $67,342
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization ....................... 1,218 487 147
Amortization of Intangible Assets ................... 440 440 440
Equity in Undistributed Earnings of Subsidiaries .... (102,485) 8,399 (61,971)
Proceeds from Sales of Securities Held-for-Trading .. 10,125 -- --
Purchase of Securities Held-for-Trading ............. (9,670) -- --
Net Securities Gains ................................ (6,251) (2,685) (5,041)
Other, Net .......................................... (4,034) (366) 479
-----------------------------------
Net Cash Provided by Operating Activities .......... 8,653 68,717 1,396
-----------------------------------
Cash Flows from Investing Activities:
Proceeds from Sales of Securities Available-for-Sale 36,427 16,083 20,963
Purchases of Securities Available-for-Sale .......... (160,894) (23,822) (16,152)
Investment in Subsidiary Trusts ..................... (3,093) (3,093) --
-----------------------------------
Net Cash (Used in)/Provided by Investing Activities (127,560) (10,832) 4,811
-----------------------------------
Cash Flows from Financing Activities:
Treasury Stock Activity, net ........................ (38) (22,566) (1,316)
Common Stock Sold for Cash .......................... 3,855 23,485 11,297
Dividends Paid to Shareholders ...................... (36,196) (23,174) (15,435)
Proceeds from the Issuance of Junior Subordinate Debt 102,713 102,737 --
-----------------------------------
Net Cash Provided by/(Used in) Financing Activities 70,334 80,482 (5,454)
-----------------------------------
Net (Decrease)/Increase in Cash and Cash Equivalents (48,573) 138,367 753
Cash and Cash Equivalents at Beginning of Year ...... 148,931 10,564 9,811
-----------------------------------
Cash and Cash Equivalents at End of Year ........... $ 100,358 $148,931 $10,564
===================================
</TABLE>
NOTE 14 -- REGULATORY MATTERS
The Company and its bank subsidiaries 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 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% ("Leverage Ratio"). 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 Company's financial statements. As of December 31, 1997,
the most recent notification from the various regulators categorized the Company
and its bank subsidiaries 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 is not subject to any written order, agreement or directive. There
are no conditions or events since such notifications that management believes
have changed this classification.
49 NORTH FORK BANCORPORATION
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
The following table sets forth the Company's regulatory capital at
December 31, 1997, under the rules applicable at such date. At such date,
management believes that the Company meets all capital adequacy requirements to
which it is subject:
<TABLE>
<CAPTION>
(dollars in thousands) AMOUNT RATIO
---------------------
<S> <C> <C>
Tier 1 Capital ....................................... $ 662,089 16.67%
Regulatory Requirement ............................... 158,831 4.00%
---------------------
Excess ............................................... $ 503,258 12.67%
---------------------
Total Risk Adjusted Capital .......................... $ 738,792 18.61%
Regulatory Requirement ............................... 317,661 8.00%
---------------------
Excess ............................................... $ 421,131 10.61%
=====================
Risk Weighted Assets ................................. $3,970,768
==========
</TABLE>
The Company's leverage capital ratio at December 31, 1997 was 10.08%. The
Tier 1, total risk based and leverage capital ratios of North Fork were 12.32%,
13.57%, and 7.13%, respectively, at December 31, 1997. The Tier I, total risk
based and leverage capital ratios of Branford were 15.41%, 16.68%, and 9.16%,
respectively, at December 31, 1997.
Dividends from North Fork to the Company are limited by the regulations of
the New York State Banking Department to North Fork's current year's earnings
plus the prior two years' retained net profits. North Fork's dividend capability
at January 1, 1998, pursuant to the regulations, was $157.8 million. Dividends
from Branford are similarly limited by regulations of the State of Connecticut.
