SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
----------------
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 3, 2000
NORTH FORK BANCORPORATION, INC.
- ------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Delaware 1-10458 36-3154608
- ---------------------------- ------------------------ -------------------
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) 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
This Current Report on Form 8-K/A amends the Current Report on Form
8-K of North Fork Bancorporation, Inc. (the "Registrant") filed with the
Securities and Exchange Commission on March 3, 2000, and amended on March
28, 2000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS
(a) Financial Statements of the Business Acquired
JSB FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
December 31, 1999 and 1998 (In Thousands, Except Share and Per Share Amounts)
<TABLE>
<CAPTION>
ASSETS 1999 1998
---- ----
<S> <C> <C>
Cash and due from banks $17,488 $13,849
Federal funds sold 22,000 99,000
------------ ----------
Cash and cash equivalents 39,488 112,849
Securities available-for-sale, at estimated fair value 78,460 83,592
Securities held-to-maturity, net (estimate fair value
of $120,416 and $208,906, respectively) 121,801 208,457
Other investments 10,833 8,922
Mortgage loans, net 1,255,825 1,146,915
Other loans, net 18,803 22,744
Premises and equipment, net 17,912 18,340
Interest due and accrued 8,073 8,773
Other assets 16,845 11,057
------------ ----------
Total Assets $1,568,040 $1,621,649
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $1,072,164 $1,124,166
Federal Home Loan Bank of New York ("FHLB-NY") advances 50,000 50,000
Advance payments for real estate taxes and insurance 14,007 13,993
Official bank checks outstanding 10,642 11,604
Deferred tax liability, net 24,908 25,476
Accrued expenses and other liabilities 15,931 13,934
------------ ----------
Total Liabilities 1,187,652 1,239,173
------------ ----------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Preferred stock ($.01 par value, 15,000,000 shares
authorized; none issued) - --
Common Stock ($.01 par value, 65,000,000 shares authorized;
16,000,000 issued; 9,381,139 and 9,505,923 outstanding,
respectively) 160 160
Additionally pain-in capital 171,323 168,663
Retained income, substantially restricted 348,693 337,474
Common stock held by Benefit Restoration Plan Trust, at
cost (196,823 and 193,723 shares, respectively) (4,770) (4,477)
Common stock held in treasury, at cost (6,618,861 and
6,494,077 shares, respectively) (173,005) (160,215)
Accumulated other comprehensive income, net 37,987 40,871
------------ ----------
Total Stockholders' Equity 380,388 382,476
------------ ----------
Total Liabilities and Stockholders' Equity $1,568,040 $1,621,649
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
JSB FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
INTEREST INCOME:
Mortgage loans, net $92,473 $87,149 $74,149
Debt & equity securities, net 6,346 11,179 19,584
Collateralized mortgage obligations ("CMOs") net
and mortgage backed securities ("MBS"), net 6,539 6,537 8,436
Other loans, net 1,364 1,838 2,070
Federal funds sold 3,055 4,057 3,503
---------- ---------- ----------
Total Interest Income 109,777 110,760 107,742
---------- ---------- ----------
INTEREST EXPENSE:
Deposits 34,174 38,291 39,874
FHLB advances 2,810 185 -
---------- ---------- ----------
Total Interest Expense 36,984 38,476 39,874
---------- ---------- ----------
Net Interest Income 72,793 72,284 67,868
Provision for Loan Losses 13 51 648
---------- ---------- ----------
Net Interest Income After Provision for
Loan losses 72,780 72,233 67,220
---------- ---------- ----------
NON-INTEREST INCOME:
Real estate operations, net 1,239 714 10,442
Loan fees and service charges 3,709 5,859 3,969
Recovery of prior period expenses and unaccrued
interest on troubled loans - 4,346 -
Gain on sale of investments, net - - 6,991
Miscellaneous income, net 73 1,982 527
---------- ---------- ----------
Total Non-interest Income 5,021 12,901 21,929
---------- ---------- ----------
NON-INTEREST EXPENSE:
Compensation and benfits 15,826 15,843 15,921
Occupancy and equipment expenses (net of rental
income of $1,417, $1,283 and $1,287, respectively) 5,470 5,181 5,094
Federal deposit insurance premiums 138 142 149
Other real estate (income) expense, net (856) 33 (59)
Other general and administrative 6,251 6,259 5,324
---------- ---------- ----------
Total Non-Interest Expense 26,829 27,458 27,434
---------- ---------- ----------
Income Before Provision for Income Taxes 50,972 57,676 61,715
Provision for Income Taxes 21,820 13,288 24,625
---------- ---------- ----------
Net Income $ 29,152 $ 44,388 $ 37,090
========== ========== ==========
Basic earnings per common share $ 3.13 $ 4.53 $ 3.76
Diluted earnings per common share $ 3.06 $ 4.41 $ 3.64
Cash dividends per common share $ 1.80 $ 1.60 $ 1.40
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
JSB FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended December 31, 1999, 1998 and 1997
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
COMMON STOCK (PAR VALUE: $.01)
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Balance at beginning and end of year $ 160 $ 160 $ 160
---------- ---------- ----------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of year 168,663 165,112 163,500
Net allocation of common stock for benefit
Restoration Plan 293 278 924
Tax benefit for stock plans 2,318 3,222 688
Issuance of common stock for Directors' compensation 49 51 --
---------- ---------- ----------
Balance at end of year 171,323 168,663 165,112
---------- ---------- ----------
RETAINED INCOME, SUBSTANTIALLY RESTRICTED
Balance at beginning of year 337,474 311,436 289,588
Net income 29,152 44,388 37,090
Loss on reinsurance of treasury stock (1,086) (2,634) (1,437)
Cash dividends on common stock ($1.80, $1.60,
$1.40, respectively) (16,847) (15,716) (13,805)
---------- ---------- ----------
Balance at end of year 348,693 337,474 311,436
---------- ---------- ----------
COMMON STOCK HELD BY BENEFIT RESTORATION PLAN
TRUST, AT COST
Balance at beginning of year (4,477) (4,199) (3,275)
Common stock acquired (379) (285) (934)
Common stock distributed 86 7 10
---------- ---------- ----------
Balance at end of year (4,770) (4,477) (4,199)
---------- ---------- ----------
COMMON STOCK HELD IN TREASURY, AT COST
Balance at beginning of year (160,215) (133,464) (136,469)
Common stock reacquired (17,995) (31,466) --
Common stock reissued for options exercised 5,163 4,675 3,005
Common stock reissued for Directors' compensation 42 40 --
---------- ---------- ----------
Balance at end of year (173,005) (160,215) (133,464)
---------- ---------- ----------
ACCUMULATED OTHER COMPREHENSIVE INCOME:
NET UNREALIZED GAIN ON SECURITIES AVAILABLE-FOR-SALE,
NET OF TAX
Balance at beginning of year 40,871 28,469 21,795
Net unrealized (depreciation) appreciation in
securities available-for-sale, net of
realized gains included in income of $0, $0,
$6,991 respectively, and change in deferred
tax liability of $2,247, $8,947 and $5,371,
respectively) (2,884) 12,402 6,674
---------- ---------- ----------
Balance at end of year 37,987 40,871 28,469
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY $ 380,388 $ 382,476 $ 367,514
---------- ---------- ----------
See accompanying Notes to Consolidated Financial Statements.
JSB FINANCIAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999, 1998 and 1997
(In Thousands)
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 29,152 $ 44,388 $ 37,090
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 13 51 648
Net gain on sale/redemption of equity securities -- -- (6,991)
Decrease in deferred loan fees and discounts, net (439) (630) (418)
Accretion of discount less than (in excess of)
amortization of premium on MBS and CMOs 143 (46) (300)
Accretion of discount in excess of amortization
of premium on debt securities (4) (94) (337)
Depreciation and amortization of premises and equipment 2,585 2,213 1,891
Mortgage loans originated for sale (538) (4,839) (1,612)
Proceeds from sale of mortgage loans originated for sale 634 4,821 1,636
Gain on sales of mortgage and other loans, net (3) (47) (35)
Tax benefit for stock plans credited to capital 2,318 3,222 688
Gain on sale of real estate held-for-sale (1,042) (691) (9,992)
Decrease in interest due and accrued 700 505 32
(Decrease) increase in official bank checks outstanding (962) 1,199 761
Other (2,365) 2,445 (7)
---------- ---------- ----------
Net cash provided by operating activities 30,192 52,497 23,054
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans originated:
Mortgage loans (172,367) (261,201) (205,174)
Other loans (9,559) (15,143) (21,010)
Purchases of CMOs held-to-maturity (50,244) (57,084) (55,035)
Purchases of debt securities held-to-maturity and
securities available-for-sale (325,000) (379,000) (499,920)
Principal payments on:
Mortgage loans 63,597 85,652 60,833
Other loans 13,338 16,278 19,025
CMOs 45,886 65,381 106,545
MBS 875 1,353 1,590
Proceeds from maturities of U.S. Government and
federal agency securities 415,000 514,000 555,000
Proceeds from sale of other loans 151 5,144 681
Purchases of FHLB-NY stock (1,911) (1,277) (786)
Proceeds from sale/redemption of equity securities -- -- (7,813)
Purchases of premises and equipment, net of disposals (2,157) (3,524) (2,091)
Proceeds from sales of real estate holdings held-for-
sale and ORE, net of change in real estate holdings 1,590 3,356 18,375
---------- ---------- ----------
Net cash (used) by investing (20,801) (26,065) (14,154)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits (52,002) 2,963 (23,190)
Increase in advance payments for real estate taxes
insurance 14 3,671 2,057
Proceeds upon exercise of common stock options 4,078 2,041 1,568
Cash dividends paid to common stockholders (16,847) (15,716) (13,805)
Payments to repurchase common stock (17,995) (31,466) -
FHLB-NY advances - 50,000 -
---------- ---------- ----------
Net cash (used) provided by financing activities (82,752) 11,493 (33,370)
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents (73,361) 37,925 (24,470)
Cash and cash equivalents at beginning of year 112,849 74,924 99,394
---------- ---------- ----------
Cash and cash equivalents at end of year $ 39,488 $ 112,849 $ 74,924
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest on deposits $ 34,209 $ 38,333 $ 39,881
Income taxes $ 21,786 $ 5,825 $ 32,036
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Real estate acquired through foreclosure $ 212 - $ 540
========== ========== ==========
Transfer of real estate held-for-investment to
held-for-sale - - $ 6,145
========== ========== ==========
Mortgage originated upon sale of real estate from
the held-for-sale portfolio and other real estate - - $ 33
========== ========== ==========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
JSB FINANCIAL, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
NOTE (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RELATED MATTERS
JSB Financial, Inc.(the "Company" or the "Parent") is a unitary
savings and loan holding company. The Company holds all of the outstanding
common stock of its subsidiary, Jamaica Savings Bank FSB (the "Bank" or the
"Subsidiary"). The Company is subject to the financial reporting
requirements of the Securities Exchange Act of 1934.
(A) BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting principles. The
consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, the Bank, as consolidated with the Bank's
wholly owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation. Reclassifications have
been made to prior year financial statements to conform with the 1999
presentation. In preparing the consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets, liabilities and disclosures of contingent
assets and liabilities as of the dates of the consolidated statements of
financial condition and revenues and expenses for the periods presented.
Actual results could differ significantly from those estimates. Material
estimates that are particularly susceptible to significant change relate to
the determination of the allowances for credit losses.
(B) CONSOLIDATED STATEMENTS OF CASH FLOWS
For the purposes of reporting cash flows, the Company considers all
short-term investments with a maturity of less than three months from the
date of purchase to be cash equivalents.
(C) SECURITIES
The Company is required to report debt, readily-marketable equity,
and mortgage-backed securities in one of the following categories: (i)
"held-to-maturity" (when management has a positive intent and ability to
hold to maturity) which are reported at amortized cost; (ii) "trading"
(when held for current resale) which are to be reported at estimated fair
value, with unrealized gains and losses included in earnings; and (iii)
"available-for-sale" (all other debt and equity securities not designated
as held-to- maturity or trading) which are reported at estimated fair
value, with unrealized gains and losses excluded from earnings and
reported, net of tax, as other comprehensive income, a separate component
of stockholders' equity. The designation of a security as held-to-maturity
or available-for-sale is made at the time of acquisition.
Discounts on debt securities are accreted to income and premiums
are amortized against income over the life of the security, using a method
which approximates the level yield method. Gains and losses on the sales of
securities, if any, are recognized upon realization, using the specific
identification method.
(D) MORTGAGE AND OTHER LOANS
Loans are carried at unpaid principal balances net of any deferred
loan fees and unearned discounts. Discounts are accreted to income using a
method which approximates the level yield method, over the composite
average life of the loans. Loan fees received for commitments to make or
purchase loans are deferred and accreted into income over the life of the
loan using the level yield method.
Interest is accrued monthly on the outstanding balances of loans.
Mortgages 90 days in arrears and/or loans where full collection of
principal and interest is questionable are placed on non-accrual status, at
which time loan interest due and accrued is reversed against interest
income of the current period. A non-accrual loan is restored to accrual
status when principal and interest payments are current and full payment of
principal and interest is expected. Cash receipts on an impaired loan are
applied to principal and interest in accordance with the contractual terms
of the loan unless full payment of principal is not expected, in which case
both principal and interest payments received are applied against the loan
balance. The Bank continues to accrue interest income on non-insured other
loans up to 120 days delinquent, beyond which time the loan balance is
written off.
In accordance with SFAS No. 114, "Accounting by Creditors for
Impairment of a Loan" ("Statement 114"), and the amendment thereof, SFAS
No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition Disclosures" ("Statement 118"), the Company considers a loan
impaired if it is probable that, based upon current information, the
Company will be unable to collect all amounts due according to the
contractual terms of a loan agreement. Statement 114 does not apply to
large groups of smaller-balance homogeneous loans that are collectively
evaluated for impairment including the Company's one-to four-family
mortgage loans and consumer loans other than those modified in a troubled
debt restructure ("TDR"). The Company generally does not consider a loan
impaired when the delay in the timing of payments is three months or less
or the shortfall in the amount of payments is the lower of $10,000 or 1.0%
of the loan amount.
Loans individually reviewed for impairment by the Company are
limited to loans secured by multi-family, underlying cooperative,
commercial and construction properties, loans modified in TDRs and selected
one-to four-family loans. Examples of measurement techniques utilized by
the Company include present value of expected future cash flows, the loan's
market price (if one exists) and the estimated fair value of the
collateral. Reserves are established against impaired loans in amounts
equal to the difference between the recorded investment and either the
present value of the cash flows expected to be received, or the fair value
of the underlying collateral if foreclosure is deemed probable or if the
loan is considered collateral dependent. The Company's impaired loan
identification and measurement process is conducted in conjunction with the
Company's review of the adequacy of its allowance for loan losses.
A loan is deemed a TDR by the Company when concessionary
modifications to the original contractual terms are made for economic or
legal reasons related to the debtor's financial difficulties. Loans
modified in a TDR subsequent to the January 1, 1995 adoption of Statement
114 are considered impaired, unless in periods subsequent to restructuring,
the loan is performing in accordance with the new terms of the agreement
and such terms reflect those that would be offered by the Bank for a new
credit. Valuation allowances associated with such impaired loans are
measured in accordance with Statement 114 throughout the loan term.
