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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended Commission File No. 0-22058
December 31, 1995
MERCHANTS NEW YORK BANCORP, INC.
(Exact name of registrant as specified in charter)
Delaware 13-3650812
(State or other jurisdiction of (IRS employer
incorporation or organization) identification No.)
275 Madison Avenue, New York, N.Y. 10016
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (212) 973-6600
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Title of Class:
---------------
Common Shares, $.001 par value
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K [ ].
As of March 27, 1996, the aggregate market value of the voting stock held
by non-affiliates was approximately $118,366,649.
As of March 27, 1996, 4,982,323 common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
(1) Specified portions of the 1995 Annual Report of Merchants New York Bancorp,
Inc. are incorporated by reference in Part I, Part II and Part IV.
(2) Specified portions of the definitive Proxy Statement for the Annual Meeting
of Stockholders, dated March 28, 1996 of Merchants New York Bancorp, Inc.
are incorporated by reference in Part III.
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<PAGE>
MERCHANTS NEW YORK BANCORP, INC.
FORM 10-K
TABLE OF CONTENTS
Page
----
PART I
ITEM 1. BUSINESS...................................................... 1
ITEM 2. PROPERTIES.................................................... 20
ITEM 3. LEGAL PROCEEDINGS............................................. 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 21
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS................................... 21
ITEM 6. SELECTED FINANCIAL DATA....................................... 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................... 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 22
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE........................ 22
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY............... 22
ITEM 11. EXECUTIVE COMPENSATION........................................ 22
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT................................................ 22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND \
REPORTS ON FORM 8-K........................................... 23
SIGNATURES ............................................................. 24
<PAGE>
PART I
ITEM 1. BUSINESS
General
Merchants New York Bancorp, Inc. (the "Company") is a bank holding company
that was organized under the laws of the State of Delaware on February 27, 1992
for the purpose of acquiring all of the issued and outstanding capital stock of
The Merchants Bank of New York (the "Bank"), a banking corporation organized
under the laws of the State of New York. The sole subsidiary of the Company is
the Bank. The principal business of the Company is the operation of the Bank.
The Bank is a commercial bank, servicing the communities in which its
branches are located. It is authorized to receive both demand and time deposits,
to make loans of various types, to engage in trust services and other fiduciary
funds, to issue letters of credit, to accept and pay drafts, to rent safety
deposit boxes, and to engage in similar activities.
The Bank was founded in 1874 as Markel Brothers Private Bankers. A New York
City branch was established in 1881. In 1926, a charter was obtained from the
Banking Department of the State of New York. The name and style of the Bank was
changed to The Merchants Bank, and at the same time the Bank became publicly
held. The Bank's name was changed to The Merchants Bank of New York in 1937.
Cash dividends were commenced in 1932 and since then have been paid
consecutively every quarter for the ensuing 63 years.
The Bank operates seven branches, all in Manhattan, which are strategically
located to serve its middle market customers. The executive offices of the
Company are located at 275 Madison Avenue, New York, New York 10016. The
telephone number is (212) 973-6600.
Banking Services
The Bank offers conventional banking services consisting of retail banking,
commercial banking, international banking and trust services to small and medium
size businesses and to individuals. The Bank's deposits are insured by the
Federal Deposit Insurance Corporation (the "FDIC").
The Bank provides a full range of retail banking services that include
Regular and Special Checking Accounts, NOW (Negotiable Orders of Withdrawal) and
Super NOW Accounts, Money Market Accounts, Savings Accounts plus Keogh and IRA
Accounts and Lease Security Accounts for landlords and Attorney Escrow Accounts.
Since June 1995, the Bank has issued VISA(R) and MASTERCARD(R) credit cards
offered through an intermediary affinity program with all credit risk assumed by
the third party. The complete process, including credit checks and eligibility,
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is being handled by the third party. 24-hour automated teller machine (ATM)
cards with access to NYCE, The Exchange and CIRRUS(R) systems will be available
beginning the first quarter of 1996 for use on non-Bank owned ATMs. The Bank
does not have any ATMs at any of its branches and does not anticipate installing
any in the near future.
The Bank furnishes lending and depository services to small and medium size
commercial and industrial customers and to individuals. Loan facilities to these
customers include short term loans, revolving credit arrangements, term loans,
personal installment loans, and auto loans. Most of the Bank's business loans
are short term. Lending is limited to the New York metropolitan area which
includes the five boroughs, Westchester, Long Island, and Northern New Jersey.
No single borrower or group of related borrowers is indebted to the Bank in the
aggregate for an amount in excess of $9.4 million. The Bank's legal lending
limit was in excess of $13 million at December 31, 1995.
The Bank's International Banking Department offers financial services to
its customers through its network of correspondent banks around the world. The
Bank provides Letters of Credit and foreign collection services to finance
import and export transactions. It also issues Standby Letters of Credit for
domestic use. The Bank maintains active correspondent relationships with leading
financial institutions, both domestic and world wide.
Competition
The Bank faces significant competition for both the loans it makes and the
deposits it accepts. The Bank's market area has a high density of financial
institutions, many of which are branches of significantly larger institutions
which have greater financial resources than the Company, and all of which are
competitors of the Bank to varying degrees. The Company and its competitors are
significantly affected by general economic and competitive conditions,
particularly changes in market interest rates, government policies and actions
of regulatory authorities.
The Bank's competition for loans comes principally from other commercial
banks. The Bank competes successfully for loans primarily by emphasizing the
quality of its loan services and by charging loan fees and interest rates that
are generally competitive in its market area. Its most direct competition for
deposits has historically come from commercial banks, savings banks, credit
unions, and savings and loan associations. Additionally, the Bank faces
competition for deposits from money market funds, stock and bond mutual funds,
brokerage companies and insurance companies. The Bank competes for deposits by
offering a variety of customer services and deposit accounts at generally
competitive interest rates.
Management considers the Bank's reputation for financial strength and
customer service as its major competitive advantage in attracting customers in
its market area. The Bank also believes it benefits from its community bank
orientation as well as its relatively high percentage of core deposits.
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Potential Impact of Changes in Government Monetary Policies and Interest Rates
The earnings of the Company and the Bank are affected by legislative
changes and policies of various governmental authorities such as the New York
State Banking Department, the Board of Governors of the Federal Reserve System
(the "FRB") and the FDIC. The FRB controls interest rates, which in turn may
affect the cost of funds and the return on earning assets. The changing economic
conditions and changes in the money markets make it impossible to predict future
changes in interest rates, loan demand, or their effects on the Bank's business
and earnings.
The Bank's profitability, like that of most financial institutions, is
dependent to a large extent upon its net interest income, which is the
difference between its interest on interest-earning assets, such as loans and
securities, and its interest expense on interest-bearing liabilities, such as
deposits. When the amount of interest-earning assets differs from the amount of
interest-bearing liabilities expected to mature or reprice in a given period, a
significant change in market rates of interest will affect net interest income.