In September 1996, legislation was passed that empowered the Federal
Deposit Insurance Corporation to impose a special assessment on "SAIF-Assessable
Deposits" of depository institutions in order to recapitalize the Savings
Association Insurance Fund ("SAIF"). Certain of North Fork's deposit liabilities
acquired in previous thrift acquisitions are insured under the SAIF fund (SAIF
insured deposits at December 31, 1997 were approximately $1.2 billion) and
accordingly are subject to higher quarterly assessments. As a result of
maintaining deposits in the SAIF, North Fork is considered an OAKAR institution
and, therefore, qualified for a reduced one-time special assessment rate of 52.6
basis points per $100 of insured SAIF assessable deposits as of March 31, 1995.
During 1996, North Fork recognized a non-recurring one-time charge for this
assessment of $8.4 million.
NOTE 15 -- OTHER COMMITMENTS AND CONTINGENT LIABILITIES
(A) OFF-BALANCE SHEET RISKS
The Company is a party to financial instruments with off-balance sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Such financial instruments are reflected in the consolidated
financial statements when and if proceeds associated with the commitments are
disbursed. The exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual notional amount of
those instruments. Management uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
financial instruments.
Commitments to extend credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements.
Management evaluates each customer's creditworthiness on a case-by-case basis.
The amount of collateral obtained, if deemed necessary, upon extension of
credit, is based on management's credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable, inventory, property,
plant and equipment, and income-producing properties.
50 NORTH FORK BANCORPORATION
<PAGE> 54
Standby letters of credit are conditional commitments issued to guarantee
the performance of a customer to a third party. The credit risk involved in
issuing letters of credit is essentially the same as that involved in extending
loan facilities to customers.
The notional principal amount of the off-balance sheet financial
instruments at December 31, are as follows:
<TABLE>
<CAPTION>
1997 1996
CONTRACT OR CONTRACT OR
NOTIONAL NOTIONAL
(in thousands) AMOUNT AMOUNT
---------------------------
<S> <C> <C>
Financial instruments whose contract amounts
represent credit risk
Commitments to extend credit ................. $422,616 $306,310
Standby letters of credit .................... 25,232 16,892
</TABLE>
(B) LEASE COMMITMENTS
At December 31, 1997, the Company was obligated under a number of non-cancelable
leases for land and buildings that expire at various dates through August 2016.
Minimum annual rental commitments, exclusive of taxes and other charges, under
non-cancelable leases are summarized as follows:
<TABLE>
<CAPTION>
MINIMUM
(in thousands) RENTALS
-------
<S> <C>
Year Ended December 31:
1998 .................................................................. $ 5,297
1999 .................................................................. 4,565
2000 .................................................................. 3,762
2001 .................................................................. 3,454
2002 .................................................................. 3,145
Thereafter ............................................................. 11,955
</TABLE>
Rent expense for the years ended December 31, 1997, 1996, and 1995
amounted to $4.4 million, $3.5 million, and $2.5 million, respectively.
(C) OTHER MATTERS
North Fork is required to maintain balances with the Federal Reserve Bank of New
York for reserve and clearing requirements. These balances averaged $8.2 million
in 1997. Similarly, Branford is required to maintain balances with the Federal
Reserve Bank of Boston.
The Company and its subsidiaries are subject to certain pending and
threatened legal actions which arise out of the normal course of business.
Management believes that the resolution of any pending or threatened litigation
will not have a material adverse effect on its financial condition or results of
operations.
NOTE 16 -- DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosure about Fair Value
of Financial Instruments" ("SFAS 107") requires that the Company disclose
estimated fair values for its financial instruments. Fair value estimates are
made at a specific point in time, based on relevant market information and
information about the financial instrument. SFAS 107 has no effect on the
financial position or results of operations in the current year or any future
period. Furthermore, the fair values disclosed under SFAS 107 are not
representative of the total value of the Company.
If quoted market prices are not available, SFAS 107 permits using the
present value of anticipated future cash flows to estimate fair value.
Accordingly, the estimated fair value will be influenced by prepayment and
discount rate assumptions. This method may not provide the actual amount that
would be realized in the ultimate sale of the financial instrument. Fair value
estimates, methods and assumptions are set forth below.
