<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, 1999
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) (631) 844-1004
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- - - - ------------------- -----------------------------------------
COMMON STOCK, PAR NEW YORK STOCK EXCHANGE
VALUE $2.50
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 28, 2000, there were 173,584,524 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 27, 2000) held by
non-affiliates was approximately $2,929,239,000.
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. 1999 Annual Report to Shareholders - Parts
I, II and IV.
North Fork Bancorporation, Inc. 2000 Definitive Proxy Statement for its
annual meeting of Stockholders to be held on April 25, 2000- Part III
CAUTIONARY STATEMENT UNDER FEDERAL SECURITIES LAWS: Certain statements
which involve risk and uncertainties contained in this Annual Report on Form
10-K may constitute "forward-looking statements" under the Private Securities
Litigation Reform Act of 1995. These statements are based on the beliefs,
assumptions and expectations of management of the Company. Words such as
"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 financial condition,
performance or operations 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 indicated or forecasted in such
forward-looking statements. Factors that may cause or contribute to such
differences include, among others, the following possibilities: (1) changes in
economic or market conditions; (2) significantly increased competition among
financial services companies; (3) changes in the interest rate environment,
which may reduce interest margins; and (4) accounting, tax, legislative or
regulatory changes may adversely affect the business in which the Company is
engaged. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
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 "Company"), 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 Company's primary subsidiary, North
Fork Bank ("North Fork"), operates through 154 full-service retail banking
facilities (inclusive of the locations acquired in the JSB and Reliance
transactions) located in the New York metropolitan area. The Company's other
bank subsidiary, Superior Savings of New England ("Superior") a Connecticut
chartered savings bank located in the Connecticut county of New Haven, operates
from one location where it currently conducts a telebanking operation focused on
gathering deposits throughout the New England region.
On March 5, 2000, the Company announced its intention to seek to acquire
Dime Bancorp, Inc. ("Dime"). Additional information is set forth in
Note 18 - "Subsequent Event" (page 62) of the Company's 1999 Annual Report to
Shareholders included herewith as Exhibit 13 and incorporated herein by
reference.
On August 16, 1999, the Company entered into an Agreement and Plan of
Merger with JSB Financial, Inc. ("JSB"), the parent company of Jamaica Savings
Bank, whereby it would acquire JSB in a stock-for-stock merger. In connection
with the merger, the Company needed to reissue a sufficient number of shares of
its treasury stock prior to the consummation of the merger in order that the
merger qualify for pooling-of-interests accounting treatment. The necessary
treasury shares were reissued on February 18, 2000, in connection with the
Reliance transaction described below. On February 29,2000, JSB was merged with
and into the Company in accordance with the pooling-of-interests method of
accounting. On March 10, 2000, Jamaica Savings Bank was merged with and into
North Fork Bank. Pursuant to the merger agreement, the Company issued 3.0 shares
of common stock for each share of JSB's common stock outstanding. Accordingly
the Company issued 28,312,851 of its common shares and simultaneously retired
6,562,383 of JSB's common shares held in treasury. At December 31, 1999, JSB had
total assets of $1.6 billion, deposits of $1.1 billion, and stockholders' equity
of $380 million. Jamaica Savings Bank operated from 13 retail-banking facilities
in the New York City boroughs of Manhattan and Queens and in Nassau and Suffolk
counties, New York.
On August 30, 1999, the Company entered into an Agreement and Plan of
Merger with Reliance Bancorp, Inc. ("Reliance"), the parent company of Reliance
Federal Savings Bank, whereby it would acquire Reliance in a stock-for-stock
merger accounted for under the purchase method of accounting. On August 30,
1999, simultaneous with the announcement of the merger, the Company's Board of
Directors formally approved the purchase of up to 50% of the common shares to be
issued in the transaction, or 8.5 million shares. As of December 31, 1999 the
Company completed the purchase of 7.8 million shares under the program. The
program was completed subsequent to December 31, 1999. On February 18, 2000,
Reliance was merged with and into the Company in accordance with the purchase
method of accounting. Pursuant to the merger agreement, the Company issued 2.0
shares of its common stock for each share of Reliance's common stock outstanding
(17,120,160 common shares were reissued by the Company from its treasury account
in satisfaction of the Reliance exchange ratio and the JSB pooling requirement.
At December 31, 1999, Reliance had total assets of $2.5 billion, deposits of
$1.5 billion, and stockholders' equity of $176 million. Reliance Federal Savings
Bank operated from 29 retail-banking facilities throughout Suffolk and Nassau
counties, New York, as well as in the New York City borough of Queens.
During December 1999, the Company announced the formation of North Fork's
equipment and vehicle lease finance company, All Points Capital Corp. ("All
Points"). All Points provides lease financing products and programs on a
national basis to qualified third party originators as well as offering existing
business customers equipment-leasing solutions. The Company expects that
origination's from this new program will be significant in the near future and
will add to the diversity in the loan portfolio through the origination of
quality asset based lease receivables.
3
<PAGE> 4
PART I (CONTINUED)
ITEM 1 - BUSINESS (CONTINUED)
GENERAL DEVELOPMENT OF BUSINESS (CONTINUED)
In June 1998, the Company completed its first non-bank acquisition with the
purchase of Amivest Corporation ("Amivest"), a privately held investment
management and broker/dealer firm located in New York City. At the date of
acquisition, Amivest had approximately $700 million in assets under management.
On March 27, 1998, New York Bancorp Inc. ("NYB"), the parent company of
Home Federal Savings Bank ("Home"), was merged with and into the Company in a
transaction treated as a tax-free reorganization and accounted for using the
pooling-of-interests method of accounting. Pursuant to the merger agreement, the
Registrant issued 39.9 million shares of its common stock to NYB shareholders,
as adjusted, for the 3-for-2 stock split and simultaneously retired 12.7 million
shares, as adjusted, of NYB's common stock held in treasury as of the merger
date. NYB had $3.4 billion in total assets, $2.0 billion in net loans, $1.7
billion in deposit liabilities, $140.3 million in capital and operated 35
branches throughout Kings, Queens, Richmond, Nassau and Suffolk counties of New
York.
In anticipation of its merger with NYB, 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. In December 1996, the
Company also issued $100 million of 8.70% Capital Securities. At December 31,
1999, the carrying value of these Capital Securities qualified as Tier I
capital.
In December 1997, the Company acquired Superior, formerly Branford Savings
Bank; a Connecticut chartered savings bank, in a purchase transaction. At
December 31, 1997, Superior had total assets of $179 million, deposits of $160
million, and stockholders' equity of $16.6 million. In October 1998, four of the
five Superior branches and $67 million in deposit liabilities were sold for a
deposit premium of 9%. The net gain on the sale of the branches was
approximately $5.8 million and was utilized to reduce goodwill arising from the
original purchase.
In December 1996, North Side Savings Bank ("North Side") was merged with
and into North Fork in a transaction accounted for as a tax-free reorganization
and accounted for using the pooling-of-interests method of accounting. 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 of New York. Pursuant to the merger agreement, the Company issued 22.7
million shares of its common stock to North Side shareholders.
In March 1996, North Fork acquired the domestic commercial banking business
of Extebank ("Extebank") in a purchase transaction. 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%.
In July 1995, the Company acquired Great Neck Bancorp, the parent company
of Bank of Great Neck, ("Great Neck") in a purchase transaction. Great Neck had
net assets of $91 million, including $49.4 million in net loans and $90.3
million in deposits.
In November 1994, Metro Bancshares Inc. ("Metro"), the parent company of
Bayside Federal Savings Bank ("Bayside"), was merged with and into the Company
in a transaction accounted for using the pooling-of-interests method of
accounting. 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 of New York.
Additionally, the Company operates other non-bank subsidiaries, none of
which accounted for a significant portion of the Company's consolidated assets,
nor contributed significantly to the Company's consolidated results of
operations, at and for the year ended December 31, 1999.
4
<PAGE> 5
PART I (CONTINUED)
ITEM 1 - BUSINESS (CONTINUED)
DESCRIPTION OF BUSINESS
The Company, through its primary subsidiary North Fork and its investment
management and broker/dealer subsidiaries, Compass Investment Services Corp
("Compass") and Amivest Corporation, provides a variety of banking and financial
services to middle market and small business organizations, local governmental
units, and retail customers in the New York metropolitan area. Additionally, the
Registrant conducts a telebanking operation through its other bank subsidiary,
Superior. The Company's major competitors across the entire line of its products
and services are local branches of large money-center banks headquartered in New
York City and other major commercial banks headquartered in New York State and
elsewhere. 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 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. Superior currently competes with financial
institutions throughout the New England region for deposits.
The Company 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 28 - 29) in Management's Discussion
and Analysis and "Note 14 - Regulatory Matters" (pages 58 - 59) of the Company's
1999 Annual Report to Shareholders included as Exhibit 13 herewith and
incorporated herein by reference.
As of December 31, 1999, the Company and its consolidated subsidiaries had
1,783 full-time equivalent employees.
ITEM 2 - PROPERTIES
The executive and administrative offices of the Company and its bank
subsidiaries are located at 275 Broad Hollow Road, Melville, New York. The
Company currently leases 83,000 square feet of the facility, representing
approximately 70% of its rentable space.
North Fork maintains its data processing and operations center in a 53,000
square foot, owned facility, located at 9025 Main Road, Mattituck, New York.
Superior operates from an owned facility, located at 45 South Main Street,
Branford, Connecticut.
Amivest conducts its investment management and broker/dealer operations at
767 Fifth Avenue, New York, New York. Amivest currently leases space on the 50th
floor of the building.
At December 31, 1999, the Company's bank subsidiaries owned 56 of their
branch offices (see "Note 6 - Premises and Equipment" (page 49) of the Company's
1999 Annual Report to Shareholders included as Exhibit 13 herewith and
incorporated herein by reference) and leased 58 branch offices under various
lease arrangements expiring at various times through 2016 (see "Note 16 - Other
Commitments and Contingent Liabilities (b) Lease Commitments" (page 60) of the
Company's 1999 Annual Report to Shareholders included as Exhibit 13 herewith and
incorporated herein by reference). The Company is also obligated under various
other leases for facilities that have been vacated, as a result of its
consolidation of operations following its merger and acquisition activities. The
facilities owned or occupied under a lease are considered by management to be
well located and suitably equipped to serve as banking and financial services
facilities.
5
<PAGE> 6
PART I (CONTINUED)
ITEM 3 - LEGAL PROCEEDINGS
On March 6, 2000, we filed a complaint against Dime, certain members of the
board of directors of Dime ("Dime Board"), and Hudson United Bancorp ("Hudson")
in the Court of Chancery of the State of Delaware, alleging, among other things,
breaches of fiduciary duties by the Dime board in connection with the
Dime-Hudson merger agreement. We also allege in the complaint that Hudson has
aided and abetted the Dime board's breaches of its fiduciary duties. We believe
that the board of directors of Dime has violated its fiduciary duties to Dime
stockholders by agreeing to provisions in the Dime-Hudson merger agreement which
are designed to inhibit any competing offers for Dime from the Company or anyone
else, including (a) its agreement not to enter into any discussions with or
furnish any confidential information to any person making an offer to merge with
or acquire Dime, (b) its agreement to recommend the proposed Dime-Hudson merger
to Dime stockholders under any and all circumstances, even if a third party
makes a superior proposal to merge with or acquire Dime and (c) its agreement
that Dime may not terminate the merger agreement prior to June 30, 2000, even if
Dime stockholders fail to approve the proposed Dime-Hudson merger. Our complaint
seeks, among other things, an order invalidating these provisions of the
Dime-Hudson merger agreement.
On March 9, 2000, we amended our complaint to include allegations that the
Dime board had violated its fiduciary duties by, among other things, forcing a
premature stockholder vote under circumstances where Dime stockholders have been
coerced, misled and insufficiently informed. We also alleged in the amended
complaint that Dime's proxy statement supplement contains materially false and
misleading information.
Also on March 9, 2000, we brought a motion in the Court of Chancery for a
temporary restraining order to enjoin the Dime stockholder vote at the special
meeting initially scheduled for March 15, 2000 until such time as the court
rules on our motion, complete and curative disclosures are mailed to Dime's
stockholders with a reasonable period for their review, or the court orders
otherwise. A hearing was scheduled for Friday, March 10, 2000.
Later on March 9, 2000, Dime announced that it was postponing its special
meeting of stockholders to be held to consider the Dime-Hudson merger until
March 24, 2000. In light of the postponement of Dime's special meeting, we
subsequently withdrew our motion for a temporary restraining order, and the
March 10, 2000 hearing was cancelled. We have not abandoned any of our claims
contained in the amended complaint and have reserved our right to renew our
motion, if appropriate, following review of Dime's supplemental proxy materials
and other disclosures in the form actually distributed to Dime stockholders.
On March 10, 2000, Dime filed a complaint in the Supreme Court of the State
of New York, County of New York, against the Company and FleetBoston, alleging
violations of the New York State antitrust laws, including that the Company
and FleetBoston conspired to purchase Dime in order to eliminate a combined
Dime/Hudson entity from competition in several purported banking markets, that
the proposed acquisition of Dime by the Company and FleetBoston will
substantially lessen competition and create a monopoly in at least two purported
banking markets, and that FleetBoston has monopoly power in banking markets
throughout New England and is using its monopoly profits in order to acquire
Dime and eliminate a strong new competitor in several purported banking markets
throughout New York, Connecticut and New Jersey. Dime's complaint seeks
declaratory and injunctive relief, including an order enjoining the Company and
FleetBoston from making any coordinated effort to acquire Dime and an order
enjoining FleetBoston's pending branch sale transaction with Sovereign Bancorp,
Inc., and such other relief as may be granted.
We believe that the allegations against us in Dime's complain are without
merit and we intend to contest Dime's allegations vigorously. Among other
things, we believe that the alleged market area in New York in which Dime
alleges that competition will be diminished is inconsistent with applicable
precedent, including recent orders of the Federal Reserve Board and thus does
not present the appropriate area in which to assess competitive effects. We
believe that the banking competition in the Metropolitan New York-New Jersey
banking market, as defined by the Federal Reserve Bank of New York, is vigorous
and will not be impacted adversely by the Company's acquisition of Dime.
Furthermore, we believe not only that Dime will be unable to substantiate its
claims, but also that the New York State regulatory scheme set out under the
Bank Holding Company Act, which places exclusive jurisdiction to review and
approve bank holding company mergers and acquisitions with the Federal Reserve
Board and the U.S. Department of Justice. We understand that FleetBoston also
believes that the allegations against it in Dime's complaint are without merit
and that FleetBoston intends to contest Dime's allegations vigorously.
6
<PAGE> 7
PART I (CONTINUED)
ITEM 3 - LEGAL PROCEEDINGS (CONTINUED)
On March 13, 2000, we filed a motion in the Court of Chancery to enjoin
Dime from taking any further steps to prosecute the New York action on the
grounds that the New York action arises out of the same nucleus of operative
facts as those involved in the Delaware litigation and would necessarily involve
adjudication of matters relating to the Delaware litigation.
On March 17, 2000, Dime filed a response with the Delaware court opposing
the Company's motion to stay Dime's antitrust action in New York. On March 20,
2000, the Delaware court denied the Company's motion.
On March 17, 2000, the Company moved for an expedited hearing and partial
summary judgment with respect to its claims in the Delaware litigation. A
briefing schedule on that motion has been established and a hearing has been set
for April 17, 2000.
On March 21, 2000, Dime filed a complaint in the United States District
Court for the Eastern District of New York against the Company and the
individual members of the Company's board of directors alleging claims under the
federal securities laws based on what Dime has claimed are material
misstatements and omissions in the proxy solicitation and exchange offer
material filed by the Company with the SEC. Dime's claim seeks injunctive and
other relief. The Company believes that the claims alleged by Dime in its
complaint are without merit and intends to contest the action vigorously.
Additional information required by this item is set forth in "Note 16 -
Other Commitments and Contingent Liabilities (c) Other Matters" (page 60) and
"Note 18 - Subsequent Event" (page 62) of the Company's 1999 Annual Report to
Shareholders included herewith as Exhibit 13 and incorporated herein by
reference.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders during the fourth
quarter of 1999.
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 Company as of January 1, 2000, are
presented in the following table. The officers are elected annually by the Board
of Directors.
Name Age Positions Held in Most Recent 5 Years
- - - - ---- --- -------------------------------------
John A. Kanas 53 Chairman, President and
Chief Executive Officer of the
Company and North Fork, throughout
the past five years.
John Bohlsen 57 Vice Chairman of the Company and North Fork.
Mr. Bohlsen also has been President of the
Helm Development Corp., a real estate
company, throughout the past five years.
7
<PAGE> 8
Thomas M. O'Brien 49 Vice Chairman of the Company and North Fork
(since January 1997). Previously, Mr. O'Brien
was Chairman, President and Chief Executive
Officer of North Side Savings Bank.
Daniel M. Healy 57 Executive Vice President and Chief Financial
Officer of the Company throughout the past
five years.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on the New York Stock Exchange under
the symbol NFB. As of March 27, 2000, there were 7,395 shareholders of record of
the Company's common stock.
For additional information regarding dividends and restrictions thereon,
and market price information, refer to the "Selected Financial Data" (pages
12-13), and "Liquidity" (page 23) sections of Management's Discussion and
Analysis, the "Selected Statistical Data" (page 33), and "Note 14 - Regulatory
Matters" (page 58-59) of the Company's 1999 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" (pages 12-13) of the Company's 1999 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 14-33) of the Company's 1999 Annual Report to
Shareholders included herewith as Exhibit 13 and incorporated herein by
reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required by this item is set forth in Management's
Discussion and Analysis, (pages 14-33) of the Company's 1999 Annual Report to
Shareholders included herewith as Exhibit 13 and incorporated herein by
reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth under the captions
"Selected Statistical Data" (page 33); the Consolidated Financial Statements
(pages 34-39); the Notes to the Consolidated Financial Statements (pages 40-63);
the Independent Auditors' Report (page 64); and the Report of Management (page
65) of the Company's 1999 Annual Report to Shareholders included herewith as
Exhibit 13 and incorporated herein by reference.
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.
8
<PAGE> 9
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 4-7) in the Company's Definitive Proxy Statement for its Annual Meeting
of Stockholders to be held on Tuesday, April 25, 2000, 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 9), "Executive Compensation" (pages 10-26),
and "Retirement Plans" (pages 26-27) in the Company's Definitive Proxy Statement
for its Annual Meeting of Stockholders to be held April 25, 2000, 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 2-4) in the Company's Definitive Proxy Statement
for its Annual Meeting of Stockholders to be held April 25, 2000, 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
27) in the Company's Definitive Proxy Statement for its Annual Meeting of
Stockholders to be held April 25, 2000, which is incorporated herein by
reference.
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 Company, 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 Company's 1999 Annual Report
to Shareholders filed herewith as Exhibit 13.
1. Financial Statements Page No.
-------------------- --------
Consolidated Statements of Income 34
Consolidated Balance Sheets 35
Consolidated Statements of Cash Flows 36-37
Consolidated Statements of Changes
in Stockholders' Equity 38
Consolidated Statements of
Comprehensive Income 39
Notes to Consolidated Financial Statements 40-63
Independent Auditors' Report 64
Report of Management 65
2. Financial Statement Schedules
-----------------------------
9
<PAGE> 10
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 Company have
been omitted because they are either not required, are not
applicable or are included in the consolidated financial
statements or notes thereto, which are incorporated herein
by reference to the Company's 1999 Annual Report to
Shareholders filed herewith as Exhibit 13.
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 Reports on Form 8-K filed during the fourth quarter of 1999
are as follows:
On October 22, 1999, the Company filed a Current Report stating that
it had issued a press release regarding its third quarter and
year-to-date 1999 financial results.
On December 29, 1999, the Company filed a Current Report containing,
as exhibits, the Agreement and Plan of Mergers (as amended and
restated) for both the Reliance Bancorp, Inc. (Exhibit 2.1) and the
JSB Financial, Inc. (Exhibit 2.2) transactions.
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 29, 2000
10
<PAGE> 11
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
- - - - --------- ----- ----
/s/ John A. Kanas Chairman of the Board, March 28, 2000
- - - - ------------------------- President and Chief Executive
John A. Kanas Officer
(Principal Executive Officer)
/s/ Daniel M. Healy Director March 28, 2000
- - - - ------------------------- Executive Vice President and
Daniel M. Healy Chief Financial Officer
Principal Accounting Officer)
/s/ John Bohlsen Director March 28, 2000
- - - - ------------------------- Vice Chairman of the Board
John Bohlsen
/s/ Thomas M. O'Brien Director March 28, 2000
- - - - ------------------------- Vice Chairman of the Board
Thomas M. O'Brien
/s/ Irvin L. Cherashore Director March 28, 2000
- - - - -------------------------
Irvin L. Cherashore
/s/ Park T. Adikes Director March 28, 2000
- - - - -------------------------
Park T. Adikes
/s/ Allan C. Dickerson Director March 28, 2000
- - - - -------------------------
Allan C. Dickerson
/s/ Lloyd A. Gerard Director March 28, 2000
- - - - -------------------------
Lloyd A. Gerard
/s/ Patrick E. Malloy III Director March 28, 2000
- - - - -------------------------
Patrick E. Malloy III
/s/ Raymond A. Nielsen Director March 28, 2000
- - - - -------------------------
Raymond A. Nielsen
/s/ James F. Reeve Director March 28, 2000
- - - - -------------------------
James F. Reeve
/s/ George H. Rowsom Director March 28, 2000
- - - - -------------------------
George H. Rowsom
/s/ Dr. Kurt R. Schmeller Director March 28, 2000
- - - - -------------------------
Dr. Kurt R. Schmeller
/s/ Raymond W. Terry, Jr. Director March 28, 2000
- - - - -------------------------
Raymond W. Terry, Jr.
<PAGE> 12
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- - - - ------ ----------- ----------------
<S> <C> <C>
2.1 Amended and Restated Agreement Previously filed on Form 8-K
and Plan of Merger, dated as of as Exhibit 2.2 dated December 29, 1999 and
August 16, 1999, between North incorporated herein by reference.
Fork Bancorporation, Inc. and
JSB Financial, Inc.
2.2 Amended and Restated Agreement Previously filed on Form 8-K
and Plan of Merger, dated as of as Exhibit 2.1 dated December 29, 1999 and
August 30, 1999, between North incorporated herein by reference.
Fork Bancorporation, Inc. and
Reliance Bancorp, Inc.
3.1 Articles of Incorporation of North Filed herewith.
Fork Bancorporation, Inc.
3.2 By-Laws of North Fork Bancorporation, Previously filed on Form 10-K for the year ended
Inc., as amended, effective October 29, December 31, 1998, dated March 29, 1999, as
1998. Exhibit 3.2 and incorporated herein by reference.
4.1 Prospectus included in the North Fork Previously filed with Post-Effective Amendment
Capital Trust I offer to exchange its No. 1 to the Registrants' registration statement on
8.70% Capital Trust Pass-Through Form S-4, dated May 2, 1997 (Registration No.
Securities, which have been registered 333-24419) and incorporated herein by reference.
under the Securities Act of 1933 for
all of its outstanding 8.70% original
Capital Trust Pass-Through Securities.
4.2 Prospectus for North Fork Capital Previously filed with Post-Effective Amendment
Trust II issuance of Capital Trust No. 1 to the Registrants' registration statement on
Pass-Through Securities. Form S-3, dated November 21, 1997 (Registration
No. 333-40311) and incorporated herein by
reference.
4.3 Prospectus for Reliance Capital Trust Previously filed by Reliance Bancorp, Inc on Form
I, issuance of Capital Trust Pass- S-4, dated October 13, 1998 (Registration No. 333-64219)
Through Securities. and incorporated 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. 1985 (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.
</TABLE>
<PAGE> 13
EXHIBIT INDEX (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- - - - ------ ----------- ----------------
<S> <C> <C>
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 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.
10.8(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.
10.9(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.
10.10(a) Form of Non-Qualified Stock Option Filed herewith.
Agreement entered into between North
Fork Bancorporation, Inc. and John A.
Kanas, John Bohlsen, Thomas M.
O'Brien and Daniel M. Healy dated
December 13, 1999.
10.11(a) Form of Restricted Stock Agreement, Filed herewith.
entered into between North Fork
Bancorporation, Inc. and John A.
Kanas, John Bohlsen, Thomas M.
O'Brien and Daniel M. Healy dated
December 13, 1999.
10.12(a) North Fork Bancorporation, Inc. 1999 Filed herewith.
Stock Compensation Plan.
</TABLE>
<PAGE> 14
EXHIBIT INDEX (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION METHOD OF FILING
- - - - ------ ----------- ----------------
<S> <C> <C>
10.13(a) North Fork Bancorporation, Inc. 1997 Previously filed on Form S-8, dated June 8, 1998
Non-Officer Stock Plan. (Registration No. 333-56329) and
incorporated herein by reference.
10.14(a) North Fork Bancorporation, Inc. 1998 Filed herewith.
Stock Compensation Plan, as amended.
10.15(a) Form of Consulting Agreement, as entered Filed herewith.
into between North Fork Bancorporation,
Inc. and Raymond A. Nielsen, III dated
December 29, 1999.
10.16(a) Form of Consulting Agreement, as entered Filed herewith.
into between North Fork Bancorporation,
Inc. and Thomas M. O'Brien dated
December 31, 1999.
11 Statement re: Computation of Filed herewith.
Earnings Per Share.
13 Pages 12 through 65 of the Company's Filed herewith.
1999 Annual Report to Shareholders
that are incorporated herein by
reference.
21 Subsidiaries of Company. Filed herewith.
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 3.1
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION
OF
NORTH FORK BANCORPORATION, INC.
------------------------------------
PURSUANT TO SECTION 242 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
------------------------------------
North Fork Bancorporation, Inc., a Delaware corporation (hereafter called
the "Corporation"), does hereby certify as follows:
FIRST: Paragraph (a) of Article Fourth of the Corporation's Restated
Certificate of Incorporation is hereby amended to read in its entirety as set
forth below:
FOURTH: Capital Stock (a) The authorized shares which the Corporation has
authority to issue shall be five hundred ten million (510,000,000), divided
into five hundred million (500,000,000) shares of common stock, par value
of one cent ($.01) each, and ten million (10,000,000) shares of Preferred
Stock, par value of one dollar ($1.00) each which Preferred Stock may be
divided into and issued in series as described herein,
SECOND: The foregoing amendment was duly adopted in accordance with
Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, North Fork Bancorporation, Inc. has caused this
Certificate to be duly executed in its corporate name this 11th day of February,
2000.
NORTH FORK BANCOPORATION, INC.
By: /s/ Aurelie S. Graf
---------------------------
Name: Aurelie S. Graf
Title: Secretary
<PAGE> 1
EXHIBIT 10.10(A)
1998 Plan
Executive
---------
(reload, transferable, immediate
vesting, deferred delivery)
NORTH FORK BANCORPORATION, INC.
-------------------------------
NONQUALIFIED STOCK OPTION AGREEMENT
Date of Option Grant: _______ Number of Shares to Which Option Relates: _______
OPTION PRICE PER SHARE: $_________
(Representing ___ Percent of the Market Price on the Date of Grant)
AGREEMENT, dated the Date of Option Grant set forth above, between North
Fork Bancorporation, Inc., a Delaware corporation (the "Company"), and _________
("Optionee").
WHEREAS, Optionee is a valued and trusted key employee of the Company or
one of its subsidiaries; and
WHEREAS, the Company, pursuant to and in accordance with its 1998 Stock
Compensation Plan (the "Plan"), has elected to grant to Optionee an option to
buy shares of the common stock, par value $2.50 per share, of the Company
("Common Stock"), with the expectation that Optionee thereby may be induced to
acquire and maintain an ownership interest in the Common Stock and to work for
the success of the Company and its subsidiaries;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants contained herein, the parties hereto hereby agree as follows:
1. GRANT OF OPTION. As of the Date of Option Grant identified above, the
Company grants to Optionee, subject to the conditions set forth herein and in
the Plan, the right, privilege, and option (the "Option") to purchase that
number of shares of Common Stock identified above opposite the heading "Number
of Shares to Which Option Relates" (the "Shares"), at the per share price
specified above opposite the heading "Option Price Per Share," ex dividend.
2. VESTING (EXERCISABILITY) OF OPTION; TERM OF OPTION. The Option shall
vest on the earliest date permitted under the terms of the Plan and applicable
law, such being the Date of Option Grant as indicated above (the "Vesting
Date"). On and after the Vesting Date and until the tenth anniversary of the
Date of Option Grant (such period, the "Option Period"), the Option will be and
remain exercisable, in whole or in part, subject to Section 4 hereof,
"Conditions to Exercise," and to possible early termination of the Option under
Section 3, below.
3. EFFECT OF TERMINATION OF EMPLOYMENT, DEATH OR DISABILITY OF OPTIONEE. In
the event that Optionee's employment with the Company and its subsidiaries
terminates prior to full
<PAGE> 2
exercise of the Option and expiration of the Option Period, Optionee may
exercise the Option at any time prior to or on, but not after, the date that is
ninety (90) days after the date of termination of employment or the last day of
the Option Period, whichever comes first; provided, however, (i) if Optionee's
employment is terminated due to Optionee's Disability (as defined below),
Optionee may exercise the Option at any time prior to or on, but not after, the
date that is one year after the date of termination of employment or the last
day of the Option Period, whichever comes first, (ii) if Optionee's employment
is terminated due to the death of Optionee, the Option may be exercised by the
legal representative(s) or beneficiary(-ies) of Optionee at any time prior to or
on, but not after, the last day of the Option Period, and (iii) if Optionee's
employment is Terminated for Cause (as defined below), the Option will cease to
be exercisable and will terminate, effective as of the date of termination of
employment. For purposes of this Agreement, leaves of absence granted by the
Company for reasons including, but not limited to, military service or illness
and transfers of employment between the Company and any of its subsidiaries
shall not constitute termination of employment.
"Disability" means permanent and total disability as defined in Section
22(e)(3) of the Internal Revenue Code of 1986, as amended and in effect from
time to time (the "Code"), as determined by the Committee in good faith, upon
receipt of and in reliance on sufficient competent medical advice.
"Terminated for Cause" means, (a) for any Optionee serving under an
employment agreement containing a provision for termination of employment for
"cause," termination of the employment of Optionee for "cause" pursuant to such
provision, and (b) for any other Optionee, termination of the employment of
Optionee by a two-thirds vote of the entire Board of Directors of the Company or
the subsidiary of the Company employing such Optionee expressly for one or both
of the following "causes," as evidenced in a certified resolution of such Board:
(1) any willful misconduct by Optionee which is materially injurious to the
Company or the subsidiary, monetarily or otherwise, or (2) conviction of
Optionee with no further possibility of appeal of a felony under applicable
state or federal banking or financial institution laws, or the agreement of
Optionee to plead guilty to any such felony.
4. CONDITIONS TO EXERCISE OF OPTION. The Option may not be exercised
unless, as of the Exercise Date (as defined in Section 5(b), below), each of the
following conditions is met:
(i) The Option has not terminated pursuant to Section 3;
(ii) The underlying Shares as to which the Option is then sought to be
exercised are the subject of an effective registration statement under the
Securities Act of 1933, as amended, and are registered under applicable
state securities laws, or may then be issued to Optionee exempt from such
federal or state registration;
(iii) Payment in full of the exercise price for that number of Shares
as to which the Option is being exercised has been received by the Company
in accordance with Section 5(c), below; and
2
<PAGE> 3
(iv) All other actions required to be taken by the Company and the
Exercising Person (as defined in Section 5(a), below) prior to such
exercise of the Option in accordance with the Plan and this Agreement shall
have been taken.
3
<PAGE> 4
5. METHOD OF EXERCISE OF OPTION.
(a) If Optionee or any person authorized to exercise the Option on
Optionee's behalf or in the event of Optionee's death (the "Exercising Person")
elects to exercise the Option, in whole or in part, such Exercising Person shall
deliver to the Secretary of the Company at the Company's principal place of
business a written notice of election to exercise the Option, identifying that
number of whole Shares as to which exercise is then being sought, which number
may not exceed the number of Shares as to which the Option may then be exercised
in light of any and all prior partial exercises of the Option. If the Exercising
Person is not Optionee, the notice also shall identify the nature of the
Exercising Person's authority to exercise the Option. In all cases, such written
notice of election must be accompanied by surrender of the original of this
Agreement.
(b) In the event of such election, the effective date of the exercise (the
"Exercise Date") shall be a date designated by the Secretary of the Company that
is not later than the third business day after the day the Secretary receives
the written notice, unless all required conditions to exercise as set forth in
Section 4 have not been satisfied as of the close of business on such third day,
in which event the Exercise Date shall be the first subsequent business day on
which all such conditions are satisfied. If postponement of exercise beyond such
third business day becomes necessary, the Secretary shall give the Exercising
Person reasonable advance notice of such postponement. At any time prior to the
Exercise Date, the Exercising Person may revoke the election to exercise by
subsequent notice to the Secretary, such revocation to become effective upon
receipt of such subsequent notice.
(c) Payment of the exercise price for that number of Shares as to which the
Option is being exercised shall be made to the Secretary of the Company. Payment
shall be in cash or, if authorized by the committee of the Board of Directors of
the Company that administers the Plan (the "Committee"), may be made at the
discretion of the Exercising Person in whole or in part by surrender to the
Company of shares of Common Stock owned by Optionee and acceptable to the
Committee (a "Stock-for-Stock Exercise"). Any shares surrendered in payment of
the exercise price in a Stock-for-Stock Exercise ("Payment Shares") shall be
valued at the fair market value thereof, (determined as provided in the Plan) on
the Exercise Date. In a Stock-for-Stock Exercise, in lieu of actually
surrendering to the Company a certain number of Payment Shares, the Exercising
Person may elect to submit to the Company a statement affirming ownership by
Optionee of such number of shares and request that such shares, although not
actually surrendered, be deemed to have been surrendered by the Exercising
Person to the Company in payment of the exercise price (any such payment, a
"Deemed Payment").
(d) Subject to Section 5(e) below, on the Exercise Date, the Company shall
deliver to the Exercising Person or the designee of the Exercising Person as of
the Exercise Date the number of Shares as to which the Option has thus been
exercised, provided that, if the Exercising Party has elected in connection with
a Stock-for-Stock Exercise to make a Deemed Payment, the Company will deduct
from the number of Shares thus deliverable by it on the Exercise Date the number
of shares deemed surrendered but not actually surrendered by the Exercising
Person and deliver only the remaining number of Shares (the "Spread Shares").
If, on the Exercise Date, any Shares remain as to which the Option is not being
exercised, the Company, simultaneously with delivery of the appropriate number
of Shares, shall return to the Exercising Person the original of
4
<PAGE> 5
this Agreement, with appropriate notations as to the partial exercise of the
Option. To the extent that exercise of the Option obligates the Company to pay
withholding taxes on behalf of Optionee, the Company will pay the minimum amount
of such withholding taxes then due and either (i) withhold such amount from
Optionee's wages or other compensatory payments due to Optionee, or (ii) if the
Company so elects, deduct from the number of Shares otherwise then deliverable
by it a number of Shares having a fair market value on the Exercise Date, as
determined by the Committee, equal to the amount of such withholding tax
payment, in which event Optionee shall have no further rights with respect to
such nondelivered Shares, provided that, if the Exercising Person at the time of
exercise delivers funds to the Company for payment of such withholding taxes,
the Company will first apply such funds to the payment of such taxes.