The Bank manages its interest rate risk primarily by structuring its balance
sheet to emphasize holding adjustable rate loans in its portfolio, maintaining a
large portion of its investments in mortgage-backed securities which produce
monthly cash flow for reinvestment, and maintaining a large base of core
deposits.
Supervision and Regulation
Bank holding companies and banks are extensively regulated under both
federal and state law. These laws and regulations are intended primarily to
protect depositors and not stockholders. To the extent that the following
information describes statutory and regulatory provisions, it is qualified in
its entirety by reference to the particular statutory and regulatory provisions.
Any change in the applicable law or regulation may have a material effect on the
business and prospects of the Company and the Bank.
The Company is a registered bank holding company subject to the regulation
and examination by the Federal Reserve Board under the Bank Holding Company Act
of 1956, as amended (the "Act"). The Company is required to file with the FRB
quarterly and annual reports and any additional information that may be required
under the Act. The Act also requires every bank holding company to obtain the
prior approval of the FRB before (i) acquiring all or substantially all of the
assets of or direct or indirect ownership or control of more than 5% of the
outstanding voting stock of any bank which is not already majority owned, or
(ii) acquiring, or merging or consolidating with, any other bank holding
company. The FRB will not approve any acquisition, merger, or consolidation that
would have a substantially anti-competitive effect, unless the anti-competitive
impact of the proposed transaction is clearly outweighed by a greater public
interest in meeting the convenience and needs of the community to be served. The
FRB also considers capital adequacy and other financial and managerial resources
and future prospects of the companies and the banks concerned, together with the
convenience and needs of the community to be served, when reviewing
acquisitions, mergers or consolidations.
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<PAGE>
Prior to September 29, 1995, the Act prohibited the FRB from approving any
such acquisition of control of any bank operating outside the bank holding
company's principal state of operations, unless such action was specifically
authorized by the statutes of the state in which the bank to be acquired was
located. On September 29, 1994, the President of the United States signed into
law the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Riegle-Neal Act"). Beginning September 29, 1995, an adequately capitalized and
managed bank holding company may (with FRB approval) acquire control of banks
outside its principal state of operations, without regard to whether such
acquisitions are permissible under state law. States may, however, limit the
eligibility of banks to be acquired by an out-of-state bank holding company to
banks in existence for a minimum period of time (not in excess of five years).
No bank holding company may make an acquisition outside its principal state of
operations which would result in it controlling more than 10% of the total
amount of deposits of all insured depository institutions in the United States,
or 30% or more of the total deposits of insured depository institutions in any
state (unless such limit is waived, or a more restrictive or permissive limit is
established, by a particular state). The Riegle-Neal Act also provides that,
beginning June 1, 1997, banks may branch across state lines either by merging
with banks in other states or by establishing new branches in other states. The
date relating to interstate branching through mergers may be accelerated by any
state, and such mergers may be prohibited by any state. The provision relating
to establishing new branches in another state requires a state's specific
approval. In response to the Riegle-Neal Act, New York has amended its banking
laws, effective February 6, 1996, to delete the reciprocity requirement formerly
imposed on the acquisition of New York banks by out-of-state bank holding
companies, and to add the requirement that a New York bank chartered less than
five years which is acquired by an out-of-state bank holding company generally
may not be merged with other banks owned by that bank holding company. These
amendments to the New York banking laws also permit an out-of-state bank to
branch into the state by merging with an existing New York bank or by acquiring
one or more branches of an existing New York bank, subject in either case (until
June 1, 1997) to a reciprocity requirement. The amendments do not permit an
out-of-state bank to open de novo branches in the state. The Company is unable
to predict the ultimate impact of interstate banking on it or its competition.
Additionally, the Act prohibits a bank holding company, with certain
limited exceptions, from (i) acquiring or retaining direct or indirect ownership
or control of more than 5% of the outstanding voting stock of any company which
is not a bank or bank holding company, or (ii) engaging directly or indirectly
in activities other than those of banking, managing or controlling banks, or
performing services for its subsidiaries unless such non-banking business is
determined by the FRB to be so closely related to banking or managing or
controlling banks as to be properly incident thereto. In making such
determinations, the FRB is required to weigh the expected benefits to the
public, such as greater convenience, increased competition or gains in
efficiency, against the possible adverse effects, such as undue concentration of
resources, decreased or unfair competition, conflicts of interest, or unsound
banking practices.
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<PAGE>
The FRB has adopted risk-based capital guidelines for bank holding
companies. The risk-based capital guidelines are designed to make regulatory
capital requirements more sensitive to differences in risk profile among banks
and bank holding companies, to account for off-balance sheet exposure and to
minimize disincentives for holding liquid assets. Under these guidelines, assets
and off-balance sheet items are assigned to broad risk categories each with
appropriate weights. The resulting capital ratios represent capital as a
percentage of total risk-weighted assets and off-balance sheet items. Failure to
meet the capital guidelines could subject a banking institution to a variety of
enforcement remedies available to federal regulatory authorities.
Bank holding companies currently are required to maintain a minimum ratio
of total capital to risk-weighted assets (including certain off-balance sheet
activities, such as standby letters of credit) of 8%. At least half of the total
capital is required to be "Tier 1 capital," consisting of common equity,
retained earnings, less certain goodwill items and intangible assets. The
remainder ("Tier 2 capital") may consist of (a) the allowance for loan losses of
up to 1.25% of risk-weighted risk assets, (b) excess of qualifying perpetual
preferred stock, (c) hybrid capital instruments, (d) perpetual debt, (e)
mandatory convertible debt securities, and (f) a limited amount of subordinated
debt and intermediate-term preferred stock up to 50% of Tier 1 capital. The
maximum amount of supplementary capital elements that qualifies as Tier 2
capital is limited to 100% of Tier 1 capital net of goodwill and certain other
intangible assets. Total capital is the sum of Tier 1 and Tier 2 capital less
reciprocal holdings of other banking organizations' capital instruments,
investments in unconsolidated subsidiaries and any other deductions as
determined by the FRB (determined on a case by case basis or as a matter of
policy after formal rule-making).
Bank holding company assets are given risk-weights of 0%, 20%, 50% and
100%. In addition, certain off-balance sheet items are given similar credit
conversion factors to convert them to asset equivalent amounts to which an
appropriate risk-weight will apply. These computations result in the total
risk-weighted assets. Most loans will be assigned to the 100% risk category,
except for performing first mortgage loans fully secured by certain residential
property, which carry a 50% risk rating. Most investment securities (including,
primarily, general obligation claims on states or other political subdivisions
of the United States) will be assigned to the 20% category, except for municipal
or state revenue bonds, which have a 50% risk-weight, and direct obligations of
the U.S. Treasury or obligations backed by the full faith and credit of the U.S.
Government, which have a 0% risk-weight. In converting off-balance-sheet items,
direct credit substitutes including general guarantees and standby letters of
credit backing financial obligations, are given a 100% conversion factor.