51 NORTH FORK BANCORPORATION
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
CASH, CASH EQUIVALENTS AND SECURITIES
The carrying amounts for cash and cash equivalents are reasonable estimates of
fair value. The fair value of securities is estimated based on quoted market
prices as published by various quotation services, or if quoted market prices
are not available, on dealer quotes. The following table presents the carrying
value and estimated fair value of cash, cash equivalents and securities at
December 31,
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
(in thousands) AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------------------------------------------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents ................. $ 164,750 $ 164,750 $ 267,663 $ 267,663
Securities Held-to-Maturity ............... 1,118,468 1,120,660 1,300,115 1,293,472
Securities Available-for-Sale ............. 1,660,714 1,660,714 857,391 857,391
-------------------------------------------------
Total Cash, Cash Equivalents and Securities $2,943,932 $2,946,124 $2,425,169 $2,418,526
=================================================
</TABLE>
LOANS
Fair values are estimated for portfolios of loans with similar financial
characteristics. The fair value of performing loans is calculated by discounting
the estimated cash flows through its expected maturity or repricing using the
current rates at which similar loans would be made to borrowers with similar
credit risks. For non-performing loans, the present value is separately
discounted consistent with management's assumptions in evaluating the adequacy
of the allowance for loan losses. The following table presents the carrying
value and the estimated fair value of the loan portfolio as of December 31, 1997
and 1996.
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
(in thousands) AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------------------------------------------
<S> <C> <C> <C> <C>
Gross Loans ............................... $3,714,650 $3,755,204 $3,194,086 $3,170,157
=================================================
</TABLE>
DEPOSIT LIABILITIES AND BORROWINGS
The carrying amount for demand deposits, savings, N.O.W., money market accounts
and borrowings with a term of 90 days or less are reasonable estimates of fair
value. Fair value for certificates of deposit and longer term borrowings are
estimated by discounting the future cash flows using the rates currently offered
for deposits and borrowings of similar remaining maturities. The following table
presents the carrying value and estimated fair value of the deposits and
borrowings as of December 31,
<TABLE>
<CAPTION>
1997 1996
-------------------------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
(in thousands) AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------------------------------------------
<S> <C> <C> <C> <C>
Demand Deposits ........................... $905,650 $905,650 $734,907 $734,907
Savings, N.O.W. and Money Market .......... 2,007,966 2,007,966 1,974,570 1,974,570
Certificates of Deposit ................... 1,723,575 1,735,963 1,760,033 1,777,680
Borrowings with terms of 90 days or less .. 122,355 122,355 201,289 201,289
Borrowings with terms greater than 90 days 1,177,350 1,179,306 455,500 456,635
-------------------------------------------------
Total Deposit Liabilities and Borrowings .. $5,936,896 $5,951,240 $5,126,299 $5,145,081
=================================================
</TABLE>
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
These financial instruments generally are not sold or traded, and estimated fair
values are not readily available. However, the fair value of commitments to
extend credit and standby letters of credit is based on fees currently charged
to enter into similar agreements with comparable credit risks and the current
creditworthiness of the counterparties. Commitments to extend credit issued by
the Company are generally short-term in nature and, if drawn upon, are issued
under current market terms and conditions for credits with comparable risks.
At December 31, 1997 and 1996, there was no significant unrealized
appreciation or depreciation on these financial instruments.
INTEREST RATE CAP, FLOOR AND SWAP AGREEMENTS
The Company had no interest rate cap, floor or swap agreements outstanding
at December 31, 1997 and 1996.
52 NORTH FORK BANCORPORATION
<PAGE> 56
NOTE 17 -- RECENT ACCOUNTING PRONOUNCEMENTS
ACCOUNTING FOR TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS
OF LIABILITIES
In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standard No. 125 "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" ("SFAS 125"). SFAS 125
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on consistent
application of a financial-components approach that focuses on control. Under
this approach, after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has incurred,
derecognizes the 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. SFAS 125 is effective for transfers and
servicing of financial assets and extinguishments of liabilities occurring after
December 31, 1996.