(e) With the consent of the Committee and subject to such procedures as may
be established from time to time by the Committee, Optionee, by written notice
given to the Company an appropriate period of time prior to the Exercise Date,
in connection with a Stock-for-Stock Exercise of the Option, may elect to defer
until some date after the Exercise Date the delivery by the Company of some or
all of the Spread Shares otherwise deliverable by the Company as of the Exercise
Date under Section 5(d), above (a "Deferred Delivery"). Notice of any such
Deferred Delivery shall be on such form as may be specified by the Committee,
which form, in addition to any other appropriate information or statements,
shall require Optionee to identify the number of Spread Shares as to which
delivery is to be deferred (the "Deferred Shares") and the date or dates upon
which Optionee wishes delivery of the Deferred Shares to be made (the "Deferred
Delivery Date"), and to agree to abide by all procedures then or thereafter
established by the Committee for a Deferred Delivery. In the event of a Deferred
Delivery, on the Exercise Date the Company shall give to Optionee, in lieu of
the Deferred Shares, a promise to deliver the Deferred Shares on the Deferred
Delivery Date selected by Optionee, together with such other documentation as
the Committee may deem appropriate. Until the Deferred Delivery Date and
delivery by the Company to Optionee of the Deferred Shares, Optionee shall not
be treated as the owner of the Deferred Shares, shall not have any rights as a
stockholder as to the Deferred Shares, and shall have only a contractual right
to receive the Deferred Shares, unsecured by any assets of the Company or its
subsidiaries.
(f) Nothing in this Section 5 shall preclude exercise of this Option by
means of a so-called "brokered exercise" involving payment of the exercise price
of the Shares as to which the Option is being exercised by a broker, dealer or
other agent acting on behalf of Optionee, utilizing proceeds from the sale on
behalf of Optionee of a number of shares of Common Stock equal to or less than
the full number of Shares deliverable by the Company upon such exercise,
provided the Company has approved exercise of the Option by such method.
6. TRANSFERABILITY OF OPTION. At any time from and after the Date of Grant
and prior to full exercise of the Option or expiration of the Option Period,
Optionee may transfer any portion of the Option that is then exercisable, for no
consideration, to or for the benefit of one or more members of Optionee's
Immediate Family (as defined below), including, without limitation, to a trust
for the benefit of one or more members of Optionee's Immediate Family or to a
partnership of and among members of Optionee's Immediate Family, in which event
the transferee or transferees of such portion shall possess all rights of
Optionee under this Agreement with respect to such portion and shall remain
subject to all the terms and conditions applicable thereto, including those
terms and conditions pursuant to which the exercisability of the Option is
related
5
<PAGE> 6
to the continuing employment of Optionee (not the transferee or transferees) by
the Company or its subsidiaries as specified in Section 3 above. The Committee
may specify from time to time the procedures applicable to any such transfer and
certain limitations relating thereto as may be practical or are necessary to
protect the Company's interests, including limitations on the minimum size of
the Option interest (expressed as a number of Shares) that may be transferred in
any one transaction, the maximum number of transfers per year, and requirements
that in connection with any such transfer or transfers Optionee retain ownership
of an appropriate interest in the Option and the right to acquire the Shares
subject thereto for the purpose of utilizing such Shares, if necessary, for
payment of applicable withholding taxes upon exercise of the portion or portions
of the Option thus transferred. For purposes of this Section 6, "Optionee's
Immediate Family" means Optionee's parents, spouse, children, stepchildren,
adoptive relationships, sisters, brothers and grandchildren.
If a transferee of the Option elects to exercise the Option by way of a
Stock-for-Stock Exercise, Optionee, if still employed by the Company or a
subsidiary thereof on the Exercise Date, may request that the Committee award to
the Optionee (not to the exercising transferee) as of the Exercise Date of the
underlying Option, a Reload Option as defined in and in accordance with the
terms and conditions set forth in Section 10 hereof. If the Optionee submits
such a request, the Committee, in its sole discretion, shall determine whether
or not to grant a Reload Option to the Optionee, but such decision (and if the
Committee elects to grant such a Reload Option, the grant thereof) shall have no
impact on the rights and obligations of the transferee exercising the underlying
transferred Option pursuant to this Section 6.
Except for those transfers specifically permitted in accordance with the
foregoing paragraph, the Option shall be non-transferable except in the event of
Optionee's death, as provided in Section 3 above, and during Optionee's lifetime
shall be exercisable only by Optionee.
7. STOCKHOLDER RIGHTS. Optionee shall have no rights as a stockholder with
respect to any of the Shares until the Option shall have been exercised with
respect to such Shares and such Shares have been issued in the name of Optionee.
8. DESIGNATION OF BENEFICIARY. Optionee may designate a person or persons
to receive the Option in the event of the death of Optionee. Such designation
must be made either in the space indicated at the end of this Agreement or upon
forms supplied by and delivered to the Company and may be revoked in writing. If
Optionee fails effectively to designate a beneficiary, the estate of Optionee
will be deemed to be the beneficiary of Optionee with respect to the Option.
9. ADJUSTMENTS. In the event of any change in the outstanding shares of
Common Stock after the Date of Option Grant, by reason of any stock dividend or
stock split, recapitalization, merger, sale, consolidation, spinoff,
reorganization, combination, issuance of stock rights or warrants, exchange of
shares, or other similar corporate change, an appropriate adjustment will be
made by the Committee to the number of Shares to which the Option theretofore
related and the exercise price per Share under the Option, consistent with
equitable considerations; provided, however, that if the Company shall issue
additional shares of Common Stock or other securities
6
<PAGE> 7
for consideration, no such adjustment shall be made. No such adjustment may
materially change the value of benefits available to Optionee as a result of the
prior grant of the Option.
10. RELOAD OPTION. In the event that the holder of the Option intends to
exercise the Option, in whole or in part, in a Stock-for-Stock Exercise,
Optionee may request, prior to such exercise, that the Committee award Optionee
a Reload Option, as defined below, upon such exercise, and the Committee, in its
sole discretion, will determine whether or not to do so. If the Committee
determines to comply with Optionee's request, then upon such Stock-for-Stock
Exercise, the Company shall deliver to Optionee, a new option (a "Reload
Option") to purchase a number of shares of Common Stock equal to (i) the number
of Payment Shares surrendered or deemed surrendered by the holder of the Option
upon exercise of the Option, plus (ii) the additional number of shares of Common
Stock, if any, then withheld by the Company from the Shares otherwise
deliverable to the holder of the Option as payment of any applicable withholding
taxes upon such exercise. The date of grant of the Reload Option shall be the
Exercise Date of the underlying Option and the exercise price per share of the
Reload Option shall be the fair market value (determined as provided in the
Plan) of the Common Stock on such Exercise Date. The Reload Option shall be
fully exercisable immediately upon grant, and shall continue to be exercisable
during the period, but only during the period, that the underlying Option
remains exercisable or would have remained exercisable absent full exercise
thereof, in accordance with Sections 2 and 3 hereof. Optionee may elect, by
notice to the Company prior to the Exercise Date of the underlying Option, to
have the Reload Option be an "incentive stock option" within the meaning of
Section 422 of the Code (subject to the availability of incentive stock options
under the Company's compensatory stock option plans then in effect and
limitations on the maximum number of incentive stock options first becoming
exercisable in any year that may be granted to any one individual under the
Code). To the extent Optionee does not elect "incentive stock option" treatment,
the Reload Option shall be a so-called "nonqualified stock option," that is, an
option that is not an "incentive stock option" under Section 422 of the Code.
Any Reload Option granted to Optionee shall be the subject of a separate Option
Agreement between Optionee and the Company.
11. EFFECT ON EMPLOYMENT. The grant of the Option provided for herein shall
not confer upon Optionee any right to continue in the employment of the Company
or its subsidiaries or to continue to perform services therefor and shall not in
any way interfere with any right of the Company or its subsidiaries to terminate
the services of Optionee as an employee or officer at any time.
12. APPLICABLE LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware.
13. EFFECT OF THE PLAN. Optionee acknowledges that in the event of any
inconsistency between the provisions of this Agreement and the Plan, the
provisions of the Plan will control.
14. NONQUALIFIED STOCK OPTION. This Option is not intended to be, and will
not be treated as, an "incentive stock option" within the meaning of Section 422
of the Code.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have, personally or by a duly
authorized representative, executed this Agreement as of the Date of Option
Grant first above written.
NORTH FORK BANCORPORATION, INC.
By:
----------------------------------
(Authorized Officer)
("OPTIONEE")
-------------------------------------
(Optionee)
DESIGNATION OF BENEFICIARY
- - - - ---------------------------------------
(Relationship to Optionee)
--------------------------------------
(Name of Beneficiary)
--------------------------------------
(Street Address)
--------------------------------------
(City, State, Zip Code)
--------------------------------------
(Social Security Number)
8
<PAGE> 1
EXHIBIT 10.11(A)
1998 Plan
Executive
---------
(retirement vesting/
from treasury with
complete tax gross up)
NORTH FORK BANCORPORATION, INC.
RESTRICTED STOCK AGREEMENT
DATE OF GRANT: _______________ NUMBER OF SHARES: _______________
AGREEMENT, dated the Date of Grant set forth above, between North Fork
Bancorporation, Inc., a Delaware corporation (the "Company"), and _____________
_______________________________ ("Grantee").
WHEREAS, Grantee is a valued and trusted key employee of the Company or one
of its subsidiaries; and
WHEREAS, the Company has elected to award to Grantee shares of "Restricted
Stock" pursuant to and in accordance with the Company's 1998 Stock Compensation
Plan (the "Plan"), in order that Grantee thereby may be induced to acquire and
maintain an ownership interest in the Common Stock of the Company ("Common
Stock") and to work for the success of the Company and its subsidiaries;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants contained herein, the parties hereto agree as follows:
1. RESTRICTED STOCK AWARD. The Company hereby grants and awards to Grantee,
subject to the conditions and restrictions set forth in this Agreement and in
the Plan, that number of shares of Common Stock identified above opposite the
heading "Number of Shares" (the "Shares"), which Shares will be "Restricted
Stock" within the meaning of Sections 2(u) and 9 of the Plan. As of the Date of
Grant, the Shares will be issued from the treasury of the Company in the name of
Grantee or a nominee of Grantee, provided, however, that a certificate or
certificates representing the Shares will not be delivered to Grantee until such
later date as is identified in Section 3 below.
2. RESTRICTIONS ON TRANSFER, FORFEITABILITY PRIOR TO VESTING.
(a) Except as otherwise specified by the committee of the Board of
Directors of the Company (the "Board") charged with administering the Plan from
time to time (the "Committee"), the Shares and rights relating thereto may not
be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of,
and Grantee agrees not to sell, assign, transfer, pledge, hypothecate or
otherwise dispose of such Shares or rights, prior to the Vesting Date (as
defined in Section 2(b)
<PAGE> 2
below). If Grantee ceases to be an Affiliate of the Company (as defined below)
prior to such Vesting Date, Grantee shall immediately forfeit any and all
unvested Shares together with all rights relating thereto, and the full
ownership of such Shares and rights shall revert to the Company, and Grantee
shall have no further rights under this Agreement. For purposes of the foregoing
sentence, Grantee shall be an "Affiliate of the Company" if Grantee is employed
by the Company or any of its subsidiaries or is serving the Company under a
Consulting Agreement (as defined in Section 2(b) below). A leave of absence
granted by the Company for reasons including, but not limited to, military
service or illness and transfers of employment between the Company and any of
its subsidiaries shall not be deemed a termination of employment of Grantee. On
the Vesting Date, the restrictions on transferability of the Shares set forth in
the first sentence of this Section 2(a) and the forfeitability of the Shares set
forth in the second sentence of this Section 2(a) shall lapse and expire, and
the Shares, if not previously forfeited, will become freely transferable,
subject only to such further limitations on transfer, if any, as may exist under
applicable securities laws or any other agreement then binding upon Grantee.
(b) The "Vesting Date" for all the Shares subject hereto shall be that date
when there occurs the first to occur of the following "Vesting Events":
(i) Grantee's attaining normal retirement age under the principal
retirement plan of the Company in effect at such time (the "Retirement
Plan"), or the "early retirement" of Grantee under the Retirement Plan
prior to attaining normal retirement age with the approval of the Board or
the Committee, which approval for early retirement required under this
subsection (b)(i) may be withheld for any reason or no reason (other than
unlawful discrimination) and shall be required in order for the date of
early retirement to constitute the Vesting Date hereunder even if such
approval is not required for early retirement under the Retirement Plan;
(ii) Grantee's death or Disability (as defined in Section 2(d) below);
or
(iii) the occurrence of a Change in Control of the Company (as defined
in Section 7 below);
provided, however, that if the first to occur of subsections (b)(i), (b)(ii) or
(b)(iii), above, is the Grantee's attaining normal retirement age or the
approved early retirement of Grantee in accordance with subsection (b)(i) above,
and if, as of the date of such occurrence ("Grantee's Retirement Date"), the
Board or the Committee determines, in the exercise of its reasonable judgment,
that it is highly probable that some or all of the taxable compensation income
that would be recognized by Grantee as a result of the vesting of the Shares as
of Grantee's Retirement Date would be non-deductible to the Company for federal
income tax purposes for the taxable year of the Company in which Grantee's
Retirement Date falls as a result of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), or any successor provision of federal income
tax law then in effect, then
Page 2
<PAGE> 3
Grantee's attaining normal retirement age or the approved early retirement of
Grantee shall not constitute a Vesting Event under this Agreement and Grantee's
Retirement Date shall not be the Vesting Date of the Shares hereunder, but
rather on Grantee's Retirement Date, without any further action on the part of
Grantee or the Company, there shall automatically come into existence a
post-retirement consultancy agreement between Grantee and the Company
("Consulting Agreement"), which Consulting Agreement shall consist of such
mutual duties, obligations and undertakings, and shall continue for at least
such minimum period of time (the "Minimum Consulting Period"), as are set forth
in Exhibit A attached hereto. In the event such a Consulting Agreement comes
into effect, a Vesting Event within the meaning of subsection (b)(i) above shall
be the expiration of the Minimum Consulting Period under the Consulting
Agreement following Grantee's Retirement Date, and if such occurrence is the
first Vesting Event to occur, the Vesting Date shall be 11:59 p.m. on the last
day of the Minimum Consulting Period. To the extent that Grantee may have the
right under the Retirement Plan, separate and apart from this Agreement and
approved early retirement under subsection 2(b)(i), above, to elect early
retirement without otherwise obtaining approval of the Company, the Board or the
Committee, Grantee may request in advance that the Board or the Committee make a
preliminary determination as to whether Grantee's election of early retirement
as of any particular date would result in an automatic Consulting Agreement
hereunder, and if so requested the Board or the Committee shall exercise its
good faith judgment in making such a preliminary determination and communicating
the same to Grantee for his consideration before electing early retirement.
(c) Notwithstanding any other provision of this Agreement to the contrary,
the Committee may, in its sole discretion, at any time or from time to time and
with respect to any or all of the Shares, accelerate the Vesting Date of the
Shares, if in its judgment the performance of Grantee has warranted such action
or such action is in the best interest of the Company.
(d) For purposes of this Agreement, "Disability" shall have the meaning set
forth in Section 22(e)(3) of the Code, as determined by the Committee in good
faith, upon receipt of and in reliance on sufficient competent medical advice.
3. CERTIFICATES. One or more certificates representing the Shares will be
held by the Company or by its transfer agent, together with a stock power to be
executed by Grantee in favor of the Company, until the Vesting Date of the
Shares under Section 2(b), at which time a certificate or certificates
representing the Shares will be issued to Grantee.
4. DIVIDENDS AND VOTING. From and after the Date of Grant with respect to
the Shares and until any subsequent transfer or forfeiture thereof by Grantee,
Grantee shall be treated as the sole beneficial owner of such Shares, having all
rights of a common stockholder of the Company with respect thereto, except as
otherwise may be set forth in this Agreement. Specifically, and without
limitation, Grantee shall have the following rights:
Page 3
<PAGE> 4
(a) Grantee shall be entitled to receive all dividends, payable in stock,
in cash or in kind, or other distributions, declared on or with respect to any
Shares as of a record date that occurs on or after the Date of Grant hereunder
and prior to any transfer or forfeiture of such Shares; provided that any such
dividends or distributions payable in equity securities of the Company or its
affiliates, including shares of Common Stock or any series of Preferred Stock of
the Company, or any warrants, options or rights to purchase any of the
foregoing, received by Grantee prior to the Vesting Date shall be received and
held by Grantee subject to the same restrictions on transfer and the same
conditions regarding forfeiture as apply to the Shares with respect to which
such dividends or distributions are paid; and
(b) Grantee shall be entitled to exercise all voting rights with respect to
the Shares, if the record date for the exercise of such voting rights occurs on
or after the Date of Grant hereunder and prior to any transfer or forfeiture of
such Shares.
In the event of forfeiture of any or all of the Shares by Grantee, Grantee shall
not be required to return to the Company any dividends or distributions
previously paid to Grantee with respect to such Shares, other than any dividends
or distributions payable in the form of equity securities as described in
subsection (a) of this Section 4, above.
5. DESIGNATION OF BENEFICIARY. Grantee may designate a person or persons to
receive, in the event of the death of Grantee, any Shares that may then vest.
Such designation must be made either in the space indicated at the end of this
Agreement or upon forms supplied by and delivered to the Company and may be
revoked in writing. If Grantee fails effectively to designate a beneficiary, the
estate of Grantee will be deemed to be the beneficiary of Grantee with respect
to any such Shares then vesting.
6. ADJUSTMENTS. In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend or stock split, recapitalization,
merger, sale, consolidation, spinoff, reorganization, combination, delivery of
stock rights or warrants, exchange of shares, or other similar corporate change,
an appropriate adjustment will be made by the Committee to the number of Shares
then subject to this Agreement, consistent with equitable considerations;
provided, however, that if the Company shall deliver additional shares of Common
Stock or other securities for consideration, no such adjustment shall be made.
No such adjustment may materially change the value of benefits available to
Grantee as a result of the prior award of the Shares.
7. CHANGE IN CONTROL. A Change in Control of the Company (as defined below)
constitutes a Vesting Event under Section 2(b) of this Agreement.
For purposes of this Agreement, a "Change in Control of the Company" shall
be deemed to have occurred as of the first date that any of the following
occurs:
Page 4
<PAGE> 5
(a) Any individual, corporation (other than the Company), partnership,
trust, association, pool, syndicate, or any other entity or any group of persons
acting in concert (other than any of the foregoing that is controlled by or
under common control with the Company) becomes the "beneficial owner," as that
concept is defined in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, as the result
of any one or more transactions (including gifts and stock repurchases but
excluding transactions described in subsection (c), below), of securities of the
Company possessing twenty-five percent (25%) or more of the Voting Power (as
defined below) of the Company;
(b) Approved Directors constitute less than a majority of the entire Board,
with "Approved Directors" defined to mean the members of the Board as of the
Date of Grant hereunder and any individuals who subsequently become members of
the Board (i) having been elected by stockholders after being nominated or
approved by a majority of the Approved Directors on the Board prior to such
election, or (ii) having been appointed to the Board to fill a vacancy with the
approval of a majority of Approved Directors on the Board prior to such
appointment; or
(c) The Company has entered into a binding agreement for a Sale of the
Company (as defined below) and has received all required corporate, regulatory
and other approvals for consummating such Sale of the Company, and the
consummation thereof is expected by the Company to occur within fifteen (15)
days.
For purposes of subsection (c) of the preceding paragraph, "Sale of the
Company" shall mean:
(i) Any consolidation, merger or stock-for-stock-exchange involving
the Company or the securities of the Company in which the holders of voting
securities of the Company immediately prior to the consummation of such
transaction will own, as a group, immediately after such consummation,
voting securities of the Company (or, if the Company is not to survive such
transaction, voting securities of the Surviving Corporation, as defined
below) having less than fifty percent (50%) of the Voting Power of the
Company (or the Surviving Corporation), excluding any securities of the
Surviving Corporation owned by any members of such group prior to such
transaction and any securities to be received in such transaction by any
members of such group which represent disproportionate percentage increases
in their share holdings vis-a-vis the other members of such group; or
(ii) Any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions), of all, or substantially all, of the
assets of the Company to a party which is not controlled by or under common
control with the Company prior to such transaction or series of
transactions.
For purposes of the preceding sentence, the "Surviving Corporation" in any
transaction in which the
Page 5
<PAGE> 6
Company does not survive shall mean the corporation that issues securities
and/or other consideration to the stockholders of the Company in connection with
such transaction, or, if such issuing corporation is controlled directly or
indirectly by another corporation, the ultimate controlling corporation of such
issuing corporation.
For purposes of this Section 7, the "Voting Power" of a corporation at a
given time shall mean the total number of votes entitled to be cast generally in
an election of directors of such corporation at such time by all holders of
outstanding equity securities of such corporation.
8. EFFECT ON EMPLOYMENT. The award of Shares and related rights to Grantee
provided for herein shall not, in and of itself, confer upon Grantee any right
to continue in the employment of the Company or its subsidiaries or to continue
to perform services therefor and shall not in any way interfere with any right
of the Company or its subsidiaries to terminate the services of Grantee as an
employee or officer at any time.
9. TAX PAYMENTS. The Company shall pay on behalf of Grantee any and all
taxes, federal, state or local, payable by Grantee on or as a result of the
vesting of the Shares awarded hereunder, including any taxes or additional taxes
payable by Grantee on or as a result of amounts received by or on behalf of
Grantee under any other agreement, contract, plan or arrangement with the
Company or any of its subsidiaries which would not have been payable absent such
vesting. Taxes payable hereunder on behalf of Grantee shall include, without
limitation, all income and excise taxes, including excise taxes under Section
4999(a) of the Code, and also shall include all income and excise taxes payable
by Grantee as a result of payments of taxes by the Company on behalf of Grantee
under this Section 9.
10. APPLICABLE LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware.
11. EFFECT OF PLAN. Grantee acknowledges that in the event of any
inconsistency between the provisions of this Agreement and the Plan, the
provisions of the Plan will control.
Page 6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have, personally or by a duly
authorized representative, executed this Agreement as of the Date of Grant first
above written.
NORTH FORK BANCORPORATION, INC.
By: _________________________________
(Authorized Officer)
"GRANTEE"
________________________________________
DESIGNATION OF BENEFICIARY
_______________________________
(Relationship to Grantee)
________________________________________
(Name of Beneficiary)
________________________________________
(Street Address)
________________________________________
(City, State, Zip Code)
________________________________________
(Social Security Number)
Page 7
<PAGE> 8
Exhibit A
Key Terms of Consulting Agreement
The Consulting Agreement between Grantee and the Company referred to in
Section 2(b) of the Restricted Stock Agreement to which this Exhibit A is
attached (the "Agreement") shall contain the following key terms and provisions:
1. Grantee will perform, and the Company will expect Grantee to perform,
commencing on Grantee's Retirement Date and continuing until termination of the
Consulting Agreement, personal consulting services for the Company of a
substantial nature and involving duties and tasks of the sort typical and
suitable for retiring executives such as Grantee to perform under such
continuing consulting arrangements. The identification of specific duties and
tasks to be performed by Grantee will be within the overall control and
discretion of the Board, provided that in the daily performance of his tasks
Grantee will act as an independent contractor.
2. In return for his services as consultant, Grantee will receive from the
Company for the duration of the Consulting Agreement a monthly amount, payable
in cash, equal to one-eighteenth of Grantee's final annual base salary as an
executive officer of the Company. Grantee shall be eligible for such other
consideration, including participation in such compensatory plans of the Company
that do not limit participation therein to employees, as the Board or the
Committee may deem appropriate.
3. During the term of the Consulting Agreement, Grantee shall not at any
time be an "executive officer" of the Company within the meaning of Item 402 of
Regulation S-K promulgated by the Securities and Exchange Commission, or any
successor regulation in effect from time to time.
4. The parties intend that the Consulting Agreement shall continue for at
least a minimum period of time after Grantee's Retirement Date extending from
such date until (x) the last day of the first calendar month in the fiscal year
of the Company following the fiscal year of the Company in which Grantee's
Retirement Date occurs, or (y) the 90th day after Grantee's Retirement Date,
whichever is later (such minimum duration, the "Minimum Consulting Period"). The
Consulting Agreement will terminate on the last day of the Minimum Consulting
Period, unless terminated before such date or extended beyond such date pursuant
to the provisions of Section 5 of this Exhibit A.
5. The Company may terminate the Consulting Agreement before the last day
of the Minimum Consulting Period if and only if the Board determines by a
majority of the entire Board that Grantee has not adequately performed his
assigned consulting tasks and duties thereunder, after notice and a reasonable
opportunity to correct such non-performance. At any time prior to the last
A-1
<PAGE> 9
day of the Minimum Consulting Period, the Company may advise Grantee that it is
willing to extend the Consulting Agreement beyond such last day, for a definite
or indefinite period of time beyond such last day, and Grantee may accept such
offer of extension, in which event the Consulting Agreement shall continue until
such later date as the Company may then or subsequently designate as the final
termination date. No such offer and acceptance of an extension of the Consulting
Agreement, however, will affect the date of the Vesting Event under subsection
(i) of Section 2(b) of the Agreement, which date shall be the last day of the
Minimum Consulting Period if a Consulting Agreement described herein is entered
into and becomes effective under Section 2(b) of the Agreement. Nothing herein
shall preclude Grantee from discontinuing his services to the Company under the
Consulting Agreement at any time, with or without prior notice.
6. The Consulting Agreement shall be governed by and interpreted in
accordance with the laws of the State of Delaware. It shall be binding upon and
shall inure to the benefit of the respective parties' heirs, successors and
assigns. Capitalized terms used herein and not otherwise defined herein shall
have the meaning given such terms in the Agreement.
A-2
<PAGE> 1
EXHIBIT 10.12(A)
NORTH FORK BANCORPORATION, INC.
1999 STOCK COMPENSATION PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE
North Fork Bancorporation, Inc. (the "Company") hereby establishes a long
term incentive plan to be named the North Fork Bancorporation, Inc. 1999 Stock
Compensation Plan (the "Plan"), for employees of the Company and its
subsidiaries. The purpose of this Plan is to encourage those employees who are
given awards by the committee administering the Plan to acquire and maintain an
interest in the Common Stock of the Company and thus to have additional
incentive to continue to work for the success of the Company and its
subsidiaries.
SECTION 2. DEFINITIONS
Whenever used herein, the following terms shall have the respective
meanings set forth below:
(A) AWARD means any Option or Restricted Stock or right to receive either
granted under the Plan.
(B) AWARD AGREEMENT means the written agreement evidencing an Award under
the Plan, which shall be executed by the Company and the Award Holder.
Award Holder shall mean the Employee or other eligible individual
designated to receive an Award under the Plan or any permitted
transferee of such Award.
(C) BOARD means the Board of Directors of the Company.
(D) CODE means the Internal Revenue Code of 1986, as amended and in effect
from time to time.
(E) COMMITTEE means the Stock and Compensation Committee of the Board, or
any successor to such Committee, the members of which shall be elected
by the Board.
(F) COMPANY means North Fork Bancorporation, Inc., a Delaware corporation.
(G) EMPLOYEE means a salaried employee (including officers and directors
who are also employees) of the Company or any Subsidiary.
(H) EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
(I) EXERCISE PRICE of an Option means a price fixed by the Committee upon
grant of the Option as the purchase price for Stock under the Option,
as such may be adjusted under Section 10 of the Plan.
<PAGE> 2
(J) FAIR MARKET VALUE means, for any particular day, (i) for any period
during which the Stock shall be listed for trading on a national
securities exchange, the average of the high and low price per share
of Stock on such exchange on such day, (ii) for any period during
which the Stock shall not be listed for trading on a national
securities exchange, but when prices for the Stock shall be reported
by the National Market System of the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), the average
of the high and low transaction price per share as quoted by the
National Market System of NASDAQ for such day, (iii) for any period
during which the Stock shall not be listed for trading on a national
securities exchange or its price reported by the National Market
System of NASDAQ, but when prices for the Stock shall be reported by
NASDAQ, the average of the high and low bid price per share as
reported by NASDAQ for such day, or (iv) in the event none of (i),
(ii) and (iii) above shall be applicable, the fair market price per
share of Stock for such day as determined by the Board of Directors.
If Fair Market Value is to be determined as of a day when the
securities markets are not open, the Fair Market Value on that day
shall be the Fair Market Value on the nearest preceding day when the
markets were open.
(K) OPTION means the right to purchase Stock at the Exercise Price for a
specified period of time and subject to specified conditions. For
purposes of the Plan, all Options shall be so-called nonqualified (or
nonstatutory) stock options, not qualifying as "incentive stock
options" under Section 422 of the Code.
(L) PERIOD OF RESTRICTION means the period during which Restricted Stock
is subject to forfeiture under Section 9 of the Plan.
(M) REPORTING PERSON means a person subject to Section 16 of the Exchange
Act.
(N) RESTRICTED STOCK means shares of Stock awarded under the Plan that are
subject to certain risks of forfeiture during a Period of Restriction,
as provided in Section 9 of the Plan, and which cease to be shares of
Restricted Stock upon expiration of the Period of Restriction.
(O) RULE 16B-3 means Rule 16b-3 promulgated by the Securities and Exchange
Commission pursuant to the Exchange Act, or any successor regulation.
(P) STOCK means the Common Stock of the Company.
(Q) SUBSIDIARY means a subsidiary corporation of the Company as defined in
Section 424(f) of the Code.
(R) TAXABLE EVENT means an event relating to an Award granted under the
Plan which requires federal, state or local tax to be withheld by the
Company or a Subsidiary.
(S) TERMINATED FOR CAUSE means, (i) for Employees serving under an
employment agreement containing a provision for termination of
employment for "cause," termination of employment of the Employee for
"cause" pursuant to such
2
<PAGE> 3
provision, and (ii) for other Employees, termination of employment of
the Employee by a two-thirds vote of the entire Board of Directors of
the Company or the Subsidiary employing such Employee, expressly for
one or both of the following "causes," as evidenced in a certified
resolution of the Board: (A) any willful misconduct by the Employee
which is materially injurious to the Company or the Subsidiary,
monetarily or otherwise; or (B) conviction of the Employee with no
further possibility of appeal of any felony under applicable state or
federal banking or financial institution laws, or the agreement of the
Employee to plead guilty to any such felony.
SECTION 3. ADMINISTRATION
The Plan will be administered by the Committee. The determinations of the
Committee shall be made in accordance with its judgment as to the best interests
of the Company and its stockholders and in accordance with the purposes of the
Plan. Notwithstanding the foregoing, the Committee in its discretion may
delegate to the President or other appropriate officers of the Company or any
Subsidiary the authority to make any or all determinations under the Plan
(including the decision to grant Awards and types of Awards granted) with
respect and only with respect to persons receiving Awards or Award Holders
(other than the delegatees) who are not Reporting Persons, notwithstanding the
fact that the delegatees may themselves be persons eligible to receive Awards
under the Plan and/or Reporting Persons. A majority of members of the Committee
shall constitute a quorum, and all determinations of the Committee shall be made
by a majority of its members. Any determination of the Committee under the Plan
may be made without notice or meeting of the Committee, and all actions made or
taken by the Committee pursuant to the provisions of the Plan shall be final,
binding and conclusive for all purposes and upon all persons.
SECTION 4. SHARES AUTHORIZED FOR AWARDS
The maximum number of shares available for Awards under the Plan is
5,000,000 shares of Stock, of which a maximum of 3,300,000 shares may take the
form of Restricted Stock, and there is hereby reserved for issuance under the
Plan an aggregate of 5,000,000 shares of Stock, subject in the case of each of
the foregoing to adjustment as provided in Section 10 of the Plan. Shares of
Stock underlying outstanding Options and outstanding shares of unvested
Restricted Stock will be counted against the Plan maximum while such Options and
shares of Restricted Stock are outstanding. Upon termination of outstanding
Options that are unexercised and upon forfeiture of outstanding shares of
Restricted Stock prior to vesting, the shares of Stock underlying such Awards
shall be returned to the Plan and available for future grants of Awards
thereunder. In addition, if payment of the Exercise Price of any Option granted
under the Plan is satisfied, upon exercise of such Option, by the Award Holder
by surrender to the Company of shares of Stock previously owned by the Award
Holder (or, in lieu of actual surrender, by a deemed surrender of such shares),
the number of shares of Stock surrendered or deemed surrendered shall be
returned to the Plan and available for future grants of Awards thereunder.
3
<PAGE> 4
SECTION 5. RECIPIENTS OF AWARDS
(a) Any Employee of the Company or any Subsidiary of the Company will be
eligible to receive one or more Awards under the Plan if the Committee
determines in its sole discretion that the job performance of such Employee is
likely to be significantly enhanced by the latter's receipt of such Awards.
Designation of an Employee as a Participant to receive an Award in any year
shall not require the Committee to designate such Employee to receive an Award
in any other year or to designate any other Employee to receive an Award in such
year or any other year. The Committee shall consider such factors as it deems
pertinent in selecting Employees to receive Awards and determining the type and
amount of their respective Awards.
(b) The Committee in its discretion may grant one or more Awards to an
individual, in connection with the hiring or potential hiring of such individual
by the Company or any Subsidiary, prior to the date the latter becomes an
Employee and first performs services for the Company or such Subsidiary,
provided that no such Award shall become vested or exercisable prior to a date
established by the Committee upon grant, which date shall not be earlier than
the day 60 days after the date on which the individual first becomes an Employee
of the Company or such Subsidiary.
(c) The Committee may grant one or more Awards to any consultant, advisor
or other person providing key services to the Company or a Subsidiary, but only
to the extent such grant does not prohibit the Company from using a registration
statement on Form S-8, or any successor form, to register with the Securities
and Exchange Commission the shares of Stock authorized under the Plan.
(d) No individual may receive under the Plan Awards relating to more than
1,250,000 shares of Stock in the aggregate, as adjusted from time to time in
accordance with Section 10 of the Plan.
SECTION 6. TYPES OF AWARDS
The following Awards, and rights thereto, may be granted under the Plan in
any proportion: Options and Restricted Stock, as further described below. Except
as specifically limited elsewhere in this Plan, the Committee shall have
complete discretion in determining the type and number of Awards to be granted
to any eligible person and, subject to the provisions of the Plan, the terms and
conditions of each Award, which terms and conditions need not be uniform as
among different recipients of Awards or different Awards of the same general
type. Each Award shall be evidenced by an Award Agreement, as provided in
Section 7 of the Plan. From time to time, as the Committee deems appropriate and
in the best long-term interests of the Company and its stockholders, the
Committee may elect to modify or waive one or more terms or conditions of an
outstanding Award previously granted under the Plan, provided that (i) no such
modification or waiver shall give the holder of any other Award granted under
the Plan any right to a similar modification or waiver, (ii) no such
modification or waiver of an Award shall involve a change in the number of
shares subject to the Award or a change in the Exercise Price of an Option or
the purchase price, if any, of Restricted Stock which is the subject of the
Award, and (iii) any such modification or waiver which is adverse or arguably
adverse to the interests of
4
<PAGE> 5
the Award Holder shall not be effective unless and until the Award Holder shall
consent thereto in writing.
SECTION 7. AWARD AGREEMENTS
As soon as practicable after the grant of an Award, the Company shall
notify the recipient of such grant and thereafter shall hand deliver or mail to
the recipient an Award Agreement, duly executed by and on behalf of the Company,
with the request that the recipient execute the Agreement within 30 days after
the date of mailing or delivery by the Company and return the same to the
Company. The date of execution and return of the Award Agreement shall not
necessarily be or affect the date of grant of the Award, which may precede such
date of execution and return, as the Committee may determine. If the recipient
shall fail to execute and return to the Company the Award Agreement within said
30-day period, the Committee may elect to treat the Award as void and never
granted. If an Award granted under the Plan is eligible for transfer and the
subject of a proposed eligible transfer, no such transfer shall be or become
effective until and unless the permitted transferee shall have duly executed and
returned to the Company an Award Agreement in a form acceptable to the
Committee.