Transaction related contingencies such as bid bonds, standby letters of credit
backing non-financial obligations and commitments (including commercial credit
lines) with an initial maturity or more than one year have a 50% conversion
factor. Short-term commercial letters of credit are converted at 20% and certain
short-term or unconditionally cancelable commitments have a 0% factor.
The Company's management believes that the risk-weighting of assets under
these guidelines does not and will not have a material impact on the Company's
operations or on the operations of the Bank. In addition to the risk-based
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capital guidelines, the FRB has adopted a minimum Tier 1 capital leverage ratio,
under which a bank holding company must maintain a minimum level of Tier 1
capital to average total consolidated assets of at least 3% in the case of a
bank holding company that has the highest regulatory examination rating and is
not contemplating significant growth or expansion. All other bank holding
companies are expected to maintain a leverage ratio of at least 1.0% to 2.0%
above the stated minimum, The leverage capital ratio assists in the assessment
of the capital adequacy of bank holding companies. Its principal objective is to
place a constraint on the maximum degree to which a banking organization can
leverage its equity capital base, even if it invests primarily in assets with
low risk-weights.
At December 31, 1995, the capital ratios of the Company and the Bank
exceeded the FRB's minimum regulatory capital guidelines as follows:
<TABLE>
<CAPTION>
Merchants New York Bancorp, Inc.
Risked-Based Capital
Leverage Capital Tier 1 Total(2)
---------------------------- ---------------------------- ----------------------------
Amount Ratio(1) Amount Ratio Amount Ratio
---------------------------- ---------------------------- ----------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Actual $89,551 9.02% 89,551 21.61% $94,732 22.86%
Minimum
requirement 39,712 4.00 16,576 4.00 33,152 8.00
========================== ========================== ===========================
Excess $49,839 5.02% 72,975 17.61% 61,580 14.86%
========================== ========================== ===========================
The Merchants Bank of New York
Risked-Based Capital
Leverage Capital Tier 1 Total(2)
---------------------------- ---------------------------- ----------------------------
Amount Ratio(1) Amount Ratio Amount Ratio
---------------------------- ---------------------------- ----------------------------
(Dollars in Thousands)
Actual $88,706 8.96% $88,706 21.40% $93,887 22.65%
Minimum
requirement 39,601 4.00 16,581 4.00 33,161 8.00
========================== ========================== ===========================
Excess $49,105 4.96% 72,125 17.40% $60,726 14.65%
========================== ========================== ===========================
</TABLE>
(1) The leverage capital requirement is generally between 4.0% and 5.0% for all
but the most highly-rated companies.
(2) The Company's Tier 1 capital includes stockholders' equity, net of
intangible asset, and unrealized securities valuation accounts. Tier 2
capital includes Tier 1 capital plus 1.25% of risk-weighted assets.
Effective September 1, 1995, the federal bank regulatory agencies amended
their capital adequacy guidelines to provide explicitly for consideration of
interest rate risk in their overall evaluation of a bank's capital adequacy. The
amendments are intended to ensure that banking institutions effectively measure
and monitor their interest rate risk, and that they maintain adequate capital
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for the risk. Under the amendments, banking institutions deemed by the federal
bank regulatory agencies to have excessive interest rate risk may be required to
maintain additional capital. The Company does not believe that the amendments
will have a material adverse effect on the Company.
The Bank is a state-chartered bank subject to supervision, regulation and
examination by the New York State Banking Department and by the FRB. Deposits,
reserves, investments, loans, consumer law compliance, issuance of securities,
payment of dividends, establishing and closing of branches, mergers and
consolidations, changes in control, electronic funds transfer, community
reinvestment, management practices and other aspects of operations are subject
to regulation by the appropriate Federal and state regulatory agencies. The Bank
is also subject to various regulatory requirements of the FRB including
disclosure requirements in connection with personal and mortgage loans, interest
on deposits and reserve requirements. In addition, the Bank is subject to
numerous federal, state and local laws and regulations which set forth specific
restrictions and procedural requirements with respect to the extension of
credit, credit practices, the disclosure of credit terms and discrimination in
credit transactions.
Federal regulatory agencies have broad powers to take prompt corrective
action to resolve problems at banking institutions, including (in certain cases)
the appointment of a conservator or receiver. The extent of these powers is
generally influenced by the level of capital at the institution. Management does
not anticipate that the Bank will become subject to these prompt corrective
action provisions.
Only a well capitalized depository institution may accept brokered deposits
without prior regulatory approval. Under FDIC regulations, an institution is
generally considered "well capitalized" if it has a total risk-based capital
ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6%, and a
Tier 1 capital (leverage) ratio of at least 5%. The Company and the Bank meet
the guidelines to be considered a "well capitalized" institution. Federal law
generally requires full-scope on-site annual examinations of all insured
depository institutions by the appropriate federal bank regulatory agency
although the examination may occur at longer intervals for small
well-capitalized or state-chartered banks.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Act on any extension of credit to the bank holding
company or any of its subsidiaries, or investments in the stock or other
securities of the bank holding company or its subsidiaries, and in the taking of
such stock or securities as collateral for loans to any borrower. A bank holding
company and its subsidiaries are prohibited from engaging in certain "tie-in"
arrangements in connection with the extension of credit or provision of any
property or services.
Various restrictions limit the extent to which the Bank can supply funds to
the Company. The FRB limits the Bank from the payment of dividends, without
prior approval, to an amount not to exceed the net profits for that year plus
retained earnings for the preceding two calendar years, less any required
transfer to surplus. Further restrictions prevent the Company from borrowing
from a bank subsidiary unless the loans are secured in specified amounts.
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Without the prior approval of the FRB, secured loans, other transactions and
investments by any bank subsidiary are generally limited in amount to 10% of the
bank's capital and surplus. Federal law also requires that transactions between
a bank subsidiary and the Company, including extension of credit, sales of
securities or assets and the provision of services, be conducted on terms at
least as favorable to the bank subsidiary as those that apply or that would
apply to comparable transactions with unaffiliated parties.
As a consequence of the extensive regulation of the commercial banking
business in the United States, the business of the Company and the Bank are
particularly susceptible to changes in federal and state legislation and
regulations which may increase the cost of doing business.
Lending Activities and Credit Risk Management
The Bank's commercial and industrial loan portfolio represents
approximately 95% of gross loans. Loans in this category are typically made to
small and medium sized businesses with an average range between $100,000 and $3
million, although larger loans are made as the Bank's legal lending limit is in
excess of $13 million. Loan proceeds are generally used for working capital and
are seasonal in nature. In addition, the Bank supports the financing of the
importation of merchandise through letters of credit and direct loans. The
primary source of repayment is from the borrowers' conversion cycle of inventory
and accounts receivable as well as profits and cash flows.
The Bank's mortgage loan portfolio represents approximately 5% of gross
loans and is secured by mortgages on real property located in the New York
metropolitan area. Mortgage loans are made on an accommodation basis to current,
well established customers or are on occasion made to a business for property
which it is occupying. In the latter instance, full credit evaluation of the
borrowers' financial status is done and the Bank does not rely solely on the
property.