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 127"). SFAS 127 delays for one year the implementation
of SFAS 125, as it relates to (1) secured borrowings and collateral, and (2)
transfers of financial assets that are part of repurchase agreements,
dollar-rolls, securities lending and similar transactions. The Company has
adopted portions of SFAS 125 (those not deferred by SFAS 127) effective January
1, 1997. Adoption of these portions did not have a material effect on the
Company. Based on its review of SFAS 125, management does not believe the
portions of SFAS 125 which have been deferred by SFAS 127 will have a material
effect on the Company.
REPORTING COMPREHENSIVE INCOME
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 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 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 130 also requires that
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
130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of prior periods will be required. Management is currently
assessing the financial implications of implementing SFAS 130 and believes that
adoption will not have a material adverse effect on the Company.
DISCLOSURE ABOUT SEGMENTS FOR AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS
131"). SFAS 131 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 are
evaluated regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance. SFAS 131 requires a
reconciliation of total segment revenues, total segment profit or loss, total
segment assets, and other amounts disclosed for segments to the amounts in the
enterprise's financial statements. It also requires an enterprise to report
descriptive information about the way the operating segments were determined,
the products and services provided by the operating segments, and any
differences between the measurements used for segment reporting and financial
statement reporting. SFAS 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 is currently assessing the
financial implication of implementing SFAS 131 and believes that the adoption
will not have a material adverse effect on the Company.
53 NORTH FORK BANCORPORATION
<PAGE> 57
INDEPENDENT AUDITOR'S REPORT
[Letterhead of KPMG Peat Marwick LLP]
To the Stockholders and Board of Directors of North Fork Bancorporation, Inc.:
We have audited the accompanying consolidated balance sheets of North Fork
Bancorporation, Inc. and subsidiaries as of December 31, 1997 and 1996, the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1997. 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 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 North Fork
Bancorporation, Inc. and subsidiaries at December 31, 1997 and 1996, the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
New York, New York
January 15, 1998
54 NORTH FORK BANCORPORATION
<PAGE> 58
REPORT OF MANAGEMENT
Management of North Fork Bancorporation, Inc. is responsible for the
preparation, content and integrity of the consolidated financial statements and
all other information whether audited or unaudited in this annual report. The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles and, where necessary, are based on
management's best estimates and judgment. The financial information contained
elsewhere in this annual report is consistent with that contained in the
consolidated financial statements.
North Fork Bancorporation, Inc.'s independent auditors have been engaged
to perform an audit of the consolidated financial statements in accordance with
generally accepted auditing standards and the independent auditors' report
expresses their opinion as to the fair presentation of the consolidated
financial statements in accordance with generally accepted accounting
principles.
Management maintains accounting systems and an internal control structure
to meet its responsibilities for reliable consolidated financial statements.
There are inherent limitations in the effectiveness of any internal control
structure, including the possibility of errors or irregularities. Furthermore,
because of changes in conditions, the effectiveness of an internal control
structure may vary over time. Management believes that these systems and
controls provide reasonable assurance that assets are safeguarded and
transactions are properly recorded and executed, in accordance with management's
authorization. An internal audit function is maintained to continually evaluate
the adequacy and effectiveness of such internal controls, policies, and
procedures.
The Board of Directors pursues its oversight role for the financial
statements through the Audit Committee, which is composed entirely of outside
directors. The Audit Committee meets periodically with management, the internal
auditors and the independent auditors, to discuss the internal control structure
and accounting, auditing and financial reporting matters. The Audit Committee
reviews and approves the scope of internal and external audits, as well as
recommendations made with respect to the internal control structure by the
independent and internal auditors and the various regulatory agencies.