Modifications made to loans in TDRs prior to the adoption of Statement 114
that are not considered impaired based on the terms of the restructuring
agreement continue to be accounted for under Statement 15, "Accounting by
Debtors and Creditors for Troubled Debt Restructurings", and are not
included in the Company's impaired loan statistics.
Loans originated for sale are carried at the lower of unpaid
principal balance, net of any discounts and deferred fees or estimated fair
value, in the aggregate.
(E) ALLOWANCES FOR LOSSES
Allowances for losses are estimates which are primarily reactive to
actual and anticipated changes in the real estate market, the economy in
the Bank's market area and debtors' financial condition. In connection with
the determination of allowances, management reviews: loan performance;
historical trends; appraisals of real estate held-for-sale, ORE and
properties securing significant mortgages; investment ratings for debt and
equity securities; and capital and liquidity levels for correspondent
banks, on an ongoing basis.
The allowance for loan losses is available for future charge-offs
of loans. The allowance is increased by the provision for loan losses made
and recoveries of loans previously charged off and reduced by charge-offs,
in whole or in part, of problem loans. The allowance for loan losses is
based on analysis of the loan portfolio on a regular basis and reflects an
amount which, in management's judgment, is adequate to provide for possible
loan losses in the portfolio. In evaluating the portfolio, management
considers numerous factors, such as loan growth, prior loss experience,
present and potential risks of the loan portfolio and current economic
conditions and entails management's review of delinquency reports, loan to
value ratios, collateral condition and debt coverage ratios.
The ultimate collection of the Bank's loan portfolio is affected by
economic conditions in the Bank's market area and changes thereto. The
Bank's mortgage loans are secured primarily by properties located in the
New York-metropolitan area.
Management believes that the allowances for loan losses as
presented in these consolidated financial statements are adequate. Future
additions to the allowances could be necessary based on changes in debtors'
financial condition, economic conditions or if economic conditions differ
from management's previous assessments. Various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowances for losses. Such agencies may require the Bank to adjust
allowances based on their judgment using information available to them at
the time of their examination.
(F) PREMISES AND EQUIPMENT
Depreciation is computed on the straight-line method over the
estimated useful life of the related assets. Estimated lives are 15 to 60
years for buildings and 5 to 8 years for furniture and fixtures.
Amortization for leasehold improvements is computed on the straight-line
method over the lesser of the term of the lease or the asset's estimated
useful life. Premises and equipment are carried at cost, net of accumulated
depreciation.
(G) REAL ESTATE HELD-FOR-SALE AND ORE
Real estate held-for-sale is carried at the lower of cost or net
fair value. Gains on the sale of real estate, if any, are accounted for
using the cost recovery method. Revenues and expenses from the operations
are reflected, as incurred, in the Company's operating results.
Real estate properties acquired through foreclosure, known as ORE,
are recorded at the lower of the net unpaid loan balance at the foreclosure
date plus related costs, or net fair value. Subsequent valuation
adjustments are made if the net fair value decreases below the carrying
amount. Gains, if any, on the sale of ORE are accounted for using the cost
recovery method.
(H) INCOME TAXES
The Company, the Bank and certain of its subsidiary corporations
file consolidated tax returns with the federal, state and local taxing
authorities. Other subsidiaries file separately, as required.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to the differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases (temporary differences). Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which temporary differences are expected to
be recovered or settled. A valuation allowance is provided for deferred tax
assets where realization is not considered "more likely than not". The
effect of changes in tax laws or rates on deferred tax assets and
liabilities is recognized in the period that includes the enactment date.
(I) STOCK BASED COMPENSATION
SFAS No. 123 "Accounting for Stock-Based Compensation" ("Statement
123") permits either the recognition of compensation cost for the estimated
fair value of employee stock-based compensation arrangements on the date of
grant, or the disclosure in the notes to the financial statements of the
pro forma effects on net income and earnings per share, determined as if
the fair value-based method had been applied in measuring compensation
cost. The Company has adopted the disclosure option and continues to apply
Accounting Principles Bulletin Opinion No. 25, "Accounting for Stock Issued
to Employees" in accounting for its plans.
(J) EARNINGS PER SHARE
Basic earnings per share ("EPS") is calculated by dividing net
income by the weighted average number of common shares outstanding, with no
consideration given to potential outstanding shares. Diluted EPS is
calculated using the same method as basic EPS, but reflects the potential
dilution that would occur if stock options outstanding were exercised and
converted into common stock. Common stock equivalents are computed using
the treasury stock method.
(K) TREASURY STOCK
Repurchases of common stock are accounted for under the cost
method, whereby shares repurchased are recorded in a contra-equity account.
(L) COMPREHENSIVE INCOME
Total comprehensive income for the years ended December 31, 1999,
1998 and 1997 was $26,268,000, $56,790,000 and $43,764,000, respectively.
NOTE (2) MERGER WITH NORTH FORK BANCORPORATION, INC.
On August 16, 1999, the Company announced that, on that day, it had
entered into an Agreement and Plan of Merger ("Merger Agreement") in which
the Company would merge with and into North Fork Bancorporation, Inc.
("North Fork"). Under the terms of the Merger Agreement, stockholders of
JSB Financial were to receive 3.0 shares of North Fork common stock for
each share of the Company's common stock.
Pursuant to the merger agreement and in accordance with the 1996
Stock Option Plan, the Company granted a total of 142,000 stock options to
Directors and Senior Officers at various strike prices. The expense
associated with these grants has been deferred along with other costs
directly attributable to the merger. As such, these options are not
reflected in the pro-forma information presented in Note 23.
NOTE (3) REPURCHASES OF COMMON STOCK
During the years ended December 31, 1999 and 1998, the Company
repurchased 326,600 and 620,100 shares of its outstanding common stock at
an average price of $55.10 and $50.74 per share, respectively. The Company
did not repurchase any shares during 1997. The Company issued 200,160,
204,296 and 136,896 shares of treasury stock for options exercised during
1999, 1998 and 1997, respectively. In addition, the Company issued 1,656
and 1,800 shares of treasury stock pursuant to the Directors' Stock Program
during the years ended December 31, 1999 and 1998, respectively. (See Note
24.) There were 6,618,861 and 6,494,077 shares of common stock in the
treasury at December 31, 1999 and 1998, respectively.
NOTE (4) SECURITIES
The following tables set forth information regarding the Company's
securities portfolios as of December 31:
<TABLE>
<CAPTION>
1999
----
Securities Available-for-Sale:
- -----------------------------
Gross Unrealized
Cost Fair Value Gains Losses
--------------- ------------- ------------ -----------
(In Thousands)
------------- ------------ -----------
<S> <C> <C> <C> <C>
Marketable equity securities $10,869 $78,460 $67,832 $241
--------------- ------------- ------------ -----------
Securities Held-to-Maturity:
- ---------------------------
Gross Unrealized
Amortized Cost Fair Value Gains Losses
--------------- ------------- ------------ -----------
(In Thousands)
U.S. Government and federal
agency securities $20,000 $19,996 - $4
CMOS, net 100,005 98,524 10 1,491
MBS:
GNMA 1,723 1,818 95 -
FNMA 18 20 2 --
Freddie Mac 55 58 3 --
--------------- ------------- ------------ -----------
Total MBS, net 1,796 1,896 100 -
--------------- ------------- ------------ -----------
Total $121,801 $120,416 $110 $1,495
--------------- ------------- ------------ -----------
1998
Securities Available-for-Sale:
- -----------------------------
Gross Unrealized
Cost Fair Value Gains Losses
--------------- ------------- ------------ -----------
(In Thousands)
--------------- ------------- ------------ -----------
Marketable equity securities $10,869 $83,592 $72,746 $23
--------------- ------------- ------------ -----------
Securities Held-to-Maturity:
- ---------------------------
Gross Unrealized
Amortized Cost Fair Value Gains Losses
--------------- ------------- ------------ -----------
(In Thousands)
U.S. Government and federal
agency securities $109,996 $110,026 $38 $8
CMOS, net 95,790 95,997 310 103
MBS:
GNMA* 2,464 2,659 195 -
FNMA* 53 57 4 -
Freddie Mac* 154 167 13 --
--------------- ------------- ------------ -----------
Total MBS, net 2,671 2,883 212 -
--------------- ------------- ------------ -----------
Total $208,457 $208,906 $560 $111
--------------- ------------- ------------ -----------
* Definitions: GNMA - Government National Mortgage Association; FNMA - Federal
National Mortgage Association;
Freddie Mac - Federal Home Loan Mortgage Corporation
</TABLE>
CMOs represent participating interests in pools of long-term first
mortgage loans originated and serviced by the issuers of the securities.
All of the CMOs held by the Company consist of First Tranche- Planned
Amortization Class Bonds collateralized by FNMA, Freddie Mac or GNMA
mortgage-backed securities, which in turn are collateralized by whole
loans. MBS represent securities issued by governmental mortgage agencies
and are collateralized by mortgage loans.
There were no sales of securities during 1999 or 1998. During 1997,
the Bank sold or redeemed marketable equity securities with a cost of
$823,000, realizing gross pre-tax gains of $6,991,000 and no losses.
Presented in the table below is the contractual maturity
distribution for debt securities held-to- maturity at December 31, 1999:
Amortized Estimated
Cost Fair Value
------------ --------------
(In Thousands)
Within 1 year $ 20,078 $ 20,079
After 1 year through 5 years 22,912 22,726
After 5 years through 10 years 78,566 77,347
After 10 years 245 264
------------ --------------
Total $ 121,801 $ 120,416
------------ --------------
Actual maturities of CMOs and MBS may differ substantially from the
presentation, due to prepayment activity. The table reflects the balance of
the entire security in the category in which the final contractual payment
is due.
The Company loans securities to specified brokerage houses. These
loaned securities are collateralized at a minimum of 102% of their fair
value with government securities and/or cash. To protect the Company's
investment, the agreements contain provisions to increase the collateral
obtained, should the fair value of the collateral decline or the fair value
of the security loaned increase. Upon termination of the agreement,
securities loaned are returned to the Company. The following table reflects
the carrying value of securities loaned and their estimated fair value and
the estimated fair value of the collateral at December 31:
1999 1998
------------- -------------
(In Thousands)
Amortized cost - Securities loaned $ - $9,996
------------- -------------
Estimated fair value - Securities
loaned $ - $10,034
------------- -------------
Estimated fair value - Collateral $ - $10,422
------------- -------------
NOTE (5) OTHER INVESTMENTS
Other investments at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
Carrying Estimated Fair Carrying Estimated Fair
Value Value Value Value
------------ -------------- ----------- ---------------
(In Thousands)
<S> <C> <C> <C> <C>
Investment required by law* $ 10,803 $ 10,803 $ 8,892 $ 8,892
Other stock 30 30 30 30
------------ -------------- ----------- ---------------
Total other investments $ 10,833 $ 10,833 $ 8,922 $ 8,922
============ ============== =========== ===============
* The Bank is required to hold shares of the FHLB-NY.
</TABLE>
NOTE (6) LOANS
Loans are summarized as follows:
December 31,
------------
1999 1998
---- ----
(In Thousands)
Mortgage loans:
Multi-family $ 808,806 $ 702,914
Underlying cooperative* 313,020 302,494
One-to four-family 75,209 75,773
Commercial 65,514 69,001
Construction 1,272 5,176
-------------- -------------
Total mortgage loans 1,263,821 1,155,358
-------------- -------------
Deferred loan fees and unearned
discounts (2,264) (2,702)
Allowance for loan losses (5,732) (5,741)
-------------- -------------
Total mortgage loans, net $1,255,825 $1,146,915
============== =============
Other loans:
Property improvement $ 8,831 $ 10,652
Loans secured by deposit accounts 7,295 8,166
Consumer 2,470 3,754
Overdraft loans 184 202
Student 221 153
-------------- -------------
December 31,
------------
1999 1998
---- ----
(In Thousands)
Total other loans 19,001 22,927
-------------- -------------
Unearned discounts -- --
Allowance for loan losses (198) (183)
-------------- -------------
Total other loans, net $ 18,803 $ 22,744
============== =============
* Underlying cooperative loans are first liens on cooperative apartment
buildings and are senior to loans on the individual units commonly called
cooperative share loans.
NOTE (7) LOAN DELINQUENCIES
Information regarding loans delinquent 90 days or more at December 31,
1999 and 1998 is summarized as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
Number Principal Number Principal
of balance of balance
Loans of loans loans of loans
-------------- ----------- ----------- ----------------
(Dollars in Thousands)
Delinquent loans:
<S> <C> <C> <C> <C>
Guaranteed* 14 $ 288 10 $ 233
Non-guaranteed - - 5 216
-------------- ----------- ----------- ----------------
Total delinquencies over
90 days 14 $ 288 15 $ 449
============== =========== =========== ================
Ratio of loans 90 days 0.02% 0.04%
or more past due to ----- ----
total gross loans
* These loans are guaranteed by the Federal Housing Administration, the
Veterans Administration or the New York State Higher Education Services
Corporation.
</TABLE>
Impaired and Non-accrual loans
At December 31, 1999, the Bank did not have any impaired mortgage
loans. At December 31, 1998, the Bank had one impaired mortgage loan, which
comprised total non-accrual loans, with a $213,000 balance and a $27,000
specific valuation allowance. During 1999, the property securing this loan
was transferred to ORE. (See Note 13.)
If all non-accrual loans had been performing in accordance with their
original terms, the Company would have recorded interest income, with
respect to such loans, of $18,000, $509,000 and $1,180,000 for the years
ended December 31, 1999, 1998 and 1997, respectively. This compares to
$397,000 of actual payments recorded for 1998 and no interest income
recognized with respect to such loans for 1999 and 1997.
During 1998, a $12,754,000 non-accrual underlying cooperative mortgage
loan was satisfied. Upon satisfaction, $4,346,000 comprised of unrecorded
interest (which included a recovery of the $1,180,000 for each 1998 and
1997), legal fees and late charges were recovered and included in
non-interest income. The average balance of impaired loans for calendar
1999, 1998 and 1997 was $160,000, $5,491,000 and $12,754,000, respectively.