The Bank's lending is subject to its written underwriting standards and to
loan origination procedures prescribed by management. Detailed information is
obtained to assist in determining the borrower's ability to repay including
credit reports, financial statements and confirmations. The Bank's commercial
and industrial loans are underwritten based on the cash flow and financial
condition of the borrowing business and applicable collateral when appropriate.
Such loans may be secured in whole or in part by collateral such as liquid
assets, accounts receivable, inventory, equipment or real property. The majority
of the loans are personally guaranteed by the principals of the business and may
be further collateralized by the assets of those principals. The interest rates
on commercial and industrial loans are primarily variable rates that change with
market conditions and are priced in relation to the "prime rate."
Intrinsic to the lending process is the possibility of loss. In times of
economic slowdown, the risk inherent in the Bank's portfolio of loans is
increased. While management endeavors to minimize this risk, it recognizes that
loan losses will occur and that the amount of these losses will fluctuate
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depending on the risk characteristics of the loan portfolio which in turn
depends on current and expected economic conditions, the financial conditions of
borrowers and the credit management process.
As of December 31, 1995, the Bank's loans of $271 million , net of unearned
discounts, represented 26% of total assets. The Bank has no foreign loans
outstanding. The following table sets forth the composition of the Bank's loan
portfolio net of unearned discounts at the end of each of the most recent five
fiscal years:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------- -------- -------- -------- ------
(In thousands)
<S> <C> <C> <C> <C> <C>
Commercial and industrial........ $256,620 254,098 272,664 283,671 276,115
Real estate - mortgage........... 11,276 11,205 7,694 7,882 8,791
Installment loans................ 3,067 2,894 2,518 2,892 3,538
------------ ----------- ----------- ----------- -------------
Gross loans...................... 270,963 268,197 282,876 294,445 288,444
Less: unearned discounts...... (59) (80) (262) (644) (1,151)
------------ ----------- ----------- ----------- -------------
Total (net of unearned
discounts)..................... $270,904 268,117 282,614 293,801 287,293
============ =========== =========== =========== =============
</TABLE>
Approximately 47% of the current loan portfolio is outstanding to companies
in the diamond, jewelry, furs and apparel industries. This includes loans to
various types of companies such as wholesalers, retailers, manufacturers and
casters. The Bank's portfolio is sensitive to downturns in the economy, since
these items are purchased with disposable income. As of December 31, 1995, there
are no categories of loans exceeding 10% of total loans except as shown in the
above table. Substantially all of the Bank's loans are to borrowers in the New
York metropolitan area.
The following table sets forth the maturities of selected loans in the
Bank's gross loan portfolio at December 31, 1995:
<TABLE>
<CAPTION>
Due One Due One Due After
Year or Less to Five Years Five Years Total
------------------ ------------------ ---------------- ----------------
(In thousands)
<S> <C> <C> <C> <C>
Commercial and industrial........ $229,123 22,708 4,789 256,620
Real estate - mortgage........... 262 9,384 1,630 11,276
------------------ ------------------ ---------------- ----------------
Total............................ $229,385 32,092 6,419 267,896
================== ================== ================ ================
Loans included in the above which
are due after one year,
which have:
Fixed interest rates............. $4,204 1,659 5,863
Adjustable interest rates........ 27,888 4,760 32,648
------------------ ---------------- ----------------
Total............................ 32,092 6,419 38,511
================== ================ ================
</TABLE>
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Asset and Liability Management
The Bank's net interest income is an important component of its operating
results. The stability of net interest income in changing interest rate
environments depends on the Bank's ability to manage effectively the interest
rate sensitivity and maturity of its assets and liabilities. The Bank's Asset
Liability Management Committee develops and implements risk management
strategies, and uses various risk measurement tools to evaluate the impact of
changes in interest rates on the Bank's asset/liability structure and net
interest income.
The Bank's asset/liability management goal is to maintain an acceptable
level of interest rate risk to produce relatively stable net interest income in
changing interest rate environments. Management's plan has been to maximize the
amount of loans with interest rates that move with prime rate changes
(approximately 95% of the loan portfolio) and to invest a major portion of the
investment portfolio in mortgage-backed securities which have a five to seven
year average life and a constant cash flow return of principal which can be
reinvested on a monthly basis (currently $6 million to $8 million per month). In
addition, the investment portfolio has been heavily positioned in the
available-for-sale category to allow for sales to be made, when appropriate, to
take advantage of interest rate arbitrage to improve future interest returns. As
economic conditions change, management will modify the plan as necessary.
One measure of the Bank's interest rate sensitivity is its interest
sensitivity gap, or the difference between interest-earning assets and
interest-bearing liabilities scheduled to mature or reprice within a specified
time frame. Shorter gaps are a measure of exposure to changes in interest rates
for shorter intervals and longer gaps measure sensitivity over a longer
interval. At December 31, 1995, the Bank had a negative one-year gap of (24%) of
total interest-earning assets; that is, it had more interest-bearing liabilities
than interest-earning assets maturing or repricing within one year. A negative
gap may enhance earnings in periods of declining interest rates in that, during
such periods, the interest expense paid on liabilities may decrease more rapidly
than the decrease in interest income earned on assets. Conversely, in an
increasing interest rate environment, a negative gap may result in an increase
in the interest expense paid on liabilities that is more rapid than the increase
in interest income earned on assets. While a negative gap indicates the amount
of interest-earning liabilities which will mature before interest-bearing
assets, it does not indicate the extent to which they reprice. Therefore, at
times, a negative gap may not increase earnings in a declining interest rate
environment.
The following table summarizes the Bank's interest rate sensitive assets
and liabilities at December 31, 1995 according to the time periods in which they
are expected to reprice, and the resulting gap for each time period.
-10-
<PAGE>
<TABLE>
<CAPTION>
Less than Three to One to
Three Twelve Five Over
Months Months Years Five Years Total
-------------- ------------- ------------ ------------- -------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold.................... $52,000 -- -- -- 52,000
U.S. government and
agency obligations................ 19,842 217,134 287,916 15,132 540,024
Obligations of states and political
subdivisions...................... 1,059 4,494 38,616 23,260 67,429
Other securities...................... -- 246 10 3,948 4,204
Commercial and industrial loans:
Fixed rate........................ 9,117 1,537 1,004 1,343 13,001
Adjustable rate................... 243,357 -- -- -- 243,357
Real estate loans:
Fixed rate........................ 200 23 3,201 316 3,740
Adjustable rate................... 7,736 -- -- -- 7,736
Installment loans..................... 415 941 1,714 -- 3,070
-------------- ------------- ------------ ------------- -------------
Total interest-earning assets..... $333,726 224,375 332,461 43,999 934,561
-------------- ------------- ------------ ------------- -------------
Interest-bearing liabilities:
Savings accounts.................... 27,250 -- -- -- 27,250
NOW accounts........................ 39,473 -- -- -- 39,473
Money market accounts............... 116,305 -- -- -- 116,305
Time deposits....................... 193,421 153,158 34,162 158 380,899
Securities sold under repurchase
agreements........................ 105,065 -- -- -- 105,065
-------------- ------------- ------------ ------------- -------------
Total interest-bearing liabilities. $481,514 153,158 34,162 158 668,992
-------------- ------------- ------------ ------------- -------------
Net interest sensitivity gap.......... (147,788) 71,217 298,299 43,841 265,569
Cumulative gap position............... (147,788) (76,571) 221,728 265,569
Cumulative gap/total
interest-earning assets........... (15.81%) (8.19) 23.73 28.42
============== ============= ============ =============
</TABLE>
Prepayments and scheduled payments have been estimated for the loan
portfolio based on the Bank's historical experience. Non-accrual loans are
included in the table at their original contractual maturities. Savings account
and NOW account repricings are based on the Bank's historical repricing
experience and management's belief that these accounts are not highly sensitive
to changes in interest rates.