SECTION 8. STOCK OPTIONS
(a) Options shall consist of Options to purchase shares of Stock at an
Exercise Price established by the Committee upon grant, which Exercise Price
shall not be less than, but may be more than, 100 percent of the Fair Market
Value of the Stock on the date of grant.
(b) The Committee shall establish upon grant the period of time during
which an Option will be exercisable by the Award Holder, provided that no Option
shall continue to be exercisable, in whole or in part, later than ten years
after the date of grant. Subject to these limitations, the Committee may
provide, upon grant of an Option, that full exercisability will be phased in
and/or phased out over some designated period of time. The Committee also may
provide upon grant that exercisability of an Option will be accelerated, to the
extent such Option is not already then exercisable, upon the subsequent
occurrence of a "change in control" of the Company, as defined by the Committee,
or such other occurrence as the Committee may specify. Generally, exercisability
of an Option granted to an Employee also shall be conditioned upon continuity of
employment by the original recipient of the Award with the Company and its
Subsidiaries, provided that, if the Committee so provides upon grant,
exercisability of such an Option may continue for some designated period of time
after termination of employment, within the following limitations: (i) if
employment is terminated other than due to the death of the original recipient,
exercisability may be extended to not more than one year after termination; and
(ii) if employment is terminated due to the death of the original recipient,
exercisability may be extended to the normal end of the exercise period.
However, in no event may any Option continue to be exercisable more than ten
years after the date of grant. In addition, no Option granted to an Employee may
be exercisable after Termination for Cause of such Employee. Leaves of absence
granted by the Company for military service or illness and transfers of
employment between the Company and any Subsidiary shall not constitute
termination of employment.
5
<PAGE> 6
(c) Upon exercise of an Option, in whole or in part, the Exercise Price
with respect to the number of shares as to which the Option is then being
exercised may be paid by check or, if the Award Holder so elects and the
Committee shall have authorized such form of payment, in whole or in part by
surrender to the Company of shares of Stock owned prior to exercise by the Award
Holder. Any previously-owned shares of Stock to be used in full or partial
payment of the Exercise Price shall be valued at the Fair Market Value of the
Stock on the date of exercise. In lieu of the actual surrender of shares of
Stock by the Award Holder to the Company in any such stock-for-stock exercise,
the Award Holder may, with the consent of the Committee, in lieu of surrendering
some number of previously-owned shares of Stock, affirm to the Company the Award
Holder's ownership of such number of shares, in which event the Company, upon
its delivery of the shares of Stock as to which the Option is being exercised,
deduct from the number of shares otherwise deliverable the number of shares
affirmed but not surrendered by the Award Holder. Delivery by the Company of
shares of Stock upon exercise of an Option shall be made to the person
exercising the Option or the designee of such person subject to such terms,
conditions, restrictions and contingencies as the Committee may provide in the
Award Agreement. If so provided by the Committee upon grant of the Option, the
shares delivered upon exercise may be subject to certain restrictions upon
subsequent transfer or sale by the Award Holder.
(d) The Committee may require reasonable advance notice of exercise of an
Option, normally not to exceed three calendar days, and may condition exercise
of an Option upon the availability of an effective registration statement or
exemption from registration under applicable federal and state securities laws
relating to the Stock being issued upon exercise.
SECTION 9. RESTRICTED STOCK
(a) Restricted Stock shall consist of Stock or rights to Stock awarded
under the Plan by the Committee which, during a Period of Restriction specified
by the Committee upon grant, shall be subject to forfeiture by the Award Holder
to the Company if the recipient ceases to be employed by the Company and its
Subsidiaries prior to the lapse of such restrictions. Restricted Stock normally
will not be transferable or assignable during the Period of Restriction.
Restricted Stock may be granted at no cost to Participants or, if subject to a
purchase price, such price shall not exceed the par value of the Stock and may
be payable by the recipient to the Company in cash or by any other means,
including recognition of past employment, as the Committee deems appropriate.
The Committee may provide upon grant of an Award of Restricted Stock that any
shares of Restricted Stock as may be purchased by the recipient thereunder and
subsequently forfeited by the recipient prior to expiration of the Period of
Restriction shall be reacquired by the Company at the purchase price originally
paid in cash by the recipient therefor.
(b) The minimum Period of Restriction for Restricted Stock shall be three
years from the date of grant of the Award. The Committee may provide upon grant
of an Award of Restricted Stock that different numbers or portions of the shares
subject to the Award shall have different Periods of Restriction. The Committee
also may establish upon grant of an Award of Restricted Stock that some or all
of the shares subject thereto shall be subject to additional restrictions upon
transfer or sale (although not to forfeiture) after expiration of the Period of
Restriction.
6
<PAGE> 7
(c) The Award Holder of Restricted Stock shall be entitled to all dividends
declared and paid on Stock generally with respect to all shares of Restricted
Stock held thereby, from and after the date of grant of such Award, or from and
after such later date or dates as may be specified by the Committee in the
Award, and the Award Holder shall not be required to return any such dividends
to the Company in the event of forfeiture of the Restricted Stock.
(d) The Award Holder of Restricted Stock shall be entitled to vote all
shares of Restricted Stock held thereby from and after the date of grant of such
Award, or from and after such later date or dates as may be specified by the
Committee in the Award.
(e) Pending expiration of the Period of Restriction, certificates
representing shares of Restricted Stock shall be held by the Company or the
transfer agent for the Stock. Upon expiration of the Period of Restriction for
any such shares, certificates representing such shall be delivered to the Award
Holder or the permitted transferee, assignee or beneficiary thereof.
SECTION 10. ADJUSTMENT PROVISIONS
(a) If the Company shall at any time change the number of issued shares of
Stock without new consideration to the Company (such as by a stock dividend or
stock split), the total number of shares reserved for issuance under the Plan,
the maximum number of shares available for issuance as Restricted Stock, the
maximum number of shares available for Award of Options to any individual under
the Plan and the number of shares (and, in the case of Options, the Exercise
Price) covered by each outstanding Award shall be adjusted so that the aggregate
consideration payable to the Company, if any, and the value of each such Award
to the Award Holder shall not be changed. Awards may also contain provisions for
their continuation or for other equitable adjustments after changes in the Stock
resulting from reorganization, sale, merger, consolidation, issuance of stock
rights or warrants or similar occurrence.
(b) Notwithstanding any other provision of this Plan, and without affecting
the number of shares reserved or available for issuance hereunder, the Board of
Directors shall use best efforts to authorize the issuance or assumption of
benefits under the Plan in connection with any merger, consolidation,
acquisition of property or stock, or reorganization involving the liquidation,
discontinuation, merger out of existence or fundamental corporate restructuring
of the Company, upon such terms and conditions as it may deem appropriate.
SECTION 11. TRANSFERS OF AWARDS
Subject to any overriding restrictions and conditions as may be established
from time to time by the Board of Directors, the Committee may determine that
any Award granted under the Plan may be transferable, in the case of an Option,
prior to exercise thereof, and in the case of Restricted Stock, prior to
expiration of the Period of Restriction therefor, under such terms and
conditions as the Committee may specify. Unless the Committee shall specifically
determine that an Award is thus transferable by the original recipient thereof,
each Award granted under the Plan shall not be transferable by the original
recipient thereof, otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during the recipient's lifetime, only by
the recipient. In the event of the death of an Award Holder holding an
unexercised Option, exercise of the Option may be made only by the executor or
administrator of the estate of the Award
7
<PAGE> 8
Holder or the person or persons to whom the deceased Award Holder's rights under
the Option shall pass by will or the laws of descent and distribution, and such
exercise may be made only to the extent that the deceased Award Holder was
entitled to exercise such Option at the date of death. If and to the extent the
Committee shall so provide upon grant, the Period of Restriction for Restricted
Stock may be foreshortened upon the death of the Award Holder during the Period
of Restriction, such that the Stock shall be deemed not to be forfeited and no
longer to be Restricted Stock as of the date of death.
SECTION 12. TAXES
The Company shall be entitled to withhold, and shall withhold, the minimum
amount of any federal, state or local tax attributable to any shares deliverable
under the Plan, whether upon exercise of an Option or expiration of a Period of
Restriction for Restricted Stock or occurrence of any other Taxable Event, after
giving the person entitled to receive such delivery notice as far in advance of
the Taxable Event as practicable, and the Company may defer making delivery as
to any Award, if any such tax is payable, until indemnified to its satisfaction.
Such withholding obligation of the Company may be satisfied by any reasonable
method, including, if the Committee so provides upon grant of the Award,
reducing the number of shares otherwise deliverable to or on behalf of the Award
Holder on such Taxable Event by a number of shares of Stock having a fair value,
based on the Fair Market Value of the Stock on the date of such Taxable Event,
equal to the amount of such withholding obligation.
SECTION 13. NO RIGHT TO EMPLOYMENT
An Employee's right, if any, to continue to serve the Company and any
Subsidiary as an officer, employee or otherwise shall not be enhanced or
otherwise affected by the designation of such Employee as a recipient of an
Award under the Plan.
SECTION 14. DURATION, AMENDMENT AND TERMINATION
No Award shall be granted under the Plan on or after the date which is the
tenth anniversary date of the adoption by the Committee or the Board of this
Plan. The Committee or the Board may amend the Plan from time to time or
terminate the Plan at any time. By mutual agreement between the Company and an
Award Holder, one or more Awards may be granted to such Award Holder in
substitution and exchange for, and in cancellation of, any certain Awards
previously granted such Award Holder under the Plan, provided that any such
substitution Award shall be deemed a new Award for purposes of calculating any
applicable exercise period for Options or Period of Restriction for Restricted
Stock. To the extent that any Awards which may be granted within the terms of
the Plan would qualify under present or future laws for tax treatment that is
beneficial to an Award Holder, any such beneficial treatment shall be considered
within the intent, purpose and operational purview of the Plan and the
discretion of the Committee, and to the extent that any such Awards would so
qualify within the terms of the Plan, the Committee shall have full and complete
authority to grant Awards that so qualify (including the authority to grant,
simultaneously or otherwise, Awards which do not so qualify) and to prescribe
the terms and conditions (which need not be identical as among recipients) in
respect to the grant or exercise of any such Awards under the Plan.
8
<PAGE> 9
SECTION 15. MISCELLANEOUS PROVISIONS
(a) NAMING OF BENEFICIARIES. In connection with an Award, an Award Holder
may name one or more beneficiaries to receive the Award Holder's benefits, to
the extent permissible pursuant to the various provisions of the Plan, in the
event of the death of the Award Holder.
(b) SUCCESSORS. All obligations of the Company under the Plan with respect
to Awards issued hereunder shall be binding on any successor to the Company.
(c) GOVERNING LAW. The provisions of the Plan and all Award Agreements
under the Plan shall be construed in accordance with, and governed by, the laws
of the State of Delaware without reference to conflict of laws provisions,
except insofar as any such provisions may be expressly made subject to the laws
of any other state or federal law.
(d) APPROVAL BY THE BOARD AND THE COMMITTEE. The Plan, in order to become
effective, must be approved by the Board or the Committee. Any Award granted
under this Plan and any Award Agreement executed pursuant thereto prior to the
submission of this Plan to the Board or the Committee for approval shall be void
and of no effect if this Plan is not approved as provided above.
9
<PAGE> 1
EXHIBIT 10.14(A)
NORTH FORK BANCORPORATION, INC.
1998 STOCK COMPENSATION PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE
North Fork Bancorporation, Inc. (the "Company") hereby establishes a long
term incentive plan to be named the North Fork Bancorporation, Inc. 1998 Stock
Compensation Plan (the "Plan"), for employees of the Company and its
subsidiaries. The purpose of this Plan is to encourage those employees who are
given awards by the committee administering the Plan to acquire and maintain an
interest in the Common Stock of the Company and thus to have additional
incentive to continue to work for the success of the Company and its
subsidiaries.
SECTION 2. DEFINITIONS
Whenever used herein, the following terms shall have the respective
meanings set forth below:
(A) AWARD means any Option or Restricted Stock or right to receive either
granted under the Plan.
(B) AWARD AGREEMENT means the written agreement evidencing an Award under
the Plan, which shall be executed by the Company and the Award Holder.
Award Holder shall mean the Employee or other eligible individual
designated to receive an Award under the Plan or any permitted
transferee of such Award.
(C) BOARD means the Board of Directors of the Company.
(D) CODE means the Internal Revenue Code of 1986, as amended and in effect
from time to time.
(E) COMMITTEE means the Stock and Compensation Committee of the Board, or
any successor to such Committee, the members of which shall be elected
by the Board.
(F) COMPANY means North Fork Bancorporation, Inc., a Delaware corporation.
(G) EMPLOYEE means a salaried employee (including officers and directors
who are also employees) of the Company or any Subsidiary.
(H) EXCHANGE ACT means the Securities Exchange Act of 1934, as amended.
(I) EXERCISE PRICE of an Option means a price fixed by the Committee upon
grant of the Option as the purchase price for Stock under the Option,
as such may be adjusted under Section 10 of the Plan.
<PAGE> 2
(J) FAIR MARKET VALUE means, for any particular day, (i) for any period
during which the Stock shall be listed for trading on a national
securities exchange, the average of the high and low price per share
of Stock on such exchange on such day, (ii) for any period during
which the Stock shall not be listed for trading on a national
securities exchange, but when prices for the Stock shall be reported
by the National Market System of the National Association of
Securities Dealers Automated Quotation System ("NASDAQ"), the average
of the high and low transaction price per share as quoted by the
National Market System of NASDAQ for such day, (iii) for any period
during which the Stock shall not be listed for trading on a national
securities exchange or its price reported by the National Market
System of NASDAQ, but when prices for the Stock shall be reported by
NASDAQ, the average of the high and low bid price per share as
reported by NASDAQ for such day, or (iv) in the event none of (i),
(ii) and (iii) above shall be applicable, the fair market price per
share of Stock for such day as determined by the Board of Directors.
If Fair Market Value is to be determined as of a day when the
securities markets are not open, the Fair Market Value on that day
shall be the Fair Market Value on the nearest preceding day when the
markets were open.
(K) OPTION means the right to purchase Stock at the Exercise Price for a
specified period of time and subject to specified conditions. For
purposes of the Plan, all Options shall be so-called nonqualified (or
nonstatutory) stock options, not qualifying as "incentive stock
options" under Section 422 of the Code.
(L) PERIOD OF RESTRICTION means the period during which Restricted Stock
is subject to forfeiture under Section 9 of the Plan.
(M) REPORTING PERSON means a person subject to Section 16 of the Exchange
Act.
(N) RESTRICTED STOCK means shares of Stock awarded under the Plan that are
subject to certain risks of forfeiture during a Period of Restriction,
as provided in Section 9 of the Plan, and which cease to be shares of
Restricted Stock upon expiration of the Period of Restriction.
(O) RULE 16B-3 means Rule 16b-3 promulgated by the Securities and Exchange
Commission pursuant to the Exchange Act, or any successor regulation.
(P) STOCK means the Common Stock of the Company.
(Q) SUBSIDIARY means a subsidiary corporation of the Company as defined in
Section 424(f) of the Code.
(R) TAXABLE EVENT means an event relating to an Award granted under the
Plan which requires federal, state or local tax to be withheld by the
Company or a Subsidiary.
(S) TERMINATED FOR CAUSE means, (i) for Employees serving under an
employment agreement containing a provision for termination of
employment for "cause," termination of employment of the Employee for
"cause" pursuant to such
Page 2
<PAGE> 3
provision, and (ii) for other Employees, termination of employment of
the Employee by a two-thirds vote of the entire Board of Directors of
the Company or the Subsidiary employing such Employee, expressly for
one or both of the following "causes," as evidenced in a certified
resolution of the Board: (A) any willful misconduct by the Employee
which is materially injurious to the Company or the Subsidiary,
monetarily or otherwise; or (B) conviction of the Employee with no
further possibility of appeal of any felony under applicable state or
federal banking or financial institution laws, or the agreement of the
Employee to plead guilty to any such felony.
SECTION 3. ADMINISTRATION
The Plan will be administered by the Committee. The determinations of the
Committee shall be made in accordance with its judgment as to the best interests
of the Company and its stockholders and in accordance with the purposes of the
Plan. Notwithstanding the foregoing, the Committee in its discretion may
delegate to the President or other appropriate officers of the Company or any
Subsidiary the authority to make any or all determinations under the Plan
(including the decision to grant Awards and types of Awards granted) with
respect and only with respect to persons receiving Awards or Award Holders
(other than the delegatees) who are not Reporting Persons, notwithstanding the
fact that the delegatees may themselves be persons eligible to receive Awards
under the Plan and/or Reporting Persons. A majority of members of the Committee
shall constitute a quorum, and all determinations of the Committee shall be made
by a majority of its members. Any determination of the Committee under the Plan
may be made without notice or meeting of the Committee, and all actions made or
taken by the Committee pursuant to the provisions of the Plan shall be final,
binding and conclusive for all purposes and upon all persons.
SECTION 4. SHARES AUTHORIZED FOR AWARDS
The maximum number of shares available for Awards under the Plan is
1,500,000 shares of Stock, of which a maximum of 1,000,000 shares may take the
form of Restricted Stock, and there is hereby reserved for issuance under the
Plan an aggregate of 1,500,000 shares of Stock, subject in the case of each of
the foregoing to adjustment as provided in Section 10 of the Plan. Shares of
Stock underlying outstanding Options and outstanding shares of unvested
Restricted Stock will be counted against the Plan maximum while such Options and
shares of Restricted Stock are outstanding. Upon termination of outstanding
Options that are unexercised and upon forfeiture of outstanding shares of
Restricted Stock prior to vesting, the shares of Stock underlying such Awards
shall be returned to the Plan and available for future grants of Awards
thereunder. In addition, if payment of the Exercise Price of any Option granted
under the Plan is satisfied, upon exercise of such Option, by the Award Holder
by surrender to the Company of shares of Stock previously owned by the Award
Holder (or, in lieu of actual surrender, by a deemed surrender of such shares),
the number of shares of Stock surrendered or deemed surrendered shall be
returned to the Plan and available for future grants of Awards thereunder.
Page 3
<PAGE> 4
SECTION 5. RECIPIENTS OF AWARDS
Persons eligible for grants of Awards under the Plan will be those
Employees of the Company or any Subsidiary whose job performance is likely to be
significantly enhanced by the grant to them of such Awards, as determined by the
Committee in its sole discretion and as evidenced by the decision of the
Committee to grant Awards to such individuals. Designation of an Employee as a
Participant to receive an Award in any year shall not require the Committee to
designate such Employee to receive an Award in any other year or to designate
any other Employee to receive an Award in such year or any other year. The
Committee shall consider such factors as it deems pertinent in selecting
Employees to receive Awards and determining the type and amount of their
respective Awards. In addition, the Committee may grant Awards to any
consultant, advisor or other person providing key services to the Company or a
Subsidiary, but only to the extent such grant does not prohibit the Company from
using a registration statement on Form S-8, or any successor form, to register
with the Securities and Exchange Commission the shares of Stock authorized under
the Plan. The Committee may, in its discretion, grant an Award to an individual
in connection with the hiring or retention or potential hiring or retention
thereof, prior to the date the individual becomes an Employee and first performs
services for the Company or any Subsidiary, provided that such Awards shall not
become vested or exercisable prior to the date established by the Committee,
which date shall be no earlier than 60 days after the date on which the
individual first is employed by or performs services for the Company or a
Subsidiary. No individual may receive under the Plan Awards relating to more
than 1,400,000 shares of Stock in the aggregate.
SECTION 6. TYPES OF AWARDS
The following Awards, and rights thereto, may be granted under the Plan in
any proportion: Options and Restricted Stock, as further described below. Except
as specifically limited herein, the Committee shall have complete discretion in
determining the type and number of Awards to be granted to any eligible person
and, subject to the provisions of the Plan, the terms and conditions of each
Award, which terms and conditions need not be uniform as among different Awards.
Each Award shall be evidenced by an Award Agreement, as provided in Section 7 of
the Plan. From time to time, as the Committee deems appropriate and in the best
long-term interests of the Company and its stockholders, the Committee may elect
to modify or waive one or more terms or conditions of an outstanding Award
previously granted under the Plan, provided that (i) no such modification or
waiver shall give the holder of any other Award granted under the Plan any right
to a similar modification or waiver, (ii) no such modification or waiver of an
Award shall involve a change in the number of shares subject to the Award or a
change in the Exercise Price of an Option or the purchase price, if any, of
Restricted Stock which is the subject of the Award, and (iii) any such
modification or waiver which is adverse or arguably adverse to the interests of
the Award Holder shall not be effective unless and until the Award Holder shall
consent thereto in writing.
SECTION 7. AWARD AGREEMENTS
Within ten business days after the grant of an Award, the Company shall
notify the recipient of such grant and shall hand deliver or mail to the
recipient an Award Agreement, duly executed by and on behalf of the Company,
with the request that the recipient execute the
Page 4
<PAGE> 5
Agreement within 30 days after the date of mailing or delivery by the Company
and return the same to the Company. The date of execution and return of the
Award Agreement shall not necessarily be or affect the date of grant of the
Award, which may precede such date of execution and return, as the Committee may
determine. If the recipient shall fail to execute and return to the Company the
Award Agreement within said 30-day period, the Committee may elect to treat the
Award as void and never granted. If an Award granted under the Plan is eligible
for transfer and the subject of a proposed eligible transfer, no such transfer
shall be or become effective until and unless the permitted transferee shall
have duly executed and returned to the Company an Award Agreement in a form
acceptable to the Committee.
SECTION 8. STOCK OPTIONS
(a) Options shall consist of Options to purchase shares of Stock at an
Exercise Price established by the Committee upon grant, which Exercise Price
shall not be less than, but may be more than, 100 percent of the Fair Market
Value of the Stock on the date of grant.
(b) The Committee shall establish upon grant the period of time during
which an Option will be exercisable by the Award Holder, provided that no Option
shall continue to be exercisable, in whole or in part, later than ten years
after the date of grant. Subject to these limitations, the Committee may
provide, upon grant of an Option, that full exercisability will be phased in
and/or phased out over some designated period of time. The Committee also may
provide upon grant that exercisability of an Option will be accelerated, to the
extent such Option is not already then exercisable, upon the subsequent
occurrence of a "change in control" of the Company, as defined by the Committee,
or such other occurrence as the Committee may specify. Generally, exercisability
of an Option granted to an Employee also shall be conditioned upon continuity of
employment by the original recipient of the Award with the Company and its
Subsidiaries, provided that, if the Committee so provides upon grant,
exercisability of such an Option may continue for some designated period of time
after termination of employment, within the following limitations: (i) if
employment is terminated other than due to the death of the original recipient,
exercisability may be extended to not more than one year after termination; and
(ii) if employment is terminated due to the death of the original recipient,
exercisability may be extended to the normal end of the exercise period.
However, in no event may any Option continue to be exercisable more than ten
years after the date of grant. In addition, no Option granted to an Employee may
be exercisable after Termination for Cause of such Employee. Leaves of absence
granted by the Company for military service or illness and transfers of
employment between the Company and any Subsidiary shall not constitute
termination of employment.
(c) Upon exercise of an Option, in whole or in part, the Exercise Price
with respect to the number of shares as to which the Option is then being
exercised may be paid by check or, if the Award Holder so elects and the
Committee shall have authorized such form of payment, in whole or in part by
surrender to the Company of shares of Stock owned prior to exercise by the Award
Holder. Any previously-owned shares of Stock to be used in full or partial
payment of the Exercise Price shall be valued at the Fair Market Value of the
Stock on the date of exercise. In lieu of the actual surrender of shares of
Stock by the Award Holder to the Company in any such stock-for-stock exercise,
the Award Holder may, with the consent of the Committee, in lieu of surrendering
some number of previously-owned shares of Stock, affirm to the Company the
Page 5
<PAGE> 6
Award Holder's ownership of such number of shares, in which event the Company,
upon its delivery of the shares of Stock as to which the Option is being
exercised, deduct from the number of shares otherwise deliverable the number of
shares affirmed but not surrendered by the Award Holder. Delivery by the Company
of shares of Stock upon exercise of an Option shall be made to the person
exercising the Option or the designee of such person subject to such terms,
conditions, restrictions and contingencies as the Committee may provide in the
Award Agreement. If so provided by the Committee upon grant of the Option, the
shares delivered upon exercise may be subject to certain restrictions upon
subsequent transfer or sale by the Award Holder.
(d) The Committee may require reasonable advance notice of exercise of an
Option, normally not to exceed three calendar days, and may condition exercise
of an Option upon the availability of an effective registration statement or
exemption from registration under applicable federal and state securities laws
relating to the Stock being issued upon exercise.
SECTION 9. RESTRICTED STOCK
(a) Restricted Stock shall consist of Stock or rights to Stock awarded
under the Plan by the Committee which, during a Period of Restriction specified
by the Committee upon grant, shall be subject to forfeiture by the Award Holder
to the Company if the recipient ceases to be employed by the Company and its
Subsidiaries prior to the lapse of such restrictions. Restricted Stock normally
will not be transferable or assignable during the Period of Restriction.
Restricted Stock may be granted at no cost to Participants or, if subject to a
purchase price, such price shall not exceed the par value of the Stock and may
be payable by the recipient to the Company in cash or by any other means,
including recognition of past employment, as the Committee deems appropriate.
The Committee may provide upon grant of an Award of Restricted Stock that any
shares of Restricted Stock as may be purchased by the recipient thereunder and
subsequently forfeited by the recipient prior to expiration of the Period of
Restriction shall be reacquired by the Company at the purchase price originally
paid in cash by the recipient therefor.
(b) The minimum Period of Restriction for Restricted Stock shall be three
years from the date of grant of the Award. The Committee may provide upon grant
of an Award of Restricted Stock that different numbers or portions of the shares
subject to the Award shall have different Periods of Restriction. The Committee
also may establish upon grant of an Award of Restricted Stock that some or all
of the shares subject thereto shall be subject to additional restrictions upon
transfer or sale (although not to forfeiture) after expiration of the Period of
Restriction.
(c) The Award Holder of Restricted Stock shall be entitled to all dividends
declared and paid on Stock generally with respect to all shares of Restricted
Stock held thereby, from and after the date of grant of such Award, or from and
after such later date or dates as may be specified by the Committee in the
Award, and the Award Holder shall not be required to return any such dividends
to the Company in the event of forfeiture of the Restricted Stock.
(d) The Award Holder of Restricted Stock shall be entitled to vote all
shares of Restricted Stock held thereby from and after the date of grant of such
Award, or from and after such later date or dates as may be specified by the
Committee in the Award.
Page 6
<PAGE> 7
(e) Pending expiration of the Period of Restriction, certificates
representing shares of Restricted Stock shall be held by the Company or the
transfer agent for the Stock. Upon expiration of the Period of Restriction for
any such shares, certificates representing such shall be delivered to the Award
Holder or the permitted transferee, assignee or beneficiary thereof.
SECTION 10. ADJUSTMENT PROVISIONS
(a) If the Company shall at any time change the number of issued shares of
Stock without new consideration to the Company (such as by a stock dividend or
stock split), the total number of shares reserved for issuance under the Plan,
the maximum number of shares available for issuance as Restricted Stock, the
maximum number of shares available for Award of Options to any individual under
the Plan and the number of shares (and, in the case of Options, the Exercise
Price) covered by each outstanding Award shall be adjusted so that the aggregate
consideration payable to the Company, if any, and the value of each such Award
to the Award Holder shall not be changed. Awards may also contain provisions for
their continuation or for other equitable adjustments after changes in the Stock
resulting from reorganization, sale, merger, consolidation, issuance of stock
rights or warrants or similar occurrence.
(b) Notwithstanding any other provision of this Plan, and without affecting
the number of shares reserved or available for issuance hereunder, the Board of
Directors shall use best efforts to authorize the issuance or assumption of
benefits under the Plan in connection with any merger, consolidation,
acquisition of property or stock, or reorganization involving the liquidation,
discontinuation, merger out of existence or fundamental corporate restructuring
of the Company, upon such terms and conditions as it may deem appropriate.
SECTION 11. TRANSFERS OF AWARDS
Subject to any overriding restrictions and conditions as may be established
from time to time by the Board of Directors, the Committee may determine that
any Award granted under the Plan may be transferable, in the case of an Option,
prior to exercise thereof, and in the case of Restricted Stock, prior to
expiration of the Period of Restriction therefor, under such terms and
conditions as the Committee may specify. Unless the Committee shall specifically
determine that an Award is thus transferable by the original recipient thereof,
each Award granted under the Plan shall not be transferable by the original
recipient thereof, otherwise than by will or the laws of descent and
distribution, and shall be exercisable, during the recipient's lifetime, only by
the recipient. In the event of the death of an Award Holder holding an
unexercised Option, exercise of the Option may be made only by the executor or
administrator of the estate of the Award Holder or the person or persons to whom
the deceased Award Holder's rights under the Option shall pass by will or the
laws of descent and distribution, and such exercise may be made only to the
extent that the deceased Award Holder was entitled to exercise such Option at
the date of death. If and to the extent the Committee shall so provide upon
grant, the Period of Restriction for Restricted Stock may be foreshortened upon
the death of the Award Holder during the Period of Restriction, such that the
Stock shall be deemed not to be forfeited and no longer to be Restricted Stock
as of the date of death.
Page 7
<PAGE> 8
SECTION 12. TAXES
The Company shall be entitled to withhold, and shall withhold, the minimum
amount of any federal, state or local tax attributable to any shares deliverable
under the Plan, whether upon exercise of an Option or expiration of a Period of
Restriction for Restricted Stock or occurrence of any other Taxable Event, after
giving the person entitled to receive such delivery notice as far in advance of
the Taxable Event as practicable, and the Company may defer making delivery as
to any Award, if any such tax is payable, until indemnified to its satisfaction.
Such withholding obligation of the Company may be satisfied by any reasonable
method, including, if the Committee so provides upon grant of the Award,
reducing the number of shares otherwise deliverable to or on behalf of the Award
Holder on such Taxable Event by a number of shares of Stock having a fair value,
based on the Fair Market Value of the Stock on the date of such Taxable Event,
equal to the amount of such withholding obligation.
SECTION 13. NO RIGHT TO EMPLOYMENT
An Employee's right, if any, to continue to serve the Company and any
Subsidiary as an officer, employee or otherwise shall not be enhanced or
otherwise affected by the designation of such Employee as a recipient of an
Award under the Plan.
SECTION 14. DURATION, AMENDMENT AND TERMINATION
No Award shall be granted under the Plan on or after the date which is the
tenth anniversary date of the adoption by the Committee or the Board of this
Plan. The Committee or the Board may amend the Plan from time to time or
terminate the Plan at any time. By mutual agreement between the Company and an
Award Holder, one or more Awards may be granted to such Award Holder in
substitution and exchange for, and in cancellation of, any certain Awards
previously granted such Award Holder under the Plan, provided that any such
substitution Award shall be deemed a new Award for purposes of calculating any
applicable exercise period for Options or Period of Restriction for Restricted
Stock. To the extent that any Awards which may be granted within the terms of
the Plan would qualify under present or future laws for tax treatment that is
beneficial to an Award Holder, any such beneficial treatment shall be considered
within the intent, purpose and operational purview of the Plan and the
discretion of the Committee, and to the extent that any such Awards would so
qualify within the terms of the Plan, the Committee shall have full and complete
authority to grant Awards that so qualify (including the authority to grant,
simultaneously or otherwise, Awards which do not so qualify) and to prescribe
the terms and conditions (which need not be identical as among recipients) in
respect to the grant or exercise of any such Awards under the Plan.
SECTION 15. MISCELLANEOUS PROVISIONS
(a) NAMING OF BENEFICIARIES. In connection with an Award, an Award Holder
may name one or more beneficiaries to receive the Award Holder's benefits, to
the extent permissible pursuant to the various provisions of the Plan, in the
event of the death of the Award Holder.
(b) SUCCESSORS. All obligations of the Company under the Plan with respect
to Awards issued hereunder shall be binding on any successor to the Company.
Page 8
<PAGE> 9
(c) GOVERNING LAW. The provisions of the Plan and all Award Agreements
under the Plan shall be construed in accordance with, and governed by, the laws
of the State of Delaware without reference to conflict of laws provisions,
except insofar as any such provisions may be expressly made subject to the laws
of any other state or federal law.
(d) APPROVAL BY THE BOARD AND THE COMMITTEE. The Plan, in order to become
effective, must be approved by the Board or the Committee. Any Award granted
under this Plan and any Award Agreement executed pursuant thereto prior to the
submission of this Plan to the Board or the Committee for approval shall be void
and of no effect if this Plan is not approved as provided above.
As amended by the Stock and Compensation Committee on December 13, 1999.
Page 9
<PAGE> 1
EXHIBIT 10.15(a)
CONSULTING AGREEMENT
CONSULTING AGREEMENT, dated as of December 29, 1999, between North Fork
Bancorporation, Inc. a Delaware corporation (the "Company"), and Raymond A.
Nielsen (the "Consultant").
WHEREAS, the Consultant is employed by Reliance Bancorp, Inc., a Delaware
corporation ("Reliance"), as President & Chief executive Officer of Reliance;
WHEREAS, the Consultant and Reliance have entered into an Employment
Agreement date as of September 11, 1996 (the "Prior Agreement");
WHEREAS, the Company and Reliance have entered into an Agreement and Plan
of Merger, dated as of August 30, 1999 (the "Merger Agreement"), pursuant to
which, among other things, Reliance will be merged with and into the Company as
of the Effective Time (as defined in the Merger Agreement);
WHEREAS, the parties desire to provide for the termination in part of the
Prior Agreement as of the date on which the Effective Time occurs (the
"Effective Date");
WHEREAS, the Company desires to induce the Consultant to act as a
consultant to the Company as of the Effective Date in order to assist it in
effectuating an orderly and efficient transition in respect of the Merger and
the transactions contemplated by the Merger Agreement and to prevent the
Consultant from engaging in activities which are competitive with the business
of the Company, and the Consultant desires to act as a consultant to the Company
as of the Effective Date and is, in consideration of the benefits to him of this
Agreement, willing to restrict his ability to compete with the business of the
Company.
NOW THEREFORE, in order to effect the foregoing, the Company and the
Consultant wish to enter into a consulting agreement upon the terms and subject
to the conditions set forth below. Accordingly, in consideration of the premises
and the respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
<PAGE> 2
1. Consulting Term and Services to be Provided. The Company hereby agrees
to engage the Consultant, and the Consultant hereby agrees to perform services
for the Company, on the terms and conditions set forth herein.
2. Term. The Term of this Agreement (the "Term") shall commence as of the
Effective Date and terminate on the second anniversary thereof. This Agreement
shall be null and void and of no force or effect if the Effective Time does not
occur.
3. Duties. From time to time during the Term, the Consultant shall perform
such services as the Company shall reasonably request to assist the Company in
effecting an orderly and efficient transition in respect of the Merger and the
transactions contemplated by the Merger Agreement. The Consultant shall in no
event be required to provide consulting services to the Company hereunder in
excess of 20 hours during any calendar month in the first year of the Term or in
excess of 10 hours during any calendar month in the second year of the Term. The
scheduling of such time shall be mutually agreeable to the Consultant and the
Company. Subject to the Consultant's obligations hereunder, the Company
acknowledges that the Consultant is permitted to pursue other activities,
whether of a personal or business nature, and, accordingly, may not always be
immediately available to the Company.
4. Place of Performance. The Consultant shall perform his duties and
conduct his business at such locations as are reasonably acceptable to him and
the Company, such locations shall include the Consultant's place of residence.