NOTE (8) ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses for the years ended December
31, 1999, 1998 and 1997 is summarized as follows:
Mortgage loans
--------------
1999 1998 1997
---- ---- ----
(In Thousands)
Balance at beginning of period $5,741 $5,741 $5,176
Provision for loan losses -- -- 600
Loans charged off (9) -- (35)
Recoveries of loans previously
charged off -- -- --
------------ ------------- -----------
Balance at end of period $5,732 $5,741 $5,741
============ ============= ===========
Other loans
-----------
1999 1998 1997
---- ---- ----
(In Thousands)
Balance at beginning of period $183 $139 $151
Provision for loan losses 13 51 48
Loans charged off (22) (25) (72)
Recoveries of loans previously
charged off 24 18 12
------------ -------------- -----------
Balance at end of period $198 $183 $139
============ ================ ===========
NOTE (9) MORTGAGE LOAN SERVICING
A summary of principal balances, servicing income and the number of
loans serviced for others by the Bank at and for the years ended December
31, 1999, 1998 and 1997 were as follows:
1999 1998 1997
---- ---- ----
(Dollars In Thousands)
Principal balances $ 14,823 $ 16,509 $ 14,467
============ ============== ==========
Servicing income $ 38 $ 40 $ 46
============ ============== ==========
Number of loans 338 534 906
============ ============== ==========
The balance of loans sold with full recourse was $3,957,000 and
$4,414,000 at December 31, 1999 and 1998, respectively. The Bank has not
sold any loans with recourse since 1985. The Bank sold mortgage loans
without recourse during 1999, 1998 and 1997, receiving proceeds of
$634,000, $4,821,000 and $1,636,000, respectively. The Bank retained
servicing for these loans, which did not result in the recording of any
servicing assets.
NOTE (10) PREMISES AND EQUIPMENT
Premises and equipment at December 31, 1999 and 1998 consisted of the
following:
1999 1998
---- ----
(In Thousands)
Banking houses and land $23,028 $22,253
Furniture, fixtures and equipment 20,906 19,813
Safe deposit vaults 1,016 1,016
----------- ----------
44,950 43,082
Less accumulated depreciation and
amortization 27,038 24,742
----------- ----------
Premises and equipment, net $17,912 $18,340
=========== ==========
Depreciation and amortization expense for the years ended December 31,
1999, 1998 and 1997 was $2,585,000, $2,213,000 and $1,891,000,
respectively.
NOTE (11) INTEREST DUE AND ACCRUED
Interest due and accrued at December 31, 1999 and 1998 consisted of the
following:
1999 1998
---- ----
(In Thousands)
U.S. Government and federal agency
securities $ 398 $ 1,042
CMOs 491 489
MBS 23 23
Mortgage and other loans 7,161 7,219
----------- ----------
Total interest due and accrued $ 8,073 $ 8,773
=========== ==========
NOTE (12) REAL ESTATE HELD-FOR-INVESTMENT
On June 30, 1997, management reclassified all real estate
held-for-investment to held-for-sale. The Company has not held any real
estate for investment subsequent to this reclassification and accordingly,
no results of operations for subsequent periods are presented. A commercial
office tower located at 1995 Broadway, New York, was sold in October 1997,
subsequent to its reclassification to held-for- sale, resulting in a
pre-tax gain of $9,163,000. (See Note 13.)
The summarized statement of operations for the Bank's wholly-owned
subsidiaries that comprised real estate held-for-investment for the year
ended December 31, 1997, were as follows:
1997
----
(In Thousands)
Rental income $1,478
Net interest income 2
Other income 17
-----------
Total income 1,497
-----------
Real estate taxes 246
Operating and other expenses 647
-----------
Total expenses 893
-----------
Income from real estate held-for- $ 604
investment ===========
NOTE (13) REAL ESTATE HELD-FOR-SALE AND ORE
The following summarizes real estate properties owned by the Bank
through its real estate subsidiaries at December 31:
1999 1998
---- ----
(In Thousands)
Real Estate Held-for-Sale 1:
Land $ 130 $ 130
Buildings 49 50
Other assets/(liabilities), net (154) 328
----------- ----------
25 508
----------- ----------
ORE:
Cooperative apartments 2 -- 277
Condominium apartment 212 --
----------- ----------
212 277
----------- ----------
Total Real Estate Held-for-Sale and ORE $ 237 $ 785
=========== ==========
1 Several of the Bank's wholly-owned subsidiaries own cooperative
apartments in various buildings, which are carried at zero cost and are
included in Real Estate Held-for-Sale. At December 31, 1999 and 1998,
118 and 126 such cooperative apartments remained held-for-sale,
respectively.
2 During 1999, all of the cooperative apartments that comprised ORE were
sold resulting net gains, before tax, of $878,000.
NOTE (14) REAL ESTATE OPERATIONS, NET
Results of real estate operations for the years ended December 31,
1998, 1997 and 1996 were as follows:
1999 1998 1997
---- ---- ----
(In Thousands)
Income from real estate held-for-
investment, net (See Note 12.) $ - $ - $ 604
------------- ------------ ------------
Real estate held-for-sale:
Rental income, net of expenses 197 23 (154)
Gain on sale 1 1,042 691 9,992
------------- ------------ ------------
1,239 714 9,838
------------- ------------ ------------
Real estate operations, net $1,239 $ 714 $ 10,442
============= ============ ============
1 Includes gains on the sale of cooperative apartments, owned by various
of the Bank's wholly-owned subsidiaries, which are carried at zero
cost. The 1997 gains include a $9,163,000 pre-tax gain on the sale of
an office tower. (See Note 12.)
NOTE (15) INCOME TAXES
The 1999, 1998 and 1997 provisions for income tax were comprised of the
following amounts:
1999 1998 1997
---- ---- ----
(In Thousands)
Current:
Federal $13,747 $ 8,791 $18,877
State and local 6,393 3,597 5,652
------------- ------------ ------------
20,140 12,388 24,529
------------- ------------ ------------
Deferred:
Federal 1,160 465 66
State and local 520 435 30
------------- ------------ ------------
1,680 900 96
------------- ------------ ------------
Provision for income taxes $21,820 $13,288 $24,625
============= ============ ============
For the years ended December 31, 1999, 1998 and 1997, the Company
recognized tax benefits relating to its stock option and other stock
benefit plans of $2,318,000, $3,222,000 and $688,000, respectively, which
were credited directly to stockholders' equity.
A reconciliation of the statutory U.S. federal income tax provision and
rate, to the actual tax provision and effective rate for the years ended
December 31, 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
% of % of % of
Pre Tax Pre Tax Pre Tax
Amount Earnings Amount Earnings Amount Earnings
--------- --------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Statutory Federal rate $17,840 35.00% $20,187 35.00% $21,600 35.00%
Dividends received exclusion (272) (.53) (247) (.43) (246) (.40)
State and local income taxes,
net of Federal income
tax benefit 4,493 8.81 2,621 4.54 3,693 5.98
Benefits realized from realign-
ment of operating subsidiary -- -- (10,667) (18.49) -- --
Other, net (241) (.47) 1,394 2.42 (422) (.68)
----- ----- ----- ---- ----- ------
Provision for income taxes $21,820 42.81% $13,288 23.04% $24,625 39.90%
========= ========= ======= ======= ======= =========
</TABLE>
At December 31, 1999 and 1998, deferred tax assets and liabilities were
comprised of the following:
1999 1998
---- ----
(In Thousands)
Deferred Tax Assets:
Deferred profits on unsold cooperative shares $1,297 $ 1,582
Allowance for loan losses 2,597 2,594
Benefit plan costs 5,096 4,684
Loan fees and mortgage discounts 189 294
Other 96 657
----------- ----------
Deferred tax assets 9,275 9,811
----------- ----------
Deferred Tax Liabilities:
Securities available-for-sale (29,604) (31,852)
Benefit plan costs (4,579) (3,435)
----------- ----------
Deferred tax liabilities (34,183) (35,287)
----------- ----------
Deferred tax liability, net $(24,908) $(25,476)
=========== ==========
Pursuant to SFAS No. 109 "Accounting for Income Taxes", the Bank is
generally not required to provide deferred taxes for the difference between
book and tax bad debt expense taken in years prior to, or ending at
December 31, 1987, referred to as base year reserves. The Bank did not have
any post 1987 tax reserves. The base year reserves of $85,107,000 and
supplemental reserve are frozen, not forgiven. These reserves continue to
be segregated as they are subject to recapture penalty if one of the
following occurs: (a) the Bank's retained earnings represented by this
reserve are used for purposes other than to absorb losses on loans,
including excess dividends or distributions in liquidation; (b) the Bank
redeems its stock; (c) the Bank fails to meet the definition provided by
the Code for a Bank. Future changes in the Federal tax law, could of course
further affect the status of the base year reserve. (See Note 19.)
New York State and the City of New York adopted legislation to reform
the franchise taxation of thrift reserves for loan losses. The legislation
applies to taxable years beginning after December 31, 1995. The
legislation, among other things, retained the reserve method for bad debt
deductions. The New York State and the City of New York bad debt deduction
is no longer predicated on the Federal deduction which is now computed on
the direct charge-off method.
NOTE (16) EARNINGS PER SHARE
The following is a reconciliation of the denominators of basic and
diluted EPS computations for net income. The numerator for calculating both
basic and diluted earnings per share for the Company is net income.
For the Year Ended December 31,
1999 1998 1997
---- ---- ----
(In Thousands, Except EPS Amounts)
Net Income - (Numerator) $29,152 $44,388 $37,090
Basic EPS: (Denominator)
Weighted Average Shares 9,322 9,793 9,858
Basic EPS $3.13 $4.53 $3.76
============= ============ ============
Diluted EPS: (Denominator)
Weighted Average Shares 9,322 9,793 9,858
Incremental shares-options 203 281 332
------------- ------------ ------------
Weighted Average and
Incremental Shares 9,525 10,074 10,190
Diluted EPS $3.06 $4.41 $3.64
============= ============ ============
NOTES (17) DEPOSITS
Deposits at December 31, 1999 and 1998 are summarized as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------- ------------------------------
Stated Rate Amount Percent Stated Rate Amount Percent
----------- -------- -------- ----------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance by interest rate:
Demand -- % $ 40,240 3.75% -- % $ 47,152 4.20%
Negotiable order of
withdrawal ("NOW") 1.24 35,157 3.28 1.24 37,005 3.29
Money market 2.32 68,675 6.41 2.32 62,747 5.58
Passbook 2.22 493,317 46.01 2.22 522,671 46.49
Lease security 2.22 22,200 2.07 2.22 21,031 1.87
Certificates: 4.07-5.00 344,017 32.09 4.07-5.00 200,635 17.85
5.01-6.00 54,104 5.04 5.01-6.00 213,121 18.96
6.01-6.82 14,454 1.35 6.01-6.82 19,804 1.76
--------- -------- --------- --------- ---------
412,575 38.48% 433,560 38.57
--------- -------- --------- ---------
Total deposits $1,072,164 100.00% $1,124,166 100.00%
========= ======== ========= ---------
</TABLE>
At December 31, 1999 and 1998, the scheduled maturities of certificate
accounts were as follows:
1999 1998
---- ----
Amount Percent Amount Percent
-------------- ---------- ----------- -----------
(Dollars in Thousands)
12 months or less $353,359 85.65 % $367,226 84.70%
13 to 36 months 41,070 9.95 48,220 11.12
37 to 60 months 18,146 4.40 18,114 4.18
-------------- ---------- ----------- -----------
$412,575 100.00 % $433,560 100.00%
============== ========== =========== ===========
At December 31, 1999 and 1998, certificate accounts in excess of
$100,000, were $52,375,000 and $48,517,000, respectively. The Federal
Deposit Insurance Corporation, an agency of the U.S. Government, generally
insures each depositor's savings up to $100,000 through the Bank Insurance
Fund.
Interest expense on deposit balances is summarized as follows for the
years ended December 31, 1999, 1998 and 1997:
1999 1998 1997
---- ---- ----
(In Thousands)
NOW $ 431 $ 733 $ 880
Money market 1,954 2,092 2,549
Passbook 10,985 13,011 15,186
Lease security 479 482 491
Certificates 20,325 21,973 20,768
------------- ------------ ------------
Total interest expense $34,174 $38,291 $39,874
============= ============ ============
NOTE (18) FHLB-NY ADVANCES
On December 8, 1998, the Bank borrowed $50.0 million from the FHLB-NY
at a fixed rate of 5.62% for ten years. Interest expense on FHLB-NY
advances for the years ended December 31, 1999 and 1998 was $2,810,000 and
$185,000, respectively. Prior to 1998, the Bank had not borrowed funds for
its direct activities since 1984. Pursuant to a blanket collateral
agreement with the FHLB-NY, advances are secured by qualifying mortgage
loans owned by the Bank in an amount at least equal to 110% of the advances
outstanding.
NOTE (19) RETAINED INCOME, SUBSTANTIALLY RESTRICTED
In the unlikely event of a complete liquidation of the Bank (and only
in such an event) eligible depositors who continue to maintain accounts
shall be entitled to receive a distribution from the liquidation account,
which was established in connection with the Company's initial public stock
offering. The total amount of the liquidation account is decreased if the
balances of eligible deposits decrease on the annual determination dates.
The balance of the liquidation account was $51,046,000 at December 31, 1999
and $57,358,000 at December 31, 1998.
The Bank is not permitted to declare or pay a cash dividend on, or
repurchase any of its stock if the effect thereof would cause its net worth
to be reduced below either (i) the amount required for the liquidation
account or (ii) the amount of applicable regulatory capital requirements.
Retained income at December 31, 1999 and 1998 includes $85,107,000,
which has been segregated for federal income tax purposes as a bad debt
reserve. Any use of this amount for purposes other than to absorb losses on
loans may result in taxable income, under federal regulations, at current
rates. The Bank did not recognize any tax bad debt deductions during the
years ended December 31, 1999, 1998 and 1997. (See Note 15.)
NOTE (20) COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Bank occupies premises covered by noncancellable leases with
expiration dates through October 31, 2002 (exclusive of renewal options).
Rental expense under these leases for the years ended December 31, 1999,
1998 and 1997 was $276,000, $270,000 and $272,000, respectively. At
December 31, 1999 the projected minimum rental payments (exclusive of
possible rent escalation charges and normal recurring charges for
maintenance, insurance and taxes) were as follows for the years ended
December 31:
Amount
(In Thousands)
2000 $ 166
2001 100
2002 50
Thereafter --
---------------
Total $ 316
===============
Loan Commitments
At December 31, 1999, commitments to originate mortgage loans, all of
which were at fixed rates, were $33,123,000 with stated rates ranging from
7.125% to 7.875%. At December 31, 1999, deposit account overdraft lines
available were $824,000, with stated rates ranging from 10.00% to 12.00%
and unused business lines of credit were $1,000, with a stated rate of
15.00%. At December 31, 1999, there were $130,000 of mortgage loans
held-for-sale.
Security Purchase Commitments
At December 31, 1998, there were no commitments to purchase federal
agency securities, equity securities, CMOs or MBS.
Litigation
The Bank is a defendant in several lawsuits arising out of the normal
conduct of business. In the opinion of management and after consultation
with legal counsel, the ultimate outcome of these matters is not expected
to have a material adverse effect on the Company's results of operations,
business operations or the consolidated financial condition of the Company.
NOTE (21) PENSION PLANS AND OTHER POSTRETIREMENT BENEFIT PLANS
The Bank sponsors a trusteed non-contributory defined benefit pension
plan (the "Pension Plan") covering substantially all of its full-time
employees. It is the policy of the Bank to fund current and past service
pension costs accrued. In addition, the Bank sponsors a pension benefit
restoration plan ("Pension Restore Plan") to provide retirement benefits
which would have been provided under the Pension Plan except for
limitations imposed by Section 415 and 401(a)(17) of the Internal Revenue
Code. Payments under the Pension Restore Plan will be paid out of the
general assets of the Bank.