Asset Quality
Management continually reviews delinquent loans to adequately assess
problem situations and to quickly and efficiently remedy these problems whenever
possible. When a loan becomes past due (when it is past due 90 days) and doubt
exists as to the ultimate collection of principal or interest, the accrual of
interest is discontinued. Any accrued but unpaid interest on such loans is
charged against current earnings. Non-accrual loans at December 31, 1995 were
$2.17 million or 0.80% of total loans, while at December 31, 1994 and 1993, they
were $1.31 and $1.84 million, respectively. Loans which are current as of
-11-
<PAGE>
December 31, 1995 but for which there are serious doubts as to the ability of
the borrowers to comply with the present loan repayment terms are not material
in amount.
The following table sets forth the aggregate amount of domestic
non-accrual, past due and restructured loans at the end of each of the most
recent five fiscal years:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Non-accrual loans....................... $2,169 1,311 1,837 1,848 1,781
Past due 90 days or more
(other than above).................... 281 308 308 468 2,094*
Restructured............................ -- -- -- -- --
------ ------ ------ ------ ------
Total................................... $2,450 1,619 2,145 2,316 3,875
Interest income that would
have been earned on
non-accrual and reduced
rate loans outstanding................ 103 94 110 118 152
Interest income included in
net income for the above
loans................................. -- -- -- 27 25
Non-accrual, past due and
restructured loans as a
percentage of total gross
loans................................. .90% .60 .76 .79 1.34
</TABLE>
The provision for loan losses is a charge against income which increases
the allowance for loan losses. The adequacy of the allowance for loan losses is
evaluated periodically and is determined based on management's judgment
concerning the amount of risk and potential for loss inherent in the portfolio.
Management's judgment is based upon a number of factors including a review of
non-performing and other classified loans, the value of collateral for such
loans, historical loan loss experience, changes in the nature and volume of the
loan portfolio, and current and prospective economic conditions. While
management uses the best information available in establishing the allowance for
loan losses, future adjustments may be necessary based on changes in economic
conditions and in the credit risk inherent in the loan portfolio. As of December
31, 1995, there were no potential problem loans of which management was aware
that in management's opinion would materially impact financial results.
The Bank's allowance for loan losses at December 31, 1995 was $6.48 million
or 2.39% of total loans compared to $6.19 million at December 31, 1994 or 2.31%
of total loans. At December 31, 1993 it was $6.96 million or 2.46% of total
- --------------------
* In 1991 approximately 80% of the past due 90 days or more category was
represented by a loan on which the Bank has an assignment of insurance with a
loss claim which was under review.
-12-
<PAGE>
loans. Of the allowance for loan losses, non-accrual loans represented 33.47%,
21.2% and 26.4% respectively.
As in all banks, in addition to non-accrual loans, the Bank has other loans
which reflect a higher degree of risk because of general economic conditions or
specific deterioration because of circumstances for a particular borrower. These
loans are reflected in the criticized and/or classified categories by the Bank's
loan review process. In establishing the allowance for loan losses, the Bank
must consider these categories, and additions to the allowance are made with
this in mind. Although actual non-accrual loans at December 31 (those on which
interest is no longer being accrued) were on average $1.8 million for each of
the past five years, the Bank's actual charge-offs for the past five years
aggregated $28.7 million. In the same period, the aggregate provision for
additions to the allowance was $29.5 million, with 1995 accounting for only $2.1
million.
The following table sets forth certain information with respect to the
Bank's loan loss experience for each of the most recent five fiscal years:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------------------------
(Dollars in thousands)
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Allowance for loan losses balance at
beginning of year................... $6,188 6,960 4,359 3,209 4,009
Provision for loan losses........... 2,080 1,850 9,785 8,394 7,392
Charge offs:
Commercial and industrial........ (2,315) (2,918) (7,343) (7,636) (8,383)
Installment...................... (33) (--) (8) (20) (55)
-------- -------- -------- -------- --------
Total charge offs................... (2,348) (2,918) (7,351) (7,656) (8,438)
Recoveries
Commercial and industrial........ 563 294 166 407 244
Installment...................... 1 2 1 5 2
- ------ ------ ------ ------
Total recoveries.................... 564 296 167 412 246
Net (charge offs) recoveries........ (1,784) (2,622) (7,184) (7,244) (8,192)
------- ------- ------- ------- -------
Balance at end of year.............. $6,484 6,188 6,960 4,359 3,209
======= ======= ======= ======= =======
Ratio of net charge offs to average
loans outstanding, net of unearned
discounts........................... .65% .96 2.34 2.48 2.70
</TABLE>
-13-
<PAGE>
The following table sets forth an approximate breakdown of the allowance
for loan losses by major categories of loans for each of the most recent five
fiscal years:(1)
<TABLE>
<CAPTION>
December 31,
------------
1995 1994 1993 1992 1991
-------------- --------------- --------------- -------------- ----------------
% of % of % of % of % of
Loans Loans Loans Loans Loans
in Ea. in Ea. in Ea. in Ea. in Ea.
Categ. Categ. Categ. Categ. Categ.
Loan to Loan to Loan to Loan to Loan to
Loss Total Loss Total Loss Total Loss Total Loss Total
Allow Loans Allow Loans Allow Loans Allow Loans Allow Loans
----- ----- ------ ----- ----- ----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial & industrial.. 1,085 94.71 656 94.74 919 96.39 924 96.34 888 95.72
Real estate.............. -- 4.16 -- 4.18 -- 2.72 -- 2.68 -- 3.05
Installment.............. 23 1.13 20 1.08 26 .89 29 .98 29 1.23
Unallocated.............. 5,376 -- 5,512 -- 6,015 -- 3,406 -- 2,292 --
----- ----- ----- ----- -----
Total.................... 6,484 6,188 6,960 4,359 3,209
===== ===== ===== ===== =====
</TABLE>
Securities and Investment Policy Objectives
The Bank invests in U.S. Government obligations, U.S. Agency
mortgage-backed securities and high quality state and municipal securities, high
grade bonds and money market instruments. The Bank's investment portfolio
represents a significant share of its assets and exerts an important and
stabilizing influence upon the Bank's earnings.