5. Independent Contractor. During the term of this Agreement, the
Consultant shall be an independent contractor and not an employee of the Company
and is not entitled to the benefits provided by the Company and/or its
affiliates to its employees, including but not limited to group insurance and
coverage under any tax-qualified retirement plan. Accordingly, Consultant shall
be responsible for payment of all taxes for remuneration received under this
Agreement, including Federal and State income tax, Social Security tax,
Unemployment Insurance tax, and any other taxes or business license fees as
required. Notwithstanding any provision in this Agreement, Consultant shall
remain eligible to receive any fees or benefits as a director or Advisory Board
member of the Company or any of its affiliates.
<PAGE> 3
6. Compensation.
(a) Quarterly Consulting Fee. During the Term, the Company shall pay to the
Consultant, as compensation for the services to be performed by the Consultant
hereunder, a quarterly consulting fee of $ 167,500 during the first year of the
Term and $ 82,500 during the second year of the Term, in each case, payable on
or about the 90th, 180th, 270th and last day of each year during the Term. In
the event this Agreement is terminated pursuant to Section 7, the Consultant
shall be entitled to receive any unpaid quarterly consulting fee on a pro rata
basis based upon the date of termination. In the event of a Change in Control of
the Company (as defined in the Bank Change in Control Act), any remaining
payments due under this Agreement shall become due and immediately payable to
the Consultant.
(b) Business Expenses. The Company shall reimburse the Consultant for all
reasonable business expenses incurred by him in connection with his performance
of consulting services hereunder upon submission by the Consultant of receipts
and other documentation in accordance with the Company's normal reimbursement
procedures.
7. Termination. The Consultant's engagement as a consultant hereunder shall
terminate without further action by any party hereto upon the expiration of the
Term. This Agreement may also be terminated by the Company without further
obligation other than for fees already earned or as set forth in the next
sentence of this Section 7 if the Consultant (a) engages in any willful conduct
with regard to his obligations to the Company under this Agreement which is
materially injurious to the Company, (b) is convicted of a felony or (c) becomes
employed on a full time basis by a depository institution having total deposits
of more than $2 billion which is headquartered in Long Island, NY. This
Agreement may also be terminated by the Consultant upon written notice by the
Consultant. Upon any termination of the Consultant's engagement as a consultant
hereunder, the parties hereto shall have no further obligation or liability
under this Agreement, except that the Company shall pay the Consultant all fees
or any pro rata portion thereof and reimburse the Consultant for all reasonable
expenses incurred hereunder prior to the date of termination.
8. Additional Covenants.
(a) The Consultant hereby agrees that during the Term the Consultant shall
not be employed by any depository institution with assets of $2 billion or more
which is headquartered in Long Island, NY.
3
<PAGE> 4
(b) The Consultant and the Company acknowledge that the non competition
provision contained in Section 8(a) above is reasonable and necessary, in view
of the nature of the Company, its business and his knowledge thereof, in order
to protect the legitimate interests of the Company.
(c) The Consultant agrees that during the Term and for a period of one year
thereafter, he shall not (i) solicit any employee of the Company or any of its
affiliates to leave the employ of the Company or any of its affiliates or to
accept any other employment or position, or (ii) assist any other person in
hiring any such employee, provided, however, this provision shall not apply to
any unsolicited contact by an employee of the Company or contact which is
otherwise initiated by the employee.
(d) The Consultant agrees that any information received by the Consultant
during any furtherance of the Consultant's obligations under this Agreement,
which concerns the affairs of the Company will be treated by the Consultant in
full confidence and will not be revealed to any other individual, partnership,
company or other organization except as may be required by law, as directed by
any regulatory authority or by order of any court.
(e) If any court or arbitrator determines that any covenant contained in
this Agreement, or any part thereof, is unenforceable for any reason, the
duration and/or scope of such provision shall be reduced so that such provision
becomes enforceable and, in its reduced form, such provision shall then be
enforceable and shall be enforced.
(f) With respect to each calendar year during which the Consultant receive
payments or benefits under the Prior Agreement, the Consultant agrees to file
all tax returns required by any governmental authority with respect to each such
year on or before the due respective due dates, including extensions, therefore.
9. Compliance with Law. In the performance of the services herein
contemplated, the Consultant is an independent contractor with the authority to
control the details of his work. However, the services of the Consultant are
subject to the approval of the Company and shall be subject to the Company's
general right of supervision to secure the satisfactory performance thereof. The
Consultant agrees to comply with all federal, state and municipal laws, rules
and regulations, as well as all policies and procedures of the Company, that are
now or may in the future
4
<PAGE> 5
become applicable to the Consultant in connection with his services to the
Company, provided, however, such noncompliance shall not represent a breach of
this Agreement to the extent such noncompliance is not materially injurious to
the Company and its affiliates, taken as a whole.
10. Successors; Binding Agreement.
(a) The Company shall require any successor to all or substantially all of
the business or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
(b) This Agreement and all rights of the Consultant hereunder shall inure
to the benefit of and be enforceable by the Consultant's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. This Agreement is personal to and may not be assigned by
the Consultant.
11. Notice. For the purposes of this Agreement, notices, demands and all
other communications provided for herein shall be in writing and shall be deemed
to have been duly given when delivered or (unless otherwise specified) mailed by
United States certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Consultant:
Mr. Raymond A. Nielson
7 Fox Meadow Lane
Lloyd Harbor, New York 11743
If to the Company:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Attn: Daniel M. Healy
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
5
<PAGE> 6
12. Disputes.
(a) Any dispute, controversy or claim arising out of or relating to this
Agreement, including any annexes hereto, or the breach, termination or validity
hereof, shall be finally settled by arbitration by one arbitrator in New York
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court of competent jurisdiction. The arbitration shall be governed by the
Federal Arbitration Act, 9 U.S.C. ss.ss. 1-16.
(b) In no event shall the Consultant be liable to the Company on account of
any breach or breaches of this Agreement for an aggregate amount that exceeds
the amount paid to the Consultant during the Term under Section 6(a) hereof.
13. Modification; Waiver; Discharge. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by the parties hereto. No waiver by a party hereto
at any time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
14. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
15. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto solely in respect of the services of the Consultant as a
consultant and, except as set forth below, supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or warranties
whether oral or written, by any officer, employee or representative of any party
hereto, and any prior agreement of the parties hereto solely in respect of the
services of the Consultant as a consultant is hereby terminated. Notwithstanding
the foregoing, this Agreement shall not supersede the Prior Agreement which
shall remain in full force and effect in accordance with its terms and Section
7.7(c) of the Merger Agreement. No agreements or representations, oral or
otherwise, expressed or implied, solely with respect to the services of the
Consultant as a consultant have been made by either party that are not set forth
expressly in this Agreement.
6
<PAGE> 7
16. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
17. Headings. The headings contained herein are for reference purposes only
and shall not in any way affect the meaning or interpretation of this Agreement.
18. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the state of New
York without regard to principles of conflicts of laws.
19. Indemnification. The Company shall indemnify the Consultant for any and
all losses, claims and liabilities resulting from the Consultant's performance
of services for the Company under this Agreement, which such indemnification
shall include any reasonable expenses, including attorneys or other professional
fees, incurred as the result of any action or investigation whereby the
Consultant is named as a party or is called to testify or provide information.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first above written.
NORTH FORK BANCORPORATION, INC.
By: /s/ Daniel M. Healy
Daniel M. Healy
Executive Vice President and
Chief Financial Officer
/s/ Raymond A. Nielson
Raymond A. Nielson
7
<PAGE> 1
EXHIBIT 10.16(A)
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT, made and entered into as of the 31st day of
December, 1999 (the "Agreement"), by and between North Fork Bancorporation,
Inc., a Delaware corporation ("Company"), and Thomas M. O'Brien (the
"Executive").
RECITALS
WHEREAS, effective as of the date hereof, the Executive is resigning from
his position as an executive officer of the Company and North Fork Bank, a New
York trust company and wholly owned subsidiary of the Company (the "Bank"),
while continuing to serve as a Director and Vice Chairman of the Company and the
Bank; and
WHEREAS, the Company and the Executive seek to enter into an arrangement
pursuant to which the Executive, following his resignation, will make himself
available to provide to the Company and the Bank advice, consultation and
assistance on an as-needed basis with respect to certain matters pertaining to
the overall management and business of the Company and the Bank, as may be
requested from time to time by the President of the Company or its Board of
Directors; and
WHEREAS, the Executive is willing to make himself available for such
services pursuant to, and in accordance with, the terms of this Agreement; and
<PAGE> 2
WHEREAS, the parties intend that each will have certain other rights and
responsibilities with respect to such arrangement for the duration thereof, all
as more fully set forth below;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the Company and the Executive agree as follows:
1. SERVICES FURNISHED.
(a) During the Services Period (as defined in Section 2, below), the
Executive shall hold himself available to provide, and shall provide, such
advisory services relating to aspects of the business and operations of the
Company and the Bank as to which he gained specialized knowledge and experience
in the course of his employment with the Company, the Bank or North Side Savings
Bank prior to January 1, 2000 as the Company may reasonably request, including,
but not be limited to, rendering advice and assistance in connection with
litigation or threatened litigation meeting such description, as, for example,
by advising the Company exclusively on the prosecution, defense and settlement
of any such litigation, providing non-inculpatory testimony as a witness on
behalf of the Company or the Bank, and evaluating any settlement proposal or
proposals to terminate or cease prosecuting any case or to pursue or abandon any
appeals.
(b) The Executive may engage in business activities and may perform
services, as an employee or independent contractor, other than for the Company
(including but not limited to private employment with competitors of the Company
and employment in the public sector as an elected or appointed official), and
such business activities and/or the performance of such services shall not be
deemed to impair the Executive's availability to perform services for the
Company as contemplated by this Agreement so long as the Executive makes
himself available on a reasonable basis outside of normal business hours,
it being understood that
2
<PAGE> 3
the Company shall not have the right to require, and shall not require, the
delivery of advisory services in any manner that does, or would reasonably be
expected to, interfere with the Executive's ability to engage in such other
employment or self-employment described above on a substantially full-time basis
during normal business hours. If as a result of any such other employment or
self-employment, the Executive believes that he may be required, due to an
actual or potential conflict-of-interest, to discontinue rendering particular
advisory services hereunder for a period of time or to decline to render
particular advisory services requested of him hereunder, he shall so advise the
Company and may discontinue or decline the rendering of such services, but such
discontinuance or declination shall not terminate the Services Period or
adversely affect the Executive's rights under this Agreement.
(c) In the performance of any services required of him hereunder, the
Executive shall have exclusive control over the manner of performance of such
services, including, without limitation, the selection, supervision and
compensation of personnel, if any, in addition to the Executive to be involved
in the performance of such services, the selection methods, procedures,
strategies and equipment to be employed in the performance of such services, and
determination of the times, places and dates at which such services will be
performed, subject to the right of the Company, through its President or Board
of Directors, to establish limitations on the amount of reasonable expenses
incurred by the Executive that the Company will be obligated to reimburse, as
set forth in Section 3(b).
2. TERM. The term of this Agreement and the obligation of the Executive to
render services hereunder shall commence as of 12:01 a.m. on January 1, 2000,
and shall continue during the period (the "Services Period") extending from such
commencement until the expiration of this Agreement upon the normal expiration
date of this Agreement, which shall be
3
<PAGE> 4
December 31, 2005. This Agreement and the Services Period may be terminated
prior to such normal expiration date as follows: (i) by the Company, if it
obtains the express written consent of the Executive to such termination; (ii)
by the Company, if it provides for the full vesting, as of or prior to such
termination, of all restricted stock awards granted to the Executive prior to
January 1, 2000 under the Company's 1994 Key Employee Stock Plan and 1998 Stock
Compensation Plan (collectively, the "Plans") and listed on Schedule A attached
to this Agreement and made a part hereof (the "Outstanding Restricted Stock");
(iii) by the Company, by written notice of termination given to the Executive,
following (A) the Executive's material breach of his obligations under section 1
hereof and subsequent failure to substantially cure such breach within the
30-day period following his receipt of a written notice of breach from the
Company, (B) the Executive's material breach of his obligations under Section 5
hereof, if such breach shall have materially damaged the Company, or (C) the
Executive's conviction of, or plea of guilty or nolo contendere to, the
commission of a felony; or (iv) by the Executive, upon 30 days' notice to the
Company.
3. OFFICE SPACE; EXPENSES.
(a) Office Space. If and as may be required by the Executive in order
to perform services hereunder, the Company will provide the Executive with
suitable office space at its main offices at 275 Broad Hollow Road, Melville,
New York, and with appropriate secretarial, clerical and other administrative
support and assistance.
(b) Expenses. Subject to such limitations as may be established from
time to time by the President of the Company or its Board of Directors, the
Company will reimburse the Executive for any reasonable expenses incurred by him
in connection with services rendered by him pursuant to this Agreement.
4
<PAGE> 5
4. COMPENSATION.
(a) The Company shall have no obligation to pay, and the Executive
shall have no right to claim, cash compensation (other than reimbursement of
expenses pursuant to section 3(b) of this Agreement) in consideration of his
remaining available to provide and his provision of the services contemplated by
this Agreement, it being the understanding of the parties that the sole
compensation (other than reimbursement of expenses) due to the Executive under
this Agreement shall be the potential vesting of the Executive's Outstanding
Restricted Stock and the continuing exercisability of all stock options granted
to the Executive under the Plans prior to January 1, 2000, and outstanding on
such date, as listed on Schedule A attached hereto ("Outstanding Stock
Options"), all of which were fully exercisable upon grant, in each case as
further described in Section 4(b).
(b) The Company hereby stipulates that: (i) upon commencement of the
Services Period under this Agreement, the Executive's "employment" with the
Company and its subsidiaries shall be deemed to have continued unbroken from
prior periods, and thereafter during the Services Period the Executive's
"employment" with the Company and its subsidiaries shall be deemed to continue
unbroken, in each case for purposes and only for purposes of the vesting of the
Outstanding Restricted Stock and the continuing exercisability of the
Outstanding Stock Options, and (ii) the Executive's withdrawal from availability
to provide services under this Agreement upon expiration of this Agreement on
the normal expiration date hereof (December 31, 2005) shall be deemed an
approved early retirement of the Executive which shall result in the full
vesting of all Outstanding Restricted Stock. Attached to this Agreement as
Exhibit B is a certified copy of a resolution duly adopted by the Compensation
Committee of the Company (i) approving such withdrawal as an early retirement
and a vesting event for all
5
<PAGE> 6
purposes of the Outstanding Restricted Stock and the agreements between the
Company and the Executive relating thereto, and (ii) exercising its powers of
interpretation to cause the Services Period to be deemed a part of the
Executive's period of continuous and unbroken employment for purposes of the
Outstanding Restricted Stock and Outstanding Stock Options and the agreements
between the Company and the Executive relating thereto (the "Awards
Agreements"). Execution of this Agreement shall not constitute an amendment,
modification or termination of any Stock Plan or any of the Awards Agreements.
Subject to the approvals and interpretations evidenced by the resolutions of the
Compensation Committee attached to this Agreement as Exhibit B, the Stock Plans
and the terms of all Awards Agreements shall, insofar as they apply to the
Executive, remain and continue in full force and effect. Except as provided
above or in any other agreement between the Company and the Executive or any
other plan of the Company covering the Executive, the Executive shall not be
deemed by virtue of this Agreement or the services to be performed by him
hereunder to be or to continue to be an "employee" of the Company and/or its
subsidiaries under any of the Company's other employee benefit plans, or to be
entitled to receive what an employee may be entitled to receive thereunder,
provided, however, that nothing in the foregoing clause will limit the right of
the Executive to receive or to continue to receive benefits payable or accruing
to him under some or all of such other employee benefit plans of the Company as
a former qualifying active employee of the Company and/or its subsidiaries
thereunder.
(c) Nothing in Sections 4(a) or 4(b) above shall imply or suggest that
early termination of this Agreement pursuant to Sections 2(a)(i), (iii) or (iv)
will constitute in and of itself an approved early retirement of the Executive
within the meaning of any Award Agreement or will result in and of itself in the
vesting of any Outstanding Restricted Stock.
6
<PAGE> 7
5. Confidentiality. Except to the extent otherwise authorized by the
Company, the Executive agrees to keep confidential all information coming into
his possession in the course of his employment with the Company or provision of
services under this Agreement that is not otherwise in the public domain and
that belongs or relates to or emanates from the Company or its subsidiaries.
Nothing in this Agreement, however, shall prohibit the Executive, with or
without the Company's authorization, from producing documents, providing
testimony or otherwise participating or cooperating in any judicial or
administration action, proceeding, investigation or other activity to the extent
he is advised in writing by legal counsel that such document production,
testimony, participation or cooperation is required under applicable law.
6. Indemnification. To the maximum extent permitted under applicable law,
during the Services Period and for a period of six (6) years thereafter, the
Company shall indemnify the Executive against and hold him harmless from any and
all claims, costs, liabilities, losses and exposures suffered or incurred by him
as a result of his rendering services hereunder, except for any such claims,
costs, liabilities, losses or exposures suffered or incurred by the Executive as
a result of intentional bad acts or omissions. The Company also shall indemnify
the Executive for all legal fees and expenses incurred by the Executive in
contesting or disputing any termination of this Agreement or in seeking to
obtain or enforce any right or benefit provided by this Agreement, unless such
fees and expenses are determined by a court of competent jurisdiction to have
been incurred as a result of the Executive's bad faith. The indemnification
provided herein shall be in addition to, and not in lieu of, any other
indemnification provided by the Company or its subsidiaries to the Executive
under any other contract or agreement or under any bylaw or charter provision.
The provisions of this section 6 shall be in addition to, and not
7
<PAGE> 8
in substitution for, any rights which the Executive may now have or may in the
future acquire to coverage under policies of errors and omission insurance
obtained by the Company or any of its subsidiaries relating to services provided
by him as any officer, employer or director of any of them or services
(including service as a fiduciary) provided by him to others at the request of
the Company or any of its subsidiaries.
7. Entire Agreement; Amendment; Waiver. This Agreement cancels and
supersedes all previous agreements or understandings between the parties
relating to the subject matter hereof, and embodies the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
shall not be amended, modified or supplemented in any respect except by a
subsequent written instrument entered into by the parties. The performance of or
compliance with any covenant given herein or the satisfaction of any condition
to the obligations of either party hereunder may be waived by the party to whom
such covenant is given or whom such condition is intended to benefit, except to
the extent any such condition is required by law; provided, however, that, no
waiver of any provision of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof nor shall any such waiver constitute a
continuing waiver.
8. Successors; Binding Agreement. This Agreement shall be binding upon and
inure to the benefit of the Executive and his heirs and representatives and the
Company and its respective successors and assigns.
9. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute
8
<PAGE> 9
one agreement which is binding upon all the parties hereto, notwithstanding that
all parties are not signatories to the same counterpart.
10. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of the other
provisions of this Agreement, which shall remain in full force and effect.
11. Governing Law. This Agreement shall be governed in all respects,
including as to validity, interpretation and effect, by the internal laws of the
State of New York, without giving effect to the conflict of laws rules thereof.
Notwithstanding anything herein contained to the contrary, any payments to the
Executive by the Company, whether pursuant to this Agreement or otherwise, are
subject to and conditioned upon their compliance with section 18(k) of the
Federal Deposit Insurance Act, 12 U.S.C.ss.1828(k), and any regulations
promulgated thereunder.
12. Notices. Any communication required or permitted to be given to a party
under this Agreement, including any notice, direction, designation, consent,
instruction, objection or waiver, shall be in writing and shall be deemed to
have been given at such time as it is delivered personally, or five (5) calendar
days after mailing if mailed, postage prepaid, by registered or certified mail,
return receipt requested, addressed to such party at the address listed below or
at such other address as either party may by written notice specify to the other
party:
If to the Executive:
Thomas M. O'Brien
9
<PAGE> 10
copy to
Thacher Proffitt & Wood
Two World Trade Center
New York, New York 10048
Attention: W. Edward Bright, Esq.
If to the Company:
North Fork Bancorporation, Inc.
275 Broad Hollow Road
Melville, New York 11747
Attention: Chief Executive Officer
13. Survival. Any provisions of this Agreement which, by its express terms
or in practical effect, contemplates performance after the expiration of the
Services Period or termination of this Agreement shall survive the expiration of
the Services Period or termination of this Agreement.
10
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this Agreement or caused this
Agreement to be executed by their duly authorized representatives, as of the day
and year first above written.
NORTH FORK BANCORPORATION, INC.
By: /s/ Daniel M. Healy
Daniel M. Healy
Executive Vice President and
Chief Financial Officer
"THE EXECUTIVE"
/s/ Thomas M. O'Brien
Thomas M. O'Brien
11
<PAGE> 12
Exhibit A
Outstanding Awards
as of December 31, 1999
-----------------------
Restricted Stock
- - - - ----------------
No. of Shares(1) Date of Grant
---------------- -------------
37,500 12/09/97
25,000 12/16/98
30,000 12/13/99
Stock Options(2)
- - - - ----------------
No. of Shares(1) Date of Grant Exercise Price(1)
---------------- ------------- -----------------
30,000 12/09/97 21.15
9,774 04/23/98 26.88
48,809 04/23/98 26.88
20,000 12/16/98 20.47
25,000 12/13/99 18.1563
- - - - ---------------------------------
(1) Adjusted to reflect stock dividends and stock splits post grant date.
(2) All stock options granted to the Executive were fully exercisable by him
immediately upon grant.
<PAGE> 1
EXHIBIT 11 - STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
------------------------------------------------------------
DECEMBER 31, 1999 December 31, 1998 December 31, 1997
------------------------------------------------------------
<S> <C> <C> <C>
Net Income $220,368,929 $167,975,347 $170,521,287
Common Equivalent Shares:
Weighted Average Common Shares Outstanding 135,025,108 140,706,044 136,760,843
Weighted Average Common Equivalent Shares - Options 385,172 675,556 2,424,623
Weighted Average Common Equivalent Shares - Restricted Stock 454,589 383,968 147,585
----------------------------------------------------------
Weighted Average Common and Common Equivalent Shares 135,864,869 141,765,568 139,333,051
==========================================================
Net Income per Common Equivalent Share - Basic $1.63 $1.19 $1.24
Net Income per Common Equivalent Share - Diluted $1.62 $1.18 $1.22
</TABLE>
<PAGE> 1
SELECTED FINANCIAL DATA
Selected financial data for each of the years in the five-year period ended
December 31, 1999 are set forth below. The Company's consolidated financial
statements and notes thereto as of December 31, 1999 and 1998 and for each of
the years in the three-year period ended December 31, 1999 are included
elsewhere herein. All prior years' financial information has been conformed to
the current year presentation.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) 1999 1998 1997 1996 1995
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Interest Income (tax equivalent basis)(1) ................. $ 826,499 $ 758,606 $ 731,832 $ 617,580 $ 532,209
Interest Expense .......................................... 368,440 328,456 326,803 281,107 242,129
----------------------------------------------------------------------
Net Interest Income (tax equivalent basis) ..... 458,059 430,150 405,029 336,473 290,080
Less: Tax Equivalent Adjustment ........................... 8,753 5,506 7,408 3,818 1,970
----------------------------------------------------------------------
Net Interest Income ............................ 449,306 424,644 397,621 332,655 288,110
Provision for Loan Losses ................................. 6,000 15,500 8,100 8,000 13,525
Non-Interest Income ....................................... 59,439 54,885 50,915 38,602 29,695
Net Securities Gains ...................................... 13,578 9,433 8,407 6,224 5,886
Other Non-Interest Expense ................................ 152,043 146,607 157,182 154,643 140,983
Capital Securities Costs .................................. 16,843 16,843 9,235 25 -
Amortization & Write-down of Intangible Assets ............ 8,408 14,479 7,292 6,364 1,688
Merger Related Restructure Charges ........................ - 52,452 - 21,613 19,024
SAIF Recapitalization Charge .............................. - - - 17,782 -
----------------------------------------------------------------------
Income Before Income Taxes ..................... 339,029 243,081 275,134 169,054 148,471
Provision for Income Taxes ................................ 118,660 75,106 104,613 74,606 69,567
----------------------------------------------------------------------
Net Income ..................................... $ 220,369 $ 167,975 $ 170,521 $ 94,448 $ 78,904
======================================================================
PER SHARE:
Net Income-Basic .......................................... $ 1.63 $ 1.19 $ 1.24 $ .69 $ .55
Net Income-Diluted ........................................ $ 1.62 $ 1.18 $ 1.22 $ .68 $ .55
Cash Dividends(2) ......................................... $ .63 $ .65 $ .38 $ .28 $ .18
Dividend Payout Ratio ..................................... 39% 55% 32% 36% 26%
Book Value at December 31 ................................. $ 4.82 $ 5.89 $ 5.53 $ 4.45 $ 4.15
Market Price at December 31 ............................... $ 17.59 $ 23.94 $ 22.50 $ 11.88 $ 8.42
BALANCE SHEET DATA AT DECEMBER 31:
Total Assets .............................................. $12,108,116 $10,679,556 $10,073,632 $ 8,691,434 $ 7,622,458
Securities:
Available-for-Sale ............................. 3,592,917 2,980,223 2,156,624 1,301,891 1,425,868
Held-to-Maturity ............................... 1,229,703 1,571,545 1,763,308 1,851,575 1,770,734
Loans, net ................................................ 6,617,130 5,714,293 5,739,131 5,044,073 4,086,497
Demand Deposits ........................................... 1,507,162 1,263,105 948,458 771,920 520,977
Interest Bearing Deposits ................................. 5,037,588 5,164,517 5,389,481 5,427,940 4,983,498
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase ....................... 2,665,200 2,955,096 2,104,036 1,075,487 987,229
Other Borrowings .......................................... 1,844,000 35,000 449,600 590,088 457,278
Capital Securities ........................................ 199,314 199,289 199,264 99,637 -
Stockholders' Equity ...................................... 618,710 831,250 770,889 609,434 582,515
AVERAGE BALANCE SHEET DATA:
Total Assets .............................................. 11,479,539 10,107,386 9,557,020 8,283,418 7,099,152
Securities ................................................ 4,799,458 3,835,761 3,783,276 3,346,563 2,879,863
Loans, net ................................................ 6,115,127 5,729,743 5,357,470 4,531,541 3,919,342
Total Deposits ............................................ 6,550,717 6,484,243 6,179,024 6,114,852 5,402,606
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase ....................... 2,911,802 2,236,257 1,944,592 939,365 658,050
Other Borrowings .......................................... 847,386 185,783 485,200 533,516 397,830
Capital Securities ........................................ 199,302 199,277 105,646 281 -
Stockholders' Equity ...................................... $ 786,590 $ 837,413 $ 667,211 $ 589,352 $ 558,816
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS, EXCEPT RATIOS AND PER SHARE AMOUNTS) 1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SELECTED RATIOS:
Return on Average Total Assets ............................ 1.92% 1.66% 1.78% 1.14% 1.11%
Return on Average Stockholders' Equity(3) ................. 27.05 20.50 25.63 15.90 14.09
Core Efficiency Ratio(4) .................................. 34.34 35.03 38.22 42.61 43.95
Net Interest Margin(1) .................................... 4.16 4.48 4.42 4.24 4.24
Average Stockholders' Equity to Average Assets ............ 6.85 8.29 6.98 7.11 7.87
Tier I Capital Ratio ...................................... 11.48 15.19 15.33 13.82 14.45
Risk Adjusted Capital Ratio ............................... 12.45 16.39 16.58 15.11 15.59
Leverage Capital Ratio .................................... 6.84 9.09 8.74 7.46 7.35
Allowance for Loan Losses to Non-Performing Loans ......... 462 470 198 146 107
Non-Performing Loans to Total Loans, net .................. .22 .27 .66 1.00 1.78
Non-Performing Assets to Total Assets ..................... .13 .17 .43 .64 1.08
Weighted Average Shares-Basic ............................. 135,025 140,706 136,761 136,504 142,297
Weighted Average Shares-Diluted ........................... 135,865 141,766 139,333 138,707 144,227
Branch Offices ............................................ 154 111 85 82 67
</TABLE>
(1) 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 local 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.
(2) Cash dividends per share represent amounts for the Company on an
historical basis. In December 1998, the Company declared a special cash
dividend of $.15.
(3) Excludes the effect of the SFAS No. 115 adjustment.
(4) 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 securities gains/(losses) and other
non-recurring items.
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD LOOKING STATEMENTS
Certain statements under this caption which involve risk and uncertainties
constitute "forward-looking statements" under the Private Securities Litigation
Reform Act of 1995. These statements are based on the beliefs, assumptions, and
expectations of management of the Company. Words such as "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 financial condition, performance or
operations and involve certain risks and uncertainties that are difficult to
quantify or, in some cases, to identify. Therefore, actual outcomes or results
may differ materially from what is indicated or forecasted in such
forward-looking statements. Factors that may cause or contribute to such
differences include, among others, the following possibilities: (1) changes in
economic or market conditions; (2) significantly increased competition among
financial service companies; (3) changes in the interest rate environment, which
may reduce interest margins; and (4) accounting, tax, legislative or regulatory
changes may adversely affect the business in which the Company is engaged.
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 $12.1 billion multi-bank holding company headquartered in
Melville, New York. The Company ranks among the nation's top 50 bank holding
companies when measured by performance and size. The Company's primary bank
subsidiary, North Fork Bank ("North Fork"), operates through 154 full-service
retail-banking facilities (inclusive of JSB and Reliance) located in the New
York metropolitan area, one of the most densely populated and wealthiest markets
in the nation. North Fork focuses on providing superior customer service to both
personal and commercial clients by offering the convenience of telephone banking
as well as an array of financial products and brokerage/investment management
services through its non-bank subsidiaries, Compass Investment Services Corp.
("Compass") and Amivest Corporation ("Amivest"). The Company's other bank
subsidiary, Superior Savings of New England ("Superior"), a Connecticut
chartered savings bank located in the Connecticut county of New Haven, operates
from one location, where it currently conducts a telebanking operation focused
on gathering deposits throughout the New England region.
On August 16, 1999, the Company entered into an Agreement and Plan of
Merger with JSB Financial, Inc. ("JSB"), the parent company of Jamaica Savings
Bank, whereby it would acquire JSB in a stock-for-stock merger. In connection
with the merger, the Company needed to reissue a sufficient number of shares of
its treasury stock prior to the consummation of the merger in order that the
merger qualify for pooling-of-interest accounting treatment. The necessary
treasury shares were reissued on February 18, 2000, in connection with the
Reliance transaction described below. On February 29, 2000, JSB was merged with
and into the Company in accordance with the pooling-of-interest method of
accounting. On March 10, 2000, Jamaica Savings Bank was merged with and into
North Fork Bank. Pursuant to the merger agreement, the Company issued 3.0 shares
of common stock for each share of JSB's common stock outstanding. Accordingly,
the Company issued 28,312,851 of its common shares and simultaneously retired
6,562,383 of JSB's common shares held in treasury. At December 31, 1999, JSB had
total assets of $1.6 billion, deposits of $1.1 billion, and stockholders' equity
of $380 million. Jamaica Savings Bank operated from 13 retail-banking facilities
in the New York City boroughs of Manhattan and Queens and in Nassau and Suffolk
counties, New York (See "Notes to Consolidated Financial Statements - Note 2 -
Business Combinations").
On August 30, 1999, the Company entered into an Agreement and Plan of
Merger with Reliance Bancorp, Inc. ("Reliance"), the parent company of Reliance
Federal Savings Bank, whereby it would acquire Reliance in a stock-for-stock
merger accounted for under the purchase method of accounting. On August 30,
1999, simultaneous with the announcement of the merger, the Company's Board of
Directors formally approved the purchase of up to 50% of the common shares to be
issued in the transaction, or 8.5 million shares. As of December 31, 1999, the
Company completed the purchase of 7.8 million shares under the program. The
program was completed subsequent to December 31, 1999. On February 18, 2000,
Reliance was merged with and into the Company in accordance with the purchase
method of accounting. Pursuant to the merger agreement, the Company issued 2.0
shares of its common stock for each share of Reliance's common stock outstanding
(17,120,160 common shares were reissued by the Company from its treasury account
in satisfaction of the Reliance exchange ratio and the JSB pooling requirement).
At December 31, 1999, Reliance had total assets of
<PAGE> 4
$2.5 billion, deposits of $1.5 billion, and stockholders' equity of $176
million. Reliance Federal Savings Bank operated from 29 retail-banking
facilities throughout Suffolk and Nassau counties, New York, as well as in the
New York City borough of Queens (See "Notes to Consolidated Financial Statements
- - - - - Note 2 - Business Combinations").
These strategic in-market acquisitions which are expected to be
earnings accretive in 2000, will provide the Company with approximately 300,000
new customers and 42 additional branch locations, while providing $2.6 billion
in core deposits, and $4.1 billion in assets, which compliment the Company's
current risk profile. Additionally, all data system conversions related to these
transactions have been successfully completed. At December 31, 1999, the
Company, inclusive of JSB and Reliance, would have pro forma assets of $16.3
billion, deposits of $9.2 billion, stockholders' equity of $1.3 billion, and
would operate 154 retail-banking facilities throughout the New York metropolitan
area and Connecticut. The Company believes that the aforementioned transactions
mark a return to a more rationale trend in thrift consolidation and merger and
acquisition pricing.
During the fourth quarter of 1998, the Board of Directors, (the
"Board") after considering the Company's exceptional ability to consistently
generate excess capital from earnings, adopted a capital management strategy
aimed at improving shareholder returns. In October 1998, a share repurchase
program of up to 14.3 million or 10% of the Company's common shares was
approved. At the time, seller price expectations for all potential mergers and
acquisitions were unrealistic and the Board acknowledged the program as the best
use of the Company's capital. On August 16, 1999, simultaneous with the
announcement of the JSB merger, the Company's Board of Directors formally
rescinded the 10% share repurchase program. At the date of rescission, the
Company had completed the repurchase of approximately 8.1 million shares. On
August 30, 1999, simultaneous with the announcement of the Reliance merger, the
Company's Board of Directors formally approved the purchase of up to 50% of the
common shares issuable in the Reliance transaction, or 8.5 million shares.
On December 14, 1999, the Board declared a 20% increase in its
quarterly cash dividend to $0.18 per common share. The Board has approved
dividend increases of this magnitude on a recurring basis since June 1994. The
Board believes that these increases are reflective of increasing shareholder
returns and a capital management strategy commensurate with the Company's
consistent earnings growth.
During December 1999, the Company announced the formation of North
Fork's equipment and vehicle lease finance company, All Points Capital Corp.
("All Points"). All Points provides lease financing programs and products on a
national basis to qualified third party originators as well as offering existing
business customers equipment leasing solutions. The Company expects that
originations from this new program will be significant in the near future and
will add to the diversity in the loan portfolio through the origination of
quality asset based lease receivables.
On March 5, 2000, the Company announced its intention to seek to
acquire Dime Bancorp, Inc.. Reference is made to Note 18 in the accompanying
consolidated financial statements presented herein for additional information.
The discussion and analysis that follows should be read in
conjunction with the consolidated financial statements and supplementary data
contained elsewhere in this 1999 Annual Report to Shareholders.