The Bank's life insurance benefit plan provides for continued coverage
for retirees with fifteen years of credited service. The coverage at the
time of retirement, or age 65, whichever comes first, is reduced by 20% per
year over a five year period to a minimum coverage of $5,000, which remains
in force until death. The retiree has the option each time the coverage is
reduced to convert all or part of the reduction to whole-life coverage at
the retiree's cost. In accordance with SFAS No. 106, costs of
postretirement benefits are accrued during an employee's active working
career.
The following tables, which do not reflect curtailment costs due to
workforce reductions upon completion of the North Fork merger (See Note
2.), set forth the Bank's benefit obligations, fair values of plan assets
and funded status recognized in the Company's consolidated financial
statements for the Pension Plan and Pension Restore Plan, as combined, and
other postretirement benefit plans at December 31:
Pension Benefits Other Benefits
---------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
(In Thousands)
CHANGE IN BENEFIT OBLIGATION
Balance at beginning of year $48,101 $47,133 $ 1,663 $ 1,596
Service cost 1,333 1,239 24 24
Interest cost 2,775 2,624 96 96
Amendments 3,975 -- -- --
Actuarial (gain)/loss (4,926) (1,150) -- --
Benefits paid (1,769) (1,745) (57) (53)
----------- ----------- ----------- ----------
Balance at end of year $49,489 $48,101 $ 1,726 $ 1,663
=========== =========== =========== ==========
CHANGE IN PLAN ASSETS
Balance at beginning of year $71,020 $ 63,711 $ -- $ --
Actual return on plan assets,
net of expenses 7,093 9,020 -- --
Employer contribution 34 34 57 53
Benefits paid (1,769) (1,745) (57) (53)
---------- ----------- ----------- ----------
Balance at end of year $76,378 $71,020 $ -- --
========== =========== =========== ==========
Funded status 26,889 22,919 (1,726) (1,663)
Unrecognized net asset (2,431) (2,885) -- --
Unrecognized prior service cost 5,139 1,428 -- --
---------- ----------- ----------- ----------
Unrecognized actuarial (gain/
loss) (23,450) (17,658) -- --
Net amount recognized $ 6,147 $ 3,804 $ (1,726)$ (1,663)
========== =========== =========== ==========
AMOUNTS RECOGNIZED IN THE
STATEMENT OF FINANCIAL
POSITION CONSIST OF:
Prepaid benefit cost $ 10,457 $ 7,917 $ -- $ --
Accrued benefit liability (4,310) (4,113) (1,726) (1,663)
Accumulated other com-
prehensive income -- -- -- --
---------- ----------- ----------- ----------
Net amount recognized $ 6,147 $ 3,804 $ (1,726) $ (1,663)
========== =========== =========== ==========
Weighted-average assumptions were as follows as of December 31:
Pension Benefits Other Benefits
--------------------------- --------------------------
1999 1998 1997 1999 1998 1997
------- --------- -------- -------- -------- ------
Discount rate 6.25% 5.75% 5.75% 8.00% 8.00% 8.00%
Expected return on plan
asset 8.00% 8.00% 8.00% N/A N/A N/A
Rate of compensation
increase 6.50% 6.50% 6.50% 6.50% 6.50% 6.50%
The components of net periodic benefit costs were as follows for the
years ended December 31:
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
------------------------ ---------------------
1999 1998 1997 1999 1998 1997
------- -------- ------- ------- ------ ------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Service cost $ 1,333 $ 1,239 $ 998 $ 24 $ 24 $ 24
Interest cost 2,775 2,624 2,568 96 96 96
Expected return on plan assets (5,601) (5,032) (4,167) -- -- --
Amortization of unrecognized net asset (454) (454) (454) -- -- --
Amortization of prior service cost 264 145 145 -- -- --
Recognized actuarial (gain/loss) (626) (429) (228) -- -- --
----------------------------------------------
Net periodic benefit cost $(2,309) $(1,907)$(1,138)$ 120 $ 120 $ 120
==============================================
</TABLE>
The projected benefit obligation, accumulated benefit obligation and
fair value of plan assets for the pension plan with accumulated benefit
obligations (i.e. the Pension Restore Plan) in excess of plan assets were
$3,707,000, $3,323,000 and $0, respectively, as of December 31, 1999, and
$4,043,000, $3,544,000 and $0, respectively, as of December 31, 1998.
NOTE (22) INCENTIVE SAVINGS PLAN
The Incentive Savings Plan (the "Savings Plan") is a defined
contribution and thrift savings plan subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA"), as amended.
Prior to the suspension of the Savings Plan during 1990, all full-time
employees were eligible for voluntary participation after one year of
continuous service. The Savings Plan continues to earn income on the
Savings Plan's investments. The Bank bears the costs of administering the
Savings Plan. Effective December 31, 1999, this plan was terminated and the
assets will be distributed to participants prior to the February 29, 2000
consummation.
In connection with the Bank's adoption of an Employee Stock Ownership
Plan ("ESOP") during 1990, in order to comply with the limitations set
forth by the Internal Revenue Code regarding qualified plans, no further
contributions have been made to the Savings Plan. Management has determined
to continue the ESOP and that contributions to the Savings Plan will remain
suspended indefinitely.
NOTE (23) STOCK OPTION PLANS
Effective upon the conversion of the Bank, in 1990, from mutual to
stock form of ownership, the Company adopted the Incentive Stock Option
Plan (the "Stock Option Plan") and the Option Plan for Outside Directors
(the "Directors' Option Plan").
Stock Option Plan
-----------------
Pursuant to the Stock Option Plan, 1,430,000 common stock options
(which expire ten years from the date of grant, June 27, 1990) were granted
to the executive officers and employees of the Company and its subsidiary,
the Bank. Each option entitles the holder to purchase one share of the
Company's common stock at an exercise price equal to $10.00 per share (the
initial public offering price). Options became exercisable on a cumulative
basis in equal installments at a rate of 20% per year commencing one year
from the date of grant. Simultaneously with the grant of these options,
"limited rights" with respect to the shares covered by the options were
granted, however, pursuant to the merger with North Fork, the limited
rights were rescinded. During the years ended December 31, 1999, 1998 and
1997, 83,660, 98,046 and 122,646 options granted under the Stock Option
Plan were exercised, respectively. At December 31, 1999, the remaining
142,434 options granted under the Stock Option Plan were exercisable.
Directors' Option Plan
----------------------
Each member of the Board of Directors, who is neither an officer nor an
employee of the Company or the Bank, was granted nonstatutory common stock
options to purchase 25,000 shares of the common stock. In addition, active
Directors Emeritus were each granted nonstatutory common stock options to
purchase 10,000 shares of the common stock. In the aggregate, members of
the Board of Directors and active Directors Emeritus of the Company were
granted options, with limited rights, to purchase 170,000 shares of the
common stock of the Company at an exercise price equal to $10.00 per share,
the initial public offering price. All options granted, including limited
rights attached thereto, under the Directors' Option Plan expire upon the
earlier of 10 years following the date of grant or one year following the
date the optionee ceases to be a Director. During the years ended December
31, 1999, 1998 and 1997, 40,500, 106,250, and 6,250 options granted under
the Directors' Option Plan were exercised. At December 31, 1999, all
options granted under the Directors' Option Plan were exercised.
The 1996 Stock Option Plan
--------------------------
The JSB Financial, Inc. 1996 Stock Option Plan (the "1996 Option
Plan"), became effective January 1, 1996, subject to stockholder approval,
which was obtained on May 14, 1996. The Company reserved 800,000 shares of
common stock of the Company for issuance upon the exercise of options. The
1996 Option Plan provides for: (1) the grant of stock options to directors
on an annual basis pursuant to a specified formula; (2) the grant of stock
options to officers at the discretion of the Employee Benefits Committee of
the Bank; (3) if certain events, which are likely to lead to a change in
control of the Company or the Bank, should occur, stock options relating to
any shares of the Company reserved for issuance that were not previously
made subject to options, will be granted to all current directors and
officers who were previously granted stock options under the 1996 Option
Plan; (4) the grant of limited rights relating to all of the foregoing
options, which shall be exercisable only upon a change of control; and (5)
the grant of dividend equivalent rights ("DER") relating to all of the
foregoing options, which may provide for a cash payment to the optionee
upon exercise of the option, based on the difference between the percentage
of earnings per share paid by the Company as cash dividends compared to the
percentage of earnings per share paid as cash dividends by the twenty-five
largest stock owned thrift institutions in the United States, calculated on
an annual basis.
Pursuant to the 1996 Option Plan, each of the Company's Directors, who
is neither an officer nor an employee of the Company or the Bank, is
granted annually, nonstatutory common stock options to purchase 4,000
shares of the common stock, each active Director Emeritus is granted 2,000
options and individuals who become directors are granted 5,000 options.
Options granted under the 1996 Option Plan are granted at an exercise price
equal to the market closing price of the Company's common stock on the
business day prior to grant. The option period during which an individual
granted options may exercise such option will commence six months after the
date of grant and will expire no later than ten years from the date of the
grant. There were 76,000, 0 and 8,000 options exercised from the 1996
Option Plan during the years ended 1999, 1998 and 1997, respectively. At
December 31, 1999, 574,000 of the 716,000 options outstanding under the
1996 Option Plan were exercisable. Effective January 1, 1999, 154,000
options were granted at an exercise of $54.375 per share. As a result of
the merger agreement between the Company and North Fork, 142,000 options
were granted on August 16, 1999 with exercise prices ranging between
$43.5156 and $51.7361. These options, which are not reflected in the tables
below (See Note 2), will become exercisable on the earlier of six months
from the date of grant or the effective date of the merger.
The following table presents option transactions summarized for the
Company's stock option plans for the years ended December 31, 1997, 1998
and 1999.
Weighted
Average
Number of Exercise
Shares Price
------------- ------------
Options outstanding at December 31, 1996 764,786 $14.67
1997 Grants 175,000 38.48
1997 Forfeitures -- --
1997 Exercises (136,896) 11.45
----------
Options outstanding at December 31, 1997 802,890 20.40
1998 Grants 164,000 50.06
1998 Forfeitures -- --
1998 Exercises (204,296) 10.00
----------
Options outstanding at December 31, 1998 762,594 29.57
1999 Grants 296,000 49.32
1999 Forfeitures -- --
1999 Exercises (200,160) 20.37
----------
Options outstanding at December 31, 1999 858,434 $38.53
==========
Options exercisable at December 31, 1999 716,434 $37.47
==========
The range of exercise prices on options outstanding were $10.00 to
$54.38, $10.00 to $50.06, and $10.00 to $47.88, for the years ended
December 31, 1998, 1997 and 1996, respectively. The weighted average
remaining contractual life for all stock options outstanding at December
31, 1999 was 6.8 years.
In accordance with Statement 123, the Company used the Black-Scholes
option-pricing model to determine the fair value of the 1999, 1998 and 1997
option grants, using the following weighted average assumptions:
1999 1998 1997
---- ---- ----
Dividend yield 3.19% 3.07% 3.63%
Expected violatility 22.07 20.75 20.93
Risk-free interest rate 4.65 5.74 6.28
Expected option lives 4.7 Years 5.7 Years 6 Years
On a pro forma basis, had compensation expense for the Company's 1996
Stock Option Plan been determined based on the fair value at the grant
dates for awards made under that plan, in accordance with the expense
method of Statement 123, the Company's net income and earnings per share
would have been reduced as follows for the years ended December 31:
1999 1998 1997
---- ---- ----
Net income (as reported) $29,152 $44,388 $37,090
Pro forma net income $27,128 $43,378 36,288
Basic EPS (as reported) $3.13 $4.53 $3.76
Pro forma Basic EPS $2.91 $4.43 $3.68
Diluted EPS (as reported) $3.06 $4.41 $3.64
Pro forma Diluted EPS $2.85 $4.31 $3.56
The pro forma results presented above may not be representative of the
effects reported in pro forma net income for future years, because
Statement 123 was not applied to all outstanding, non-vested awards, as
Statement 123 does not apply to awards prior to January 1, 1996.
The Company recognized $400,000, $270,000 and $73,000 of expense
related to the DER for the years ended December 31, 1999, 1998 and 1997,
respectively.
NOTE (24) STOCK PLANS
Employee Stock Ownership Plan
-----------------------------
Since 1990 the Bank has maintained an ESOP. For 1997, 1998 and 1999,
the Board of Directors authorized contributions to the ESOP, to purchase
shares, based on approximately 6.0% of employees' base salary.
ESOP benefits generally become 20% vested after each year of credited
service, becoming 100% vested after five years of service with the Bank.
Forfeited shares are reallocated among participating employees in the same
proportion as contributions. Benefits are payable upon death, retirement,
early retirement, disability or separation from service and may be payable
in cash or stock. The Bank recorded a net expense of $569,000, $574,000 and
$566,000 related to the ESOP for the years ended December 31, 1999, 1998
and 1997, respectively. At December 31, 1999, there were no unallocated
shares in the ESOP Plan. There were eight and three unallocated shares in
the ESOP Plan at December 31, 1998 and 1997, respectively.
The trustee for the ESOP must vote all allocated stock held in the ESOP
trust in accordance with the instructions of the participants. Common stock
allocated to participants was 10,913, 12,451 and 15,342 for the years ended
December 31, 1999, 1998 and 1997, respectively. The Bank bears the cost of
administering the ESOP.
Directors' Stock Program
------------------------
To further align the outside Directors' interest with those of the
Company's stockholders, on December 9, 1997, the Board of Directors of the
Company authorized the issuance of up to 20,000 shares of the Company's
common stock to the Company's non-employee directors, pursuant to the
Jamaica Savings Bank FSB Directors' Stock Program (the "Directors' Stock
Program"). Pursuant to the Directors' Stock Program, each year,
non-employee Directors of the Bank will receive shares of the Company's
common stock having a fair market value equal to approximately one-third of
the annual directorship fees during such year. The stock will be issued in
lieu of a cash payment of such fees. Shares distributed thereunder will be
from the Company's treasury stock. The operation of the Directors' Stock
Program is automatic, with the determination of the appropriate number of
shares to be issued to each director based on the fair market value of the
common stock at the close of business prior to the date of issuance.
Directors do not have the option to receive cash rather than stock in
payment of the portion of their fees subject to the Directors' Stock
Program. During 1999 and 1998, the Company issued 1,656 and 1,800 shares
pursuant to this program.
NOTE (25) BENEFIT RESTORATION PLAN
The Bank maintains a non-qualified Benefit Restoration Plan (the
"Restore Plan"), to compensate participants in the Bank's benefit plans
that are limited by Section 415 of the Internal Revenue Code. With certain
exceptions, the Restore Plan is unfunded. However, in connection with the
ESOP, which entitles participants to shares of the Company's common stock
and the Savings Plan, which entitles participants to direct amounts, if
any, invested in the Company's stock, the Bank established a trust. The
purpose of this trust is to purchase, on an ongoing basis, shares of the
Company's common stock to which participants of the Restore Plan are
entitled. By establishing this trust, the Bank fixed the amount of cash
expended for benefits payable in shares of common stock of the Company or
its equivalent cash value at the time of payout. The shares of common stock
held by the trust are reflected as contra-equity and additional paid-in
capital on the Consolidated Statements of Financial Condition of the
Company. At December 31, 1999 and 1998, the trust held 196,823 and 193,723
shares of common stock, respectively, at an aggregate cost of $4,770,000
and $4,477,000, respectively. The expense recognized for the Restore Plan
in connection with the ESOP for 1999, 1998 and 1997 was $35,000, $7,000 and
$113,000, respectively.