The Bank's investment policy is designed to promote three objectives. The
primary objective is to provide liquidity necessary to meet day to day, cyclical
and long term changes in the mix of the Bank's assets and liabilities. The
secondary objective is to provide a stable flow of dependable earnings while
maintaining liquidity through absorbing funds when loan demand decreases due to
seasonal trends and to supply funds when loan demand increases toward its annual
peak. The third objective is to provide a balance of quality and diversification
to the Bank's assets. There is minimal exposure to trading losses, since the
Bank invests but does not trade. Only high grade short term instruments and top
rated bonds with an average life of approximately five years or less are
acquired with staggered maturities for liquidity.
Current money and security market conditions are evaluated by the Bank's
Investment Committee on a monthly basis. The Investment Committee includes of
the Chairman of the Board, the Vice Chairman of the Board, the President and the
Executive Vice President. The Committee's strategy and investment program for
the month ahead, created in accordance with the Bank's investment policy, is
presented for Board approval.
- ---------------
(1) The allocation of loan loss allowance is calculated on the basis of 50%
of the non-accruing commercial and industrial loans and a 5 year average of
losses on installment loans. Such allocation is not necessarily indicative of
the amounts in which future charge-offs may be taken or of future loss trends.
-14-
<PAGE>
As of December 31, 1995, there were no securities, in the name of any one
issuer, exceeding 10% of stockholders' equity, except for securities issued by
the United States and its political subdivisions and agencies.
The following table sets forth for the most recent three fiscal years the
book values and estimated market values of the Company's investment
securities:(2)
<TABLE>
<CAPTION>
December 31
-------------------------------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C>
Available for sale securities: (Dollars in thousands)
U.S. government and agency
obligations................................. $540,024 529,242 --
Obligations of states and political
subdivisions................................ 22,500 -- --
Other securities............................... 3,698 3,698 --
------------ ------------ ------------
Total - available for sale..................... $566,222 532,940 --
============ ============ ============
Estimated market value......................... $584,378 521,204 --
============ ============ ============
Held to maturity securities:
U.S. government and agency
obligations................................. -- 12,847 521,869
Obligations of states and political
subdivisions................................ 44,929 72,029 74,464
Other securities............................... 506 383 4,125
============ ============ ============
Total - held to maturity....................... $45,435 85,259 600,458
============ ============ ============
Estimated market value......................... $47,759 85,378 626,271
============ ============ ============
</TABLE>
- --------------
(2) On January 1, 1994, the Registrant adopted Statement of Financial
Accounting Standard No. 115 "Accounting for Certain Investments in Debt and
Equity Securities" ("SFAS 115"). SFAS 115 addresses the accounting for
investments in equity securities that have readily determinable fair values
and all investments in debt securities. Prior to the adoption of SFAS 115,
there was no distinction between "available-for-sale securities" and "held
to maturity securities". For a further discussion of the Registrant's
securities portfolio see Notes 3 and 4 to the financial statements
contained in the Annual Report on page 8.
-15-
<PAGE>
The following tables sets forth the book values, range of maturities and
average yields for each category at December 31, 1995.
<TABLE>
<CAPTION>
Securities Available for Sale (Market Value)
One to Five to Over Total Average
One Year Five Ten Ten Market Yield to
or Less Years Years Years Value Maturity
------------ ----------- ---------- ---------- ----------- ------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
U.S. Government
obligations(1)(2)............ $111,861 187,014 972 328 300,175 7.49%
U. S. agency obligations..... 135,248 107,225 13,708 -- 256,181 6.91
Obligation of state and
political subdivisions(2).... 3,185 14,173 4,857 2,004 24,219 7.48
Other securities............. -- -- -- 3,803 3,803 7.55
============ =========== ========== ========== =========== ============
Total available for sale..... $250,294 308,412 19,537 6,135 584,378 7.24%
============ =========== ========== ========== =========== ============
Average yield to maturity.... 6.84% 7.25 7.12 6.99
Securities Held to Maturity (Book Value)
One to Five to Over Total Average
One Year Five Ten Ten Book Yield to
or Less Years Years Years Value Maturity
------------ ---------- ----------- ---------- ----------- ------------
(Dollars in Thousands)
Obligations of New York
state(2)..................... $ 2,425 25,358 8,121 9,025 44,929 5.71%
Other securities............. 246 10 250 -- 506 6.32
============ ========== =========== ========== =========== ============
Total held to maturity....... $ 2,671 25,368 8,371 9,025 45,435 5.72
============ ========== =========== ========== =========== ============
Average yield to maturity.... 5.82% 5.78 5.71 5.50
Total investments............ $252,965 333,780 27,908 15,160 629,813 7.13%
============ ========== =========== ========== =========== ============
</TABLE>
- -----------
(1) Consisting mainly of Government guaranteed GNMA investments with an average
life of five years.
(2) Above yield is not computed on tax-equivalent basis. The average
tax-equivalent yield to maturity on obligations of states and political
subdivisions are as follows: securities available for sale - 11.33% and
securities held to maturity - 8.65%. The total tax equivalent yield on the
entire investment securities portfolio is 7.49%.
Deposits
Deposits are the Bank's principal source of funds. The Bank attracts
deposits from the general public and small businesses by offering a variety of
deposit accounts at competitive rates. The Bank's deposit accounts include
savings accounts , personal and commercial checking accounts, money market
accounts, NOW accounts, and certificates of deposit ("time deposits"). The Bank
also offers tax deferred retirement savings accounts (IRAs), savings and
certificates of deposit accounts of $100,000 or more ("jumbo certificates").
-16-
<PAGE>
Management believes that a significant portion of maturing deposits will be
retained by the Bank. There are no material amounts of foreign deposits in
domestic offices.
At December 31, 1995, the Bank had $218 million in jumbo certificates,
compared to $206 million at December 31, 1994 and $404 million at December 31,
1993. At December 31, 1995, the dollar amount of jumbo certificates by remaining
maturity dates and the average interest rates were as follows:
Remaining Maturity Amount Average Rate
- ------------------ ------ ------------
(Dollars in thousands)
3 months or less............................. $142,826 5.53%
More than 3 through 6 months................. 34,547 7.86
More than 6 months through 12 months......... 29,601 5.52
More than 12 months.......................... 10,892 6.02
=============== ============
Total.................................... $217,866 6.23%
=============== ============
Deposit inflows and outflows are generally dependent on market conditions,
interest rates, the general economic environment in the Bank's market area and
other competitive factors. The variety of accounts offered by the Bank has
enabled it to be more competitive in obtaining funds and to respond with more
flexibility to changes in the interest rate environment. Management's policy is
to review deposit interest rates at least weekly and to adjust appropriately
based on the need for funds, competition and the effect on the net interest
margin. The Bank's interest costs on time and savings deposits may continue to
trend upward in a higher interest rate environment.