OVERVIEW
The Company continues to be among the industry leaders in all key measures of
operating performance during a year in which it did not close any merger and
acquisition transactions. 1999 was highlighted by record earnings of $220.4
million, or diluted earnings per share of $1.62. In 1998, the Company's core
earnings were $206.6 million, or diluted earnings per share of $1.46 exclusive
of a merger related restructure charge and other special items, totaling $38.6
million after taxes, or $0.28 per share, incurred in connection with the March
1998 merger of New York Bancorp ("NYB"). (See "Notes to Consolidated Financial
Statements - Note 2 - Business Combinations"). Return on average total assets
and average stockholders' equity for 1999 was 1.92% and 27.05%, respectively,
placing the Company, once again, in a leading position among top bank holding
companies. The core efficiency ratio approximated 34%, continuing its declining
trend since the early 1990's. The Company ranks among the most efficient bank
holding companies in the nation, demonstrating management's ability to control
operating expenses and enhance revenues, while successfully growing its core
businesses. During 1998, the Company's net income, return on average assets and
return on average equity, including the aforementioned charges, was $168
million, or diluted earnings per share of $1.18, 1.66% and 20.50%, respectively.
The ability to grow the core business without a merger and
acquisition transaction was evidenced by the continued growth in demand deposits
and generation of fee income. This growth is attributable to an emphasis on
developing long-term deposit relationships with borrowers, the use of incentive
compensation plans to propel demand deposit growth, and the Company's de novo
<PAGE> 5
branch strategy centered on New York City. Demand deposits increased 19.3% to
$1.5 billion and represent approximately 23.0% of total deposits at December 31,
1999, as compared to $1.3 billion or 19.7% of total deposits at December 31,
1998. For the five year period ending December 31, 1999, demand deposits have
increased approximately 200%. Non-interest income, excluding securities gains,
increased 8.3% to $59.4 million with growth highlighted in fees and service
charges on deposits and investment management, commissions and trust income.
The Company continues to differentiate itself in a marketplace
dominated by large nationally focused financial institutions as demonstrated by
its loan portfolio growth and overall asset quality. At December 31, 1999, the
loan portfolio grew by $900 million or 15.7% to $6.6 billion with increases
reflected in all segments of the portfolio. Management anticipates continued
growth in all segments of its loan portfolio during 2000. Asset quality remained
strong with non-performing assets and restructured accruing loans declining by
19% to $15.4 million, or 0.13% of total assets, at December 31, 1999 when
compared to 1998. The Company has continued to grow its loan portfolio by
recognizing the needs of its individual customers while avoiding high risk,
volatile lending products such as credit cards and subprime lending. Inclusive
of JSB and Reliance, the Company's pro forma loan portfolio at December 31, 1999
would have been $8.9 billion. The underlying composition of the JSB and Reliance
portfolios are similar to those of the Company.
NET INTEREST INCOME
Net interest income, which represents the difference between interest earned on
interest earning assets and interest incurred on interest bearing liabilities,
is the primary source of earnings. Net interest income is affected by the level
and composition of assets, liabilities, and equity, as well as changes in market
interest rates.
During 1999, net interest income increased $24.7 million or 5.8% to
$449.3 million when compared to $424.6 million in 1998. This growth was achieved
through a significant increase in the level and composition of interest earning
assets, offset by a 32 basis point decline in the net interest margin. The
decline in the net interest margin was due in large measure to management's
decision to improve net interest income and net income by adding interest
earning assets and interest bearing liabilities at spreads narrower than
traditionally obtained if asset growth were funded with customer deposits. As a
result, the Company's net interest margin continued to decline throughout 1999
due to the aforementioned strategy. However, management believes that the net
interest margin will begin to stabilize. Factors contributing to the expected
stabilization include, but are not limited to: (a) the assumption of additional
core deposits from the two recently completed transactions; (b) projected growth
in demand deposits achieved through the successful conversion of acquired
savings bank locations into full-service commercial banking locations; and (c)
an emphasis on expanding its existing strategy of developing long-term deposit
relationships with our borrowers to the JSB and Reliance customer base.
Interest income increased $64.6 million or 8.6% to $817.7 million in
1999. This improvement resulted from a $1.4 billion, or 14.6%, increase in
average interest earning assets to $11.0 billion in 1999, partially offset by a
38 basis point decline in the yield on average earning assets from 7.89% to
7.51%.
Average loans grew by $385.4 million, or 6.7%, to $6.1 billion in
1999, when compared to 1998. Each component of the loan portfolio contributed to
the growth, with consumer loans reflecting the largest percentage increase.
However, the net interest margin and interest income were negatively impacted by
a 42 basis point decline in yield on average loans to 8.22% during 1999. This
decline was primarily due to competition for quality loans as well as prepayment
and refinancing activity, the proceeds of which were reinvested into lower
yielding loans reflecting market interest rates at the time. Loans represented
55.5% of average interest earning assets and 93.3% of average total deposits at
December 31, 1999.
Average securities increased $963.7 million, or 25.1% to $4.8
billion, and represented the largest component of the increase in average
interest earning assets. This resulted from management's decision in early 1999
to improve net interest income and net income as previously described. The
securities purchased during 1999 were principally collateralized mortgage-backed
securities, which have been classified as available-for-sale. However, this
positive impact on net interest income and net income was partially offset by a
21 basis point decline in the yield on average securities to 6.59% for 1999,
when compared to 6.80% in the comparable prior year. This decline was due to the
aforementioned growth in the securities portfolio, accelerated prepayment
activity, and the reinvestment of related cash flows throughout 1999 into lower
yielding securities reflecting market interest rates.
<PAGE> 6
During 1999, interest expense increased $40.0 million, or 12.2%, over
the comparable prior year to $368.4 million. This was attributable to a $1.1
billion, or 14.2%, increase in average interest bearing liabilities to $8.9
billion. The increase in interest expense due to the level of average interest
bearing liabilities was partially offset by a 7 basis point decline in the
Company's average cost of funds to 4.13% for 1999, as compared to 4.20% for the
comparable prior year.
The increase in average interest bearing liabilities resulted from
management's decision to fund growth in interest earning assets with principally
short term repurchase agreements and Federal Home Loan Bank ("FHLB") advances.
As a result of this decision, average total borrowings increased $1.3 billion,
or 55.2%, to $3.8 billion during 1999, when compared to $2.4 billion during
1998. The average cost of funds on total borrowings declined 28 basis points to
5.53% from 5.81%, reflecting market interest rates during the respective
periods.
Average time and savings deposits, which continue to represent a
stable funding source, were $5.2 billion, reflecting an average cost of funds of
3.11% during 1999, compared to $5.4 billion, with an average cost of funds of
3.48% during 1998. The decline in the level of time deposits and certificates of
deposits greater than $100,000 resulted from management's decision to reduce its
reliance on these rate sensitive sources of funding. In addition, both the level
and cost of all interest bearing deposits were impacted by the decision to lower
rates and overlay the Company's pricing and integration strategy on liabilities
assumed in the NYB merger.
Average demand deposits increased $295.9 million, or 27.2%, to $1.4
billion during 1999, as compared to $1.1 billion in 1998. The growth in demand
deposits has been achieved through the successful conversion of acquired savings
bank locations into full-service commercial banking locations, an emphasis on
developing long-term deposit relationships with borrowers, and the use of
incentive compensation plans. At December 31, 1999, demand deposits represented
23.0% of total deposits, as compared to 19.7% at December 31, 1998.
The use of interest rate swaps and stock indexed call options
decreased interest expense by approximately $2.0 million and $.8 million during
1999 and 1998, respectively. These derivative financial instruments were
immaterial to the overall cost of funds and net interest margin during these
respective period ends. (See "Asset/Liability Management" section of
"Management's Discussion and Analysis").
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, 1999 VS. 1998 1998 VS. 1997
------------------------------------------------------------------------------
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 ................... $ (81) $ (34) $ (115) $ 324 $ (14) $ 310
Securities .................................. 62,716 (7,324) 55,392 3,678 (10,747) (7,069)
Loans, net of unearned income ............... 32,368 (25,078) 7,290 32,181 430 32,611
Money Market Investments .................... 4,031 1,295 5,326 904 18 922
------------------------------------------------------------------------------
Total Interest Income .................. 99,034 (31,141) 67,893 37,087 (10,313) 26,774
INTEREST EXPENSE ON LIABILITIES:
Savings, NOW & Money Market Deposits ........ (1,367) (10,486) (11,853) 1,706 (2,142) (436)
Time Deposits ............................... (8,035) (7,187) (15,222) (282) 747 465
Federal Funds Purchased and Securities Sold
Under Agreements to Repurchase ......... 37,474 (5,694) 31,780 16,851 (549) 16,302
Other Borrowings ............................ 34,988 291 35,279 (18,081) 3,403 (14,678)
------------------------------------------------------------------------------
Total Interest Expense ................. 63,060 (23,076) 39,984 194 1,459 1,653
------------------------------------------------------------------------------
Net Change in Net Interest Income ........... $ 35,974 $ (8,065) $ 27,909 $ 36,893 $(11,772) $ 25,121
==============================================================================
</TABLE>
(1) The above table is presented on a tax equivalent basis.
(2) Non-accrual loans are included in the average outstanding loan balances.
<PAGE> 7
NET INTEREST INCOME (continued)
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>
1999 1998
-----------------------------------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
(DOLLARS IN THOUSANDS) BALANCE INTEREST RATE BALANCE INTEREST
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Earning Deposits ............. $ 7,556 $ 341 4.51% $ 9,305 $ 456
Securities ............................ 4,799,458 316,223 6.59% 3,835,761 260,831
Loans, net of unearned income(1) ...... 6,115,127 502,603 8.22% 5,729,743 495,313
Money Market Investments .............. 89,230 7,332 8.22% 36,010 2,006
-----------------------------------------------------------------------------------------
Total Interest Earning Assets ......... 11,011,371 826,499 7.51% 9,610,819 758,606
-----------------------------------------------------------------------------------------
Non-Interest Earning Assets:
Cash and Due from Banks ............... 184,129 156,101
Other Assets(2) ....................... 284,039 340,466
-----------------------------------------------------------------------------------------
Total Assets .......................... $ 11,479,539 $ 10,107,386
Interest Bearing Liabilities:
Savings, NOW & Money
Market Deposits .................. $ 2,925,312 $ 52,704 1.80% $ 2,989,870 $ 64,557
Time Deposits ......................... 2,242,083 107,990 4.82% 2,406,901 123,212
-----------------------------------------------------------------------------------------
Total Savings and Time Deposits .. 5,167,395 160,694 3.11% 5,396,771 187,769
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase ....... 2,911,802 160,963 5.53% 2,236,257 129,183
Other Borrowings ...................... 847,386 46,783 5.52% 185,783 11,504
-----------------------------------------------------------------------------------------
Total Borrowings ................. 3,759,188 207,746 5.53% 2,422,040 140,687
-----------------------------------------------------------------------------------------
Total Interest Bearing Liabilities 8,926,583 368,440 4.13% 7,818,811 328,456
Rate Spread ........................... 3.38%
Non-Interest Bearing Liabilities:
Demand Deposits ....................... 1,383,322 1,087,472
Other Liabilities ..................... 183,742 164,413
-----------------------------------------------------------------------------------------
Total Liabilities ................ 10,493,647 9,070,696
Capital Securities .................... 199,302 199,277
Stockholders' Equity .................. 786,590 837,413
-----------------------------------------------------------------------------------------
Total Liabilities and
Stockholders' Equity ........... $ 11,479,539 $ 10,107,386
Net Interest Income and
Net Interest Margin(3) .............. 458,059 4.16% 430,150
Less: Tax Equivalent
Adjustment ....................... (8,753) (5,506)
-----------------------------------------------------------------------------------------
Net Interest Income ......... $ 449,306 $ 424,644
=========================================================================================
1998 1997
-------------------------------------------------------------
AVERAGE AVERAGE AVERAGE AVERAGE
(DOLLARS IN THOUSANDS) RATE BALANCE INTEREST RATE
-------------------------------------------------------------
Interest Earning Assets:
Interest Earning Deposits ............. 4.90% $ 2,718 $ 146 5.37%
Securities ............................ 6.80% 3,783,276 267,900 7.08%
Loans, net of unearned income(1) ...... 8.64% 5,357,470 462,702 8.64%
Money Market Investments .............. 5.57% 19,780 1,084 5.48%
-------------------------------------------------------------
Total Interest Earning Assets ......... 7.89% 9,163,244 731,832 7.99%
-------------------------------------------------------------
Non-Interest Earning Assets:
Cash and Due from Banks ............... 136,249
Other Assets(2) ....................... 257,527
-------------------------------------------------------------
Total Assets .......................... $ 9,557,020
Interest Bearing Liabilities:
Savings, NOW & Money
Market Deposits .................. 2.16% $ 2,912,303 $ 64,993 2.23%
Time Deposits ......................... 5.12% 2,412,431 122,747 5.09%
-------------------------------------------------------------
Total Savings and Time Deposits .. 3.48% 5,324,734 187,740 3.53%
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase ....... 5.78% 1,944,592 112,881 5.80%
Other Borrowings ...................... 6.19% 485,200 26,182 5.40%
-------------------------------------------------------------
Total Borrowings ................. 5.81% 2,429,792 139,063 5.72%
-------------------------------------------------------------
Total Interest Bearing Liabilities 4.20% 7,754,526 326,803 4.21%
Rate Spread ........................... 3.69% 3.77%
Non-Interest Bearing Liabilities:
Demand Deposits ....................... 854,290
Other Liabilities ..................... 175,347
-------------------------------------------------------------
Total Liabilities ................ 8,784,163
Capital Securities .................... 105,646
Stockholders' Equity .................. 667,211
-------------------------------------------------------------
Total Liabilities and
Stockholders' Equity ........... $ 9,557,020
Net Interest Income and
Net Interest Margin(3) .............. 4.48% 405,029 4.42%
Less: Tax Equivalent
Adjustment ....................... (7,408)
-------------------------------------------------------------
Net Interest Income ......... $ 397,621
=============================================================
</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 tax equivalent basis.
<PAGE> 8
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 assets and liabilities, and the credit quality of the loan
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 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 interest earning assets and interest bearing liabilities, net interest
margin, capital and liquidity, and to evaluate the Company's strategic plans.
The balance sheet structure is primarily short-term with most assets and
liabilities repricing or maturing in less than five years. Management monitors
the sensitivity of net interest income by utilizing a dynamic simulation model
complemented by a traditional gap analysis. This model measures net interest
income sensitivity and volatility to interest rate changes. It involves a degree
of estimation based on certain assumptions that management believes to be
reasonable. Factors considered include actual maturities, estimated cash flows,
repricing characteristics, deposit growth/ retention and, primarily, the
relative sensitivity of assets and liabilities to changes in market interest
rates. Utilizing this process, management can estimate and 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 adjustable rate assets or liabilities whose yields or cost
of funds 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. Management may choose to extend
the maturity of its funding sources and/or reduce the repricing mismatches of
its assets or liabilities by using interest rate swaps. Additionally, management
may use interest rate collars, interest rate floors, and interest rate cap
agreements to assist in insulating it from volatile interest rate changes.
Based upon the aforementioned factors regarding the simulation model,
projected net interest income for the next twelve months was modeled based on
both an immediate rise or fall in interest rates as well as gradual movements in
interest rates over the twelve month period. Based on the information and
assumptions in effect at December 31, 1999, management believes that a 100 basis
point gradual increase in interest rates over the next twelve months would
decrease net interest income by $14.7 million or 3.10% while a gradual decrease
in interest rates would increase net interest income by $20.1 million or 4.25%.
The JSB and Reliance transactions will add stable core deposits and
assets which compliment the Company's current risk profile. As previously noted,
core deposit costs are internally controlled and generally exhibit less
sensitivity to changes in interest rates than the adjustable rate assets or
liabilities whose yields or cost of funds are based on external indices and
change in concert with market interest rates. During 2000, management
anticipates continued growth in all segments of its loan portfolio. Based upon
pro forma simulation modeling including the effects of the JSB and Reliance
transactions, management believes that a 100 basis point gradual increase in
interest rates over the next twelve months would decrease pro forma net interest
income by $18.5 million or 2.9% while a gradual decrease in interest rates would
increase pro forma net interest income by $15.6 million or 2.4%.
Management utilizes the traditional gap analysis to complement its
income simulation modeling, primarily focusing on the longer term structure of
the balance sheet, since the gap analysis does not assess the relative
sensitivity of assets and liabilities to changes in interest rates. The gap
analysis is prepared based on the maturity and repricing characteristics of
interest earning assets and interest bearing 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.
<PAGE> 9
A negative gap (liability sensitive) will generally have the opposite
results on the net interest margin. However, the gap analysis is static in
nature; therefore, the maturity and repricing characteristics of interest
earning assets and interest bearing liabilities can change considerably with
changes in interest rates.
Management's strategy for the securities portfolios is to maintain a
short-weighted average life to minimize the exposure to future rises in interest
rates and to provide cash flows that may be reinvested at current market
interest rates. At December 31, 1999, the combined weighted average life of
securities portfolios was 4.5 years. Approximately 87% of these securities were
mortgage-backed securities ("MBS") representing a relatively stable source of
cash flows. Such MBS securities are either guaranteed by FHLMC, GNMA or FNMA, or
constitute collateralized mortgage-backed obligations ("CMO") backed by U.S.
government agency securities or CMO private issuances, which are principally AAA
rated and are conservative current pay sequentials or PAC structures.
During 1998 the Company, in order to maintain the interest rate risk
profile which existed prior to the merger with NYB, reclassified approximately
$913 million of investment securities from its held-to-maturity portfolio to its
available-for-sale portfolio. This transfer was made pursuant to Statement of
Financial Accounting Standard ("SFAS") No. 115 "Accounting for Certain
Investments in Debt and Equity Securities". The securities transferred were
primarily MBS's and CMO's having a higher degree of interest rate risk and
duration volatility. Additionally, approximately $415 million of these
securities were subsequently sold, resulting in $2.5 million of securities
losses in the quarter ended March 31, 1998.
At December 31, 1999, the Company had $375 million in interest rate
swap agreements which extended the maturity of certain funding sources and
reduced the repricing mismatches of certain interest earning assets and interest
bearing liabilities. These agreements created a more consistent and predictable
interest rate spread between certain securities and their funding sources. These
agreements require the Company to make periodic fixed rate payments while
receiving periodic variable rate payments indexed to the 3 month LIBOR rate and
mature in terms ranging from 2 to 10 years. The interest rate swaps are
accounted for as hedges and are not recorded on the balance sheet. Income or
expense related to these instruments is accrued monthly and recognized as
adjustments to interest income or interest expense for those balance sheet items
being hedged. At December 31, 1999, an unrealized gain of $4.9 million was
recorded relating to a $75 million interest rate swap hedging available-for-sale
securities.
The credit risk associated with these off-balance sheet instruments
is the risk of non-performance by the counterparty to the agreements. However,
management does not anticipate non-performance by the counterparty and
monitors/controls the risk through its asset/liability management procedures.
(See "Notes to Consolidated Financial Statements - Note 15 - Derivative
Financial Instruments").
<PAGE> 10
The following table reflects the repricing of the balance sheet, or "gap"
position at December 31, 1999.
<TABLE>
<CAPTION>
0-90 91-180 181-365 1-5
(DOLLARS IN THOUSANDS) DAYS DAYS DAYS YEARS
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Deposits ........................... $ 6,529 $ - $ - $ -
Money Market Investments ............................ 57,238 - - -
Securities(1) ....................................... 438,136 140,173 387,888 2,002,926
Loans, net of unearned income(2) (3) ................ 800,543 276,048 544,024 3,186,652
-------------------------------------------------------------------
Total Interest Earning Assets .................. $ 1,302,446 $ 416,221 $ 931,912 $ 5,189,578
-------------------------------------------------------------------
INTEREST BEARING LIABILITIES:
Savings, NOW and Money Market Deposits(4) ........... $ 273,857 $ 444,769 $ 889,537 $ 1,356,961
Time Deposits ....................................... 839,091 551,073 414,493 267,402
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase ............ 1,659,700 47,000 - 708,500
Other Borrowings .................................... 1,544,000 300,000 - -
Capital Securities .................................. - - - -
-------------------------------------------------------------------
Total Interest Bearing Liabilities ............. $ 4,316,648 $ 1,342,842 $ 1,304,030 $ 2,332,863
-------------------------------------------------------------------
Gap before Interest Rate Swaps ...................... $(3,014,202) $ (926,621) $ (372,118) $ 2,856,715
-------------------------------------------------------------------
Interest Rate Swaps ................................. $ 375,000 - $ (100,000) $ (200,000)
Cumulative Difference Between Interest Earning
Assets and Interest Bearing Liabilities after
Interest Rate Swaps ............................ $(2,639,202) $(3,565,823) $(4,037,941) $(1,381,226)
===================================================================
Cumulative Difference as a Percentage
of Total Assets ................................ (21.80)% (29.45)% (33.35)% (11.41)%
===================================================================
<CAPTION>
OVER 5
(DOLLARS IN THOUSANDS) YEARS TOTAL
-----------------------------
<S> <C> <C>
INTEREST EARNING ASSETS:
Interest Earning Deposits ........................... $ - $ 6,529
Money Market Investments ............................ - 57,238
Securities(1) ....................................... 1,986,496 4,955,619
Loans, net of unearned income(2) (3) ................ 1,800,865 6,608,132
-----------------------------
Total Interest Earning Assets .................. $ 3,787,361 $11,627,518
-----------------------------
INTEREST BEARING LIABILITIES:
Savings, NOW and Money Market Deposits(4) ........... $ - $ 2,965,124
Time Deposits ....................................... 403 2,072,462
Federal Funds Purchased and Securities
Sold Under Agreements to Repurchase ............ 250,000 2,665,200
Other Borrowings .................................... - 1,844,000
Capital Securities .................................. 199,314 199,314
-----------------------------
Total Interest Bearing Liabilities ............. $ 449,717 $ 9,746,100
-----------------------------
Gap before Interest Rate Swaps ...................... $ 3,337,644
-----------
Interest Rate Swaps ................................. $ (75,000)
Cumulative Difference Between Interest Earning
Assets and Interest Bearing Liabilities after
Interest Rate Swaps ............................ $ 1,881,418
===========
Cumulative Difference as a Percentage
of Total Assets ................................ 15.54%
===========
</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 $9.0 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 NOW deposit run-off in the first two years with remaining
balance withdrawn evenly through year five.
The Company's pro forma gap position, when factoring in the impact of the JSB
and Reliance transactions, was (12.88)% in 0-90 days, (20.19)% in 91-180 days,
(24.36)% in 181-365 days, (6.55)% in 1-5 years and 18.90% over 5 years at
December 31, 1999.
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, 1999, respectively:
Held-to-Maturity
<TABLE>
<CAPTION>
U.S.
STATE & GOVERNMENT
(DOLLARS IN THOUSANDS) MUNICIPAL AGENCIES' OTHER
MATURITY OBLIGATIONS YIELD OBLIGATIONS YIELD SECURITIES YIELD TOTAL YIELD
- - - - -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Within 1 Year ............... $ 8,504 6.85% $ - - $ - - $ 8,504 6.85%
After 1 But Within 5 Years... 36,052 7.08% 51 8.88% 9,703 6.57% 45,806 6.97%
After 5 But Within 10 Years.. 19,876 6.69% - - 9,269 6.17% 29,145 6.52%
After 10 Years .............. 11,741 10.38% - - - - 11,741 10.38%
----------------------------------------------------------------------------------------------------
Subtotal ............... 76,173 7.46% 51 8.88% 18,972 6.37% 95,196 7.25%
Mortgage-Backed Securities - - - - - - 445,413 6.65%
CMO's ....................... - - - - - - 689,094 6.28%
----------------------------------------------------------------------------------------------------
Total Securities ....... $ 76,173 7.46% $ 51 8.88% $ 18,972 6.37% $1,229,703 6.49%
====================================================================================================
</TABLE>
<PAGE> 11
Available-for-Sale(1)
<TABLE>
<CAPTION>
U.S.
STATE & GOVERNMENT
(DOLLARS IN THOUSANDS) MUNICIPAL AGENCIES' OTHER
MATURITY OBLIGATIONS YIELD OBLIGATIONS YIELD SECURITIES YIELD TOTAL YIELD
- - - - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Within 1 Year ................ $ - - $ - - $ - - $ - -
After 1 But Within 5 Years ... 20,046 6.14% - - - - 20,046 6.14%
After 5 But Within 10 Years .. - - 88,709 7.15% 5,772 7.87% 94,481 7.19%
Due After 10 Years ........... - - - - 193,089 8.35% 193,089 8.35%
------------------------------------------------------------------------------------------------
Subtotal ................ 20,046 6.14% 88,709 7.15% 198,861 8.34% 307,616 7.85%
Mortgage-Backed Securities ... - - - - - - 895,855 7.58%
CMO's ........................ - - - - - - 2,270,439 6.30%
Equity Securities ............ - - - - - - 251,999 7.46%
------------------------------------------------------------------------------------------------
Total Securities ........ $ 20,046 6.14% $ 88,709 7.15% $ 198,861 8.34% $3,725,909 6.81%
================================================================================================
</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,
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997
----------------------------------------
<S> <C> <C> <C>
U.S. Treasury Securities ............... $ 19,978 $ 31,345 $ 33,119
U.S. Government Agencies' Obligations .. 86,261 167,485 246,035
State & Municipal Obligations .......... 76,173 71,837 114,511
Mortgage-Backed Securities ............. 1,315,295 1,292,630 1,180,087
CMO Agency Issuances ................... 478,109 233,949 384,336
CMO Private Issuances .................. 2,398,255 2,318,551 1,711,570
Other Securities ....................... 201,288 228,345 72,783
Equity Securities ...................... 247,261 207,626 177,491
----------------------------------------
Total ............................. $4,822,620 $4,551,768 $3,919,932
========================================
</TABLE>
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, 1999:
<TABLE>
<CAPTION>
MATURITIES
-------------------------------------------------------
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 ............. $ 79,273 $ 912,417 $ 713,213 $1,704,903
Mortgage Loans-Commercial ............... 269,667 604,716 386,035 1,260,418
Commercial & Industrial ................. 445,137 226,709 23,538 695,384
Construction & Land Loans ............... 81,171 4,813 - 85,984
-------------------------------------------------------
Total ................................. $ 875,248 $1,748,655 $1,122,786 $3,746,689
=======================================================
RATE PROVISIONS:
Amounts with Fixed Interest Rates ....... $ 55,060 $1,056,459 $1,111,384 $2,222,903
Amounts with Adjustable Interest Rates .. 820,188 692,196 11,402 1,523,786
-------------------------------------------------------
Total ................................. $ 875,248 $1,748,655 $1,122,786 $3,746,689
=======================================================
</TABLE>
<PAGE> 12
The following table shows the classification of the average daily deposits and
average rates paid for each of the last three years ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997
AVERAGE AVERAGE AVERAGE
(IN THOUSANDS) BALANCE RATE BALANCE RATE BALANCE RATE
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Demand Deposits .............. $1,383,322 - $1,087,472 - $ 854,290 -
Savings Deposits ............. 2,053,868 1.83% 2,118,024 2.15% 2,100,664 2.28%
NOW & Money Market Deposits .. 871,444 1.74% 871,846 2.18% 811,639 2.10%
Time Deposits ................ 2,242,083 4.82% 2,406,901 5.12% 2,412,431 5.09%
----------------------------------------------------------------------
Total Deposits .......... $6,550,717 2.45% $6,484,243 2.90% $6,179,024 3.04%
======================================================================
</TABLE>
At December 31, 1999, the remaining maturities of certificate of deposits in
amounts of $100,000 and over were as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999
--------
<S> <C>
3 months and less ........ $291,853
3 to 6 months ............ 84,674
6 to 12 months ........... 45,399
Greater than one year .... 44,910
--------
$466,836
========
</TABLE>
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.
Sources of liquidity include dividends from subsidiaries, borrowings,
the sale of securities from the available-for-sale portfolio, and funds
available through the capital markets. Dividends from the Company's primary
subsidiary, North Fork, 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 had $28.3 million of
retained earnings available for dividends as of January 1, 2000.
The banking 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
and Federal Home Loan Bank ("FHLB") advances utilizing their unpledged
securities and mortgage related loan portfolios, the sale of securities from
their available-for-sale portfolios, the securitization of loans within the
portfolio, whole loan sales, and growth in their core deposit base.
The banking subsidiaries currently have the ability to borrow an
additional $2.0 billion on a secured bases, utilizing mortgage related loans and
securities as collateral. At December 31, 1999, the Company had $3.1 billion in
outstanding borrowings with the FHLB.
The Company and its banking subsidiary's 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 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. 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.
At December 31, 1999, the loan portfolio increased $899.1 million, or
15.7%, to $6.6 billion with growth reflected in all segments of the portfolio.
The growth experienced in the portfolio during 1999 was as follows: a 54.1%
increase in consumer loans, a 34.2% increase in commercial & industrial loans, a
14.2% increase in commercial mortgage loans, and a 12.4% increase in residential
loans. The absolute growth in the loan portfolio has been tempered by the level
of prepayments experienced during 1999. The level of
<PAGE> 13
prepayment activity is due in large measure to the interest rate environment and
aggressive pricing levels offered by competitors, principally thrift companies
and Wall Street conduits (See "Net Interest Income" section of "Management's
Discussion and Analysis"). During 2000, management anticipates continued growth
from all segments of the portfolio.
The growth experienced during recent years has resulted from both
originations and acquisitions. 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 collateral.
Multi-family mortgage loans generally are for $1-$5 million and are secured by
properties located in the New York metropolitan area, where demand for such
housing is strong. 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 New York metropolitan area. The commercial mortgage
portfolio contains loans secured by professional office buildings, retail
stores, shopping centers and industrial developments. Commercial loans consist
primarily of loans to small and medium size businesses. Consumer loans represent
credit to individuals for household, family, and other personal expenditures and
consist primarily of loans to finance new and used automobiles. Consumer loan
growth is attributable to auto 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-$30 thousand for periods ranging from 36-60 months. Land
loans are used to finance the acquisition of vacant land for future residential
and commercial development. Construction loans finance the construction of
industrial developments and single-family subdivisions.
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.
The Company's loan portfolio will increase by approximately $2.3
billion to $8.9 billion upon the completion of the JSB and Reliance
transactions. JSB's loan portfolio, totaling $1.3 billion at December 31, 1999,
is comprised principally of multi-family and residential mortgages. Reliance's
loan portfolio, totaling $1.0 billion at December 31, 1999, is comprised
principally of multi-family mortgages, residential mortgages, and consumer
loans.
The following table represents the components of the loan portfolio at December
31,
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1999 1998 1997 1996 1995
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mortgage Loans-Residential ... $2,137,739 32% $1,901,759 33% $2,144,029 37% $2,205,533 44% $1,967,873 48%
Mortgage Loans-Multi-family .. 1,705,446 26% 1,651,590 29% 1,534,623 26% 1,127,817 22% 788,736 19%
Mortgage Loans-Commercial .... 1,261,487 19% 1,104,228 19% 1,192,071 21% 1,010,631 20% 818,704 20%
Consumer Loans and Leases .... 742,087 11% 481,691 9% 394,436 7% 306,285 6% 208,902 5%
Commercial & Industrial ...... 697,763 11% 520,130 9% 444,480 8% 359,788 7% 259,876 6%
Construction and Land Loans .. 85,984 1% 72,026 1% 51,052 1% 61,740 1% 65,943 2%
----------------------------------------------------------------------------------------------------
Total ................... $6,630,506 100% $5,731,424 100% $5,760,691 100% $5,071,794 100% $4,110,034 100%
====================================================================================================
</TABLE>
ASSET QUALITY
During 1999, non-performing assets, which include loans past due 90 days and
still accruing interest, non-accrual loans and other real estate, declined $3.1
million, or 16.6%, to $15.4 million at year-end. The decline was achieved
principally through the sales of non-performing and marginally performing assets
for cash, principal repayments on loans, the workout of non-performing loans to
performing status, and charge-offs. At December 31, 1999, non-performing loans
were comprised of $5.8 million in consumer loans and leases, $4.0 million in
residential mortgages, $2.7 million in commercial loans, $1.6 million in
commercial mortgages, and $.7 million in
<PAGE> 14
multi-family mortgages. The declining trend in non-performing assets over the
past five years is a result of the effectiveness of the Company's loan
administration and workout procedures as well as a strong local economy.
The components of non-performing assets and restructured, accruing loans are
detailed below at December 31,
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1999 1998 1997 1996 1995
------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loans Ninety Days Past Due and Still Accruing ...... $ 5,842 $ 7,684 $ 6,414 $ 6,988 $ 6,130
Non-Accrual Loans .................................. 8,998 7,592 31,231 43,297 66,783
------------------------------------------------------------
Non-Performing Loans .......................... 14,840 15,276 37,645 50,285 72,913
Other Real Estate .................................. 575 3,217 5,943 5,095 9,287
------------------------------------------------------------
Non-Performing Assets ......................... $15,415 $18,493 $43,588 $55,380 $82,200
============================================================
Restructured, Accruing Loans ....................... $ - $ 584 $14,567 $19,552 $50,420
============================================================
Allowance for Loan Losses to Non-Performing Loans .. 462% 470% 198% 146% 107%
Non-Performing Assets to Total Assets .............. .13% .17% .43% .64% 1.08%
</TABLE>
Loans are classified as restructured loans when management has granted, for
economic or legal reasons related to the borrower's financial condition,
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 yields 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. The substantial decline in restructured accruing
loans over the past five years is a result of principal repayments, maturities,
and the satisfaction of the performance requirements on certain of these loans.
ALLOWANCE FOR LOAN LOSSES
The determination of the adequacy of the allowance for loan losses and the
periodic provisioning for estimated losses included in the consolidated
financial statements is the responsibility of management. The evaluation process
is undertaken on a quarterly basis but may increase in frequency should
conditions arise that would require management's prompt attention. Conditions
giving rise to such action are business combinations, opportunities to dispose
of non-performing and marginally performing loans by bulk sale or any
development which may indicate an adverse trend. In the five year period ended
December 31, 1999, the Company completed several mergers and acquisitions of
commercial banks and thrift companies. Generally, in these transactions, the
merged entity's loan underwriting standards were less restrictive than those of
the Company which had the result of increasing the level of loan portfolio risk.
The methodology employed for assessing the appropriateness of the
allowance consists of the following criteria:
- The establishment of reserve amounts for all specifically
identified criticized loans, including those arising from business
combinations, that have been designated as requiring attention by
management's internal loan review program, bank regulatory
examinations or the Company's external auditors.
- An average one-year loss factor is applied to smaller balance
homogenous types of loans not subject to specific review. These
loans include residential 1-4 family properties and consumer loans.
- An allocation to the remaining loans giving effect to historical
loss experience over several years and linked to cyclical trends.
Recognition is also given to the changed risk profile brought about
from the aforementioned business combinations, customer knowledge, the results
of the ongoing credit-quality monitoring processes and the cyclical nature of
economic and business conditions. An important consideration in applying these
methodologies is the concentration of real estate related loans located in the
New York metropolitan area.
The initial allocation or specific-allowance methodology commences
with loan officers and underwriters grading the quality of their loans on an
eight category risk classification scale. Loans identified from this process as
below investment grade are referred to the independent Loan Review Department
(LRD) for further analysis and identification of those factors that may
ultimately affect full recovery or collectibility of principal and/or interest.
These loans are subject to continuous review and monitoring while they remain in
<PAGE> 15
the criticized category. Additionally, LRD is responsible for performing
periodic reviews of the entire loan portfolio that are independent from the
identification process employed by loan officers and underwriters. Gradings that
fall into criticized categories are further evaluated and a range of reserve
amounts is established for each loan.
The second allocation or loss factor approach to common or homogenous
loans is made by applying the average one year loss factor to the outstanding
balances in each loan category.
The final allocation of the allowance is made by applying several
years of loss experience to categories of loans. It gives recognition to the
loss experience of acquired businesses, business cycle changes and the real
estate components of loans. Since many of the loans depend upon the sufficiency
of collateral, any adverse trend in the real estate markets could seriously
affect underlying values available to protect the Company from loss. This
condition existed in the early part of the 1990's when the Company experienced
sizable real estate loan losses.