NOTE (26) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107 "Disclosures about Fair Value of Financial Instruments"
("Statement 107") defines the fair value of a financial instrument as the
amount at which the instrument could be exchanged in a current transaction
between willing parties. Statement 107 provides limited guidance for
calculating fair value estimates when quoted prices are not available,
therefore the Company has disclosed the valuation approach and the material
assumptions which have been made. The relevance and reliability of the
estimates of fair values presented are limited, given the dynamic nature of
market conditions, including changes in interest rates, the real estate
market, existing borrowers' financial condition and numerous other factors
over time.
The following methods and assumptions were utilized by management to
estimate the fair value of each class of financial instruments at December
31, 1999 and 1998:
Cash and cash equivalents, interest due and accrued: The carrying
values approximate fair value because of the short-term nature of these
instruments.
Securities available-for-sale, securities held-to-maturity and other
investments: The estimated fair values are based on quoted market prices at
the reporting date for those or similar investments, except for FHLB-NY
stock, which is reflected at cost.
Mortgage and other loans: For certain homogeneous categories of loans,
such as some residential mortgages and student loans, fair value is
estimated using the quoted market prices for securities backed by similar
loans, adjusted for differences in loan characteristics. In addition, it is
assumed that one-to four-family fixed rate mortgage loans are FNMA
qualifying, and could therefore be packaged into a MBS. The estimated fair
value for the remainder of the mortgage and other loan portfolios was
computed by discounting the contractual future cash flows at rates offered
by the Bank, which approximate market rates, at December 31, 1999 and 1998
on loans with terms similar to the remaining term to maturity and to
borrowers with similar credit quality. The estimated fair value of
non-performing loans, if material, are calculated on an individual basis,
applying a discount commensurate with the credit risk.
Techniques for estimating fair value are extremely sensitive to the
assumptions and estimates used. While management has attempted to use
assumptions and estimates which it believes are most reflective of the loan
portfolio and the current market, a greater degree of subjectivity is
inherent in these values than those determined in formal trading
marketplaces. As such, readers are cautioned in using this information for
purposes of evaluating the financial condition and/or value of the Company
in and of itself or in comparison with any other company.
Deposits: All deposits, except certificates, are subject to rate
changes at any time, and therefore are considered to be carried at fair
value. The estimates of fair value for certificates reflect the present
value of the contractual future cash flow for each certificate. The present
value rates utilized were the rates offered by the Bank (which approximate
market rates) at December 31, 1999 and 1998, respectively, on a certificate
with an initial term to maturity equal to the remaining term to maturity of
the existing certificates.
FHLB-NY Advances: Fair value estimates are based on discounted
contractual cash flows using rates which approximate the rates offered for
borrowings of similar remaining maturities.
Commitments: Commitments to originate loans and purchase securities are
derived by applying the fees currently charged to enter into similar
agreements, taking into account the remaining terms of the agreements and
the present credit worthiness of the counterparties. For fixed-rate loan
commitments, estimated fair value also considers the difference between
interest rates on the reporting date and the committed rates. The estimated
fair value of lines of credit is based on the fees charged for similar
agreements or on the estimated cost to terminate them or otherwise settle
the obligations with the counterparties at the reporting dates. The
commitments existing at December 31, 1999 and 1998, would have been offered
at substantially the same rates and under substantially the same terms that
would have been offered at December 31, 1999 and 1998 to the
counterparties; therefore the estimated fair value of the commitments was
zero at those dates.
The following table presents carrying values and estimated fair values
of financial instruments at December 31:
<TABLE>
<CAPTION>
1999 1998
------------------------ -------------------------
Estimated Estimated
Carrying Fair Carrying Fair
Value Value Value Value
----------- ------------ ------------ ------------
(In Thousands)
<S> <C> <C> <C> <C>
Financial assets
Cash and cash equivalents $ 39,488 $ 39,488 $ 112,849 $ 112,849
Securities available-for-sale 78,460 78,460 83,592 83,592
Securities held-to-maturity 121,801 120,416 208,457 208,906
Other investments 10,833 10,833 8,922 8,922
Mortgage loans, gross 1,263,821 1,248,932 1,155,358 1,197,873
Other loans, gross 19,001 18,946 22,927 22,915
Interest due and accrued 8,073 8,073 8,773 8,773
Financial liabilities
Deposits $1,072,164 $1,072,784 $1,124,166 $1,126,151
FHLB-NY advances 50,000 43,635 50,000 50,249
</TABLE>
NOTE (27) REGULATORY CAPITAL
The Bank is subject to various regulatory capital requirements
established by the federal banking agencies. 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 Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities and certain off
balance-sheet items as calculated under regulatory accounting practices.
The Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weighing and
other factors. (See also Note 19.)
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum capital amounts and ratios.
The most recent notification from the Office of Thrift Supervision ("OTS"),
as of March 31, 1998, categorized the Bank as "well capitalized" under the
regulatory framework for prompt corrective action. There are no conditions
or events since that notification that management believes have changed the
institution's "well capitalized" status. The following table sets forth the
required ratios, as applicable to the Bank, and amounts and the Bank's
actual capital ratios and amounts at December 31:
<TABLE>
<CAPTION>
To be Well
Capitalized
Under Prompt
For Capital Corrective
Actual Adequacy Purposes Action Provisions
------------------- ------------------ ------------------
Amount Ratio Amount Ratio Amount Ratio
--------- --------- --------- -------- -------- ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
1999
- ----
Total risk-based capital
(to risk weighted assets) $333,202 25.28% $105,425 8.00 % $131,782 10.00%
Tangible capital (to
tangible assets) 308,410 20.48 22,592 1.50 N/A N/A
Tier I leverage (core)
capital (to adjusted
tangible assets) 308,410 20.48 45,185 3.00 75,308 5.00
1998
- ----
Total risk-based capital
(to risk weighted assets) $302,663 24.62% $ 98,362 8.00 % $122,953 10.00%
Tangible capital (to
tangible assets) 276,364 18.25 22,717 1.50 N/A N/A
Tier I leverage (core)
capital (to adjusted)
tangible assets) 276,364 18.25 45,434 3.00 75,723 5.00
</TABLE>
The OTS regulatory capital requirements incorporate an interest rate risk
("IRR") component. Savings institutions with "above normal" IRR exposure
are subject to a deduction from regulatory capital for purposes of
calculating their risk-based capital requirements. Implementation of the
IRR component has been delayed by the OTS.
OTS regulations generally require that institutions deduct from capital
their investment in and advances to subsidiaries engaged, as principal, in
activities not permissible for national banks, such as real estate
development. OTS regulations also require that all equity and direct
investments including all loans and advances in which a legally binding
commitment existed at April 12, 1989 be deducted from capital for the
purposes of computing regulatory capital ratios. As a result of this
regulation, the Bank excluded from its regulatory capital $2,623,000 and
$4,588,000 at December 31, 1999 and 1998, respectively.
Distributions charged against an institution's capital accounts, such
as, the upstreaming of funds to holding companies are subject to certain
limitations under OTS regulations. An institution, such as the Bank, which
meets its fully phased-in capital requirements is able to pay dividends to
the Company, upon 30 days notice to the OTS, in an amount that would reduce
its surplus capital ratio by one-half at the beginning of the year, plus
all of its net income determined on the basis of generally accepted
accounting principles for that calendar year. The institution must continue
to meet all fully phased-in capital requirements after the proposed capital
distribution.
NOTE (28) PARENT ONLY FINANCIAL INFORMATION
The following condensed statements of financial condition at December
31, 1999 and 1998 and the condensed statements of operations and cash flows
for the years ended December 31, 1999, 1998 and 1997, for JSB Financial,
Inc. (parent company-only) present the Company's investment in its wholly-
owned subsidiary, the Bank, using the equity method of accounting.
Condensed Statements of Financial Condition
December 31, 1999 and 1998
(In Thousands)
ASSETS 1999 1998
---- ----
Cash and cash equivalents $ 30,657 $ 21,102
Securities held-to-maturity, net (estimated fair
value of $0 and $39,995, respectively -- $ 40,000
Other assets, net 1,110 410
Investment in subsidiary 348,651 321,155
------------ ----------
Total Assets $ 380,418 $ 382,667
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities, net $ 30 $ 30
Stockholders' equity 380,388 $ 382,637
------------ ----------
Total Liabilities and Stockholders' Equity $ 380,418 $ 382,667
============ ==========
Condensed Statements of Operations
For the Years Ended December 31,
(In Thousands)
1999 1998 1997
---- ---- ----
Interest income $ 1,822 $ 4,596 $ 6,080
Other income - 1,087 13
-------- ---------- ---------
Total income 1,822 5,683 6,093
-------- ---------- ---------
Expenses 892 661 531
-------- ---------- ---------
Income Before Income Taxes and Equity in
Undistributed Earnings of the Bank 930 5,022 5,562
Provision for Income Taxes -- 1,542 1,781
-------- ---------- ---------
Income Before Equity in Undistributed
Earnings of the bank 930 3,480 3,781
Equity in Undistributed Earnings of the Bank,
Net of Provision for Income Taxes 28,222 40,908 33,309
-------- ---------- ---------
Net Income $29,152 $44,388 $37,090
======== ========== =========
Condensed Statements of Cash Flows
For the Years Ended December 31,
(In Thousands)
Cash flows from operating activities: 1999 1998 1997
---- ---- ----
Net income $ 29,152 $ 44,388 $ 37,090
Adjustments to reconcile net income to cash
provided by operating activities:
Equity in undistributed earnings of the Bank (28,222) (40,908) (33,309)
Decrease (increase) in other assets (700) 316 (11)
Other 89 88 (2)
--------- ---------- ----------
Net cash provided by operating activities 319 3,884 3,768
--------- ---------- ----------
Cash flows from investing activities:
Purchases of securities held-to-maturity (60,000) (205,000) (260,000)
Proceeds from maturities of securities
held-to maturity 100,000 235,000 270,000
Principal payments on mortgage loans - 15,195 44
Accretion of discount in excess of
amortization of premium on debt securities - - 7
--------- ---------- ----------
Net cash provided by investing activities 40,000 45,195 10,051
--------- ---------- ----------
Cash flows from financing activities:
Cash dividends paid to common stockholders (16,847) (15,716) (13,805)
Payments to repurchase common stock (17,995) (31,466) --
Proceeds upon exercise of common stock
options 4,078 2,041 1,568
--------- ---------- ----------
Net cash used by financing activities (30,764) (45,141) (12,237)
--------- ---------- ----------
Net increase in cash and cash equivalents 9,555 3,938 1,582
Cash and cash equivalents at beginning of year 21,102 17,164 15,582
--------- ---------- ----------
Cash and cash equivalents at end of year $ 30,657 $ 21,102 $ 17,164
--------- ---------- ----------
NOTE (29) SUBSEQUENT EVENTS
Subsequent to receiving all required regulatory and stockholder
approvals, the merger with North Fork under the terms of the Merger
Agreement was consummated on February 29, 2000.
KPMG LLP
INDEPENDENT AUDITORS' REPORT
To The Stockholders and The Board of Directors of North Fork
Bancorporation, Inc. the successor by merger to JSB Financial, Inc.:
We have audited the accompanying consolidated statements of financial
condition of JSB Financial, Inc. and subsidiary as of December 31, 1999 and
1998, and the related consolidated statements of operations, changes in
stockholders' equity and cash flows 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 JSB
Financial, Inc. and subsidiary at December 31, 1999 and 1998, and 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.
/s/ KPMG LLP
Melville, New York
January 28, 2000
except Note 29, which is
as of February 29, 2000
(b) Pro Forma Financial Information
SELECTED HISTORICAL FINANCIAL INFORMATION
The following tables show selected historical financial information for
North Fork and JSB for the three years ended December 31, 1999 and for
Reliance for the three years ended June 30, 1999. This information is
derived from historical financial statements previously filed by North
Fork, JSB and Reliance with the SEC. You should read these summaries
together with these financial statements and their accompanying notes.
Certain JSB and Reliance financial information has been reclassified to
conform with North Fork's financial information.
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
(in thousands, except ratios and per share amounts)
YEARS ENDED DECEMBER 31,
1999 1998 1997
------------- ------------------------
<S> <C> <C> <C>
CONSOLIDATED SUMMARY STATEMENTS OF INCOME:
Interest Income......................................... $817,746 $753,100 $724,424
Interest Expense........................................ 368,440 328,456 326,803
----------- - ------------------------
Net Interest Income................................... 449,306 424,644 397,621
Provision for Loan Losses (2)........................... 6,000 15,500 8,100
Non-Interest Income (2) (3)............................. 73,017 64,318 59,322
Other Non-Interest Expense (2).......................... 152,043 146,607 157,182
Capital Securities Costs ............................... 16,843 16,843 9,235
Amortization & Write-down of Intangible Assets (2)...... 8,408 14,479 7,292
Merger Related Restructure Charges (2).................. - 52,452 -
----------- - ------------------------
Income Before Income Taxes............................ 339,029 243,081 275,134
Provision for Income Taxes (2).......................... 118,660 75,106 104,613
----------- - ------------------------
Net Income............................................ $220,369 $167,975 $170,521
=========== = ========================
SHARE DATA: (4)
Weighted Average Shares - Basic......................... 135,025 140,706 136,761
Weighted Average Shares - Diluted ...................... 135,865 141,766 139,333
Common Shares Outstanding at Period-End................. 128,442 141,072 139,478
CONSOLIDATED PER SHARE DATA: (4)
Net Income - Basic ..................................... $1.63 $1.19 $1.24
Net Income - Diluted (2)................................ $1.62 $1.18 $1.22
Cash Dividends (5)...................................... $0.63 $0.65 $0.38
Dividend Payout Ratio (2)............................... 39% 55% 32%
Book Value at Period-End................................ $4.82 $5.89 $5.53
CONSOLIDATED BALANCE SHEET DATA AT PERIOD-END:
Total Assets............................................$12,108,116 $10,679,556 $10,073,632
Securities:
Available-for-Sale.................................... 3,592,917 2,980,223 2,156,624
Held-to-Maturity...................................... 1,229,703 1,571,545 1,763,308
Loans, net.............................................. 6,617,130 5,714,293 5,739,131
Allowance for Loan Losses............................... 68,595 71,759 74,393
Deposits................................................ 6,544,750 6,427,622 6,337,939
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase.............................. 2,665,200 2,955,096 2,104,036
Other Borrowings........................................ 1,844,000 35,000 449,600
Capital Securities...................................... 199,314 199,289 199,264
Stockholders' Equity.................................... 618,710 831,250 770,889
CONSOLIDATED AVERAGE BALANCE SHEET DATA:
Total Assets............................................$11,479,539 $10,107,386 $9,557,020
Securities.............................................. 4,799,458 3,835,761 3,783,276
Loans, net.............................................. 6,115,127 5,729,743 5,357,470
Total Deposits.......................................... 6,550,717 6,484,243 6,179,024
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase.............................. 2,911,802 2,236,257 1,944,592
Other Borrowings........................................ 847,386 185,783 485,200
Stockholders' Equity.................................... 786,590 837,413 667,211
</TABLE>
(1) (A) During the periods presented, the following mergers were
accounted for using the pooling-of-interests method of accounting:
(a) March 1998, New York Bancorp Inc. ("NYB")
(B) The following mergers were accounted for using the purchase method
of accounting:
(a) June 1998, Amivest Corporation
(b) December 1997, Superior Savings of New England (formerly Branford
Savings Bank)
North Fork's consolidated results of operations reflect activity of the
acquired businesses specified in 1(B) above subsequent to the
acquisition dates.
