SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of
The Securities Exchanges Act of 1934
For the quarter ended Commission File No. 0-22058
March 31, 1996
MERCHANTS NEW YORK BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3650812
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
5 Madison Avenue, New York, N.Y. 10016
(Address or principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212)973-6600
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 _____
As of March 31, 1996, there were 4,982,523 shares of common stock
outstanding, the Registrant's only class of stock.
<PAGE>
Merchants New York Bancorp
Consolidated Balance Sheets
Part I Item 1
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- -------------
<S> <C> <C>
Assets
Cash and due from banks $ 45,434,527 50,919,219
Federal funds sold 0 52,000,000
Securities available for sale, at market value 521,662,048 584,377,564
Investment securities 153,396,015 45,434,596
Loans, net of unearned discounts 250,350,559 270,904,241
Less allowance for loan losses 6,648,675 6,483,935
------------- -------------
Net loans 243,701,884 264,420,306
Bank premises and equipment 6,885,807 6,645,543
Customers' liability on acceptances 9,641,401 10,591,829
Intangible asset 771,429 800,000
Other assets 12,350,378 12,002,366
------------- -------------
Total Assets $ 993,843,489 1,027,191,423
------------- -------------
Liabilities and Stockholders' Equity
Liabilities
Deposits:
Demand $ 200,541,499 228,471,451
NOW 39,871,379 39,473,117
Savings 26,598,839 27,249,627
Money market 126,033,162 116,305,147
Time 375,483,424 380,898,346
------------- -------------
Total deposits 768,528,303 792,397,688
Federal funds purchased 22,000,000 0
Securities sold under agreements to repurchase 77,720,000 105,065,000
Acceptances outstanding 9,641,401 10,591,829
Other liabilities 16,512,214 18,982,303
------------- -------------
Total Liabilities 894,401,918 927,036,820
Stockholders' Equity
Capital stock-$.001 par value per share;
Authorized 10,000,000 shares;
4,982,523 and 4,981,338 issued & outstanding 4,983 4,982
in 1996 and 1995, respectively
Surplus 23,649,634 23,626,181
Undivided profits 68,314,575 66,719,678
Net unrealized appreciation (depreciation) on investments
available for sale, net of tax effect 7,472,379 9,803,762
------------- -------------
Total Stockholders' Equity 99,441,571 100,154,603
------------- -------------
------------- -------------
Total Liabilities and Stockholders' Equity $ 993,843,489 1,027,191,423
------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
Merchants New York Bancorp
Consolidated
Statements of Income
<TABLE>
<CAPTION>
Three Months Ended
Mar 31, Mar 31,
1996 1995
----------- -----------
<S> <C> <C>
Interest Income
Interest and fees on loans $ 5,619,044 6,009,353
Interest and dividends on investment securities:
Taxable 10,118,151 9,416,803
Non-taxable 1,098,601 1,195,167
Interest on federal funds sold 100,444 56,154
----------- -----------
Total interest income 16,936,240 16,677,477
----------- -----------
Interest Expense
Interest on deposits 6,419,167 6,641,193
Interest on federal funds purchased 112,981 128,068
Interest on securities sold under repurchase agreements 991,313 410,660
----------- -----------
Total interest expense 7,523,461 7,179,921
----------- -----------
Net Interest Income 9,412,779 9,497,556
Provision for possible loan losses 100,000 250,000
----------- -----------
Net interest income after provision for loan losses 9,312,779 9,247,556
----------- -----------
Other Income
Service fee and other charges 305,635 332,338
International department services 560,405 671,977
Fee income 226,518 249,960
Other income 49,941 13,346
Investment securities gains on sales, net 364,084 0
----------- -----------
Total other income 1,506,583 1,267,621
----------- -----------
Other Expenses
Salaries and employee benefits 3,365,474 3,240,908
Net occupancy 613,493 477,984
Equipment 157,137 110,646
Other expenses 1,445,937 1,718,401
----------- -----------
Total other expenses 5,582,041 5,547,939
----------- -----------
Income before income taxes 5,237,321 4,967,238
Provision for income taxes 2,147,726 1,925,213
----------- -----------
Net Income 3,089,595 3,042,025
----------- -----------
Average number of shares outstanding 5,038,739 5,003,494
----------- -----------
Net income per average share $ 0.61 0.60
----------- -----------
Dividends per share of common stock 0.30 0.25
----------- -----------
</TABLE>
<PAGE>
Merchants New York Bancorp
Consolidated Statements of Cash Flows
Periods ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,089,595 $ 3,042,025
------------- -------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 223,094 158,347
Amortization of premium, net of discounts 1,189,649 1,289,398
Provision for loan losses 100,000 250,000
Gains on sales & other investment transactions (364,084) 0