Other evidence used to support the amount of the allowance and its
components are as follows:
- Regulatory examinations
- The amount and trend of criticized loans
- Actual losses
- Peer comparisons with other financial institutions
- Economic data associated with the real estate market in the
Company's market area
- Opportunities to dispose of marginally performing loans for cash
consideration
The following table presents the allocation of the allowance for loan losses and
the related percentage of loans in each category to total loans.
<TABLE>
<CAPTION>
% OF % OF % OF % OF % OF
LOANS LOANS LOANS LOANS LOANS
TO TO TO TO TO
1999 TOTAL 1998 TOTAL 1997 TOTAL 1996 TOTAL 1995 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-Residential ... $14,964 32% $14,278 33% $ 9,776 37% $11,195 44% $ 8,053 48%
Mortgage Loans-Multi-family .. 4,367 26% 5,985 29% 6,904 26% 5,543 22% 6,461 19%
Mortgage Loans-Commercial .... 20,100 19% 22,423 19% 23,928 21% 24,684 20% 22,506 20%
Consumer Loans and Leases .... 14,100 11% 9,634 9% 6,886 8% 5,028 7% 3,479 6%
Commercial & Industrial ...... 8,990 11% 11,408 9% 11,513 7% 14,790 6% 19,215 5%
Construction and Land Loans .. 2,150 1% 2,589 1% 1,829 1% 1,955 1% 3,418 2%
Unallocated .................. 3,924 - 5,442 - 13,557 - 10,085 - 14,767 -
-------------------------------------------------------------------------------------------------
Total ................... $68,595 100% $71,759 100% $74,393 100% $73,280 100% $77,899 100%
=================================================================================================
</TABLE>
Based upon the process employed and giving recognition to all attendant factors
associated with the loan portfolio, management considers the allowance for loan
losses at December 31, 1999 to be adequate.
<PAGE> 16
Transactions in the Allowance for Loan Losses are summarized as follows for the
years ended December 31,
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1999 1998 1997 1996 1995
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LOANS (NET OF UNEARNED INCOME & FEES):
Average Balance ............................................ $6,115,127 $5,729,743 $5,357,470 $4,531,541 $3,919,342
End of Year ................................................ 6,617,130 5,714,293 5,739,131 5,044,073 4,086,497
====================================================================
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES:
Balance at Beginning of Year ............................... $ 71,759 $ 74,393 $ 73,280 $ 77,899 $ 86,952
Loans Charged-Off:
Mortgage Loans-Commercial .................................. $ 1,104 $ 5,225 $ 3,932 $ 7,022 $ 7,668
Consumer Loans and Leases .................................. 9,736 6,439 3,014 1,126 778
Commercial & Industrial .................................... 2,382 2,567 1,888 2,623 3,215
Mortgage Loans-Residential ................................. 1,012 6,482 2,908 6,014 5,402
Mortgage Loans-Multi-family ................................ 100 287 191 548 4,456
Construction and Land Loans ................................ - 896 121 1,237 5,631
--------------------------------------------------------------------
Total Charge-Offs ....................................... $ 14,334 $ 21,896 $ 12,054 $ 18,570 $ 27,150
RECOVERIES OF LOANS CHARGED-OFF:
Mortgage Loans-Commercial .................................. $ 690 $ 153 $ 634 $ 513 $ 1,660
Consumer Loans and Leases .................................. 3,194 2,312 640 507 525
Commercial & Industrial .................................... 1,151 1,149 1,114 544 1,377
Mortgage Loans-Residential ................................. 105 51 71 97 237
Mortgage Loans-Multi-family ................................ 30 95 19 724 100
Construction and Land Loans ................................ - 57 95 284 94
--------------------------------------------------------------------
Total Recoveries ........................................ $ 5,170 $ 3,817 $ 2,573 $ 2,669 $ 3,993
NET LOANS CHARGED-OFF: ....................................... $ 9,164 $ 18,079 $ 9,481 $ 15,901 $ 23,157
Provision for Loan Losses .................................. 6,000 15,500 8,100 8,000 13,525
Merger and Acquisition Activity:
Net Merger Activity for the Quarter Ended December 31,(1) .. - (55) - 190 87
Additional Allowance Acquired in Purchase Acquisitions ..... - - 2,494 3,092 492
--------------------------------------------------------------------
Balance at End of Year ..................................... $ 68,595 $ 71,759 $ 74,393 $ 73,280 $ 77,899
====================================================================
Ratio of Net Charge-Offs to Average Loans .................. .15% .32% .18% .35% .59%
====================================================================
Ratio of Allowance for Loan Losses to
Non-performing Loans .................................... 462% 470% 198% 146% 107%
====================================================================
</TABLE>
(1) Represents the activity of the NYB, North Side, and Hamilton mergers for
the quarters ended December 31, 1997, 1995 and 1994, respectively.
During 1999, the provision for loan losses decreased by $9.5 million to $6.0
million as compared to $15.5 million in 1998. Reflected in 1998 was a special
provision of $11.5 million. This additional provision was due to the sale of $32
million in non-performing and marginally performing loans, at amounts below the
loans carrying values, acquired in the NYB merger. Due to the aforementioned
sale, the Company recognized a corresponding charge to the allowance for loan
losses. This decision was predicated on the fact that management could sell
these loans into a liquid market, reinvest the cash into other interest earning
assets, and mitigate potential carrying costs associated with their future
workout and resolution. Historically, NYB did not actively sell non-performing
and marginally performing loans as part of its workout and recovery process.
Subsequent to these sales, the Company restored its post-merger reserve coverage
ratios to approximate pre-merger levels.
NON-INTEREST INCOME
During 1999, non-interest income, exclusive of net securities gains, increased
$4.6 million, or 8.3%, to $59.4 million. This increase in non-interest income
resulted from a $3.3 million, or 12.5% increase in fees and service charges on
deposit accounts to $29.2 million and a $3.0 million, or 22.3% increase in
investment management, commissions and trust fees to $16.2 million. The increase
in fees and service charges on deposits was attributable to increased levels of
demand deposits, revisions to deposit fee structures, and management's deposit
integration strategy implemented on liabilities assumed in the NYB merger.
Contributing to the growth in
<PAGE> 17
investment management, commissions and trust fees are the operating results of
Amivest, which was acquired in a purchase transaction in June 1998. Other
contributing factors are the approximately 220 thousand new customers and market
areas provided in the NYB merger to which the Company's financial service
products have been provided. These improvements were partially offset by a $1.2
million, or 10.3% decrease in other operating income to $10.4 million.
During 1999, net securities gains increased to $13.6 million, when
compared with net securities gains of $9.4 million in 1998. Gross realized gains
in 1999 and 1998 resulted principally from the sale of equity positions and
capital securities of certain publicly traded companies. Management has been
successful in making such investments in publicly traded companies that have
materialized as a source of such gains. Upon consummation of the merger with
NYB, approximately $415 million of securities transferred from held-to-maturity
to available-for-sale resulted in $2.5 million of security losses in the first
quarter of 1998. (See "Asset/Liability Management" section of "Management's
Discussion and Analysis").
NON-INTEREST EXPENSE
During 1999, non-interest expense increased $7.2 million, or 4.2%, to $177.3
million. Non-interest expense during 1998 totaled $170.1 million, excluding the
merger related restructure charge and other special items totaling $52.5 million
and $7.8 million, respectively, incurred in connection with the NYB merger. The
increase in non-interest expense is attributable to a $6.8 million increase in
compensation and employee benefits and a $1.7 million increase in occupancy and
equipment, excluding the aforementioned special charges. The increase in
compensation and employee benefit costs was due primarily to the Company's
entrance into new markets, expanded use of incentive compensation plans to
achieve its objective of growing demand deposits and generating non-interest
income, annual merit increases, and increased costs associated with employee
benefits. Occupancy and equipment expense increased due in part to costs
associated with the entrance into new markets and the opening of de novo
branches in the New York City market.
In 1998, the Company recorded a $6 million intangible asset
write-down associated with a purchase transaction of a predecessor acquired
business. This asset was reviewed for possible impairment due to the Company's
acquisition of NYB and the consolidation of certain overlapping branch
locations. The remaining assets and liabilities associated with the acquired
business were branch facilities and customer deposit liabilities. The impact of
the branch facilities was reviewed and determined to have a de minimis effect on
the overall analysis. As of March 1998, the unamortized balance of the
intangible asset was $11.2 million and the remaining customer deposit balances
were $73.2 million. The Company utilized quoted market prices for branch
purchase and sale transactions at the time of the analysis to evaluate the
intangible asset's remaining value and, consequently, a $6 million charge was
taken for the amount in excess of the current fair market value.
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 and losses and other non-recurring income, was
34.3% in 1999, as compared with 35.0% for the comparable prior year. The core
efficiency ratio demonstrates management's ability to maintain a disciplined
approach to monitoring its operating structure and controlling related costs.
INCOME TAXES
For 1999, the effective tax rate was 35.0% compared to 30.9% for the year ended
1998. During 1998, the effective tax rate was positively effected by a
non-taxable distribution from a corporate reorganization. This reduction was
partially offset by the recognition of certain non-deductible merger related
restructuring costs associated with the NYB merger, the recapture of Home's
state and city tax bad debt reserves, and the intangible asset write-down due to
the realignment in the Company's business arising from the merger. The effective
tax rate during 1998 exclusive of the merger related restructure charge, special
items, and tax benefit was approximately 35%. (See "Notes to Consolidated
Financial Statements - Note 10 Income Taxes").
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.
<PAGE> 18
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 I
capital to total risk weighted assets of 4% and a Tier I 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, 1999, 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 be subject to any written order, agreement or directive. There are no
conditions or events since such notification that management believes have
changed this classification.
The Company enhanced its regulatory capital ratios with two issuances
of approximately $100 million in capital securities. At December 31, 1999, the
carrying value of these capital securities qualified as Tier I capital (See
"Notes to Consolidated Financial Statements - Note 9 - Capital Securities").
The following table sets forth the Company's regulatory capital at December 31,
1999, under the rules applicable 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 ............... $ 811,977 11.48%
Regulatory Requirement ....... 282,868 4.00%
------------------------
Excess ....................... $ 529,109 7.48%
========================
Total Risk Adjusted Capital .. $ 880,572 12.45%
Regulatory Requirement ....... 565,735 8.00%
------------------------
Excess ....................... $ 314,837 4.45%
========================
Risk Weighted Assets ......... $7,071,689
==========
</TABLE>
The Company's Leverage Capital Ratio at December 31, 1999 was 6.84%. On a
proforma basis, inclusive of JSB and Reliance, the Company's Tier 1, Total Risk
Adjusted, and Leverage Capital Ratios were 12.60%, 13.83%, and 7.58%,
respectively, at December 31, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
DISCLOSURE ABOUT SEGMENTS FOR AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS 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 has evaluated the disclosure
requirements and determined that disclosure is not required as its operating
segments do not meet the quantitative thresholds prescribed in SFAS 131 for all
reporting periods.
<PAGE> 19
EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POST-RETIREMENT BENEFITS
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Post-retirement Benefits" ("SFAS 132"). SFAS 132 revises
employers' disclosures about pensions and other post-retirement benefit plans;
it does not change the measurement or recognition under these plans. SFAS 132
standardizes the disclosure requirements for pensions and other post-retirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures that are no longer
useful. SFAS 132 is effective for fiscal years beginning after December 15, 1997
(See Footnote 11, "Retirement and Other Employee Benefit Plans", included herein
for the required disclosure).
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of
the exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a foreign
currency denominated forecasted transaction. The accounting for changes in the
fair value of a derivative depends on the intended use of the derivative and the
resulting designation. Under SFAS 133, an entity that elects to apply hedge
accounting is required to establish, at the inception of the hedge, the method
it will use for assessing the effectiveness of the hedging derivative and the
measurement approach for determining the ineffective aspect of the hedge. Those
methods must be consistent with the entity's approach to managing risk.
In June 1999, the FASB issued Statement of Financial Accounting
Standards No. 137 "Accounting for Derivative Instruments and Hedging
Activities-Deferral of the Effective Date of SFAS 133", delaying its effective
date to all fiscal quarters of all fiscal years beginning after June 15, 2000.
Management is currently evaluating the effect SFAS 133 will have on its
financial statements.
At December 31, 1999, the Company was party to three interest rate
swap contracts with an aggregate notional value of $375 million.
COMPARISON BETWEEN 1998 AND 1997
OVERVIEW
On March 27, 1998, NYB was merged with and into the Company in a transaction
accounted for in accordance with the pooling-of-interests method of accounting.
At the date of merger, NYB had $3.4 billion in total assets, $2.0 billion in net
loans, $1.7 billion in deposit liabilities, $140.3 million in capital and
operated through 35 branches throughout Kings, Queens, Richmond, Nassau and
Suffolk counties of New York. The transaction provided a much sought after
presence in the Brooklyn market area with nine branch locations. Pursuant to the
merger agreement, the Company issued 39.9 million shares, or 1.19 shares of
common stock, for each outstanding share of NYB. A pre-tax charge for merger and
related restructuring costs of $52.5 million was recorded (See "Notes to
Consolidated Financial Statements - Note 2 - Business Combinations").
In June 1998, the Company completed its first non-bank acquisition
with the purchase of Amivest, a privately held investment management and
broker/dealer firm located in New York City. At the date of acquisition, Amivest
had approximately $700 million in assets under management. The purchase price
and operating results of this acquisition were not significant to the
consolidated financial statements of the Company. The Amivest acquisition
increased assets under management to approximately $1.4 billion at December 31,
1998.
<PAGE> 20
EARNINGS SUMMARY
For the year ended December 31, 1998, the Company's net income was $206.6
million, or diluted earnings per share of $1.46, when adjusted for the merger
related restructure charge and special items, totaling $38.6 million after
taxes, incurred in connection with the March 1998 merger with NYB. (See "Notes
to Consolidated Financial Statements - Note 2 - Business Combinations"). In
1997, the Company earned $170.5 million, or diluted earnings per share of $1.22.
Return on average total assets and average stockholders' equity, exclusive of
these items, was 2.04% and 25.22%, respectively. Net income, return on average
assets and return on average equity, including these charges, was $168 million
or diluted earnings per share of $1.18, 1.66% and 20.50%, respectively.
On March 24, 1998, the Board of Directors approved a 3-for-2 common
stock split. The additional shares were issued on May 15, 1998, to shareholders
of record on April 24, 1998. All per share, weighted average shares outstanding,
and option data presented herein have been retroactively adjusted to reflect the
effects of the split.
NET INTEREST INCOME
During 1998, net interest income increased $27.0 million or 6.8% to $424.6
million when compared to $397.6 million in 1997. This growth was achieved
through an increase in the level and composition of interest earning assets and
a modest improvement in the net interest margin. The increase in average
interest earning assets was primarily funded through the growth in demand
deposit balances, internally generated capital (primarily retained earnings),
and the December 1997 issuance of $100 million in capital securities. The growth
attributable to these factors was partially offset by the decline in yield on
average interest earning assets, principally investment securities. As a result
of the aforementioned factors, the net interest margin improved 6 basis points
to 4.48% during 1998 when compared to 4.42% in 1997.
Interest income increased $28.7 million or 4.0% to $753.1 million in
1998. This increase resulted from a $447.6 million or 4.9% increase in average
interest earning assets to $9.6 billion in 1998, partially offset by a 10 basis
point decline in the yield on average interest earning assets to 7.89% in 1998.
Average loan growth of $372.3 million, or 6.9%, was the primary factor
contributing to the increase in average interest earning assets as well as
interest income. Average loans comprised 60% of average interest earning assets
and represent 88.4% of average total deposits. The yield on average loans
remained constant at 8.64%.
During 1998, average securities increased $52.5 million to $3.8
billion. The yields on average securities declined to 6.80% in 1998 when
compared to 7.08% in 1997, adversely impacting interest income. This 28 basis
point decline was due principally to significant prepayment activity totaling
$1.7 billion, or approximately 43% of securities at December 31, 1997, and the
corresponding reinvestment into lower yielding securities, which reflected
market interest rates at the time.
Interest expense increased $1.7 million to $328.5 million in 1998,
reflecting an average cost of funds of 4.20%, as compared with $326.8 million or
a 4.21% average cost of funds in 1997. Average total savings and time deposits,
which continued to represent a stable funding source, were $5.4 billion,
reflecting an average cost of funds of 3.48% in 1998, as compared to $5.3
billion, with an average cost of funds of 3.53% during 1997. During 1998,
average interest bearing deposit growth of $72.0 million was concentrated in the
savings category, while the average cost of funds for these deposits decreased 7
basis points to 2.16%. Both interest bearing customer deposit liability levels
and the corresponding cost of funds trends were principally a result of
management implementing its pricing and integration strategy on customer deposit
liabilities assumed in the NYB merger.
Average securities sold under agreements to repurchase increased
$291.7 million to $2.2 billion replacing other borrowings, principally Federal
Home Loan Bank ("FHLB") fixed and variable rate term borrowings. The cost of
funds on total borrowings was 5.81% and 5.72% during 1998 and 1997,
respectively.
Average demand deposits increased $233.2 million, or 27.3%, to $1.1
billion during 1998, as compared to $854.3 million in 1997. The growth in the
level of demand deposits has resulted from management's emphasis on converting
acquired savings bank locations into full-service commercial banking locations,
and an emphasis on developing deposit relationships with its borrowers. At
December 31, 1998, demand deposits represented approximately 20% of total
deposits, as compared to 15% at December 31, 1997.
During 1998, the use of interest rate swaps decreased interest
expense by approximately $.8 million, which was immaterial to the overall cost
of funds and net interest margin. The average cost of funds in 1997 was
positively impacted by NYB's use of interest rate swaps and other off-balance
sheet instruments, decreasing interest expense by $6.3 million. The cost of
funds, excluding these instruments, would have increased 9 basis points to 4.30%
while the net interest margin would have decreased by 7 basis points to 4.35%
during 1997. (See "Notes to Consolidated Financial Statements - Note 15 -
Derivative Financial Instruments").
<PAGE> 21
PROVISION FOR LOAN LOSSES
During 1998, the provision for loan losses increased to $15.5 million as
compared to $ 8.1 million in 1997. Reflected in 1998 was a special provision of
$11.5 million. This additional provision was due to the sale of $32 million in
non-performing and marginally performing loans, at amounts below the loans
carrying values, acquired in the NYB merger. Due to the aforementioned sale, the
Company recognized a corresponding charge to the allowance for loan losses. This
decision was predicated on the fact that management could sell these loans into
a liquid market, reinvest the cash into other interest earning assets, and
mitigate potential carrying costs associated with their future workout and
resolution. Historically, NYB did not actively sell non-performing and
marginally performing loans as part of its workout and recovery process.
Subsequent to these sales, the Company restored its post-merger reserve coverage
ratios to approximate pre-merger levels.
NON-INTEREST INCOME
Non-interest income, exclusive of net securities gains and interest on tax
settlement received in 1997, increased 18.3% to $54.9 million in 1998, compared
with $46.4 million in 1997. This increase in non-interest income resulted from a
$2.3 million, or 9.6% increase in fees and service charges on deposit accounts
to $26.2 million, a $3.1 million, or 31.1% increase in investment management,
commissions and trust fees to $13.2 million and a $3.3 million, or 40.3%
increase in other operating income to $11.4 million. These increases were
attributable to management's success in making its multiple commercial banking
and financial service products available to approximately 220 thousand new NYB
customers and new market areas. Also, contributing to the growth in investment
management, commissions and trust fees are the operating results of Amivest,
which was acquired in a purchase transaction in June 1998.
During 1998, net securities gains were $9.4 million, compared with
net securities gains of $8.4 million in 1997. Gross realized gains in 1998 and
1997 resulted principally from the sale of equity positions and capital
securities of certain publicly traded companies. Management has been successful
in making such investments in publicly traded companies that have materialized
as a source of such gains. Upon consummation of the merger with NYB,
approximately $415 million of securities were transferred from held-to-maturity
to available-for-sale, resulting in a $2.5 million securities loss in the first
quarter of 1998. This transfer and subsequent sale was done pursuant to SFAS No.
115 in order to maintain the interest rate risk profile of the Company which
existed prior to the merger (See "Asset/Liability Management" section of
"Management's Discussion and Analysis").
NON-INTEREST EXPENSE
During 1998, non-interest expense, exclusive of the merger related restructure
charge and other special items totaling $52.5 million and $7.8 million,
respectively, aggregated $170.1 million, a decrease of $3.6 million or 2.1%
compared to $173.7 million in 1997. The reduction in non-interest expense is
attributable to a $3.0 million decrease in compensation and employee benefits, a
$2.0 million decrease in occupancy and equipment, net, and a $7.4 million
decrease in other operating expenses. The reduction was partially offset by an
increase of $7.6 million in capital securities costs due to the issuance of an
additional $100 million in capital securities in December 1997. Additionally,
amortization of intangible assets increased $1.2 million due to the purchase
acquisitions of Superior and Amivest in December 1997 and June 1998,
respectively.
The 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/(losses) and other non-recurring items, improved to 35.03% in
1998, as compared with 38.22% for 1997. The improvement in the core efficiency
ratio once again demonstrated management's ability to employ its disciplined
merger and acquisition strategy by successfully reducing operating costs and
enhancing its revenue base post-merger.
In connection with the NYB merger, the Company recorded a pre-tax
charge for merger related restructuring costs of $52.5 million. This charge
included $11.6 million in direct merger expenses, primarily investment banking,
legal fees, other professional fees, and expenses associated with shareholder
and customer notifications. Severance and other employee related costs totaled
$16.4 million consisting of employee severance, compensation arrangements,
transitional staffing and related employee benefits expenses. Facility and
systems costs totaled $16.8 million consisting primarily of lease termination
charges and equipment write-offs resulting from the
<PAGE> 22
consolidation of overlapping branch locations and duplicate headquarters and
operational facilities. Also reflected are the costs associated with the
cancellation of certain data and items processing contracts and the conversion
of NYB's computer systems. Other merger related costs totaled $7.6 million and
arose primarily from the application of the Company's accounting practices to
the accounts of the merged business and to a lesser extent other expenses
associated with the integration of operations. Additionally, the Company
recorded a $5.0 million tax charge, net of federal benefit, relating to the
recapture of Home's tax bad debt reserve for state and city tax purposes. (See
"Notes to Consolidated Financial Statements - Note 2 - Business Combinations").
INCOME TAXES
For 1998, the effective tax rate was 30.9% compared to 38.0% for the year ended
1997. The decrease in the effective tax rate was primarily due to a non-taxable
distribution from a corporate reorganization. This reduction was partially
offset by the recognition of certain non-deductible merger related restructuring
costs associated with the NYB merger, the recapture of Home's state and city tax
bad debt reserves, and the intangible asset write-down due to the realignment in
the Company's business arising from the merger. The effective tax rate exclusive
of the merger related restructure charge, special items, and tax benefit was
approximately 35%. (See "Notes to Consolidated Financial Statements - Note 10 -
Income Taxes").
SELECTED STATISTICAL DATA
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(UNAUDITED) 1999
---------------------------------------------------
1ST 2ND 3RD 4TH
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) QTR QTR QTR QTR
---------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income ............................. $ 193,856 $ 202,367 $ 208,221 $ 213,301
Interest Expense ............................ 83,765 88,969 94,857 100,848
---------------------------------------------------
Net Interest Income .................... 110,091 113,398 113,364 112,453
Provision for Loan Losses ................... 1,250 1,250 1,250 2,250
---------------------------------------------------
Net Interest Income after Provision for
Loan Losses ...................... 108,841 112,148 112,114 110,203
Non-Interest Income ......................... 17,013 21,683 15,518 18,803
Non-Interest Expense ........................ 43,434 44,055 44,354 45,451
Merger Related Restructure Charge ........... - - - -
---------------------------------------------------
Income /(Loss) Before Income Taxes ..... 82,420 89,776 83,278 83,555
Provision/(Benefit) for Income Taxes ........ 28,852 31,416 29,148 29,244
---------------------------------------------------
Net Income ............................. $ 53,568 $ 58,360 $ 54,130 $ 54,311
===================================================
PER SHARE:
Earnings Per Share-Basic ............... $ .38 $ .42 $ .40 $ .42
Earnings Per Share-Diluted ............. $ .38 $ .42 $ .40 $ .42
Common Stock Price Range:
High.............................. $ 23.88 $ 23.63 $ 21.81 $ 21.63
Low............................... $ 21.00 $ 20.13 $ 17.69 $ 17.13
<CAPTION>
(UNAUDITED) 1998
----------------------------------------------------
1ST 2ND 3RD 4TH
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) QTR QTR QTR QTR
----------------------------------------------------
<S> <C> <C> <C> <C>
Interest Income ............................. $ 190,506 $ 182,368 $ 188,110 $ 192,116
Interest Expense ............................ 86,299 77,854 81,735 82,568
----------------------------------------------------
Net Interest Income .................... 104,207 104,514 106,375 109,548
Provision for Loan Losses ................... 12,500 1,000 1,000 1,000
----------------------------------------------------
Net Interest Income after Provision for
Loan Losses ...................... 91,707 103,514 105,375 108,548
Non-Interest Income ......................... 11,251 14,863 17,792 20,412
Non-Interest Expense ........................ 54,380 40,196 42,141 41,212
Merger Related Restructure Charge ........... 52,452 - - -
----------------------------------------------------
Income /(Loss) Before Income Taxes ..... (3,874) 78,181 81,026 87,748
Provision/(Benefit) for Income Taxes ........ (11,249) 27,285 28,359 30,711
----------------------------------------------------
Net Income ............................. $ 7,375 $ 50,896 $ 52,667 $ 57,037
====================================================
PER SHARE:
Earnings Per Share-Basic................ $ .05 $ .36 $ .37 $ .40
Earnings Per Share-Diluted.............. $ .05 $ .36 $ .37 $ .40
Common Stock Price Range:
High ............................. $ 26.33 $ 27.33 $ 27.19 $ 23.94
Low .............................. $ 20.00 $ 23.79 $ 19.00 $ 16.31
</TABLE>
<PAGE> 23
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
----------------------------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
INTEREST INCOME:
Loans ................................................ $501,627 $494,125 $461,984
Mortgage-Backed Securities ........................... 267,298 211,808 219,179
Other Securities ..................................... 30,638 24,090 13,651
U.S. Treasury & Government Agency Securities ......... 10,063 16,766 23,015
State & Municipal Obligations ........................ 3,447 3,849 5,365
Money Market Investments ............................. 4,673 2,462 1,230
----------------------------------
Total Interest Income ........................... 817,746 753,100 724,424
----------------------------------
INTEREST EXPENSE:
Savings, NOW & Money Market Deposits ................. 52,704 64,557 64,993
Other Time Deposits .................................. 78,502 91,754 98,821
Certificates of Deposit, $100,000 & Over ............. 29,488 31,458 23,926
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase .......................... 160,963 129,183 112,881
Other Borrowings ..................................... 46,783 11,504 26,182
----------------------------------
Total Interest Expense .......................... 368,440 328,456 326,803
----------------------------------
Net Interest Income ............................. 449,306 424,644 397,621
Provision for Loan Losses ............................ 6,000 15,500 8,100
----------------------------------
Net Interest Income after Provision for Loan Losses .. 443,306 409,144 389,521
----------------------------------
NON-INTEREST INCOME:
Fees & Service Charges on Deposit Accounts ........... 29,235 25,981 23,921
Investment Management, Commissions & Trust Fees ...... 16,175 13,225 10,085
Mortgage Banking Operations .......................... 3,603 4,054 4,269
Other Operating Income ............................... 10,426 11,625 8,125
Interest on Tax Settlement ........................... - - 4,515
Net Securities Gains ................................. 13,578 9,433 8,407
----------------------------------
Total Non-Interest Income ....................... 73,017 64,318 59,322
----------------------------------
NON-INTEREST EXPENSE:
Compensation & Employee Benefits ..................... 87,031 81,071 83,197
Occupancy & Equipment, net ........................... 28,505 27,095 28,865
Capital Securities Costs ............................. 16,843 16,843 9,235
Amortization & Write-down of Intangible Assets ....... 8,408 14,479 7,292
Other Operating Expenses ............................. 36,507 38,441 45,120
Merger Related Restructure Charge .................... - 52,452 -
----------------------------------
Total Non-Interest Expenses ..................... 177,294 230,381 173,709
----------------------------------
Income Before Income Taxes ........................... 339,029 243,081 275,134
Provision for Income Taxes ........................... 118,660 75,106 104,613
----------------------------------
Net Income ...................................... $220,369 $167,975 $170,521
==================================
EARNINGS PER SHARE-BASIC ............................. $ 1.63 $ 1.19 $ 1.24
EARNINGS PER SHARE-DILUTED ........................... $ 1.62 $ 1.18 $ 1.22
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 24
<TABLE>
<CAPTION>
AT DECEMBER 31, 1999 1998
------------------------------
<S> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
ASSETS:
Cash & Due from Banks ............................... $ 299,946 $ 151,576
Money Market Investments ............................ 63,767 28,929
Securities:
Available-for-Sale ................................ 3,592,917 2,980,223
Held-to-Maturity (Fair value $1,179,180
in 1999; $1,574,196 in 1998) .................... 1,229,703 1,571,545
------------------------------
Total Securities .............................. 4,822,620 4,551,768
------------------------------
Loans ............................................... 6,630,506 5,731,424
Less: Unearned Income ............................. 13,376 17,131
Allowance for Loan Losses ................. 68,595 71,759
------------------------------
Net Loans ................................. 6,548,535 5,642,534
------------------------------
Intangible Assets ................................... 79,151 84,676
Premises & Equipment ................................ 74,740 72,023
Accrued Income Receivable ........................... 70,578 66,951
Other Assets ........................................ 148,779 81,099
------------------------------
Total Assets .................................. $ 12,108,116 $ 10,679,556
==============================
Liabilities and Stockholders' Equity:
Demand Deposits ..................................... $ 1,507,162 $ 1,263,105
Savings Deposits .................................... 2,034,085 2,052,650
NOW & Money Market Deposits ......................... 931,040 897,372
Other Time Deposits ................................. 1,605,627 1,672,478
Certificates of Deposit, $100,000 & Over ............ 466,836 542,017
------------------------------
Total Deposits ................................ 6,544,750 6,427,622
------------------------------
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase .......................... 2,665,200 2,955,096
Other Borrowings .................................... 1,844,000 35,000
Accrued Expenses & Other Liabilities ................ 236,142 231,299
------------------------------
Total Liabilities ............................. $ 11,290,092 $ 9,649,017
------------------------------
Capital Securities .................................. $ 199,314 $ 199,289
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 shares
145,126,522 in 1999; 144,924,714 in 1998 ........... 362,816 362,312
Additional Paid in Capital .......................... 33,381 32,044
Retained Earnings ................................... 677,853 541,967
Accumulated Other Comprehensive Income-Unrealized
(Losses)/Gains on Securities Available-for-Sale,
net of taxes ...................................... (75,805) 9,337
Deferred Compensation ............................... (28,007) (24,365)
Treasury Stock at cost; 16,684,747 shares
in 1999; 3,852,732 shares in 1998 ................. (351,528) (90,045)
------------------------------
Total Stockholders' Equity .................... 618,710 831,250
------------------------------
Total Liabilities and Stockholders' Equity .... $ 12,108,116 $ 10,679,556
==============================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 25
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
---------------------------------------------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ....................................................... $ 220,369 $ 167,975 $ 170,521
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
Provision for Loan Losses ........................................ 6,000 15,500 8,100
Depreciation and Amortization .................................... 12,245 10,846 10,485
Amortization and Write-down of Intangible Assets ................. 8,408 14,479 7,292
Amortization of Securities Premiums .............................. 9,922 12,809 9,052
Accretion of Discounts and Net Deferred Loan Fees ................ (9,126) (10,490) (6,440)
Proceeds from Sales of Securities Held-for-Trading ............... - - 10,125
Purchases of Securities Held-for-Trading ......................... - - (9,670)
Net Securities Gains ............................................. (13,578) (9,433) (8,407)
Other, Net ....................................................... (72,375) 47,829 17,376
---------------------------------------------
Net Cash Provided by Operating Activities ............. 161,865 249,515 208,434
---------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Securities Held-to-Maturity ......................... (27,533) (1,181,100) (107,722)
Maturities, Redemptions, Calls and Principal Repayments on
Securities Held-to-Maturity ........................... 367,040 424,656 253,904
Purchases of Securities Available-for-Sale ....................... (1,833,555) (2,166,825) (1,497,862)
Proceeds from Sales of Securities Available-for-Sale ............. 116,923 1,021,477 271,297
Maturities and Principal Repayments on
Securities Available-for-Sale .................................... 1,044,056 1,279,525 413,086
Loans Originated, Net of Principal Repayments .................... (994,882) (138,940) (653,769)
Proceeds from the Sale of Loans .................................. 89,054 195,534 88,415
Purchases of Loans ............................................... - (21,344) (22,342)
Transfers to Other Real Estate, Net of Sales ..................... 2,635 2,314 (1,402)
Purchases of Premises and Equipment, Net ......................... (11,853) (3,444) (6,511)
Purchase Acquisitions, Net of Cash Acquired ...................... - 805 56,147
---------------------------------------------
Net Cash Used in Investing Activities ................. (1,248,115) (587,342) (1,206,759)
---------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase/(Decrease) in Customer Deposit Liabilities .......... 117,128 44,352 (21,177)
Net Increase in Borrowings ....................................... 1,554,104 379,854 887,061
Net Decrease in Long-Term Debt ................................... (35,000) - -
Proceeds from the Issuance of Capital Securities ................. - - 99,614
Purchase of Treasury Stock ....................................... (271,318) (56,462) (27,733)
Common Stock Sold for Cash ....................................... 4,777 26,949 6,814
Cash Dividends Paid .............................................. (100,233) (67,032) (46,607)
---------------------------------------------
Net Cash Provided by Financing Activities ............. 1,269,458 327,661 897,972
---------------------------------------------
Net Increase/(Decrease) in Cash and Cash Equivalents .. 183,208 (10,166) (100,353)
NYB Activity for the Three Months Ended December 31, 1997 ........ - (384) -
Cash and Cash Equivalents at Beginning of Year ................... 180,505 191,055 291,408
---------------------------------------------
Cash and Cash Equivalents at End of Year ......................... $ 363,713 $ 180,505 $ 191,055
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
-------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash Paid During the Period for:
Interest Expense ................................................ 356,103 332,406 331,577
=====================================
Income Taxes .................................................... 159,591 19,507 55,209
=====================================
Securities Transferred from Held-to-Maturity to
Available-for-Sale due to the Merger with NYB ................... - 913,598 -
=====================================
Purchases of Various Securities at Year End which Settled in the
Subsequent Period ............................................... 24,737 7,912 60,866
=====================================
Non-Cash Activity Related to Acquisitions Not Reflected Above
for the Years ended December 31, 1998 and 1997 are as follows: .. (1) (2)
Fair Value of Assets Acquired ........................................ $ 2,377 $ 177,085
Intangible Assets .................................................... 8,434 21,515
Cash Paid ............................................................ - (3,009)
Common Stock Issued .................................................. (8,730) (34,420)
------------------------
Liabilities Assumed and Common Stock Issued .......................... $ 2,081 $ 161,171
========================
</TABLE>
(1) In June 1998, the Company acquired Amivest Corporation, a privately held
investment management and broker/dealer firm.
(2) In December 1997, the Company acquired all of the outstanding common stock
of Superior. Each share of Superior'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 Superior's outstanding warrants.
See accompanying notes to consolidated financial statements.