(2) Merger related restructure charges and other special items incurred in
the first quarter of 1998 consisted of a $52.5 million merger related
restructure charge, an additional $11.5 million loan loss provision, a
$6 million write-down of intangible assets, securities losses of $2.5
million, and $1.8 million of other operating expenses (net of $20.7
million in tax benefit). Tax items included a charge of $5 million
related to the recapture of bad debt reserve of NYB's banking
subsidiary, Home Federal Savings Bank, for state and local tax purposes
and a benefit of $20 million, which resulted from a corporate
reorganization. Diluted earnings per share and the dividend payout
ratio excluding the merger related restructure charge and other special
items would have been $1.46 and 45% for the period December 31, 1998.
(3) Includes $4.5 million from interest on a tax settlement received by NYB
from the Internal Revenue Service during 1997.
(4) Amounts have been restated to give effect for the 3-for-2 common stock
split effective May 15, 1998, the 2-for-1 common stock split effective
May 15, 1997, NYB's 4-for-3 common stock split effective July 24, 1997,
and NYB's 3-for-2 common stock split effective January 23, 1997.
(5) Cash dividends per share represent North Fork's historical cash
dividends.
SEE ACCOMPANYING "SELECTED FINANCIAL RATIOS" PAGE.
<TABLE>
<CAPTION>
JSB FINANCIAL, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
(in thousands, except ratios and per share amounts)
YEARS ENDED DECEMBER 31,
1999 1998 1997
--------------------------------------
<S> <C> <C> <C>
CONSOLIDATED SUMMARY STATEMENTS OF INCOME:
Interest Income (1)..................................... $111,837 $117,813 $109,611
Interest Expense........................................ 36,984 38,476 39,874
--------------------------------------
Net Interest Income................................... 74,853 79,337 69,737
Provision for Loan Losses .............................. 13 51 648
Non-Interest Income (1) (2)............................. 2,961 5,848 20,060
Other Non-Interest Expense.............................. 26,829 27,458 27,434
--------------------------------------
Income Before Income Taxes............................ 50,972 57,676 61,715
Provision for Income Taxes (3).......................... 21,820 13,288 24,625
--------------------------------------
Net Income............................................ $29,152 $44,388 $37,090
======================================
SHARE DATA:
Weighted Average Shares - Basic......................... 9,322 9,793 9,858
Weighted Average Shares - Diluted ...................... 9,525 10,074 10,190
Common Shares Outstanding at Period-End................. 9,381 9,506 9,920
CONSOLIDATED PER SHARE DATA:
Net Income - Basic ..................................... $3.13 $4.53 $3.76
Net Income - Diluted.................................... $3.06 $4.41 $3.64
Cash Dividends.......................................... $1.80 $1.60 $1.40
Dividend Payout Ratio................................... 59% 36% 38%
Book Value at Period-End................................ $40.55 $40.24 $37.05
CONSOLIDATED BALANCE SHEET DATA AT PERIOD-END:
Total Assets............................................ $1,568,040 $1,621,649 $1,535,031
Securities:
Available-for-Sale.................................... 89,293 92,514 69,888
Held-to-Maturity...................................... 121,801 208,457 352,967
Loans, net.............................................. 1,280,558 1,175,583 1,005,625
Allowance for Loan Losses............................... 5,930 5,924 5,880
Deposits................................................ 1,096,813 1,149,763 1,141,930
Other Borrowings........................................ 50,000 50,000 -
Stockholders' Equity.................................... 380,388 382,476 367,514
CONSOLIDATED AVERAGE BALANCE SHEET DATA:
Total Assets............................................ $1,608,797 $1,561,304 $1,534,578
Securities.............................................. 225,528 288,414 464,237
Loans, net.............................................. 1,203,988 1,096,509 912,407
Total Deposits.......................................... 1,137,468 1,148,841 1,151,377
Other Borrowings........................................ 50,000 3,288 -
Stockholders' Equity.................................... 375,797 374,194 348,608
</TABLE>
(1) Includes a $3 million recovery of non-accrual interest and late charges
and a $1.3 million recovery of prior period expenses on a non
performing loan in June 1998.
(2) Includes a $1 million gain from the sale of two of JSB's subsidiaries
during 1998.
(3) Includes a $10.7 million benefit resulting from the realignment of an
operating subsidiary during 1998.
SEE ACCOMPANYING "SELECTED FINANCIAL RATIOS" PAGE.
<TABLE>
<CAPTION>
RELIANCE BANCORP, INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
(in thousands, except ratios and per share amounts)
YEARS ENDED JUNE 30,
1999 1998 1997
--------------------------------------
CONSOLIDATED SUMMARY OF OPERATIONS:
<S> <C> <C> <C>
Interest Income........................................... $167,780 $153,980 $133,300
Interest Expense.......................................... 93,922 86,112 71,653
--------------------------------------
Net Interest Income..................................... 73,858 67,868 61,647
Provision for Loan Losses................................. 650 1,650 950
Non-Interest Income (2)................................... 7,930 7,698 3,401
Other Non-Interest Expense (3)............................ 36,400 35,443 39,620
Capital Securities Costs.................................. 4,084 716 -
Amortization of Intangible Assets......................... 4,563 4,218 3,404
--------------------------------------
Income Before Income Taxes.............................. 36,091 33,539 21,074
Provision for Income Taxes................................ 15,940 14,810 10,138
--------------------------------------
Net Income.............................................. $20,151 $18,729 $10,936
======================================
SHARE DATA:
Weighted Average Shares - Basic......................... 8,467 8,890 8,299
Weighted Average Shares - Diluted....................... 8,914 9,425 8,724
Common Shares Outstanding at Period-End................. 8,586 9,565 8,776
CONSOLIDATED PER SHARE DATA:
Net Income - Basic...................................... $2.38 $2.11 $1.32
Net Income - Diluted.................................... $2.26 $1.99 $1.25
Cash Dividends.......................................... $0.78 $0.68 $0.60
Dividend Payout Ratio................................... 35% 34% 48%
Book Value at Period-End................................ $19.99 $20.37 $18.54
CONSOLIDATED BALANCE SHEET DATA AT PERIOD-END:
Total Assets............................................ $2,451,773 $2,485,729 $1,976,764
Securities:
Available-for-Sale.................................... 1,057,206 1,075,254 748,728
Held-to-Maturity...................................... 284,752 289,448 205,382
Loans, net.............................................. 983,193 978,738 914,503
Allowance for Loan Losses............................... 9,120 8,941 5,182
Deposits................................................ 1,555,818 1,638,104 1,445,054
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase.............................. 313,716 398,070 311,913
Other Borrowings........................................ 338,718 182,136 40,000
Capital Securities...................................... 50,000 50,000 -
Stockholders' Equity.................................... 171,667 194,864 162,670
CONSOLIDATED AVERAGE BALANCE SHEET DATA:
Total Assets............................................ $2,475,646 $2,178,262 $1,870,026
Securities.............................................. 1,377,068 1,074,358 918,918
Loans, net.............................................. 974,017 966,320 848,060
Total Deposits.......................................... 1,636,607 1,566,625 1,393,655
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase.............................. 276,748 309,618 288,844
Other Borrowings........................................ 309,323 84,920 22,519
Stockholders' Equity.................................... 180,694 183,998 154,030
</TABLE>
(1) During October 1997, Reliance completed the Continental Bank mergers
accounted for in accordance with the purchase method of accounting.
Reliance's consolidated results of operations reflect activity of
Continental subsequent to the acquisition date.
(2) Includes a $1.5 million condemnation award received in September 1997.
(3) Includes an $8.3 million SAIF recapitalization charge during 1997.
SEE ACCOMPANYING "SELECTED FINANCIAL RATIOS" PAGE.
NORTH FORK COMBINED PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following table is a summary of selected financial information
for North Fork, JSB and Reliance on a pro forma combined basis ("North Fork
Combined") which is presented as follows:
(a) the balance sheet information for all periods presented
gives effect to the JSB merger as if it had been consummated
at the end of the periods presented, and the income
statement information for all periods presented gives effect
to the JSB merger as if it had been consummated at the
beginning of the periods presented; and
(b) the balance sheet information, as of and for the year ended
December 31, 1999, gives effect to the Reliance merger as if
it had been consummated at the end of the period, and the
income statement information for the year ended December 31,
1999 gives effect to the Reliance merger as if it had been
consummated at the beginning of the period.
The selected pro forma combined year-end balance sheet and income
statement information reflects information for North Fork and JSB as of and
for their annual reporting periods ended December 31 for each of the
periods indicated. Financial information for the year ended December 31,
1999 combine North Fork, JSB and Reliance, with results of Reliance
presented to coincide with the reporting period for North Fork. North Fork
completed the Reliance merger, which was accounted for as a purchase, on
February 18, 2000, and the JSB merger, which was accounted for as a
pooling-of-interests, on February 29, 2000.
We anticipate that each of the JSB and Reliance mergers will result
in financial benefits to the combined company, including reduced operating
expenses and enhanced opportunities to increase revenue. The pro forma
information, while helpful in illustrating the financial characteristics of
North Fork Combined under one set of assumptions, does not reflect these
anticipated financial benefits.
The selected pro forma combined financial information has been
derived from the historical financial statements of North Fork, JSB and
Reliance and the pro forma combined financial statements and related notes
included herein. You should read this summary together with these financial
statements and their accompanying notes.
This information is for illustrative purposes only. The companies
would likely have performed differently had they always been combined. You
should not rely on this information as being indicative of the future
results that the combined company will experience after the JSB and
Reliance mergers.
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
NORTH FORK COMBINED FINANCIAL INFORMATION
(UNAUDITED)
(in thousands, except ratios and per share amounts)
YEARS ENDED DECEMBER 31,
1999 1998 1997
-------------------------------------
<S> <C> <C> <C>
CONSOLIDATED SUMMARY STATEMENTS OF INCOME:
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
Non-Interest Income..................................... 84,812 70,166 79,382
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 Charges...................... - 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
=====================================
SHARE DATA:
Weighted Average Shares - Basic......................... 170,436 170,085 166,335
Weighted Average Shares - Diluted....................... 172,731 171,988 169,903
Common Shares Outstanding at Period-End................. 172,853 169,590 169,238
CONSOLIDATED PER SHARE DATA:
Net Income - Basic...................................... $1.49 $1.25 $1.25
Net Income - Diluted.................................... $1.47 $1.23 $1.22
Cash Dividends.......................................... $0.63 $ 0.65 $0.38
Book Value at Period-End................................ $7.34 $7.16 $6.73
CONSOLIDATED BALANCE SHEET DATA AT PERIOD-END:
Total Assets............................................$16,321,060 $12,301,205 $11,608,663
Securities:
Available-for-Sale.................................... 4,617,876 3,072,737 2,226,512
Held-to-Maturity...................................... 1,659,169 1,780,002 2,116,275
Loans, net.............................................. 8,881,597 6,889,876 6,744,756
Allowance for Loan Losses............................... 83,570 77,683 80,273
Deposits................................................ 9,188,996 7,577,385 7,479,869
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase.............................. 2,921,981 2,955,096 2,104,036
Other Borrowings........................................ 2,308,097 85,000 449,600
Capital Securities...................................... 244,314 199,289 199,264
Stockholders' Equity.................................... 1,267,992 1,213,726 1,138,403
CONSOLIDATED AVERAGE BALANCE SHEET DATA:
Total Assets............................................$15,557,889 $11,668,690 $11,091,598
Securities.............................................. 6,378,490 4,124,175 4,247,513
Loans, net.............................................. 8,302,740 6,826,252 6,269,877
Total Deposits.......................................... 9,275,080 7,633,084 7,330,401
Federal Funds Purchased & Securities Sold Under
Agreements to Repurchase.............................. 3,189,560 2,236,257 1,944,592
Other Borrowings........................................ 1,254,003 189,071 485,200
Stockholders' Equity.................................... 1,335,819 1,211,607 1,015,819
</TABLE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL RATIOS
(UNAUDITED)
YEARS ENDED
-------------------------------------
1999 1998 1997
-------------------------------------
<S> <C> <C> <C>
PERFORMANCE RATIOS:
Return on Average Total Assets:
North Fork............................................ 1.92% 1.66% 1.78%
North Fork Combined................................... 1.63% 1.82% 1.87%
Return on Average Total Stockholders' Equity:
North Fork............................................ 27.05% 20.50% 25.63%
North Fork Combined................................... 19.03% 18.29% 21.01%
Total Stockholders' Equity to Total Assets (end of period):
North Fork............................................ 5.11% 7.78% 7.65%
North Fork Combined................................... 7.77% 9.87% 9.81%
CAPITAL RATIOS:
Tier 1 Risk-Based Capital:
North Fork............................................ 11.48% 15.19% 15.33%
North Fork Combined................................... 12.75% 17.26% 17.97%
Regulatory Minimum Requirement........................ 4.00% 4.00% 4.00%
Total Risk-Based Capital:
North Fork............................................ 12.45% 16.39% 16.58%
North Fork Combined................................... 13.96% 18.82% 19.11%
Regulatory Minimum Requirement........................ 8.00% 8.00% 8.00%
Leverage Ratio:
North Fork............................................ 6.84% 9.09% 8.74%
North Fork Combined................................... 7.70% 10.76% 10.53%
Regulatory Minimum Requirement........................ 4.00% 4.00% 4.00%
ASSET QUALITY DATA:
Allowance for Loan Losses to Net Loans (end of period):
North Fork............................................ 1.04% 1.26% 1.30%
North Fork Combined................................... 0.94% 1.13% 1.19%
Allowance for Loan Losses to Nonperforming Loans
(end of period):
North Fork............................................ 462% 470% 198%
North Fork Combined................................... 374% 494% 158%
Nonperforming Assets to Total Assets:
North Fork............................................ 0.13% 0.17% 0.43%
North Fork Combined................................... 0.14% 0.16% 0.49%
</TABLE>
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table shows historical per share information about
basic and diluted net income, cash dividends and book value for North Fork,
for all periods presented and similar pro forma information for North Fork
Combined, which includes (a) the Reliance merger, with respect to
information for the year ended December 31, 1999, and (b) the JSB merger,
with respect to all periods presented. See "Pro Forma Condensed Combined
Financial Statements (Unaudited)" pages.