Discounted rental on leases (10,359) 0
(Decrease) increase in unearned discounts (15,302) 1,337
Increase in taxes payable 747,038 1,593,260
Increase in interest receivable (233,925) (622,143)
(Decrease) increase in interest payable (847,025) (427,634)
Decrease in accrued expenses (559,534) (600,820)
Increase in other assets (114,088) (196,101)
Increase (decrease) in other liabilities 185,785 (1,623,598)
Total adjustments 301,249 677,314
------------- -------------
Net cash provided by operating activities 3,390,844 3,719,339
------------- -------------
Cash flows from investing activities:
Net decrease in federal funds sold 52,000,000 47,000,000
Proceeds from redemptions of securities available for sale 30,680,345 16,219,549
Proceeds from sales of securities available for sale 49,605,756 0
Purchase of securities available for sale (22,403,942) (23,346,535)
Proceeds from redemptions of investment securities 232,436 3,572,962
Purchase of investment securities (108,503,438) (1,505,081)
Net decrease in customer loans 20,633,723 18,971,671
Net increase in bank premises and equipment (434,787) (72,673)
------------- -------------
Net cash provided by investing activities 21,810,093 60,839,893
------------- -------------
Cash flows from financing activities:
Net decrease in demand deposits, NOW, savings
and money market accounts (18,454,463) (45,677,699)
Net decrease in certificates of deposits (5,414,923) (13,291,655)
Net increase in federal funds purchased 22,000,000 11,000,000
Net decrease in securities sold under
repurchase agreements (27,345,000) (20,000,000)
Proceeds from issuance of common stock 23,454 36,536
Dividends paid (1,494,697) (1,242,213)
------------- -------------
Net cash used in financing activities (30,685,629) (69,175,031)
------------- -------------
Net decrease in cash and cash equivalents (5,484,692) (4,615,799)
Cash and cash equivalents at beginning of the period 50,919,219 50,721,430
------------- -------------
Cash and cash equivalents at end of the period $ 45,434,527 $ 46,105,631
============= =============
Supplemental disclosure of cash flow information:
Interest Paid 8,370,486 6,752,287
Taxes Paid 1,400,688 1,331,953
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
MERCHANTS NEW YORK BANCORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements include the accounts of Merchants New
York Bancorp (Bancorp) and its wholly owned subsidiary, The Merchants Bank of
New York (the Bank). All material intercompany accounts and transactions have
been eliminated in consolidation. The consolidated financial statements as of
and for the interim periods of March 31, 1996 and 1995 are unaudited. However,
in management's opinion, all adjustments (consisting of normal accruals)
necessary for the fair presentation of such periods have been made. Certain
reclassifications have been made to the 1995 financial statements to conform to
current presentation. The interim financial statements should be read in
conjunction with Bancorp's Annual Report on Form 10-K, for the year ended
December 31, 1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Part I - Item 2
THREE MONTHS ENDED MARCH 31, 1996 COMPARED WITH THREE MONTHS ENDED
MARCH 31, 1995
Interest on investments increased by $605,000 to $11.2 million for the first
quarter of 1996, as compared to $10.6 million in 1995. $351,000 was contributed
by higher volume and $254,000 from higher rates. It resulted from reinvesting
funds from paydowns on mortgage backed securities, from maturities and from a
repositioning of almost $50 million of the available for sale securities in the
first quarter of 1996. The investment portfolio average increased $19.7 million
to $637.4 in 1996, from $617.7 million in 1995.
Loan interest income decreased by $390,000 to $5.6 million from $6 million, as
lower rates resulted in a drop of $311,000, while $79,000 was due to lower loan
volume. The lower rates reflect a prime rate decrease to 8.35% in 1996, from an
average of 8.82% in 1995. Average loan outstandings decreased $3.4 million to
$245.3 million in 1996 from $248.7 million in 1995.
<PAGE>
MERCHANTS NEW YORK BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS(Continued)
Interest expense on interest bearing deposits decreased by $222,000, to $6.4
million as compared to $6.6 million, for the first quarters of 1996 and 1995,
respectively. $436,000 of the expense is attributable to lower volume of
deposits, primarily due to a drop of $419,000 in interest paid on certificates
of deposits. This decrease was offset by an increase of $214,000 in rates.
Average deposits decreased by $32.4 million to $769.9 million in 1996, from
$802.3 million in 1995. The lower average deposits are due to the cyclical
nature of both the loans and deposits, as well as customers who sought non-bank
interest returns.