<PAGE> 27
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
ADDITIONAL UNREALIZED
COMMON PAID IN RETAINED SECURITIES DEFERRED TREASURY
THREE YEARS ENDED DECEMBER 31, 1999 STOCK CAPITAL EARNINGS GAINS/(LOSSES) COMPENSATION STOCK
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance, January 1, 1997 .......................... $ 125,371 $ 202,587 $ 352,581 $ (3,195) $ (5,193) $ (62,717)
Net Income ........................................ - - 170,521 - - -
Cash Dividends ($.38 per share) ................... - - (38,226) - - -
Cash Dividends-Acquired Company ................... - - (11,391) - - -
Issuance of Stock for the 2-for-1 Stock Split ..... 126,313 (126,313) - - - -
Issuance of Stock-Superior Acquisition
(1,924,352 shares) ............................ 3,207 31,213 - - - -
Issuance of Stock (165,524 shares) ................ 276 2,311 - - - -
Purchases of Treasury Stock (4,174,344 shares) .... - - - - - (27,733)
Restricted Stock Activity, net .................... 423 11,536 - - (14,168) 3,805
Stock Based Compensation Activity, net ............ 1,200 6,519 (3,655) - - 5,512
Amortization of Unrealized Loss on Securities
Transferred from Available-for-Sale to
Held-to-Maturity .............................. - - (214) (331) - -
Adjustment to Unrealized (Losses) on Securities
Available-for-Sale, net of taxes .............. - - - 20,650 - -
--------------------------------------------------------------------------
Balance, December 31, 1997 ........................ $ 256,790 $ 127,853 $ 469,616 $ 17,124 $ (19,361) $ (81,133)
Net Income ........................................ - - 167,975 - - -
Cash Dividends ($.65 per share) ................... - - (92,713) - - -
Cash Dividends-Acquired Company ................... - - (3,219) - - -
Issuance of Stock for the 3-for-2 Stock Split ..... 120,288 (120,288) - - - -
Issuance of Stock-Amivest Acquisition ............. 905 7,825 - - - -
Issuance of Stock (1,216,087 shares) .............. 331 16,126 - - - 12,214
NYB Common Stock Retirement
(12,740,406 shares) ........................... (21,234) (35,398) - - - 56,632
Purchases of Treasury Stock (2,603,825 shares) .... - - - - - (56,462)
Restricted Stock Activity, net .................... - (385) - - (5,004) (443)
Stock Based Compensation Activity, net ............ 5,232 36,311 (11,523) - - (20,853)
NYB Net Income for the Three Months
Ended December 31, 1997 ....................... - - 11,992 - - -
Amortization of Unrealized Loss on Securities
Transferred from Available-for-Sale to
Held-to-Maturity .............................. - - (161) (170) - -
Adjustment to Unrealized Gains on Securities
Available-for-Sale, net of taxes .............. - - - (7,617) - -
--------------------------------------------------------------------------
Balance, December 31, 1998 ........................ $ 362,312 $ 32,044 $ 541,967 $ 9,337 $ (24,365) $ (90,045)
Net Income ........................................ - - 220,369 - - -
Cash Dividends ($.63 per share) ................... - - (84,312) - - -
Issuance of Stock (180,508 shares) ................ 260 1,974 - - - 1,659
Purchases of Treasury Stock (13,296,123 shares) ... - - - - - (271,318)
Restricted Stock Activity, net .................... - (1,052) - - (3,642) (480)
Stock Based Compensation Activity, net ............ 244 415 - - - 8,656
Amortization of Unrealized Loss on Securities
Transferred from Available-for-Sale to
Held-to-Maturity .............................. - - (171) 171 - -
Adjustment to Unrealized Gains on Securities
Available-for-Sale, net of taxes .............. - - - (85,313) - -
--------------------------------------------------------------------------
Balance, December 31, 1999 ........................ $ 362,816 $ 33,381 $ 677,853 $ (75,805) $ (28,007) $(351,528)
==========================================================================
<CAPTION>
THREE YEARS ENDED DECEMBER 31, 1999 TOTAL
---------
<S> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance, January 1, 1997 .......................... $ 609,434
Net Income ........................................ 170,521
Cash Dividends ($.38 per share) ................... (38,226)
Cash Dividends-Acquired Company ................... (11,391)
Issuance of Stock for the 2-for-1 Stock Split ..... -
Issuance of Stock-Superior Acquisition
(1,924,352 shares) ............................ 34,420
Issuance of Stock (165,524 shares) ................ 2,587
Purchases of Treasury Stock (4,174,344 shares) .... (27,733)
Restricted Stock Activity, net .................... 1,596
Stock Based Compensation Activity, net ............ 9,576
Amortization of Unrealized Loss on Securities
Transferred from Available-for-Sale to
Held-to-Maturity .............................. (545)
Adjustment to Unrealized (Losses) on Securities
Available-for-Sale, net of taxes .............. 20,650
---------
Balance, December 31, 1997 ........................ $ 770,889
Net Income ........................................ 167,975
Cash Dividends ($.65 per share) ................... (92,713)
Cash Dividends-Acquired Company ................... (3,219)
Issuance of Stock for the 3-for-2 Stock Split ..... -
Issuance of Stock-Amivest Acquisition ............. 8,730
Issuance of Stock (1,216,087 shares) .............. 28,671
NYB Common Stock Retirement
(12,740,406 shares) ........................... -
Purchases of Treasury Stock (2,603,825 shares) .... (56,462)
Restricted Stock Activity, net .................... (5,832)
Stock Based Compensation Activity, net ............ 9,167
NYB Net Income for the Three Months
Ended December 31, 1997 ....................... 11,992
Amortization of Unrealized Loss on Securities
Transferred from Available-for-Sale to
Held-to-Maturity .............................. (331)
Adjustment to Unrealized Gains on Securities
Available-for-Sale, net of taxes .............. (7,617)
---------
Balance, December 31, 1998 ........................ $ 831,250
Net Income ........................................ 220,369
Cash Dividends ($.63 per share) ................... (84,312)
Issuance of Stock (180,508 shares) ................ 3,893
Purchases of Treasury Stock (13,296,123 shares) ... (271,318)
Restricted Stock Activity, net .................... (5,174)
Stock Based Compensation Activity, net ............ 9,315
Amortization of Unrealized Loss on Securities
Transferred from Available-for-Sale to
Held-to-Maturity .............................. -
Adjustment to Unrealized Gains on Securities
Available-for-Sale, net of taxes .............. (85,313)
---------
Balance, December 31, 1999 ........................ $ 618,710
=========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 28
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
---------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
Net Income ....................................................... $ 220,369 $ 167,975 $ 170,521
---------------------------------------
OTHER COMPREHENSIVE INCOME, NET OF INCOME TAXES:
Unrealized (Losses)/Gains on Securities Available-for-Sale ....... (77,403) (2,507) 25,034
Less: Reclassification of Realized Gains Included in Net Income .. (7,739) (5,280) (4,715)
---------------------------------------
Other Comprehensive (Loss)/Income ................................ (85,142) (7,787) 20,319
---------------------------------------
Comprehensive Income ............................................. $ 135,227 $ 160,188 $ 190,840
=======================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
North Fork Bancorporation, Inc. (the "Company"), through its primary bank
subsidiary, North Fork Bank ("North Fork"), and its non-bank subsidiaries,
Compass Investment Services Corp ("Compass") and Amivest Corporation
("Amivest"), provides a variety of banking and financial services to middle
market and small business organizations, local governmental units, and retail
customers in the New York metropolitan area. The Company currently conducts a
telebanking operation through its subsidiary, Superior Savings of New England
("Superior") located in Connecticut.
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.
(b) SECURITIES
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.
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 trading 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
basis of individual held-to-maturity and available-for-sale securities are
reduced through write-downs to reflect other-than-temporary impairments in
value.
(c) DERIVATIVE FINANCIAL INSTRUMENTS
Periodically, the Company enters into interest rate agreements, including
interest rate swaps, caps, and floors, as part of its management of interest
rate exposure. These agreements are entered into as hedges against interest
rate risk and are designated against specific assets and liabilities. To
qualify as a hedge, the agreements must be designated as a hedge and be
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. The premium paid or received for any of these agreements is
amortized over the term of the agreements. These instruments are accounted for
on an accrual basis in the interest income or expense category of the related
hedged asset or liability. The estimated fair values of such agreements are not
reflected in the Company's consolidated balance sheets, unless designated to
securities available-for-sale, in which case they are carried at estimated fair
value with unrealized gains and losses, net of taxes, reflected as a component
of stockholders' equity. 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.
In the event of the early termination of a derivative financial instrument
contract, any resulting gain or loss is deferred, as an adjustment of the
carrying value of the designated assets or liabilities, and recognized in
operations over the shorter of the remaining life of the designated assets or
liabilities, or the derivative financial instrument agreement.
<PAGE> 30
(d) LOANS
Loans are 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 are 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 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 condition,
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 yields 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 losses inherent in the loan portfolio. In evaluating the
portfolio, management takes into consideration numerous factors, such as
present and potential risks inherent in 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
("SFAS") No.114 "Accounting by Creditors for Impairment of a Loan" and SFAS No.
118 "Accounting by Creditors for Impairment of a Loan-Income Recognition and
Disclosure" 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. Maintenance,
repairs, and minor improvements are charged to operations in the period
incurred, while major improvements are capitalized. 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 operating expenses in the
Company's consolidated statements of income.
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(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.
Post-retirement and post-employment benefits are recorded on an accrual
basis with an annual provision that considers an actuarially determined future
obligation.
(k) STOCK-BASED COMPENSATION
The Company accounts for its stock-based compensation plans in
accordance with SFAS No. 123 "Accounting for Stock-Based Compensation" ("SFAS
123"). SFAS 123 defines a fair value-based method of accounting for stock-based
compensation. However, SFAS 123 allows an entity to continue to measure
compensation expense for those instruments using the intrinsic value-based
method of accounting prescribed by Accounting Pronouncements Bulletin Opinion
No. 25 "Accounting for Stock Issued to Employees" ("APB 25"). The Company has
elected to continue to follow APB 25, however, SFAS 123 requires disclosure of
pro forma net income and earnings per share information in the notes to the
financial statements, as if the fair value-based method had been adopted.
Restricted stock awards are reflected as deferred compensation at the fair
market value of the shares at the date of grant, and amortized to compensation
expense over the vesting periods.
(l) EARNINGS PER SHARE ("EPS")
The Company calculates Basic Earnings Per Share 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
shares 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
135,025,108, 140,706,044, and 136,760,843 for the years ended 1999, 1998, and
1997, respectively. The weighted average number of common shares outstanding
used in the computation of Diluted EPS was 135,864,869, 141,765,568, and
139,333,051 for the years ended 1999, 1998 and 1997, 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 and restricted stock grants outstanding
during the periods.
(m) INTANGIBLE ASSETS
Intangible assets consist of goodwill and core deposit intangibles associated
with purchase acquisitions. The Company records the acquired assets and
liabilities assumed 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 and all direct costs associated
with the acquisition. Indirect costs relating to the acquisition are expensed
or capitalized when incurred based on the nature of the item.
Goodwill is amortized on a straight-line basis over the estimated period
to be benefited. Core deposit intangibles are amortized on an accelerated
method over the estimated period to be benefited. Intangible assets are
reviewed for possible impairment whenever events or circumstances indicate that
the carrying amount of the intangible asset may not be recoverable.
<PAGE> 32
(n) CONSOLIDATED STATEMENTS OF CASH FLOWS
For purposes of the consolidated cash flows, cash and cash equivalents are
defined as the amounts included in the Consolidated Balance Sheet under the
captions "Cash & Due from Banks" and "Money Market Investments", with a
contractual maturity of less than 90 days.
Cash flows associated with derivative financial instruments used by the
Company are classified in the accompanying Consolidated Statements of Cash
Flows in the same category as the cash flows from the asset or liability being
hedged.
NOTE 2-BUSINESS COMBINATIONS
(a) JSB FINANCIAL, INC.
On August 16, 1999, the Company entered into an Agreement and Plan of Merger
with JSB Financial, Inc. ("JSB"), the parent company of Jamaica Savings Bank
("Jamaica"), whereby it would acquire JSB in a stock-for-stock merger. In
connection with the merger, the Company needed to reissue a sufficient number of
shares of its treasury stock prior to the consummation of the merger, in order
that the merger not fail to qualify for pooling-of-interests accounting
treatment. The necessary treasury shares were reissued on February 18, 2000, in
connection with the Reliance transaction, described below. On February 29, 2000
JSB was merged with and into the Company in accordance with the pooling-of-
interests method of accounting. On March 10, 2000 Jamaica was merged with and
into North Fork. Pursuant to the merger agreement, the Company issued 3.0 shares
of common stock for each share of JSB's common stock outstanding. Accordingly,
the Company issued 28,312,851 of its common shares, simultaneously retired
6,562,383 shares of JSB's common stock held in treasury and reserved 2,410,500
common shares for JSB's outstanding stock options at the merger date.
On August 16, 1999, simultaneous with the announcement of the JSB merger,
the Company's Board of Directors formally rescinded the 10% share repurchase
program instituted in October 1998. At the date of recission, the Company had
completed the repurchase of approximately 8.1 million shares.
At December 31, 1999, JSB had total assets of $1.6 billion, deposits of
$1.1 billion and Stockholder's Equity of $380 million. Jamaica operated from 13
retail-banking facilities in the New York City boroughs of Manhattan and Queens
and in Nassau and Suffolk counties, New York.
(b) RELIANCE BANCORP, INC.
On August 30, 1999, the Company entered into an Agreement and Plan
of Merger with Reliance Bancorp, Inc. ("Reliance"), the parent company of
Reliance Federal Savings Bank, whereby it would acquire Reliance in a
stock-for-stock merger. On August 30, 1999, simultaneous with the announcement
of the merger, the Company's Board of Directors formally approved the purchase
of up to 50% of the common shares to be issued in the transaction, or 8.5
million shares. As of December 31, 1999, the Company completed the purchase of
7.8 million shares under the program. The program was completed subsequent to
December 31, 1999. On February 18, 2000, Reliance was merged with and into the
Company in accordance with the purchase method of accounting. Pursuant to the
merger agreement, the Company issued 2.0 shares of its common stock for each
share of Reliance's common stock outstanding. The Company reissued from its
treasury account 17,120,160 common shares in satisfaction of the Reliance
exchange ratio and reserved for issuance 1,369,438 common shares for Reliance's
outstanding stock options at the date of merger.
At December 31, 1999, Reliance had total assets of $2.5 billion, deposits
of $1.5 billion, and stockholders' equity of $176 million. Reliance Federal
Savings Bank operated from 29 retail banking facilities throughout Suffolk and
Nassau counties, New York, as well as in the New York City borough of Queens.
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(c) PRO-FORMA FINANCIAL INFORMATION WITH ACQUISITIONS
The following pro forma condensed combined financial statements are based on the
historical financial statements of the Company, Reliance and JSB. The pro forma
balance sheet gives effect to the transactions as if they had become effective
as of December 31, 1999. The pro forma statements of income give effect to the
transactions as if they had become effective as of the beginning of each of the
periods for which information is presented. The pro forma information depicts
the Reliance transaction using the purchase method of accounting and the JSB
transaction using the pooling-of-interests method of accounting.
<TABLE>
<CAPTION>
PRO FORMA CONDENSED COMBINED BALANCE SHEET AT DECEMBER 31,
(in thousands)
ASSETS 1999
---------------
<S> <C>
Cash & Due from Banks........................................ $ 348,422
Money Market Investments..................................... 110,737
Securities................................................... 6,277,045
Loans, net................................................... 8,881,597
Allowance for Loan Losses.................................... (83,570)
---------------
Net Loans.................................................... 8,798,027
---------------
Intangible Assets............................................ 339,070
Other Assets................................................. 447,759
---------------
Total Assets.......................................... $ 16,321,060
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Demand Deposits.............................................. $ 1,622,242
Savings, NOW & Money Market Deposits......................... 4,238,473
Time Deposits................................................ 3,328,281
---------------
Total Deposits............................................... 9,188,996
---------------
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase................................... 2,921,981
Other Borrowings............................................. 2,308,097
Accrued Expenses & Other Liabilities......................... 389,680
---------------
Total Liabilities............................................ $ 14,808,754
---------------
Capital Securities........................................... 244,314
Stockholders' Equity......................................... 1,267,992
---------------
Total Liabilities and Stockholders' Equity............ $ 16,321,060
===============
<CAPTION>
PRO FORMA CONDENSED COMBINED Statements of Income for
THE YEARS ENDED DECEMBER 31,
(in thousands, except per share amounts) 1999 1998 1997
-------------------------------------------------
<S> <C> <C> <C>
Interest Income................................................. $ 1,081,774 $ 870,913 $ 834,035
Interest Expense................................................ 496,911 366,932 366,677
-------------------------------------------------
Net Interest Income...................................... 584,863 503,981 467,358
Provision for Loan Losses....................................... 6,163 15,551 8,748
-------------------------------------------------
Net Interest Income after Provision for Loan Losses...... 578,700 488,430 458,610
Non-Interest Income............................................. 69,883 60,019 53,542
Real Estate Operations, net..................................... 1,239 714 10,442
Net Securities Gains............................................ 13,690 9,433 15,398
Other Non-Interest Expense...................................... 215,862 174,065 184,616
Capital Securities Costs........................................ 20,929 16,843 9,235
Amortization & Write-down of Intangible Assets.................. 21,404 14,479 7,292
Merger Related Restructure Charge............................... - 52,452 -
-------------------------------------------------
Income before Income Taxes............................... 405,317 300,757 336,849
Provision for Income Taxes...................................... 151,967 88,394 129,238
-------------------------------------------------
Net Income............................................... $ 253,350 $ 212,363 $ 207,611
=================================================
Earnings Per Share-Basic........................................ $ 1.49 $ 1.25 $ 1.25
Earnings Per Share-Diluted...................................... $ 1.47 $ 1.23 $ 1.22
Weighted Average Shares Outstanding-Basic....................... 170,436 170,085 166,335
Weighted Average Shares Outstanding-Diluted..................... 172,731 171,988 169,903
</TABLE>
<PAGE> 34
At December 31, 1999, the Company's pro forma Tier 1, Total Risk Based and
Leverage Capital Ratios were 12.60%, 13.83%, and 7.58%, respectively.
(d) NEW YORK BANCORP
In March 1998, New York Bancorp ("NYB"), the parent company of Home Federal
Savings Bank, was merged with and into the Company in a transaction accounted
for in accordance with the pooling-of-interests method of accounting. Pursuant
to the merger agreement, the Company issued 39.9 million shares of its common
stock to NYB shareholders and simultaneously retired 12.7 million shares of
NYB's common stock held in treasury as of the merger date. NYB had $3.4 billion
in total assets, $2.0 billion in net loans, $1.7 billion in deposit
liabilities, and $140.3 million in capital at the date of merger. In connection
with the merger, the Company recorded a pre-tax charge for merger-related
restructure costs of $52.5 million. As of December 31, 1999, substantially all
cash payments associated with this charge have been made except for certain
payments due under long-term leases.
(e) AMIVEST CORPORATION
In June 1998, the Company completed its purchase acquisition of Amivest, a
privately held investment management and broker/dealer firm located in New York
City. At the date of acquisition, Amivest had approximately $700 million in
assets under management. Goodwill recognized in connection with the transaction
was $10.4 million and is being amortized on a straight-line basis over 15
years. The operating results of Amivest are not significant to the consolidated
financial statements of the Company.
NOTE 3-SECURITIES
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>
1999
-----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in thousands) Cost Gains (Losses) Value
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
CMO's Private Issuances......................... $1,781,288 $ 235 $ (57,340) $1,724,183
CMO's Agency Issuances.......................... 489,151 - (26,064) 463,087
Mortgage-Backed Securities...................... 895,855 266 (26,239) 869,882
U.S. Government Agencies' Obligations........... 88,709 - (2,499) 86,210
U.S. Treasury Securities........................ 20,046 - (68) 19,978
Equity Securities(1)............................ 251,999 1,975 (6,713) 247,261
Other Securities................................ 198,861 5,001 (21,546) 182,316
-----------------------------------------------------------------
$3,725,909 $7,477 $(140,469) $3,592,917
=================================================================
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in thousands) Cost Gains (Losses) Value
----------------------------------------------------------------
<S> <C> <C> <C>
CMO's Private Issuances......................... $1,440,806 $ 5,358 $ (683) $1,445,481
CMO's Agency Issuances.......................... 190,249 1,776 (64) 191,961
Mortgage-Backed Securities...................... 728,849 4,115 (1,149) 731,815
U.S. Government Agencies' Obligations........... 162,464 4,947 - 167,411
U.S. Treasury Securities........................ 30,952 393 - 31,345
Equity Securities(1)............................ 202,815 6,922 (2,111) 207,626
Other Securities................................ 207,407 2,953 (5,776) 204,584
----------------------------------------------------------------
$2,963,542 $26,464 $(9,783) $2,980,223
================================================================
</TABLE>
(1) Amortized cost and fair value includes $158.6 million and $91.9 million in
Federal Home Loan Bank stock at December 31, 1999 and 1998, respectively.
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>
1999
--------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in thousands) Cost Gains (Losses) Value
--------------------------------------------------------------
<S> <C> <C> <C> <C>
CMO's Private Issuances......................... $ 674,072 $ 30 $(28,402) $ 645,700
CMO's Agency Issuances.......................... 15,022 - (76) 14,946
Mortgage-Backed Securities...................... 445,413 72 (19,486) 425,999
State & Municipal Obligations................... 76,173 126 (2,128) 74,171
U.S. Government Agencies' Obligations........... 51 - - 51
Other Securities................................ 18,972 - (659) 18,313
--------------------------------------------------------------
$1,229,703 $228 $(50,751) $1,179,180
==============================================================
</TABLE>
<TABLE>
<CAPTION>
1998
----------------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
(in thousands) Cost Gains (Losses) Value
----------------------------------------------------------------
<S> <C> <C> <C> <C>
CMO's Private Issuances......................... $ 873,070 $2,693 $(2,849) $ 872,914
CMO's Agency Issuances.......................... 41,988 147 (22) 42,113
Mortgage-Backed Securities...................... 560,815 2,140 (625) 562,330
State & Municipal Obligations....... ........... 71,837 1,301 (27) 73,111
U.S. Government Agencies' Obligations........... 74 - - 74
Other Securities................................ 23,761 29 (136) 23,654
----------------------------------------------------------------
$ 1,571,545 $6,310 $(3,659) $1,574,196
================================================================
</TABLE>
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Management's strategy is to invest in securities with short weighted
average lives, minimizing exposure to future increases in interest rates. These
are principally mortgage-backed securities ("MBS") that provide stable cash
flows which may be reinvested at current market interest rates. The combined
weighted average life of the held-to-maturity and available-for-sale securities
portfolios at December 31, 1999 and 1998 was 4.5 years and 3.4 years,
respectively.
Collateralized mortgage obligations (CMO's) are collateralized by either
U.S. Government Agency MBS's or whole loans which are principally AAA rated
conservative current pay sequentials or planned amortization class (PAC)
structures with current weighted average lives of approximately 3.5 years.
At December 31, 1999 and 1998, equity securities maintained in the
available-for-sale portfolio were comprised principally of FHLB common stock
and common and preferred stock of certain publicly traded companies. Other
securities maintained in the available-for-sale portfolio consist of capital
securities of certain financial institutions and corporate bonds.
At December 31, 1999, securities carried at $3.4 billion were pledged to
secure securities sold under agreements to repurchase, other borrowings and for
other purposes as required by law.
The amortized cost and estimated fair value of securities at December 31, 1999,
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............................. 8,504 8,513 - -
Due after one year through five years............... 45,806 45,372 20,046 19,978
Due after five years through ten years.............. 29,145 27,730 94,481 91,060
Due after ten years................................. 11,741 10,920 193,089 177,466
-------------------------------------------------------------
Subtotal..................................... 95,196 92,535 307,616 288,504
CMO's............................................... 689,094 660,646 2,270,439 2,187,270
Mortgage-Backed Securities.......................... 445,413 425,999 895,855 869,882
Equity Securities................................... - - 251,999 247,261
-------------------------------------------------------------
$1,229,703 $1,179,180 $3,725,909 $3,592,917
=============================================================
</TABLE>
Prepayments on MBS's, including CMO's, are monitored as part of the portfolio
management function. Management typically invests in MBS's with stable cash
flows and relatively short duration, thereby limiting the impact of interest
rate fluctuations on the portfolio. Management regularly performs simulation
testing to assess the impact that interest and market rate changes would have
on the MBS portfolio.
The proceeds, gross realized gains and losses on the sale of securities
available-for-sale were as follows at December 31,
<TABLE>
<CAPTION>
(in thousands) 1999 1998 1997
-------------------------------------------
<S> <C> <C> <C>
Proceeds from Sales.................................. $116,923 $1,021,477 $271,297
===========================================
Gross Realized Gains................................. 13,632 12,196 9,511
Gross Realized Losses................................ (54) (2,763) (1,104)
-------------------------------------------
Net Realized Gains................................... $ 13,578 $ 9,433 $ 8,407
===========================================
</TABLE>
Gross realized gains in 1999 and 1998 resulted principally from the sale of
equity positions and capital securities of certain publicly traded companies.
<PAGE> 36
NOTE 4-LOANS
The composition of the loan portfolio is summarized as follows at December 31,
<TABLE>
<CAPTION>
% OF % OF
(DOLLARS IN THOUSANDS) 1999 TOTAL 1998 TOTAL
---------------------------------------------------------------
<S> <C> <C> <C> <C>
Mortgage Loans-Residential............... $2,137,739 32% $1,901,759 33%
Mortgage Loans-Multi-family.............. 1,705,446 26% 1,651,590 29%
Mortgage Loans-Commercial................ 1,261,487 19% 1,104,228 19%
Consumer Loans and Leases................ 742,086 11% 481,691 9%
Commercial & Industrial.................. 697,763 11% 520,130 9%
Construction and Land Loans.............. 85,985 1% 72,026 1%
---------------------------------------------------------------
Total................................. $6,630,506 100% $5,731,424 100%
Less:
Unearned Income.......................... 13,376 17,131
Allowance for Loan Losses................ 68,595 71,759
---------------------------------------------------------------
Net Loans............................. $6,548,535 $5,642,534
===============================================================
</TABLE>
The loan portfolio is concentrated primarily in loans secured by real estate in
the New York metropolitan area. The risk inherent in this portfolio is
dependent not only upon regional and general economic stability which affects
property values, but also the financial well-being and creditworthiness of the
borrowers.
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 collateral. Multi-family lending
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 New York metropolitan
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 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 $832.8 million and $904.6
million as of December 31, 1999 and 1998, respectively. At December 31, 1999,
$1.7 million in residential mortgage loans were held-for-sale.
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 $15.4 million at December 31, 1999, as
compared to $18.5 million at December 31, 1998. This reduction was achieved
principally through the sale of non-performing assets, principal repayments,
the workout of non-performing loans to performing status, and charge-offs.
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Non-Performing Assets
Non-performing assets at December 31, consisted of the following:
(in thousands)
<TABLE>
<CAPTION>
1999 1998
-------------------------
<S> <C> <C>
Loans Ninety Days Past Due and Still Accruing ................................ $ 5,843 $ 7,684
Non-Accrual Loans ............................................................ 8,997 7,592
-------------------------
Non-Performing Loans ......................................................... 14,840 15,276
Other Real Estate ............................................................ 575 3,217
-------------------------
Non-Performing Assets ........................................................ $15,415 $18,493
=========================
Restructured, Accruing Loans ................................................. $ - $ 584
=========================
</TABLE>
The following table represents the components of non-performing loans at
December 31,
<TABLE>
<CAPTION>
1999 1998
-------------------------
<S> <C> <C>
Consumer Loans and Leases .................................................... $ 5,798 $ 4,294
Mortgage Loans-Residential ................................................... 4,022 3,511
Commercial & Industrial ...................................................... 2,693 2,485
Mortgage Loans-Commercial .................................................... 1,661 4,519
Mortgage Loans-Multi-family .................................................. 666 467
-------------------------
Total Non-Performing Loans ................................................ $14,840 $15,276
=========================
</TABLE>
Interest foregone on non-accrual loans, or the amount of income that would have
been earned had those loans remained performing, aggregated $1.0 million, $1.3
million, and $2.9 million in 1999, 1998, and 1997, respectively.
At December 31, 1999, the Company had no commitments to lend additional
funds to borrowers whose loans are non-performing.
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 $6.2 million and $5.6 million at December 31, 1999 and 1998,
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) 1999 1998 1997
---------------------------------------------
<S> <C> <C> <C>
Balance at Beginning of Year ................................................. $ 71,759 $ 74,393 $ 73,280
Provision for Loan Losses .................................................... 6,000 15,500 8,100
Recoveries ................................................................... 5,170 3,817 2,573
---------------------------------------------
82,929 93,710 83,953
Charge-offs .................................................................. (14,334) (21,896) (12,054)
NYB Net Activity for the Three Months Ended December 31, 1997 ................ - (55) -
Additional Allowance Acquired in Superior Acquisition ........................ - - 2,494
---------------------------------------------
Balance at End of Year ....................................................... $ 68,595 $ 71,759 $ 74,393
=============================================
</TABLE>
The provision for loan losses declined to $6.0 million in 1999, when compared to
$15.5 million for the prior year period. Reflected in 1998 was a special
provision of $11.5 million. This additional provision was due to the sale of $32
million in non-performing and marginally performing loans, at amounts below the
loans carrying values, acquired in the NYB merger. Due to the aforementioned
sale, the Company recognized a corresponding charge to the allowance for loan
losses. This decision was predicated on the fact that management could sell
these loans into a liquid market, reinvest the cash into other interest earning
assets, and mitigate potential carrying costs associated with their future
workout and resolution. Historically, NYB did not actively sell non-performing
and marginally performing loans as part of its workout and recovery process.
Subsequent to these sales, the Company restored its post-merger reserve coverage
ratios to approximate pre-merger levels.
<PAGE> 38
NOTE 6-PREMISES AND EQUIPMENT
The following is a summary of premises and equipment at December 31,
<TABLE>
<CAPTION>
(in thousands) 1999 1998
----------------------------------
<S> <C> <C>
Land ................................................................. $ 16,021 $ 15,946
Bank Premises ........................................................ 51,543 49,892
Leasehold Improvements ............................................... 20,517 18,576
Equipment ............................................................ 50,609 42,962
----------------------------------
138,690 127,376
Accumulated Depreciation and Amortization ............................ (63,950) (55,353)
----------------------------------
$ 74,740 $ 72,023
==================================
</TABLE>
Depreciation and amortization of premises and equipment charged to expense
amounted to $9.1 million, $8.8 million and $9.4 million for 1999, 1998, and
1997, respectively.
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 ("SSURA") at and for the years ended December 31,
<TABLE>
<CAPTION>
(dollars in thousands) 1999 1998 1997
----------------------------------------------
<S> <C> <C> <C>
FEDERAL FUNDS PURCHASED
Period End Balance ......................................... $ 89,700 $ 70,000 $ 40,000
Maximum Amount Outstanding at Any Month End ................ $ 115,000 $ 125,000 80,000
Average Outstanding Balance ................................ $ 62,446 $ 28,766 27,563
Weighted Average Interest Rate Paid ........................ 5.15% 5.49% 5.66%
Weighted Average Interest Rate at Year End ................. 5.34% 5.38% 6.81%
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Period End Balance ......................................... $2,575,500 $2,885,096 $2,064,036
Accrued Interest Payable at Period End ..................... $ 13,349 $ 14,904 10,234
Maximum Amount Outstanding at Any Month End ................ $3,291,796 $2,885,096 2,310,458
Average Outstanding Balance ................................ $2,849,356 $2,207,491 1,917,029
Weighted Average Interest Rate Paid ........................ 5.54% 5.78% 5.81%
Weighted Average Interest Rate at Year End ................. 5.69% 5.57% 5.85%
</TABLE>
Qualifying SSURA are treated as financings and the obligations to repurchase
securities sold are reflected as liabilities in the consolidated 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
securities collateralizing SSURA's, in addition to the amounts of and interest
rate on the related borrowings.
<TABLE>
<CAPTION>
MBS & CMO Securities (1)
-----------------------------------------------------
Average Amortized Fair
(dollars in thousands) SSURA(2) Rate Cost Value
-----------------------------------------------------
<S> <C> <C> <C> <C>
Up to 30 Days ............................................. $ 300,000 5.95% $ 332,778 $ 315,602
30 to 90 Days ............................................. 1,150,000 5.79% 1,281,133 1,230,660
90 Days to 1 Year ......................................... 117,000 6.32% 94,768 91,798
In Excess of 1 Year ....................................... 971,000 5.86% 1,081,365 1,042,834
-----------------------------------------------------
Total .................................................. $2,538,000 5.86% $2,790,044 $2,680,894
=====================================================
<CAPTION>
U.S. Govt. Agencies (1)
----------------------------------------------
Average Amortized Fair
(dollars in thousands) SSURA(2) Rate Cost Value
----------------------------------------------
<S> <C> <C> <C> <C>
Up to 30 Days ............................................. $ - - $ - $ -
30 to 90 Days ............................................. - - - -
90 Days to 1 Year ......................................... - - - -
In Excess of 1 Year ....................................... 37,500 5.75% 39,512 38,410
----------------------------------------------
Total .................................................. $37,500 5.75% $39,512 $38,410
==============================================
</TABLE>
(1) Excludes accrued interest receivable of $22.3 million and $1.1 million on
MBS & CMO securities and U.S. government agencies, respectively, securing
the related repurchase agreements.
(2) Excludes accrued interest payable.
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8-OTHER BORROWINGS
At December 31, 1999, the Company had outstanding $1.8 billion in short-term
Federal Home Loan Bank ("FHLB") advances at an average cost of funds of 5.89%.
Indebtedness to and outstanding commitments from the FHLB are
collateralized by the Company's investment in FHLB stock, first mortgage loans,
and certain mortgage-backed securities under the terms of the collateral
agreement.
The Company's bank subsidiaries had arrangements with various
correspondent banks providing short-term credit for regulatory liquidity
requirements. These lines of credit aggregated $225 million at December 31,
1999.
At December 31, 1998, the Company had outstanding a $25.0 million,
7.56% Senior Note and $10 million in 10% fixed rate Federal Home Loan Bank
advances. These borrowings matured in April 1999.
NOTE 9-CAPITAL SECURITIES
Company Obligated Mandatorily Redeemable Capital Securities of Subsidiary Trusts
("Capital Securities") are summarized as follows at December 31,
<TABLE>
<CAPTION>
1999 1998
---------------------
<S> <C> <C>
8.00% Capital Securities due December 15, 2027 ... $ 99,641 $ 99,628
8.70% Capital Securities due December 15, 2026 ... 99,673 99,661
---------------------
$199,314 $199,289
=====================
</TABLE>
The aforementioned Capital Securities were issued in 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, 1999 and 1998, these Capital Securities qualified as
Tier I capital for regulatory capital purposes. The costs associated with these
issuances have been capitalized and are being amortized using the straight-line
method to maturity.