/s/ John Adam Kanas /s/ Daniel M. Healy
John Adam Kanas Daniel M. Healy
Chairman, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
55 NORTH FORK BANCORPORATION
<PAGE> 59
CORPORATE INFORMATION
EXECUTIVE INFORMATION
John Adam Kanas
Chairman, President & Chief Executive Officer
John Bohlsen
Vice Chairman
Thomas M. O'Brien
Vice Chairman
Daniel M. Healy
Executive Vice President & Chief Financial Officer
Anthony J. Abate
Senior Vice President & Corporate Secretary
BOARD OF DIRECTORS
John Adam Kanas, Chairman
John Bohlsen, Vice Chairman
Thomas M O'Brien, Vice Chairman
Irvin L. Cherashore
Allan C. Dickerson
Lloyd A. Gerard
James F. Reeves
George H. Rowsom
Dr. Kurt R. Schmeller
Raymond W. Terry, Jr.
EXECUTIVE OFFICES
275 Broad Hollow Road
Melville, NY 11747
SHAREHOLDER INFORMATION
INVESTOR RELATIONS
Shareholders seeking information about the Company or the annual
report pursuant to Section 112 of the FDIC Improvement Act of 1991
are directed to contact the Corporate Secretary's office, North Fork
Bancorporation, Inc., 275 Broad Hollow Road, Melville, New York
11747, (516) 298-5000.
SHAREHOLDER ACCOUNT INQUIRIES
Shareholders who wish to change the name, address or ownership of
stock, consolidate accounts, eliminate duplicate mailings or replace
lost certificates or dividend checks, should contact the Stock
Registrar and Transfer Agent at the address and phone number listed.
DIVIDEND SERVICES
Dividend Reinvestment Plan-The Dividend Reinvestment Plan provides
shareholders with a convenient means to acquire additional shares of
stock through reinvesting dividends and/or making optional cash
payments without a brokerage commission or service charges.
Direct Deposit of Cash Dividends-Direct deposit provides a
safe, timesaving method of receiving cash dividends. Shareholders
can automatically have their dividends deposited on the date of
payment into a checking, savings, or money market account at any
financial institution which provides Automated Clearing House
services.
STOCK REGISTRAR AND TRANSFER AGENT
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, New Jersey 07303-2500
(800) 317-4445
E-mail Address: [email protected]
STOCK LISTING
North Fork Bancorporation, Inc. is traded on the New York Stock
Exchange under the symbol NFB. Newspaper stock listings: North Fork
Bcp or NO FK BC.
ANNUAL MEETING
The annual meeting of shareholders will be held on Tuesday, April
28, 1998, 10:00 a.m. at the Wyndham Windwatch Hotel, 1717 Motor
Parkway, Hauppauge, New York 11788.
56 NORTH FORK BANCORPORATION
<PAGE> 60
[LOGO]
NORTH FORK
Bancorporation, Inc.
275 Broad Hollow Road, Melville, NY 11747
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
North Fork Bank
Branford Savings Bank
North Fork Capital Corp.
North Fork Capital Trust I
North Fork Capital Trust II
Compass Investment Services Corp.
North Fork Leasing Corp. (inactive)
SUBSIDIARIES OF NORTH FORK BANK
NFB Properties, Inc.
NFB Development Corp.
Cutchco Corp.
First Settlers Corp.
Claire Elm Corp.
Compass Food Service Corp.
NS 138 Holding Corp.
NS 160 Holding Corp.
NS Hilltop Holding Corp.
NS Sprout Brook Holding Corp.
NS Mir Holding Corp.
NS 43 Holding Corp.
Long Island Mortgage Corp. (inactive)
Unifed Management Corp. (inactive)
East Quogue Health & Racquet Club, Inc. (inactive)
BFS Service Corp. (inactive)
Rock Properties, Ltd. (inactive)
North Side Capital Corp. (inactive)
Semper Paratus Inc. (inactive)
Kent Road Development Corp. (inactive).