Repurchase agreements interest expense increased as of March 31, 1996 to
$991,000 as compared to $411,000 for the same period in 1995. Attributable to
volume is $614,000, which was offset by $34,000 in rate reductions. There was an
increase in average repurchase agreements to $71.9 million in 1996 from $27.5
million in 1995, to make up for lower deposits and a larger investment
portfolio. Interest on Federal funds purchased decreased by $15,000,
substantially due to rate decreases.
Noninterest income went up by $239,000 to $1.5 million, due principally to gains
on sales of securities in 1996 of $364,000 versus none in the first quarter of
1995. The gains were the result of investment portfolio repositioning undertaken
in this quarter and were primarily offset by a reduction in International
Department fees of $112,000, due to lower transaction volume.
Noninterest expense rose to $5.6 million or $34,000 over 1995 results, due to
increases in salaries and benefits of $125,000, $135,000 in net occupancy due to
rent on the Madison Avenue branch and $46,000 in equipment. This was offset by a
reduction of $272,000 in other operating expenses, primarily stemming from a
lowering of the cost of our FDIC insurance.
An addition of $100,000 was made to the provision for loan losses for the first
quarter of 1996, versus $250,000 in 1995. Although this is a decrease quarter to
quarter, the total provision is now $6.6 million versus $6.5 million as of March
31, 1995. This is considered adequate at this time.
Loan Losses and Non-Performing Assets
Loans are generally placed on non-accrual status when principal or interest
becomes 90 days or more past due. Those loans past due 90 days or more and that
are still accruing are either well secured or are in the process of collection.
Loans remain on non-accrual status until principal and interest payments are
current or are charged off.
<PAGE>
MERCHANTS NEW YORK BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS(Continued)
The following table sets forth certain information with respect to the loan loss
experience for the quarters ended March 31, 1996 and 1995.
(In thousands)
Quarter ending 3/31/96 3/31/95
- --------------------------------------------------------------------------------
Balance at beginning of period ............... $6,484 6,188
Provision for loan loss ...................... 100 250
Charge offs .................................. 0 0
Recoveries
Commercial ................................. 65 111
Installment ................................
0 0
------ ------
Total ........................................ $6,649 6,549
====== ======
Our loan loss provision is based on maintaining a loan loss reserve to cover all
non-accrual and higher risk loans. At March 31, 1996, our level of reserves
follows industry standards, as demonstrated in other commercial banks, with the
provision rising and falling to reflect the status of our loan portfolio risk.
In addition to non-accrual loans, we consider loans classified by management as
having higher than normal credit risk but where loss is not currently
anticipated.
The following table sets forth the aggregate amount of domestic non-accrual and
past due loans which are 90 days or more past due as to principal or interest
payments on the date indicated:
(In thousands)
Quarter ending 3/31/96 3/31/95
- --------------------------------------------------------------------------------
Non-accrual loans ............................ $2,884 1,275
Loans past due more than 90 days
& still accruing ......................... 345 710
Restructured loans ........................... 0 0
Total ................................ $3,229 1,985
====== =====
Non-accrual loans as a % reserve ............. 43.4% 19.5
Non-accrual loans as a % total
loans .................................... 1.2 .5
Interest income that would have
been earned on nonaccrual loans ........... $ 61 23
Interest income that was earned on nonaccrual (impaired) loans is considered
insignificant.
<PAGE>
MERCHANTS NEW YORK BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS(Continued)
Liquidity
Liquidity measures the Bank's ability to satisfy current and future obligations
and commitments as they become due. Maintaining an adequate liquidity level
through proper asset liability management insures that these needs will be met
at a reasonable cost. Funds to meet liquidity needs are raised through the
liquidation or maturity of an asset or through increased deposits or borrowing.
At March 31, 1996, average cash and short term investments totalled $52.6
million and accounted for 5.4% of the Bank's total average assets in both years,
with $50.6 million as of March 31, 1995.
On the liability side, the primary source of funds available to meet liquidity
needs is the Bank's core deposit base. The average balance of deposits was
$769.9 million for the quarter ended March 31, 1996, with $802.3 million for
March 31, 1995. The Bank continues to retain a substantial proportion of its
average total deposits in the form of non-interest bearing funds, which were 27%
and 25% of total deposits in 1996 and 1995, respectively. Additional liquidity
is derived from scheduled loan and investment payments of principal and interest
and principal prepayments received. Proceeds from the sale of securities was
$49.6 million as of March 31, 1996 with $31.7 million received by that date from
maturities, principal paydowns and amortization, net of accretion. Purchases of
investments were $130.9 million for the period.