Fixed rate, fixed term certificates of deposit accounts ("CD's") are
generally a significant source of funds for the Company. At December 31, 1995,
CD's amounted to $380.9 million or 67.5% of total interest-bearing deposits,
compared to $414 million or 68.6% at December 31, 1994 and $404 million or 63.7%
at December 31, 1993. CD's offered by the Company have maturities of seven days
or more, impose a minimum balance requirement of $2,000, and pay simple
interest.
Savings deposit accounts amounted to $27.2 million or 4.8% of the
Company's total interest-bearing deposits at December 31, 1995, compared to $30
million or 5% at December 31, 1994 and $37.9 million or 6% at December 31, 1993.
Savings deposits consist of passbook savings accounts and statement savings
accounts. Savings accounts offered by the Bank pay interest monthly, compounded
and credited on a quarterly basis, to accounts with a minimum average daily
balance of $100.
The Bank offers NOW accounts with unlimited check writing privileges. The
minimum initial deposit required is $2,500. There is a service charge incurred
if the daily average balance for the month falls below $2,500. Interest is
compounded monthly. Interest is credited at the end of the month, at the current
rate determined by the Bank. NOW accounts amounted to $39.5 million, or 7% of
the Bank's total interest-bearing deposits at December 31, 1995, compared to
$42.9 million, or 7.1%, at December 31, 1994 and $47.5 million, or 7.5%, at
December 31, 1993.
-17-
<PAGE>
The Bank also offers a money market account with limited check writing
privileges. Such accounts have a minimum balance requirement of $2,000 and earn
interest at the Company's money market rate if the account maintains a minimum
average balance of $2,000 for the month. There is a service charge incurred if
the daily average balance falls below $2,000. Interest on all money market
accounts is compounded monthly and credited monthly. Money market accounts
amounted to $116.3 million, or 20.6% of the Bank's total interest-bearing
deposits, at December 31, 1995, compared to $116.5 million, or 19.3%, at
December 31, 1994 and $144.9 million, or 22.8%, at December 31, 1993.
The following table sets forth the average deposits and average rates paid
for each of the most recent three fiscal years for the classifications of
deposits listed:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1995 Rate(%) 1994 Rate(%) 1993 Rate(%)
---- ------- ---- ------- ---- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Deposits:
Demand.................... $194,571 -- 200,475 -- 191,457 --
NOW....................... 38,235 2.29 45,190 2.50 43,073 2.59
Savings................... 28,146 2.96 36,934 2.94 34,138 2.98
Money market.............. 116,179 3.30 138,316 2.62 158,939 2.63
Other time ............... 389,747 5.51 400,746 4.20 434,723 3.90
-------- ---- ------- ---- ------- ----
Total.......................... $766,878 821,661 862,330
======== ==== ======= ==== ======= ====
</TABLE>
Management believes the variety of deposit accounts offered by the Bank
allows it to compete for funds effectively. However, these sources of funds
generally are interest rate sensitive and therefore can be more costly in a high
interest rate environment. Although the Bank will continue to carefully monitor
deposit flows, the ability of the Bank to control deposit flows will continue to
be significantly affected by the general market rate environment and economic
conditions.
Additional sources of funds are interest and principal payments on loans
and securities, and positive cash flows generated from operations. Interest and
principal payments on loans are a relatively stable source of funds, while
deposit inflows and outflows are significantly influenced by general market
interest rates, economic conditions and competitive factors. In the event that
the Bank is not able to generate sufficient funds from these sources, it has
availability of $81 million of overnight federal funds lines of credit from
other financial institutions as well as the ability to obtain substantial funds
through repurchase agreements against its investment portfolio. The Bank has
access to the discount window of the Federal Reserve Bank. There were no
borrowings under these arrangements in 1995, 1994 and 1993.
-18-
<PAGE>
Short Term Borrowings
The following table represents the Bank's material short term borrowings as
a result of securities sold under repurchase agreements(3) for the fiscal years
ending December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Balance at year end........................................... $105,065 70,000 62,563
Weighted average interest rate on balances at end of year..... 5.81% 5.85 3.25
Maximum amount of borrowing at any month end.................. $110,731 80,000 84,150
Approximate average amounts outstanding during period......... $67,991 43,422 46,204
Approximate weighted average interest rate during period...... 5.97% 4.90 3.21
</TABLE>
Employees
At December 31, 1995, the Company and the Bank had 246 employees,
consisting of 68 officers and 178 supervisory and clerical employees. The Bank
considers its relations with its employees to be good.
- ----------------
(3) Securities sold under repurchase agreements represents the only category of
material short term borrowings.
-19-
<PAGE>
SELECTED STATISTICAL INFORMATION
In addition to the statistical information that is presented in this Form
10-K, the following information is included in the Company's 1995 Annual Report
to Shareholders (the "Annual Report") and is hereby incorporated herein by
reference:
<TABLE>
<CAPTION>
Description of Statistical Information Annual Report Caption Page
- -------------------------------------- --------------------- ----
<S> <C> <C>
Average Balance Sheets Average Assets, Liabilities and
Stockholders' Equity 23
Analysis of Net Interest Earnings Analysis of Net Interest Earnings 18
Volume and Rate Variance Change in Interest Income and Expense
19
Return on Equity and Assets Selected Financial Data 22
</TABLE>
ITEM 2. PROPERTIES
The Bank owns the nine story office building at 434 Broadway, New York, New
York where one of its branch offices is located. The Bank occupies five of the
nine floors, the mezzanine and basement; four floors are presently rented to
others and one floor is vacant. In addition, the Bank owns the commercial
condominium located at 62 West 47th Street, New York, New York, which houses the
Bank's midtown branch office, consisting of a main floor, mezzanine, and
basement.
In addition to the above offices, the Company maintains four additional
branch offices at 93 Canal Street, 1040 Sixth Avenue, 295 Fifth Avenue, 145
Fifth Avenue, and, until June 1995, 350 Park Avenue, New York, New York, subject
to lease agreements with varying expiration dates. In June 1995 the Bank
relocated its corporate headquarters and its 350 Park Avenue branch to 275
Madison Avenue, New York, New York, where the Bank's main office is now located.
ITEM 3. LEGAL PROCEEDINGS
Various actions and proceedings are presenting pending to which the Company
or the Bank is a party. In the opinion of management, the aggregate liabilities,
if any, arising from such actions are not expected to have a material adverse
effect on the financial position of the Company or the Bank.
-20-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of 1995, there were no matters submitted to a
vote of the Company's stockholders.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The market for the Company's common equity is not an exchange but is
established by the National Association of Securities Dealers' Automated
Quotation System. At December 31, 1995 the total number of holders of record of
the Company's common equity was approximately 1,547. The information appearing
on page 24 of the Annual Report under the caption "Price Range of Common Stock"
is incorporated herein by reference.
Cash dividends have been declared in each quarter of 1995 and 1994
aggregating annually $5.47 million and $4.47 million, respectively, or $1.10 per
share in 1995 and $.90 per share in 1994, after adjusting for the two-for-one
stock split which occurred during 1995.