The North Ski Holding Corp. (inactive)
BSSN, Inc. (inactive)
NS 30 Holding Corp. (inactive)
NS 10 Holding Corp. (inactive)
<PAGE> 1
EXHIBIT 23 ACCOUNTANTS CONSENT
The Stockholders and Board of Directors
North Fork Bancorporation, Inc.:
We consent to the incorporation by reference in the Registration Statements
(Nos. 2-99984, 33-14903, 33-34372, 33-52504, 33-53467, 333-05513, 333-00675,
333-19047 and 33-56743) on Form S-8, (Nos. 333-42515, 333-35111, and 333-24419)
on Form S-4 and (Nos. 33-42294, 33-54222, and 333-40311) on Form S-3 of North
Fork Bancorporation, Inc. of our report dated January 21, 1998 relating to the
consolidated statements of condition of North Fork Bancorporation, Inc. and
subsidiaries as of December 31, 1997 and 1996 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the years in the three-year period ended December 31, 1997, which report appears
in the December 31, 1997 Annual Report on Form 10-K of North Fork
Bancorporation, Inc.
Our report refers to various changes in accounting as discussed in the notes to
those statements.
KPMG PEAT MARWICK LLP
New York, New York
March 17, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR 12-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 152,963 150,365 118,006
<INT-BEARING-DEPOSITS> 7,787 2,298 2,003
<FED-FUNDS-SOLD> 4,000 115,000 28,800
<TRADING-ASSETS> 0 0 0
<INVESTMENTS-HELD-FOR-SALE> 1,660,714 857,391 1,150,510
<INVESTMENTS-CARRYING> 1,118,468 1,300,115 1,084,829
<INVESTMENTS-MARKET> 1,120,660 1,293,472 1,075,481
<LOANS> 3,714,650 3,194,086 2,419,300
<ALLOWANCE> 55,698 53,894 56,627
<TOTAL-ASSETS> 6,829,432 5,750,527 4,890,866
<DEPOSITS> 4,637,191 4,469,510 3,739,720
<SHORT-TERM> 122,355 201,289 428,369
<LIABILITIES-OTHER> 290,710 166,697 47,648
<LONG-TERM> 1,177,350 455,500 249,000
0 0 0
0 0 0
<COMMON> 169,048 81,499 80,862
<OTHER-SE> 432,778 376,032 345,267
<TOTAL-LIABILITIES-AND-EQUITY> 6,829,432 5,750,527 4,890,866
<INTEREST-LOAN> 298,326 245,960 208,813
<INTEREST-INVEST> 184,986 156,470 122,146
<INTEREST-OTHER> 1,209 2,877 1,533
<INTEREST-TOTAL> 484,521 405,307 332,492
<INTEREST-DEPOSIT> 132,218 136,438 116,476
<INTEREST-EXPENSE> 206,170 174,361 140,399
<INTEREST-INCOME-NET> 278,351 230,946 192,093
<LOAN-LOSSES> 6,000 6,800 11,825
<SECURITIES-GAINS> 6,227 1,878 6,734
<EXPENSE-OTHER> 122,736 142,997 92,820
<INCOME-PRETAX> 191,239 112,272 117,192
<INCOME-PRE-EXTRAORDINARY> 191,239 112,272 117,192
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 119,310 62,442 67,342
<EPS-PRIMARY> 1.81 0.98 1.05
<EPS-DILUTED> 1.80 0.97 1.05
<YIELD-ACTUAL> 4.69 4.50 4.56
<LOANS-NON> 13,692 17,745 36,411
<LOANS-PAST> 1,713 2,596 1,088
<LOANS-TROUBLED> 9,552 13,734 41,316
<LOANS-PROBLEM> 0 0 0
<ALLOWANCE-OPEN> 53,894 56,627 61,247
<CHARGE-OFFS> 9,094 15,425 20,851
<RECOVERIES> 2,404 2,610 3,914
<ALLOWANCE-CLOSE> 55,698 53,894 56,627
<ALLOWANCE-DOMESTIC> 55,698 53,894 56,627
<ALLOWANCE-FOREIGN> 0 0 0
<ALLOWANCE-UNALLOCATED> 3,601 4,993 7,690
</TABLE>