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) 1999 1998 1997
----------------------------------
<S> <C> <C> <C>
Current Tax Expense .... $ 98,891 $ 74,453 $100,113
Deferred Tax Expense ... 19,769 653 4,500
----------------------------------
Income Tax Provision ... $118,660 $ 75,106 $104,613
==================================
</TABLE>
<PAGE> 40
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>
1999 1998 1997
-----------------------------
<S> <C> <C> <C>
Federal Income Tax Expense at Statutory Rates ........................ 35.00% 35.00% 35.00%
Increase/(Reduction) Resulting from:
State and Local Income Taxes, Net of Federal Income Tax Benefit .. .79% 4.70% 3.96%
Non-Taxable Distributions from Corporate Reorganizations ......... - (9.35%) -
Tax Exempt Interest, Net ......................................... (.92%) (.71%) (.74%)
Nondeductible Merger & Related Restructure Charge ................ - 1.38% -
Valuation Allowance .............................................. - (1.14%) -
Amortization of Intangible Assets ................................ .45% 2.37% .43%
Dividend Received Deduction ...................................... (.28%) (.35%) (.41%)
Other, Net ....................................................... (.04%) (1.00%) (.22%)
-----------------------------
Effective Tax Rate ................................................... 35.00% 30.90% 38.02%
=============================
</TABLE>
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) 1999 1998
----------------------
<S> <C> <C>
DEFERRED TAX ASSETS
Unrealized Loss on Securities Available-For-Sale .......... $ 55,250 $ -
Allowance for Loan Losses ................................. 29,342 30,698
Deferred Compensation and Other Employee Benefit Plans .... 8,101 7,948
Acquired Net Operating Loss Carry Forward ................. - 8,195
Deductible Merger Related Restructure Charges ............. 1,715 3,112
Excess of Tax Basis Over Book Basis-Premises & Equipment .. 1,241 1,583
Other ..................................................... 3,037 3,745
----------------------
Gross Deferred Tax Asset ............................. $ 98,686 $ 55,281
Valuation Allowance ....................................... (4,567) (4,567)
----------------------
Deferred Tax Asset ................................... $ 94,119 $ 50,714
======================
DEFERRED TAX LIABILITY
Unrealized Gain on Securities Available-For-Sale .......... $ - $ (7,173)
Tax Bad Debt Recapture .................................... (6,012) (6,820)
Deferred Income ........................................... (11,519) (5,006)
Other ..................................................... (4,417) (3,873)
----------------------
Gross Deferred Tax Liability ......................... $(21,948) $(22,872)
----------------------
Net Deferred Tax Asset ............................... $ 72,171 $ 27,842
======================
</TABLE>
During 1999, the Company's valuation allowance remained at $4.6 million.
Management continues to reserve a portion of the New York State and City
deferred tax asset due to uncertainties of realization, since New York Sate and
City tax law do not provide for the utilization of net operating loss
carryforwards or carrybacks. Additionally, as a result of the Company's merging
with and acquiring thrifts, the retained earnings at December 31, 1999 and 1998
includes approximately $51 million for which no Federal income tax liability has
been recognized. This amount represents the balance of acquired thrift bad debt
reserves created for tax purposes as of December 31, 1987. These amounts are
subject to recapture in the unlikely event that the Bank (i) makes distributions
in excess of earnings and profits, (ii) redeems its stock, or (iii) liquidates.
Management anticipates that the realization of the net deferred tax
asset of $72.2 million is more likely than not, based on existing carryback
ability, available planning strategies, and projected taxable income.
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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. The
following table sets forth the change in benefit obligations, the change in plan
assets, the funded status of the plan, and amounts recognized in the
accompanying consolidated financial statements at December 31,
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1999 1998
-----------------------
<S> <C> <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit Obligation at Beginning of Year .................. $ 57,223 $ 56,911
Service Cost ............................................. 1,811 1,839
Interest Cost ............................................ 3,584 3,999
Amendments ............................................... - 503
Benefits Paid ............................................ (7,256) (7,334)
Actuarial (Gain)/Loss .................................... (5,135) 1,305
-----------------------
Benefit Obligation at End of Year ........................ $ 50,227 $ 57,223
=======================
CHANGE IN PLAN ASSETS:
Fair Value of Plan Assets at Beginning of Year ........... $ 55,649 $ 58,478
Actual Return on Plan Assets ............................. 473 4,226
Employer Contributions ................................... - 279
Benefits Paid ............................................ (7,255) (7,334)
-----------------------
Fair Value of Plan Assets at End of Year ................. $ 48,867 $ 55,649
=======================
RECONCILIATION OF FUNDED STATUS:
Funded Status ............................................ $ (1,360) $ (1,574)
Unrecognized Actuarial (Gain)/Loss ....................... 2,398 3,521
Unrecognized Prior Service Cost .......................... (1,614) (1,873)
Unrecognized Transition Asset ............................ (59) (76)
-----------------------
(Accrued)/Prepaid Benefit Cost ........................... $ (635) $ (2)
=======================
<CAPTION>
ADDITIONAL YEAR-END INFORMATION FOR PENSION PLANS WITH
ACCUMULATED BENEFIT OBLIGATIONS IN EXCESS OF PLAN ASSETS: 1999 1998
-----------------------
<S> <C> <C>
Projected Benefit Obligation ............................. 50,227 NA
Accumulated Benefit Obligation ........................... 49,378 NA
Fair Value of Plan Assets ................................ 48,867 NA
<CAPTION>
1999 1998 1997
--------------------------------------
<S> <C> <C> <C>
WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31,
Discount Rate ............................................ 7.75% 6.50% 7.00%
Expected Return on Plan Assets ........................... 8.50% 8.50% 8.50%
Rate of Compensation Increase ............................ 4.50% 4.50% 4.50%
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service Cost ............................................. $ 1,811 $ 1,839 $ 1,543
Interest Cost ............................................ 3,584 3,999 3,766
Expected Return on Plan Assets ........................... (4,486) (5,051) (4,500)
Amortization of Prior Service Cost ....................... (258) (316) (242)
Amortization of Transition Asset ......................... (18) (32) (152)
Recognized Actuarial (Gain)/Loss ......................... - 167 (290)
--------------------------------------
Net Periodic Benefit Cost ................................ $ 633 $ 606 $ 125
======================================
Additional Loss/(Gain) Recognized Due to Curtailment ....... - (201) 203
Additional Liability Recognized by NYB ..................... - - 514
--------------------------------------
Total Benefit Cost ....................................... $ 633 $ 405 $ 842
======================================
</TABLE>
<PAGE> 42
The Company maintains a Supplemental Executive Retirement Plan
("SERP"), 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 $89 thousand at December 31, 1999 and
$299 thousand at December 31, 1998. Net periodic pension expense incurred in
1999, 1998, and 1997, for the SERP was $68 thousand, $52 thousand, and $31
thousand, respectively. The weighted average discount rate utilized to determine
the projected benefit obligation was 7.75%, 6.50%, and 7.0% for 1999, 1998, and
1997, respectively. The assumed rate of future compensation increases was 4.50%
for 1999, 1998, and 1997.
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 retired 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 the change in post-retirement benefit
obligation and amounts recognized in the accompanying consolidated financial
statements at December 31,
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
----------------------
CHANGE IN ACCUMULATED POST-RETIREMENT BENEFIT OBLIGATION ("APBO"):
<S> <C> <C>
Accumulated Post-Retirement Benefit Obligation at Beginning of Year .. $ 11,297 $ 10,423
Service Cost ....................................................... 123 135
Interest Cost ...................................................... 706 788
Premiums Paid ...................................................... (540) (652)
Actuarial (Gain)/Loss .............................................. (1,298) 603
----------------------
Accumulated Post-Retirement Benefit Obligation at End of Year ...... $ 10,288 $ 11,297
======================
RECONCILIATION OF FUNDED STATUS:
Accumulated Post-Retirement Benefit Obligation at End of Year ...... $(10,288) $(11,297)
Fair Value of Assets ............................................... - -
----------------------
Funded Status ...................................................... $(10,288) $(11,297)
Unrecognized Transition Obligation/(Asset) ......................... 3,333 3,626
Unrecognized Prior Service Cost .................................... (921) (1,002)
Unrecognized Net Loss .............................................. 82 1,401
----------------------
(Accrued) Post-Retirement Benefit Cost ............................. $ (7,794) $ (7,272)
======================
</TABLE>
The weighted average discount rate utilized to determine the
accumulated post-retirement benefit obligation was 7.75% and 6.50% in 1999 and
1998, respectively.
In measuring the APBO, a 6.0% annual trend rate for health care costs
was assumed for the year ended December 31, 1999. These rates are assumed to
remain at 6% from 2000 through 2009 and decline to 5.5% through 2020. However,
for retirees after November 1, 1992, no increases in the annual trend rate are
assumed for after 1997. The effect of a 1% increase in the health care cost
trend rate on the aggregate of the service and interest cost components of net
periodic post-retirement health care benefit cost and the APBO for health care
benefits would be an increase of $46 thousand and $589 thousand, respectively,
in 1999 and $44 thousand and $644 thousand, respectively, in 1998. The effect of
a 1% decrease in the health care cost trend rate on the aggregate of the service
and interest cost components of net periodic post-retirement health care benefit
cost and the APBO for health care benefits would be a decrease of $40 thousand
and $527 thousand, respectively, in 1999 and $37 thousand and $576 thousand,
respectively, in 1998.
<PAGE> 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table sets forth the components of net periodic post-retirement
benefits expense for the years ended December 31,
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997
---------------------------------
<S> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service Cost .............................. $ 123 $ 135 $ 134
Interest Cost ............................. 706 788 694
Amortization of Prior Service Cost ........ (81) (96) (90)
Amortization of Transition Asset .......... 293 317 255
Recognized Actuarial (Gain)/Loss .......... 21 37 3
---------------------------------
Net Periodic Benefit Cost ................. $ 1,062 $ 1,181 $ 996
=================================
</TABLE>
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 is 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. The
401(k) plan expense was $1.6 million, $1.8 million, and $1.6 million for the
years ended 1999, 1998, and 1997, respectively.
NOTE 12-COMMON STOCK PLANS
1999 STOCK COMPENSATION PLAN
The plan provides for two types of awards, non-qualified stock options and
restricted stock awards, to be granted either separately or in combination to
all eligible persons, including executive officers and other full-time employees
of the Company. The number of shares issuable thereunder is 5,000,000 with no
more than 2,500,000 authorized for restricted stock awards. Shares of restricted
stock granted under the plan are forfeitable and subject to certain restrictions
on the part of the recipient until ownership of the shares vest in the recipient
at some dates after the date of grant, as determined by the compensation
committee upon grant. Awards are granted to employees by the Compensation
Committee. The Committee can, at its discretion, accelerate the removal of any
and all restrictions. If the Company is 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 and cash or other
consideration, all restrictions on outstanding unvested options, and restricted
stock will lapse and cease to be effective as of the day on which such corporate
change is consummated. Restricted stock awarded under the plan will be reflected
as deferred compensation in the Company's balance sheets at the fair market
value of the shares at the date of grant, and amortized to compensation expense
over the vesting periods. At December 31, 1999, 5,000,000 shares remain
authorized and unissued.
1998 STOCK COMPENSATION PLAN
The plan provides for two types of awards, non-qualified stock options and
restricted stock awards, to be granted either separately or in combination to
all eligible persons, including executive officers and other full-time employees
of the Company. The number of shares issuable thereunder is 1,500,000 with no
more than 1,000,000 authorized for restricted stock awards. Shares of restricted
stock granted under the plan contain similar restrictions and accelerated
vesting provisions as those in the 1999 Stock Compensation Plan. Restricted
stock awarded under the plan is reflected as deferred compensation in the
Company's balance sheets at the fair market value of the shares at the date of
grant, and amortized to compensation expense over the vesting periods. Awards
are granted to employees by the Compensation Committee. At December 31, 1999,
427,800 shares remain authorized and unissued.
<PAGE> 44
1997 NON-OFFICER STOCK PLAN
The plan provided 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, was limited to
375,000 shares. Each non-qualified stock option granted had a minimum six-month
vesting period. Restricted stock awarded under the plan contain similar
restrictions and accelerated vesting provisions as those in the 1999 Stock
Compensation Plan. Awards were granted to employees by the Compensation
Committee. The right to grant awards under the plan terminated in 1998.
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 2,100,000 to 3,600,000
shares, with no more than 1,200,000 authorized for restricted stock. The
Compensation Committee determines all grants of awards. Restricted stock
awarded under the plan contain similar restrictions and accelerated vesting
provision as those in the 1998 Stock Compensation Plan. At December 31, 1999,
111,216 shares remain authorized and unissued.
NEW YORK BANCORP PLANS-PRE-MERGER
NYB maintained several incentive stock option and non-qualified stock option
plans for its officers, directors and other key employees. Generally, these
plans granted options to individuals at a price equivalent to the fair market
value of the stock at the date of grant. Options awarded under the plans
generally vested over a three-year period from the date of grant and expired ten
years from the grant date for employees and five years for directors. As a
result of the merger, participants under the plans became fully vested with all
outstanding options exercised by the merger date.
Additionally, NYB had granted stock appreciation rights ("SARS") to
certain key employees. SARS entitled the participant to receive cash equal to
the excess of the market value of the shares at the date the right is exercised
over the exercise price. An expense was accrued for the earned portion of the
amount by which the market value of the stock exceeded the exercise price for
each SAR outstanding. Participants became fully vested at the merger date.
Compensation expense recognized under the terms of the SARS was $2.8 million in
1997.
The following is a summary of the activity in the aforementioned stock option
plans for the three-year period ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year .. 2,282,098 $16.80 5,514,363 $ 7.96 7,246,403 $ 5.53
Granted ........................... 326,900 18.29 1,002,692 25.51 1,632,752 13.05
Exercised ......................... (128,200) 6.53 (4,220,854) 7.28 (3,341,815) 5.18
Canceled .......................... (234,758) 26.54 (14,103) 26.27 (22,977) 7.64
---------------------------------------------------------------------------
Outstanding at end of year ........ 2,246,040 $16.59 2,282,098 $16.80 5,514,363 $ 7.96
===========================================================================
Options exercisable at year end ... 1,968,896 $16.64 2,030,261 $16.90 4,329,415 $ 7.56
===========================================================================
</TABLE>
<PAGE> 45
The following is a summary of the information concerning currently outstanding
and exercisable options as of December 31, 1999:
<TABLE>
<CAPTION>
Weighted Weighted Weighted
Range of Average Average Average
Exercise Options Remaining Exercise Options Exercise
Prices Outstanding Life Price Exercisable Price
- - - - ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 2.29-$10.75 .... 564,255 4.7 $ 5.68 548,055 $ 5.61
$10.76-$18.81 .... 682,354 8.3 14.48 427,910 13.19
$18.82-$26.88 .... 999,431 6.6 24.18 992,931 24.21
---------------------------------------------------------------
$ 2.29-$26.88 .... 2,246,040 6.6 $ 16.59 1,968,896 $ 16.64
===============================================================
</TABLE>
The following is a summary of the activity in the restricted stock plans for the
years ended December 31,
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------------------------------------------------------
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 .. 1,762,946 $15.32 1,489,823 $13.94 784,476 $ 8.41
Granted ........................... 378,200 18.21 324,350 20.49 746,652 19.42
Vested ............................ (31,851) 5.81 (44,626) 7.07 (6,805) 3.21
Canceled .......................... (10,850) 17.01 (6,601) 14.60 (34,500) 8.69
---------------------------------------------------------------------------
Outstanding at year end ........... 2,098,445 $16.21 1,762,946 $15.32 1,489,823 $13.94
===========================================================================
</TABLE>
The amount of compensation expense related to restricted stock awards included
in compensation and employee benefits was $3.0 million, $2.2 million, and $1.2
million in 1999, 1998, and 1997, respectively.
The Company applies APB 25 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 and Stock
Appreciation Rights. 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, net income and diluted earnings per share would have been reduced
by approximately $1.6 million, or $.01 per share in 1999, $3.4 million, or $.02
per share in 1998, and $3.8 million, or $.03 per share in 1997. The estimated
fair value of the options granted during 1999, 1998, and 1997 ranged from $4.64
to $5.43, $1.19 to $8.32, and $.73 to $7.43, respectively, 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 1999: a
dividend yield of 3.0%, volatility ranging from 24.5% to 25.5%, risk free
interest rate ranging from 5.15% to 6.15%, 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 1998: a dividend yield of 2.25%,
volatility ranging from 21-30%, risk-free interest rates ranging from
4.50%-5.66%, no assumed forfeiture rate, and an expected average life of six
years for options with an original term greater than six years or the options
remaining term, if its original maturity is less than six years. The following
assumptions were used in calculating the fair value of the options granted
during 1997: dividend yield ranging from 2.00%-2.25%, volatility ranging from
20%-40%, risk-free interest rate ranging from 5.30%-6.30%, no assumed forfeiture
and an expected life of six years for options with an original term greater than
six years or the options remaining term, if its original maturity is less than
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, 1999, 569,148 shares remain authorized and unissued.
<PAGE> 46
CHANGE-IN-CONTROL ARRANGEMENTS
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.
NOTE 13-PARENT COMPANY ONLY
CONDENSED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CONDENSED BALANCE SHEETS DECEMBER 31, 1999 1998
--------------------------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Deposits with Bank Subsidiary ......................................... $ 809 $ 5,661
Deposits with Other Financial Institutions ............................ 1,322 1,557
Securities Purchased Under Agreements to Resell with Bank Subsidiary .. - 40,000
Securities Available-for-Sale ......................................... 151,743 192,805
Investment in Subsidiaries ............................................ 686,944 805,144
Intangible Assets ..................................................... 28,416 28,965
Other Assets .......................................................... 21,952 39,190
--------------------------
Total ............................................................... $ 891,186 $1,113,322
==========================
LIABILITIES AND STOCKHOLDERS' EQUITY
Junior Subordinated Debt (See Note 9) ................................. $ 205,500 $ 205,475
Loan From Affiliate ................................................... 40,000 -
Senior Note Payable ................................................... - 25,000
Dividends Payable ..................................................... 23,119 39,041
Other Liabilities ..................................................... 3,857 12,556
Stockholders' Equity .................................................. 618,710 831,250
--------------------------
Total ............................................................... $ 891,186 $1,113,322
==========================
<CAPTION>
CONDENSED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
-----------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
INCOME:
Dividends from Subsidiaries ........................................... $ 263,000 $ 92,800 $ 41,600
Interest Income ....................................................... 10,853 14,496 10,869
Net Securities Gains .................................................. 13,566 9,032 6,376
Other Income .......................................................... 692 2,428 799
-----------------------------------------
Total Income ........................................................ 288,111 118,756 59,644
-----------------------------------------
EXPENSE:
Interest Expense ...................................................... 1,454 2,274 2,033
Interest on Junior Subordinated Debt .................................. 17,242 17,242 9,463
Compensation and Employee Benefits .................................... 3,048 2,194 1,211
Amortization and Write-down of Intangibles ............................ 2,088 7,986 440
Other Expenses ........................................................ 1,665 1,577 1,691
-----------------------------------------
Total Expenses ...................................................... 25,497 31,273 14,838
-----------------------------------------
Income before Income Taxes and Equity in Undistributed
Earnings of Subsidiaries .......................................... 262,614 87,483 44,806
Income Tax Expense .................................................... (177) 280 151
Equity in Undistributed Earnings of Subsidiaries ...................... (42,422) 80,772 125,866
-----------------------------------------
Net Income .......................................................... $ 220,369 $ 167,975 $ 170,521
=========================================
</TABLE>
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 1998 1997
---------------------------------------
<S> <C> <C> <C>
(IN THOUSANDS)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income ............................................................ $ 220,369 $ 167,975 $ 170,521
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and Amortization ..................................... 4,338 1,187 1,218
Amortization of Intangible Assets ................................. 2,088 7,986 440
Equity in Undistributed Earnings of Subsidiaries .................. 42,422 (80,772) (125,866)
Proceeds from Sales of Securities Held for Trading ................ - - 10,125
Purchase of Securities Held for Trading ........................... - - (9,670)
Net Securities Gains .............................................. (13,566) (9,032) (6,376)
Other, Net ........................................................ 14,805 (28,049) (4,019)
---------------------------------------
Net Cash Provided by Operating Activities ...................... 270,456 59,295 36,373
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sales of Securities Available-for-Sale .............. 105,038 112,782 42,016
Purchases of Securities Available-for-Sale ........................ (68,807) (133,632) (161,032)
Investment in Subsidiary Trusts ................................... - - (3,093)
Investment in Bank Subsidiary ..................................... - - (4,000)
---------------------------------------
Net Cash Provided by/(Used in) Investing Activities ............ 36,231 (20,850) (126,109)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Maturity of Senior Note Payable ................................... (25,000) - -
Loan from Affiliate ............................................... 40,000 - -
Purchase of Treasury Shares ....................................... (271,318) (56,462) (27,733)
Common Stock Sold for Cash ........................................ 4,777 26,949 6,814
Dividends Paid to Shareholders .................................... (100,233) (67,032) (46,607)
Proceeds from the Issuance of Junior Subordinate Debt Securities .. - - 102,713
---------------------------------------
Net Cash (Used in)/Provided by Financing Activities ............... (351,774) (96,545) 35,187
---------------------------------------
Net Decrease in Cash and Cash Equivalents ......................... (45,087) (58,100) (54,549)
Cash and Cash Equivalents at Beginning of Year .................... 47,218 105,318 159,867
---------------------------------------
Cash and Cash Equivalents at End of Year ....................... $ 2,131 $ 47,218 $ 105,318
=======================================
</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, 1999,
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 not be subject to any written order, agreement or directive. There
are no conditions or events since such notifications that management believes
have changed this classification.
<PAGE> 48
The following table sets forth the Company's regulatory capital at December 31,
1999, 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 ............... $ 811,977 11.48%
Regulatory Requirement ....... 282,868 4.00%
---------------------
Excess ....................... $ 529,109 7.48%
=====================
Total Risk Adjusted Capital .. $ 880,572 12.45%
Regulatory Requirement ....... 565,735 8.00%
---------------------
Excess ....................... $ 314,837 4.45%
=====================
Risk Weighted Assets ......... $7,071,689
==========
</TABLE>
The Company's Leverage Capital Ratio at December 31, 1999 was 6.84%. The Tier 1,
Total Risk Based and Leverage Capital Ratios of North Fork were 9.69%, 10.68%,
and 5.68%, respectively, at December 31, 1999. The Tier I, Total Risk Based and
Leverage Capital Ratios of Superior were 72.49%, 73.18%, and 7.36%,
respectively, at December 31, 1999.
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, 2000, pursuant to the regulations, was $28.3
million. Dividends from Superior are similarly limited by regulations of the
State of Connecticut.
Certain of North Fork's deposit liabilities acquired in previous
thrift acquisitions are insured under the SAIF fund (SAIF insured deposits at
December 31, 1999 were approximately $3.0 billion) and accordingly are subject
to higher quarterly assessments.
NOTE 15-DERIVATIVES FINANCIAL INSTRUMENTS
Periodically, the Company enters into interest rate agreements, including
interest rate swaps, caps, and floors, as part of its management of interest
rate exposure. These agreements are entered into as hedges against interest rate
risk and are designated against specific assets and liabilities.
Interest rate swaps outstanding at December 31, 1999 are summarized as follows
(dollars in thousands):
<TABLE>
<CAPTION>
Fixed Variable
Notional Interest Rate Interest Rate
MATURITY Amount Paying Receiving
- - - - -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
November 2000 ....................................... $100,000 4.62% 6.11%
November 2001 ....................................... $100,000 4.66% 6.11%
November 2001 ....................................... $100,000 4.72% 6.11%
May 2008 ............................................ $ 75,000 6.14% 6.13%
--------
Total Notional Amount of Interest Rate Swaps ..... $375,000
========
</TABLE>
These agreements require the Company to make periodic fixed rate payments while
receiving periodic variable rate payments indexed to the three month London
Interbank Offer Rate ("LIBOR"). At December 31, 1999 and 1998, the Company's
interest rate swaps had an unrealized gain of $13.9 million and an unrealized
loss of $1.0 million, respectively.
NOTE 16-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 non-performance 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.
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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, is as follows:
<TABLE>
<CAPTION>
1999 1998
Contract or Contract or
(IN THOUSANDS) Amount Amount
----------- -----------
<S> <C> <C>
Financial instruments whose contract amounts represent credit risk:
Commitments to extend credit..................................... $589,658 $468,556
Standby letters of credit........................................ 60,473 45,229
</TABLE>
(b) LEASE COMMITMENTS
At December 31, 1999, 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>
YEAR ENDED DECEMBER 31: Minimum
(IN THOUSANDS) Rentals
-------
<S> <C>
2000......................................................... $ 8,054
2001......................................................... 7,178
2002......................................................... 6,668
2003......................................................... 5,725
2004......................................................... 4,777
Thereafter................................................... 13,349
</TABLE>
Rent expense for the years ended December 31, 1999, 1998, and 1997 amounted to
$6.9 million, $6.4 million, and $6.9 million, respectively.
(c) OTHER MATTERS
On February 11, 2000, shareholders approved a reduction in the par value of the
Company's common stock from $2.50 per share to $0.01 per share and increased the
Company's authorized common shares from 200 million to 500 million.
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 17-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.
<PAGE> 50
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>
1999 1998
-------------------------------------------------------
Carrying Estimated Carrying Estimated
(IN THOUSANDS) Amount Fair Value Amount Fair Value
-------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and Cash Equivalents........................... $ 363,713 $ 363,713 $ 180,505 $ 180,505
Securities Held-to-Maturity......................... 1,229,703 1,179,181 1,571,545 1,574,196
Securities Available-for-Sale(1).................... 3,588,015 3,588,015 2,984,035 2,984,035
-------------------------------------------------------
Total Cash, Cash Equivalents and Securities..... $5,181,431 $5,130,909 $4,736,085 $4,738,736
=======================================================
</TABLE>
(1) Excludes $4.9 million in unrealized gains and $3.8 million in unrealized
losses on related interest swap agreements, used to hedge certain debt
securities at December 31, 1999 and 1998, respectively.
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 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,
<TABLE>
<CAPTION>
1999 1998
----------------------------------------------------
Carrying Estimated Carrying Estimated
(IN THOUSANDS) Amount Fair Value Amount Fair Value
----------------------------------------------------
<S> <C> <C> <C> <C>
Gross Loans......................................... $6,630,506 $6,530,986 $5,731,424 $5,889,662
====================================================
</TABLE>
DEPOSIT LIABILITIES AND BORROWINGS
The carrying amount for demand deposits, savings, NOW, money market accounts
and borrowings with an interest sensitive period of 90 days or less, are
reasonable estimates of fair value. Fair value for certificates of deposit and
other 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>
1999 1998
---------------------------------------------------
Carrying Estimated Carrying Estimated
(IN THOUSANDS) Amount Fair Value Amount Fair Value
---------------------------------------------------
<S> <C> <C> <C> <C>
Demand Deposits..................................................... $ 1,507,162 $ 1,507,162 $1,263,105 $1,263,105
Savings............................................................. 2,034,085 2,034,085 2,052,650 2,052,650
NOW and Money Market................................................ 931,040 931,040 897,372 897,372
Certificates of Deposit............................................. 2,072,463 2,084,178 2,214,495 2,244,254
Borrowings with an Interest Sensitive Period of 90 days or less..... 3,203,700 3,203,700 823,300 823,300
Borrowings with an Interest Sensitive Period Greater Than 90 Days... 1,305,500 1,296,578 2,166,796 2,209,348
---------------------------------------------------
Total Deposit Liabilities and Borrowings........................ $11,053,950 $11,056,743 $9,417,718 $9,490,029
===================================================
</TABLE>
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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, 1999 and 1998, there was no significant unrealized
appreciation or depreciation on these financial instruments.
DERIVATIVE FINANCIAL INSTRUMENTS
The fair value of derivative financial instruments is estimated based on quoted
market prices from various brokers. The following table presents the carrying
value and the estimated fair value of derivative financial instruments as of
December 31,
<TABLE>
<CAPTION>
1999 1998
-------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------------------------------------------------
<S> <C> <C> <C> <C>
Off Balance Sheet Instruments...................... $4,902 $13,930 $(3,812) $(957)
=================================================
</TABLE>
NOTE 18-SUBSEQUENT EVENT
DIME BANCORP, INC.
On March 5, 2000, the Company announced its intention to offer an exchange of
the Company's common stock and cash for the common stock of Dime Bancorp, Inc.
("Dime"), the parent company of Dime Savings Bank of New York, FSB. The purpose
is for the Company to acquire control of, and, thereafter the entire common
equity interest in Dime. Under the terms of the proposal, each share of Dime's
common stock would be exchanged for 0.9302 shares of the Company's common stock
and $2.00 cash. The offer is contingent on various conditions, including (i)
conditions that would require Dime's stockholders not to approve the Dime's
proposed merger with another financial institution, (ii) a minimum number of
shares of Dime's common stock to be tendered, (iii) making of Dime's
stockholder rights plan inapplicable to the Company's offer, (iv) approval of
the Company's stockholders of the issuance of the Company's common stock in the
offer and the merger, and (v) receipt of required regulatory approvals. The
transaction should close during the third quarter of 2000, if all of the
Company's conditions are met. The transaction, as proposed, is expected to be
treated as a tax-free reorganization for tax purposes and accounted as a
purchase for accounting purposes.
Dime had total assets of $23.9 billion, net loans of $15.2 billion,
investments of $4.2 billion, deposits of $14.3 billion and stockholder's equity
of $1.5 billion at December 31, 1999.
Contingent on the closure of the above proposed transaction, the
Company entered into a stock purchase agreement with FleetBoston Corporation
("FleetBoston"). Pursuant to this agreement, FleetBoston agreed to purchase (i)
250,000 shares of the Company's 7.5% Series B Non-Cumulative Convertible
Preferred Stock, par value $1.00 per share and with a liquidation preference of
$1,000.00 per share, convertible at $18.69 per share into the Company's common
stock and (ii) Common Stock Purchase Rights to acquire 7,500,000 shares of the
Company's common stock at an exercise price of $17.88, for an aggregate
purchase price of $250 million.
In connection with the Company's announcement of the aforementioned
proposed acquisition, a lawsuit has been filed by Dime alleging that the
Company and FleetBoston's actions violate anti-trust laws. The Company is of
the opinion that the allegations raised in the Dime's complaint are without
merit and intends to contest the allegations vigorously.
<PAGE> 52
NOTE 19-RECENT ACCOUNTING PRONOUNCEMENTS
DISCLOSURE ABOUT SEGMENTS FOR AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS 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 has evaluated the disclosure
requirements and determined that disclosure is not required as its operating
segments do not meet the quantitative thresholds prescribed in SFAS 131 for all
reporting periods.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may be specifically
designated as (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment, (b) a hedge of
the exposure to variable cash flows of a forecasted transaction, or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or a foreign
currency denominated forecasted transaction. The accounting for changes in the
fair value of a derivative depends on the intended use of the derivative and the
resulting designation. Under SFAS 133, an entity that elects to apply hedge
accounting is required to establish, at the inception of the hedge, the method
it will use for assessing the effectiveness of the hedging derivative and the
measurement approach for determining the ineffective aspect of the hedge. Those
methods must be consistent with the entity's approach to managing risk.
In June 1999, the FASB issued Statement of Financial Accounting Standards
No. 137 "Accounting for Derivative Instruments and Hedging Activities-Deferral
of the Effective Date of SFAS 133", delaying its effective date to all fiscal
quarters of all fiscal years beginning after June 15, 2000. Management is
currently evaluating the effect SFAS 133 will have on its financial statements.
At December 31, 1999, the Company was party to three interest rate swap
contracts with an aggregate notional value of $375 million.
<PAGE> 53
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, 1999 and 1998, the
related consolidated statements of income, cash flows, changes in stockholders'
equity and comprehensive income for each of the years in the three-year period
ended December 31, 1999. 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, 1999 and 1998,
the results of their operations and their cash flows for each of the years
in the three-year period ended December 31, 1999, in conformity with
generally accepted accounting principles.
New York, New York
January 18, 2000, except for note 2 (a) and (b), and note 18, which is as of
March 10, 2000
<PAGE> 54
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 internal controls to meet its
responsibilities for reliable consolidated financial statements. There are
inherent limitations in the effectiveness of internal controls, including the
possibility of errors or irregularities. Furthermore, because of changes in
conditions, the effectiveness of internal controls may vary over time.
Management believes that these systems and controls provide reasonable
assurance that assets are safe-guarded 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 internal controls 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 internal controls 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
<PAGE> 1
EXHIBIT - 21
SUBSIDIARIES OF REGISTRANT STATE OF INCORPORATION
- - - - -------------------------- ----------------------
North Fork Bank New York
Superior Savings of New England Connecticut
Compass Investment Services Corp New York
Amivest Corporation Delaware
North Fork Capital Trust I New York
North Fork Capital Trust II New York
Reliance Capital Trust I New York
SUBSIDIARIES OF NORTH FORK BANK
NFB Properties, Inc. New York
Home Fed Realty Corporation Connecticut
NFB Funding Inc. New Jersey
First Settlers Corporation New York
NFB Development Corp New York
Cutchco Corp New York
Clare Elm Corp New York
Compass Food Service Corp New York
Auto Group Services Corp New York
All Points Capital Corp New York
NFB Funding Inc. New Jersey
NFB Holding Corp New York
CBMC Inc. New York
Reliance Preferred Funding Corp. Delaware
Grandcet Realty Corp New York
Litneck Realty Corp New York
Before Real Estate Inc. New York
Afta Real Estate Inc. New York
Forty Second & Park Corp New York
Lefmet Corp New York
Concerned Management Corp New York
Jas-Cove Realty Corp New York
Avre Realty Corp New York
D&D Associates New York
Parkway Associates New York
Elmback Associates New York
<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,
333-56329, 333-74713, and 333-19047) on Form S-8, (Nos. 333-64219 and
333-24419) on Form S-4 and (Nos. 33-54222, and 333-40311) on Form S-3 of North
Fork Bancorporation, Inc. of our report dated January 18, 2000, except for note
2 (a) and (b), and note 18, which is as of March 10, 2000 relating to the
consolidated balance sheets of North Fork Bancorporation, Inc. and subsidiaries
as of December 31, 1999 and 1998 and the related consolidated statements of
income, cash flows, changes in stockholders' equity, and comprehensive
income for each of the years in the three-year period ended December 31, 1999,
which report appears in the December 31, 1999 Annual Report on Form 10-K of
North Fork Bancorporation, Inc.
KPMG LLP
New York, New York
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 299,946
<INT-BEARING-DEPOSITS> 63,767
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,592,917
<INVESTMENTS-CARRYING> 1,229,703
<INVESTMENTS-MARKET> 1,179,180
<LOANS> 6,617,130
<ALLOWANCE> 68,595
<TOTAL-ASSETS> 12,108,116
<DEPOSITS> 6,544,750
<SHORT-TERM> 2,908,700
<LIABILITIES-OTHER> 435,456
<LONG-TERM> 1,600,500
0
0
<COMMON> 362,816
<OTHER-SE> 255,894
<TOTAL-LIABILITIES-AND-EQUITY> 12,108,116
<INTEREST-LOAN> 501,627
<INTEREST-INVEST> 311,446
<INTEREST-OTHER> 4,673
<INTEREST-TOTAL> 817,746
<INTEREST-DEPOSIT> 160,694
<INTEREST-EXPENSE> 368,440
<INTEREST-INCOME-NET> 449,306
<LOAN-LOSSES> 6,000
<SECURITIES-GAINS> 13,578
<EXPENSE-OTHER> 177,294
<INCOME-PRETAX> 339,029
<INCOME-PRE-EXTRAORDINARY> 339,029
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 220,369
<EPS-BASIC> 1.63
<EPS-DILUTED> 1.62
<YIELD-ACTUAL> 4.16
<LOANS-NON> 8,998
<LOANS-PAST> 5,842
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 71,759
<CHARGE-OFFS> 14,334
<RECOVERIES> 5,170
<ALLOWANCE-CLOSE> 68,595
<ALLOWANCE-DOMESTIC> 64,671
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,924
</TABLE>