Bancorp's cash needs consist primarily of dividends, which flow up from the
Bank, and cash to cover its expenses, which are minimal. Dividends paid were
$1,494,697 in the first quarter of 1996, with $1,242,213 for the first quarter
of 1995.
Capital
The primary source of capital growth is through retention of earnings. Undivided
profits increased to $68.3 million at 3/31/96 as compared to $62.5 million for
the prior year. The Bank's Board of Directors declared a dividend of $.30 for
the first quarter of 1996, which was an increase of 20% over the $.25 dividend
for the first quarter of 1995. These dividends and the 1995 financial results
have been restated to fully reflect the effect of the 2 for 1 stock split in
October of 1995.
The capital base of a bank is a significant measure of the strength of a
financial institution. The Bank has seen a steady capital growth over the past
several years, with our risk based ratios, as shown below, in excess of the
required "Well Capitalized" level of 10%. The Bank was also in excess of the
required leverage ratio of 4%, with 9.48% for the first quarter of 1996.
<PAGE>
MERCHANTS NEW YORK BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS(Continued)
There was an overall increase of $13.2 million in capital from March 31, 1995 to
March 31, 1996. Of this change, $6.1 million represents retained earnings after
dividends were paid and $7.1 million (net of tax effect) is from the change in
market value of our available for sale securities.
Required 3/31/96 3/31/95
----------------------------------------
Tier I Capital Ratio.............. 4.00% 23.51% 21.90%
Total Capital Ratio............... 8.00 24.76 23.15
Leverage Ratio.................... 4.00 9.48 9.07
<PAGE>
MERCHANTS NEW YORK BANCORP
Part II - Other Information
Item 6. Exhibits and Reports on Form 8 - K
(a) Exhibits: Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8 - K: None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MERCHANTS NEW YORK BANCORP, INC.
--------------------------------
Registrant
Date: May 13, 1996 /s/ JAMES G. LAWRENCE
--------------------------------
James G. Lawrence
President & Chief Executive Officer
Date: May 13, 1996 /s/ NANCY J. OSTERMANN
--------------------------------
Nancy J. Ostermann
Vice President and Comptroller
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule is a compilation of information appearing in the financial
statements that are included in the Quarterly Report on Form 10-Q of Merchants
New York Bancorp for the quarter ended March 31, 1996. It is qualified in its
entirety by reference to those financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> MAR-31-1996 DEC-31-1995
<CASH> 45,434,527 50,919,219
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 0 52,000,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 521,662,048 584,377,564
<INVESTMENTS-CARRYING> 153,396,015 45,434,596
<INVESTMENTS-MARKET> 154,506,282 47,758,971
<LOANS> 250,350,559 270,904,241
<ALLOWANCE> 6,648,675 6,483,935
<TOTAL-ASSETS> 993,843,489 1,027,191,423
<DEPOSITS> 768,528,303 792,397,688
<SHORT-TERM> 99,720,000 105,065,000
<LIABILITIES-OTHER> 26,153,615 29,574,132
<LONG-TERM> 0 0
<COMMON> 4,983 4,982
0 0
0 0
<OTHER-SE> 99,436,588 100,149,621
<TOTAL-LIABILITIES-AND-EQUITY> 993,843,489 1,027,191,423
<INTEREST-LOAN> 5,619,044 26,604,396
<INTEREST-INVEST> 11,216,752 42,782,617
<INTEREST-OTHER> 100,444 182,593
<INTEREST-TOTAL> 16,936,240 69,569,606
<INTEREST-DEPOSIT> 6,419,167 27,032,507
<INTEREST-EXPENSE> 7,523,461 31,907,403
<INTEREST-INCOME-NET> 9,412,779 37,662,203
<LOAN-LOSSES> 100,000 2,080,000
<SECURITIES-GAINS> 364,084 127,697
<EXPENSE-OTHER> 5,582,937 22,731,545
<INCOME-PRETAX> 5,237,321 18,004,619
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,089,595 11,465,430
<EPS-PRIMARY> 0.61 2.28
<EPS-DILUTED> 0.61 2.28
<YIELD-ACTUAL> 4.51 4.55
<LOANS-NON> 2,884,000 2,169,000
<LOANS-PAST> 345,000 281,000
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 6,484,000 6,188,000
<CHARGE-OFFS> 0 2,348,000
<RECOVERIES> 65,000 564,000
<ALLOWANCE-CLOSE> 6,649,000 6,483,935
<ALLOWANCE-DOMESTIC> 1,454,000 1,108,000
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 5,195,000 5,376,000
</TABLE>