As a depository institution whose deposits are insured by the FDIC, the
Bank may not pay dividends or distribute any of its capital assets while it
remains in default on any assessment due the FDIC. The Bank currently is not in
default under any of its obligations to the FDIC. The Company and the Bank, in
declaring and paying dividends, are also limited insofar as minimum capital
requirements of regulatory authorities must be maintained. The Company and the
Bank comply with such capital requirements.
Under the Federal Reserve Act, the approval of the FRB is required for
dividends declared by a state member bank which in any year exceed the net
profits of such bank for that year, as defined, combined with retained net
profits for the two preceding years. Additionally, under Federal law, a bank is
prohibited from paying dividends in amounts greater than undivided profits then
on hand, as defined, after deducting bad debts.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing on page 14 (Note 16) and page 22 respectively of
the Annual Report under the captions "Selected Quarterly Financial Data" and
"Selected Financial Data" is incorporated herein by reference.
-21-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information appearing on pages 17 through 21 of the Annual Report under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations" is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements, related notes and Independent Auditors'
Report which appear on pages 3 through 16 of the Annual Report are incorporated
herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information appearing on pages 3 through 5 of the Company's Proxy
Statement prepared in connection with the 1995 Annual Meeting of Stockholders
(the "Proxy Statement") under the caption "Election of Directors" is
incorporated herein by reference.
All executive officers are designated annually by the Board of Directors
and serve at the pleasure of the Board.
ITEM 11. EXECUTIVE COMPENSATION
The information appearing on pages 8 through 11 of the Proxy Statement
under the caption "Executive Compensation" is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information appearing on pages 6 and 7 of the Proxy Statement under the
caption "Security Ownership of Certain Beneficial Owners and Management" is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information appearing on page 13 of the Proxy Statement under the
caption "Compensation and Option Committee Interlocks and Insider Participation;
Certain Relationships and Related Transactions" is incorporated herein by
reference.
-22-
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)1. Financial Statements. The financial statements, related notes and the
Report of Independent Auditors, KPMG Peat Marwick, dated February 9, 1996 appear
on pages 3 through 16 of the Annual Report and are incorporated herein by
reference.
(a)2. Financial Statements Schedules.
(a)3. Exhibits (numbered in accordance with Item 601 of Regulation S-K):
Item Description
---- -----------
(11) Computation of Earnings Per Share Earnings
(13) 1995 Annual Report to Shareholders
(b) Reports on Form 8-K. None.
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
MERCHANTS NEW YORK BANCORP, INC.
(Registrant)
By: /s/ Spencer B. Witty__________
Spencer B. Witty
Chairman of the Board
Dated March 26, 1996
By: /s/ James G. Lawrence_________
James G. Lawrence
President (Principal
Executive Officer)
Dated March 26, 1996
By: /s/ William J. Cardew_________
William J. Cardew
Executive Vice President
(Principal Financial Officer)
Dated March 26, 1996
By: /s/ Nancy J. Ostermann________
Nancy J. Ostermann
Vice President and
Controller (Principal
Accounting Officer)
Dated March 26, 1996
-24-
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Charles J. Baum____________________ Director March 26, 1996
Charles J. Baum
/s/ William J. Cardew__________________ Executive Vice President, Chief March 26, 1996
William J. Cardew Operating Officer and Director
/s/ Rudolf H. Hertz____________________ Vice Chairman of the Board March 26, 1996
Rudolf H. Hertz
/s/ Isidore Karten_____________________ Director March 26, 1996
Isidore Karten
/s/ James G. Lawrence__________________ President & Chief Executive Officer March 26, 1996
James G. Lawrence and Director
/s/ Robinson Markel____________________ Director March 26, 1996
Robinson Markel
/s/ Paul Meyrowitz_____________________ Director March 26, 1996
Paul Meyrowitz
/s/ Alan Mirken________________________ Director March 26, 1996
Alan Mirken
/s/ Mitchell J. Nelson_________________ Director March 26, 1996
Mitchell J. Nelson
/s/ Leonard Schlussel__________________ Director March 26, 1996
Leonard Schlussel
/s/ Charles I. Silberman_______________ Vice Chairman of the Board March 26, 1996
Charles I. Silberman
/s/ Spencer B. Witty___________________ Chairman of the Board March 26, 1996
Spencer B. Witty
</TABLE>
-25-
Exhibit 11 Computation of Per Share Earnings
The computation of earnings per share for each period presented is as follows:
1995 1994 1993
---- ---- ----
Net income.............................. $11,465,430 10,709,341 7,884,433
Average weighted shares outstanding..... 5,027,475 4,967,202 4,965,400
Earnings per share...................... $2.28 2.15 1.59
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule is a compilation of information appearing in the financial
statements that are included in the Annual Report on Form 10-K of Merchants New
York Bancorp for the quarter ended December 31, 1995. It is qualified in its
entirety by reference to those financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-END> DEC-31-1995 DEC-31-1994
<CASH> 50,919,219 50,721,430
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 52,000,000 47,000,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 584,377,564 521,204,126
<INVESTMENTS-CARRYING> 45,434,596 85,259,019
<INVESTMENTS-MARKET> 47,758,971 85,378,000
<LOANS> 270,904,241 268,116,684
<ALLOWANCE> 6,483,935 6,187,574
<TOTAL-ASSETS> 1,027,191,423 1,001,386,488
<DEPOSITS> 792,397,688 831,591,752
<SHORT-TERM> 105,065,000 70,000,000
<LIABILITIES-OTHER> 29,574,132 22,060,402
<LONG-TERM> 0 0
<COMMON> 4,982 2,484
0 0
0 0
<OTHER-SE> 100,149,621 77,731,850
<TOTAL-LIABILITIES-AND-EQUITY> 1,027,191,423 1,001,386,488
<INTEREST-LOAN> 26,604,396 22,200,289
<INTEREST-INVEST> 42,782,617 38,823,737
<INTEREST-OTHER> 182,593 321,204
<INTEREST-TOTAL> 69,569,606 61,345,230
<INTEREST-DEPOSIT> 27,032,507 22,657,858
<INTEREST-EXPENSE> 31,907,403 25,107,286
<INTEREST-INCOME-NET> 37,662,203 36,237,944
<LOAN-LOSSES> 2,080,000 1,850,000
<SECURITIES-GAINS> 127,697 (1,847,334)
<EXPENSE-OTHER> 22,731,545 22,004,249
<INCOME-PRETAX> 18,004,619 15,700,064
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,465,430 10,709,341
<EPS-PRIMARY> 2.28 2.16
<EPS-DILUTED> 2.28 2.16
<YIELD-ACTUAL> 4.55 4.35
<LOANS-NON> 2,169,000 1,311,000
<LOANS-PAST> 281,000 308,000
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 6,188,000 6,960,000
<CHARGE-OFFS> 2,348,000 2,918,000
<RECOVERIES> 564,000 296,000
<ALLOWANCE-CLOSE> 6,483,935 6,188,000
<ALLOWANCE-DOMESTIC> 1,108,000 676,000
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 5,376,000 5,512,000
</TABLE>