The information in the following table is based on the historical
financial information that North Fork has presented in prior SEC filings.
We are incorporating this material into this document by reference. This
information is for illustrative purposes only. The companies would likely
have performed differently had they always been combined. You should not
rely on this information as being indicative of the future results that
North Fork Combined will experience after the JSB and Reliance mergers.
<TABLE>
<CAPTION>
COMPARATIVE PER SHARE DATA
(UNAUDITED)
AS OF OR FOR THE
YEARS ENDED DECEMBER 31,
-----------------------------
1999 1998 1997
-----------------------------
<S> <C> <C> <C>
NET INCOME PER SHARE:
Basic:
North Fork................................................... $1.63 $1.19 $1.24
North Fork Combined (1)...................................... 1.49 1.25 1.25
Diluted:
North Fork................................................... $1.62 $1.18 $1.22
North Fork Combined (1)...................................... 1.47 1.23 1.22
Cash Dividends Declared per Common Share:
North Fork................................................... $0.63 $0.65 $0.38
North Fork Combined (2)...................................... 0.63 0.65 0.38
Book Value Per Share at Period End:
North Fork................................................... $4.82 $5.89 $5.53
North Fork Combined (3)...................................... 7.34 7.16 6.73
</TABLE>
(1) The North Fork Combined pro forma net income per share amounts are
calculated by (a) totaling the historical net income of North Fork and
JSB, plus Reliance's net income for the year ended December 31, 1999;
and (b) dividing the resulting amounts by the average pro forma shares
of North Fork Combined, giving effect to the JSB and the Reliance
mergers. The average pro forma shares of North Fork Combined equals (a)
the historical basic and diluted average shares of North Fork plus (b)
the historical basic and diluted average shares of JSB as adjusted for
the exchange ratio of 3.0 plus (c) the historical basic and diluted
average shares of Reliance, conformed to North Fork's calendar year
basis, and adjusted for an exchange ratio of 2.0, less (d) the purchase
of North Fork common stock and Reliance common stock equivalents,
necessary to effect the Reliance merger.
(2) The North Fork Combined pro forma dividends per share represent North
Fork's historical dividends per share.
(3) The book value per share amounts are calculated by dividing historical
and North Fork Combined stockholders equity by historical and North
Fork Combined common shares outstanding, respectively. The pro forma
shares of North Fork Combined are calculated by combining North Fork
historical with JSB historical common shares outstanding adjusted for
the 3.0 exchange ratio and Reliance historical adjusted for the 2.0
exchange ratio less the purchase of North Fork Common stock necessary
to effective to Reliance merger. Stockholders' equity at December 31,
1999 has been adjusted to reflect the pro forma adjustments necessary
to affect the JSB and Reliance mergers.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
The following pro forma condensed combined financial statements are
based on the historical financial statements of North Fork, JSB and
Reliance, under the assumptions and adjustments set forth in the
accompanying notes. The Pro Forma Condensed Combined Balance Sheets give
effect to the JSB merger and the Reliance merger as if such transactions
had become effective as of December 31, 1999. The Pro Forma Condensed
Combined Statements of Income give effect to the JSB merger as if it had
become effective as of the beginning of each of the periods for which
information is presented and the Reliance merger as if it had become
effective as of January 1, 1999. The pro forma information assumes that the
JSB merger is accounted for using the pooling-of-interests method of
accounting and the Reliance merger is accounted for using the purchase
method of accounting.
Reliance's annual reporting period is as of and for the year ended
June 30, whereas North Fork and JSB utilize a calendar year reporting
period. Reliance's financial results for twelve months ended December 31,
1999 have been utilized in order to conform to the calendar year reporting
period of North Fork.
The unaudited pro forma condensed combined financial statements
should be read in conjunction with and are qualified in their entirety by
the historical financial statements, including the notes thereto, of North
Fork, JSB and Reliance. Certain JSB and Reliance financial information has
been reclassified to conform with North Fork's financial information.
The unaudited pro forma condensed combined financial statements do
not give effect to the anticipated cost savings and revenue enhancement
opportunities that could result from the JSB merger or the Reliance merger.
The pro forma information is not necessarily indicative of the combined
financial position or the results of operations of the companies in the
future or of the combined financial position or the results of operations
which would have been realized had the mergers been consummated during the
periods or as of the dates for which the pro forma information is
presented.
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEETS
(UNAUDITED)
DECEMBER 31, 1999
(dollars in thousands)
NORTH
PRO PRO FORK/
NORTH FORMA FORMA RELIANCE
FORK RELIANCE DEBITS CREDITS PRO FORMA
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Assets.............................
Cash & Due from Banks.............. $299,946 $40,904 $11,046 6a $11,046 2a $324,405
$16,445 2c
Money Market Investments........... 63,767 31,499 95,266
Securities:
Available-for-Sale............... 3,592,917 965,042 $1,067 2b $11,046 6a 4,528,583
556 5a $14,953 2b
5,000 5a
Held-to-Maturity................. 1,229,703 307,665 1,537,368
---------------------------------- ------- ---------
Total Securities............... 4,822,620 1,272,707 1,623 30,999 6,065,951
---------------------------------- ------- ---------
Loans, net of Unearned Income
& Fees........................... 6,617,130 999,009 15,100 5b 7,601,039
Allowance for Loan Losses........ 68,595 9,045 77,640
---------------------------------- ------- ---------
Net Loans........................ 6,548,535 989,964 - 15,100 7,523,399
---------------------------------- ------- ---------
Premises & Equipment, Net.......... 74,740 17,417 92,157
Accrued Interest Receivable........ 70,578 13,032 83,610
Mortgage Servicing Asset...........
Intangible Assets.................. 79,151 52,092 315,877 2b 176,376 2d 339,070
14,953 2b
11,906 2c
41,467 4
Other Assets....................... 148,779 60,498 4,539 2c 456 2b 222,805
9,683 4 238 5a
TOTAL ASSETS................... $12,108,116 $2,478,113 $411,094 $250,660 $14,746,663
================================================================
Liabilities and Stockholders'
Equity Demand Deposits........... $1,507,162 $64,198 $1,571,360
Savings N.O.W. & Money Market
Deposits.......................... 2,965,125 642,190 3,607,315
Time Deposits...................... 2,072,463 841,045 2,913,508
----------------------------------- -------- ----------
Total Deposits................... 6,544,750 1,547,433 - - 8,092,183
----------------------------------- -------- ----------
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase......... 2,665,200 256,781 2,921,981
Other Borrowings................... 1,844,000 429,197 15,100 5b 2,258,097
Accrued Expenses & Other Liabilities 236,142 18,326 - 51,150 4 305,618
----------------------------------- -------- ----------
Total Liabilities................ 11,290,092 2,251,737 15,100 51,150 13,577,879
Capital Securities................. 199,314 50,000 5,000 5a - 244,314
Stockholders' Equity...............
Preferred Stock.................... - - - - -
Common Stock....................... 362,816 108 108 2d - 362,816
Additional Paid in Capital......... 33,381 119,494 119,494 2d - (4,636)
38,017 2b
Retained Earnings.................. 677,853 123,195 123,195 2d - 677,853
Accumulated Other Comprehensive
Income Unrealized (Losses)/Gains
on Securities
Available-for-Sale, net of taxes. (75,805) (18,741) 18,741 2d (74,876)
611 2b
318 5a
Deferred Compensation.............. (28,007) (3,862) - 3,862 2d (28,007)
Treasury Stock..................... (351,528) (43,818) 11,046 2a 43,818 2d (8,680)
353,894 2b
----------------------------------- -------- ----------
Total Stockholders' Equity..... 618,710 176,376 291,860 421,244 924,470
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $12,108,116 $2,478,113 $311,960 $472,394 $14,746,663
==============================================================
SELECTED CAPITAL RATIOS:
Tier 1 Capital Ratio............... 11.48% 17.98% 10.81%
Total Risk Adjusted Capital Ratio.. 12.45% 18.83% 11.77%
Leverage Ratio..................... 6.84% 7.89% 6.23%
</TABLE>
[CHART CONTINUED]
<TABLE>
<CAPTION>
PRO PRO NORTH
FORMA FORMA FORK
JSB DEBITS CREDITS COMBINED
--------------------------------------------
<S> <C> <C> <C> <C>
Assets.............................
Cash & Due from Banks.............. $17,488 $341,893
Money Market Investments........... 22,000 117,266
Securities:
Available-for-Sale............... 89,293 4,617,876
Held-to-Maturity................. 121,801 1,659,169
----------- ---------- -------- ----------
Total Securities............... 211,094 - - 6,277,045
----------- ---------- -------- ----------
Loans, net of Unearned Income
& Fees............................. 1,280,558 8,881,597
Allowance for Loan Losses........ 5,930 83,570
----------- ---------- -------- ----------
Net Loans........................ 1,274,628 - - 8,798,027
----------- ---------- -------- ----------
Premises & Equipment, Net.......... 17,912 110,069
Accrued Interest Receivable........ 8,073 91,683
Mortgage Servicing Asset........... -
Intangible Assets.................. - 339,070
Other Assets....................... 16,845 6,357 8 - 246,007
-
TOTAL ASSETS................... $1,568,040 $6,357 - $16,321,060
===============================================
Liabilities and Stockholders'
Equity Demand Deposits........... $50,882 $1,622,242
Savings N.O.W. & Money Market
Deposits.......................... 631,158 4,238,473
Time Deposits...................... 414,773 3,328,281
----------- ---------- -------- ----------
Total Deposits................... 1,096,813 - - 9,188,996
----------- ---------- -------- ----------
Federal Funds Purchased &
Securities Sold Under
Agreements to Repurchase......... - 2,921,981
Other Borrowings................... 50,000 2,308,097
Accrued Expenses & Other Liabilities 40,839 - 43,223 8 389,680
----------- ---------- -------- ----------
Total Liabilities................ 1,187,652 - 43,223 14,808,754
Capital Securities................. - - - 244,314
Stockholders' Equity...............
Preferred Stock.................... - - - -
Common Stock....................... 160 160 7a 70,199 7a 1,733
431,442 10 160 7a
Additional Paid in Capital......... 171,323 70,199 7a 431,442 10 350,155
173,005 7b
4,770 7c
Retained Earnings.................. 348,693 36,866 8 - 989,680
Accumulated Other Comprehensive
Income Unrealized (Losses)/Gains
on Securities
Available-for-Sale, net of taxes. 37,987 (36,889)
Deferred Compensation.............. (4,770) - 4,770 7c (28,007)
Treasury Stock..................... (173,005) - 173,005 7b (8,680)
------------------------------------------------
Total Stockholders' Equity..... 380,388 716,442 679,576 1,267,992
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY $1,568,040 $716,442 $722,799 $16,321,060
================================================
SELECTED CAPITAL RATIOS:
Tier 1 Capital Ratio............... 25.32% 12.75%
Total Risk Adjusted Capital Ratio.. 28.01% 13.96%
Leverage Ratio..................... 21.47% 7.70%
</TABLE>
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
COMBINED WITH RELIANCE BANCORP, INC. & JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1999
(in thousands, except per share amounts)
NORTH
FORK/ NORTH
NORTH PRO FORMA ADJUSTMENTS RELIANCE FORK
FORK RELIANCE DEBITS CREDITS PRO FORMA JSB COMBINED
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest Income.................. $817,746 $165,475 $13,284 6b $969,937 $111,837 $1,081,774
Interest Expense................. 368,440 91,487 459,927 36,984 496,911
-------------------------------------------- --------------------------------
Net Interest Income............ 449,306 73,988 13,284 - 510,010 74,853 584,863
Provision for Loan Losses...... 6,000 150 6,150 13 6,163
-------------------------------------------- --------------------------------
Net Interest Income after
Provision for Loan Losses.... 443,306 73,838 13,284 - 503,860 74,840 578,700
Non-Interest Income.............. 73,017 8,834 81,851 2,961 84,812
Other Non-Interest Expense....... 152,043 36,990 189,033 26,829 215,862
Capital Securities Costs......... 16,843 4,086 20,929 - 20,929
Amortization of Intangible Assets 8,408 4,564 12,996 4,564 3 21,404 - 21,404
-------------------------------------------- --------------------------------
Income before Income Taxes..... 339,029 37,032 26,280 4,564 354,345 50,972 405,317
Provision for Income Taxes....... 118,660 16,136 - 4,649 6 130,147 21,820 151,967
-------------------------------------------- --------------------------------
Net Income..................... 220,369 20,896 26,280 9,213 224,198 29,152 253,350
============================================ ================================
Earnings per Share - Basic....... $1.63 $2.53 $1.57 $3.13 $1.49
Earnings per Share - Diluted..... $1.62 $2.40 $1.56 $3.06 $1.47
Weighted Average Shares
Outstanding Basic.............. 135,025 8,270 142,470 9,322 170,436 9
Weighted Average Shares
Outstanding Diluted............ 135,865 8,693 144,156 9,525 172,731 9
</TABLE>
SEE "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
COMBINED WITH JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1998
(in thousands, except per share amounts)
PRO FORMA ADJUSTMENTS NORTH FORK
NORTH FORK JSB DEBITS CREDITS COMBINED
---------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Income.................................... $753,100 $117,813 $870,913
Interest Expense................................... 328,456 38,476 366,932
---------------------------------------------------------
Net Interest Income.............................. 424,644 79,337 - - 503,981
Provision for Loan Losses.......................... 15,500 51 15,551
---------------------------------------------------------
Net Interest Income after Provision for Loan Losses 409,144 79,286 - - 488,430
Non-Interest Income................................ 64,318 5,848 70,166
Other Non-Interest Expense......................... 146,607 27,458 174,065
Capital Securities Costs........................... 16,843 - 16,843
Amortization & Write-down of Intangible Assets..... 14,479 - 14,479
Merger Related Restructure Charge.................. 52,452 - 52,452
---------------------------------------------------------
Income before Income Taxes....................... 243,081 57,676 - - 300,757
Provision for Income Taxes......................... 75,106 13,288 88,394
---------------------------------------------------------
Net Income....................................... 167,975 44,388 - - 212,363
=========================================================
Earnings per Share - Basic......................... $1.19 $4.53 $1.25
Earnings per Share - Diluted....................... $1.18 $4.41 $1.23
Weighted Average Shares Outstanding - Basic........ 140,706 9,793 170,085
Weighted Average Shares Outstanding - Diluted...... 141,766 10,074 171,988
</TABLE>
SEE "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
<TABLE>
<CAPTION>
NORTH FORK BANCORPORATION, INC.
COMBINED WITH JSB FINANCIAL, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share amounts)
PRO FORMA ADJUSTMENTS NORTH FORK
NORTH FORK JSB DEBITS CREDITS COMBINED
-----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Income.................................... $724,424 $109,611 $834,035
Interest Expense................................... 326,803 39,874 366,677
-----------------------------------------------------------
Net Interest Income.............................. 397,621 69,737 - - 467,358
Provision for Loan Losses.......................... 8,100 648 8,748
-----------------------------------------------------------
Net Interest Income after Provision for Loan Losses 389,521 69,089 - - 458,610
Non-Interest Income................................ 59,322 20,060 79,382
Other Non-Interest Expense......................... 157,182 27,434 184,616
Capital Securities Costs........................... 9,235 - 9,235
Amortization of Intangible Assets.................. 7,292 - 7,292
-----------------------------------------------------------
Income before Income Taxes....................... 275,134 61,715 - - 336,849
Provision for Income Taxes......................... 104,613 24,625 129,238
-----------------------------------------------------------
Net Income....................................... $170,521 $37,090 $- $- $207,611
===========================================================
Earnings Per Share - Basic......................... $1.24 $3.76 $1.25
Earnings Per Share - Diluted....................... $1.22 $3.64 $1.22
Weighted Average Shares Outstanding - Basic........ 136,761 9,858 166,335
Weighted Average Shares Outstanding - Diluted...... 139,333 10,190 169,903
</TABLE>
SEE "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
NOTES TO THE PRO FORMA
CONDENSED COMBINED FINANCIAL STATEMENTS
Note (1) Basis of Presentation
The pro forma information presented is not necessarily
indicative of the results of operations or the combined financial
position that would have resulted had the JSB merger become
effective at the beginning of each of the periods indicated and the
Reliance merger become effective as of January 1, 1999. The pro
forma information presented is not necessarily indicative of the
results of operations in future periods or the future financial
position of the combined entities. North Fork completed the
Reliance merger, which was accounted for as a purchase, on February
18, 2000, and the JSB merger, which was accounted for as a pooling-
of-interests, on February 29, 2000.
The JSB merger was accounted for using the
pooling-of-interests method of accounting and, as such, the assets
and liabilities of JSB will be combined with those of North Fork at
their historical values. Accordingly, the financial statements of
JSB are combined with the financial statements of North Fork as of
the earliest period presented.
The Reliance merger was accounted for using the purchase
method of accounting and, as such, the assets and liabilities of
Reliance will be recorded at their estimated fair values. The pro
forma financial statements do not reflect adjustments necessary to
allocate a portion of the purchase price paid for Reliance to the
individual assets and liabilities assumed in the merger. For
purposes of the pro forma financial statements, the full amount of
the purchase price has been reflected as an intangible asset.
Management is currently finalizing the purchase price allocation to
Reliance's assets and liabilities. However, these adjustments are
not expected to materially impact the pro forma financial
statements.
The Pro Forma Condensed Combined Balance Sheets give effect
to the Reliance and JSB mergers as if such transactions had become
effective as of December 31, 1999. The Pro Forma Condensed Combined
Statements of Income give effect to the JSB merger as if it had
become effective as of the beginning of each of the periods for
which information is presented and the Reliance merger as if it had
become effective as of January 1, 1999.
Reliance's annual reporting periods are as of and for the
year ended June 30, whereas North Fork and JSB utilize a calendar
year basis. Reliance's financial results for the year ended
December 31, 1999 has been conformed to the calendar year reporting
period of North Fork and JSB. Reliance's Statements of Income for
the year ended December 31, 1999 was derived by adding the results
for the six months ended December 31, 1999, to the year ended June
30, 1999, and removing the results for the six months ended
December 31, 1998.
Note (2)
The terms of the Reliance merger reflect a 18.63 per share
purchase price consisting of 2.0 shares of North Fork common stock
for each of the 8,479,911 shares outstanding as of December 31,
1999 (reduced by the 402,500 shares of Reliance common stock owned
by North Fork). The equivalent number of North Fork shares to be
issued is 16,959,822.
Pro forma adjustments to stockholders' equity at December
31, 1999 to reflect the Reliance merger accounted for in accordance
with the purchase method of accounting through:
(a) The purchase of an additional 694,977 shares of North Fork
common stock in order to complete the 8.5 million share
purchase program to be used to fund the merger at an average
cost of $15.89. As of December 31, 1999, 15,899,948 shares
were held by North Fork in treasury stock;
(b) The issuance of 16,959,822 shares of North Fork's treasury
stock (purchased at an average per share cost of $20.87) at
$18.625 (the average market price of North Fork common stock
for the period August 26, 1999 through September 1, 1999) in
exchange for the 8,479,911 outstanding common shares of
Reliance based on the exchange ratio of 2.0. This excludes
402,500 shares of Reliance common stock held by North Fork
in its available-for-sale portfolio (at an average per share
cost of $37.15), which were retired at cost. The unrealized
loss on these securities of $1.1 million was reversed
against Other Assets and Accumulated Other Comprehensive
Income;
(c) A cash payment of $16.4 million net of $4.5 million in related
tax benefits, for the satisfaction of all Reliance stock options
outstanding at December 31, 1999; and
(d) The elimination of Reliance's stockholder's equity at
December 31, 1999.
Note (3)
The Reliance purchase transaction if completed at December
31, 1999 would have resulted in an increase in the consolidated
intangible assets of $259.9 million. The items that give rise to
the increase are detailed below and more fully described in their
detailed components in the following notes 3 through 6. The
incremental intangible asset will be amortized on a straight-line
basis over a 20 year period.
<TABLE>
<CAPTION>
<S> <C>
North Fork Common Stock (16,959,822 shares at $18.625 per share)........ $315,877
North Fork Investment in Reliance, at cost (402,500 shares at
$37.15 per share)..................................................... 14,953
Cash Payments for Exercise of Options, net of taxes..................... 11,906
Transaction Costs, net of taxes......................................... 41,466
-------------
Total Consideration Paid............................... $384,202
Reliance Equity at December 31, 1999............................. 176,376
Historical Goodwill.............................................. (52,092)
Reliance Tangible Book Value, as adjusted, at December 31, 1999 124,284
-------------
Net Intangible Asset Recognized in Reliance Acquisition................. $259,918
-------------
</TABLE>
Note (4)
Transaction costs currently estimated at approximately $41.5
million, net of $9.7 million in related tax benefits, were incurred
in connection with the Reliance merger and reflected as part of the
purchase price for financial reporting purposes. A summary of the
approximate transaction costs is as follows:
TYPE OF COST EXPECTED COSTS
- ------------ --------------
(IN THOUSANDS)
Transaction Costs.......................................... $6,226
Merger Related Compensation and Severance Costs............ 37,360
Facilities and Systems Costs............................... 6,689
Other Merger Related Costs................................. 875
-------------
Total Pre-Tax Transaction Costs............................ 51,150
Less: Related Tax Benefit................................. (11,633)
Add: State and Local Tax Bad Debt Recapture, Net of
Federal Benefit.......................................... 1,950
-------------
Total Transaction Costs, Net of Taxes...................... $41,467
=============
Transaction costs consist primarily of investment banking,
legal and other professional fees, and expenses associated with
stockholder and customer notifications. Merger related compensation
and severance costs consist primarily of employee severance,
compensation arrangements, transitional staffing and related
employee benefit expenses. Facility and system costs consist
primarily of lease termination charges and equipment write-offs
resulting from the consolidation of overlapping branch locations,
duplicate headquarters and operational facilities. Also reflected
are the costs associated with the cancellation of certain data and
item processing contracts and the deconversion of Reliance's
computer systems. Other merger related costs arise primarily from
the application of North Fork's accounting practices to the
accounts of Reliance and other expenses associated with the
integration of operations. These estimates include all material
expenses, however, refinements may occur subsequent to the
completion of the Reliance merger.
The effect of the proposed charge has been reflected in the
Pro Forma Condensed Combined Balance Sheet as of December 31, 1999;
however, it has not been reflected in the pro forma combined
statements of income. Although no assurance can be given, North
Fork expects that cost savings will be achieved at an annual rate
of approximately $14.9 million on an after tax basis by the end of
2000 as a result of steps to be taken to integrate operations and
to achieve efficiencies in certain combined lines of businesses.
These anticipated merger related cost savings were determined based
upon preliminary estimates. The pro forma financial information
does not give effect to these expected cost savings, nor does it
include any estimates of revenue enhancements that could be
realized as a result of the Reliance merger.
Note (5)
(A) Reflects the elimination of $5.0 million in Reliance Capital
Securities owned by North Fork in its securities
available-for- sale portfolio. For purposes of the pro forma
adjustments, the unrealized loss on these securities of
$556,000 has been reversed against Other Assets and
Accumulated Other Comprehensive Income.
(B) Reflects the elimination of a $15.1 million line of credit
issued to Reliance from North Fork in December 1999.
Note (6)
Treasury shares acquired for purposes of funding the
Reliance merger have been acquired and reissued and reflection in
the Pro Forma Condensed Combined Financial Statements in accordance
with the following assumptions:
(A) The Pro Forma Condensed Combined Balance Sheets at December
31, 1999 reflect the purchase of the remaining 694,977
shares necessary to fund the transaction at an average cost
of $15.89 (see note (2) for more detail). The cash proceeds
were obtained from the liquidation of mortgage backed
securities held in the available-for-sale portfolio at their
carrying values.
(B) The Pro Forma Condensed Combined Statements of Income
assumes that the shares necessary to fund the transaction
were acquired and reissued in accordance with the
assumptions contained in note (2) above, as of January 1,
1999. The cash proceeds are assumed to have been obtained
from the liquidation of $11.0 million of mortgage backed
securities held in the available-for-sale portfolio, at
December 31, 1999. These securities are assumed to be
liquidated at their respective book values and to have a
weighted average yield of 7.00% for all periods indicated.
North Fork utilized its effective tax rate of 35%, exclusive
of merger related restructure charge and special items, for
all periods indicated.
Note (7)
Pro forma adjustments to stockholders' equity, at December 31,
1999, to reflect the merger of JSB:
(a) The JSB merger accounted for in accordance with the
pooling-of-interest method of accounting through the
exchange of 28,143,417 shares of North Fork common stock
(using an exchange ratio of 3.0) for 9,381,139 actual
outstanding shares of JSB;
(b) The retirement of JSB treasury stock of $173,005,000
(6,618,861 shares with an average cost of $26.14 per share);
and
(c) The retirement of JSB's benefit restoration plan of
$4,770,000 (196,823 shares with an average cost of
$24.23 per share).
Pro forma adjustments do not include any shares of North Fork
common stock to be received upon consummation of the JSB merger by
holders of JSB options.
Note (8)
A merger and restructuring charge currently estimated at $36.9
million, net of taxes, will be incurred in connection with the JSB merger.
This charge reduces diluted earnings per share for the period in which the
charge is recognized by approximately $0.21 (based on pro forma diluted
weighted average shares outstanding of approximately 172,731,000 for the
year ended December 31, 1999). A summary of the approximate merger and
restructuring charge, based on North Fork's best estimates, are as follows:
TYPE OF COST EXPECTED COSTS
- ------------ ---------------
(IN THOUSANDS)
Merger Expenses........................................... $4,148
Restructuring Charge:
Merger Related Compensation and Severance Costs........... 32,566
Facilities and Systems Costs.............................. 5,635
Other Merger Related Costs................................ 874
--------------
Total Pre-Tax Merger and Restructuring Charge............. 43,223
Less: Related Tax Benefit................................ (13,857)
Add: State and Local Tax Bad Debt Recapture, Net of
Federal Benefit..................................... 7,500
--------------
Total Merger and Restructuring Charge, Net of Taxes....... $36,866
--------------
Merger and restructure charges consist primarily of investment
banking, legal and other professional fees, and expenses associated with
stockholder and customer notifications. Merger related compensation and
severance costs consist primarily of employee severance, compensation
arrangements, transitional staffing and the related employee benefits
expenses. Facility and system costs consist primarily of lease termination
charges and equipment write-offs resulting from the consolidation of
overlapping branch locations and duplicate headquarters and operational
facilities. Also reflected are the costs associated with the cancellation
of certain data and item processing contracts and the deconversion of
existing JSB computer systems. Other merger related costs arise primarily
from the application of North Fork's accounting practices to the accounts
of JSB and other expenses associated with the integration of operations.
Refinements to the foregoing estimates may occur subsequent to the
completion of the JSB merger.
The effect of the proposed charge has been reflected in the Pro
Forma Condensed Combined Balance Sheet as of December 31, 1999; however, it
has not been reflected in the Pro Forma Combined Statements of Income.
Although no assurance can be given, North Fork expects that cost savings
will be achieved at an annual rate of approximately $13.2 million on an
after tax basis by the end of 2000 as a result of steps to be taken to
integrate operations and to achieve efficiencies in certain combined lines
of business. These anticipated cost savings were determined based upon
preliminary estimates. The pro forma financial information does not give
effect to these expected cost savings, nor does it include any estimates of
revenue enhancements that could be realized as a result of the JSB merger.
Note (9)
The pro forma weighted average shares outstanding for the year
ended December 31, 1999, reflect: (a) an exchange ratio of 2.0 shares of
North Fork common stock for each average share of Reliance common stock
outstanding during such periods (all Reliance options are assumed to have
been settled for cash in accordance with the provisions of the limited
rights associated therewith); (b) the assumed purchase of all additional
shares not held by North Fork in treasury needed to fund the Reliance
transaction; and (c) the reissuance by North Fork of treasury shares
necessary to fund the Reliance transaction. The pro forma weighted average
shares outstanding for all periods presented reflect the assumed issuance
of 3.0 shares of North Fork common stock for each average equivalent share
of JSB common stock outstanding during such periods.
Note (10)
An adjustment to reflect the assumed reduction in the par value of
North Fork's common stock from $2.50 to $0.01. Pro forma shares
outstanding, inclusive of pro forma shares issued in the JSB merger, total
173,269,939 at December 31, 1999.
(c) Exhibits
23.1 Consent of KPMG LLP, Melville, New York.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
NORTH FORK
BANCORPORATION, INC.
By: /s/ Daniel M. Healy
------------------------------------
Name: Daniel M. Healy
Title: Executive Vice President
and Chief Financial Officer
Date: April 14, 2000
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
23.1 Consent of KPMG LLP, Melville, New York.
EXHIBIT 23.1
Consent of Independent Auditors
The Board of Directors
North Fork Bancorporation, Inc.:
We consent to incorporation by reference in the Post-Effective
Amendment No. 1 on Form S-8 to Form S-4 (No. 333-94381) dated as of March
1, 2000, the Registration Statement on Form S-8 (No. 333-33008) dated as
of March 22, 2000, the Post-Effective Amendment No. 1 on Form S-8 to Form
S-4 (No. 333-94385) dated as of March 22, 2000, and Amendment No. 1 to Form
S-4 filed on Form S-4/A (No. 333-32492) dated March 28, 2000, of our
report, dated January 28, 2000, except for Note 29, which is as of February
29, 2000, with respect to consolidated statements of financial condition of JSB
Financial, Inc. and subsidiary as of December 31, 1999 and 1998, and the
related consolidated statements of operations, changes in stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1999, included in the current report on Form 8-K/A of North
Fork Bancorporation, Inc. dated April 14, 2000.
/s/ KPMG LLP
- -------------------
KPMG LLP
Melville, New York
April 14, 2000
