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, 2000
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 identification no.)
incorporation or organization)
275 Madison Avenue, New York, N.Y. 10016-0001
(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 May 04, 2000, there were 18,765,700 shares of common stock
outstanding, the Registrant's only class of stock.
<PAGE>
Merchants New York Bancorp
Quarter Ended March 31, 2000
Page
----
Part I Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets 2
Consolidated Statements of Income and
Comprehensive Income 3
Consolidated Statements of Changes in Stockholders' Equity 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
Part II Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 14
<PAGE>
Merchants New York Bancorp
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Part I - Item 1, Financial Statements
For the periods ended March 31, 2000 December 31, 1999
- --------------------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Assets
Cash and due from banks............................................... $ 51,361,908 $ 32,940,883
Federal funds sold.................................................... 14,000,000 50,000,000
Securities available for sale, at market value........................ 587,288,043 649,931,593
Securities held to maturity (market value of $245,457,472 in
2000 and $195,169,226 in 1999)................................... 249,624,576 197,988,432
----------------------------------------
Total securities............................................ 836,912,619 847,920,025
----------------------------------------
Loans, net of unearned discounts...................................... 431,830,559 437,097,287
Less allowance for loan losses................................... 9,664,291 9,108,216
----------------------------------------
Total loans, net............................................ 422,166,268 427,989,071
----------------------------------------
Premises and equipment, net........................................... 6,394,062 5,992,660
Customers' liability on acceptances................................... 17,533,010 12,134,217
Other assets.......................................................... 16,354,325 18,336,292
- --------------------------------------------------------------------------------------------------------------------
Total Assets..................................................... $1,364,722,192 $1,395,313,148
====================================================================================================================
Liabilities and Stockholders' Equity
Deposits:
Demand........................................................... $ 300,933,382 $ 312,300,580
NOW.............................................................. 48,163,561 51,214,572
Savings.......................................................... 28,598,751 28,865,561
Money market..................................................... 207,733,567 191,972,362
Time............................................................. 362,712,663 374,625,133
----------------------------------------
Total deposits................................................... 948,141,924 958,978,208
Securities sold under repurchase agreements .......................... 205,000,000 185,000,000
FHLB term advances.................................................... 70,000,000 105,000,000
Other short-term borrowings........................................... 11,858,331 20,047,500
Acceptances outstanding............................................... 17,533,010 12,134,217
Other liabilities..................................................... 15,236,408. 14,945,286
----------------------------------------
Total Liabilities................................................ 1,267,769,673 1,296,105,211
Stockholders' Equity*
Capital stock: $.001 par value; 40,000,000 authorized shares;
19,978,664 shares issued in 2000 and 1999........................ 19,978 19,978
Surplus............................................................... 23,879,363 23,879,363
Undivided profits..................................................... 97,229,738 95,012,110
Treasury stock at cost: 1,113,024 and 856,160 shares
in 2000 and 1999, respectively................................... (16,805,846) (12,570,633)
Accumulated other comprehensive income, net of tax:
Unrealized depreciation on securities available for sale......... (7,370,714) (7,132,881)
----------------------------------------
Total Stockholders' Equity....................................... 96,952,519 99,207,937
- --------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity....................... $1,364,722,192 $1,395,313,148
====================================================================================================================
</TABLE>
* Shares are adjusted for 2-1 stock split, effective October 1999.
See accompanying notes to consolidated financial statements.
2
<PAGE>
Merchants New York Bancorp
Consolidated Statements of Income & Comprehensive Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, 2000 1999
- --------------------------------------------------------------------------------------
<S> <C> <C>
Interest and Dividend Income
Loans ............................................... $ 9,865,595 $ 7,275,005
Investment securities:
Taxable ........................................... 13,724,197 12,355,627
Non-taxable ....................................... 1,157,277 1,168,053
Other interest income ............................... 468,845 256,106
---------------------------
Total interest and dividend income ................ 25,215,914 21,054,791
---------------------------
Interest Expense
Deposits ............................................ 6,830,378 6,698,773
Securities sold under repurchase agreements ......... 2,665,631 1,932,738
FHLB term advances .................................. 1,362,034 602,103
Other short-term borrowings ......................... 186,324 88,168
---------------------------
Total interest expense ............................ 11,044,367 9,321,782
---------------------------
Net Interest Income ............................... 14,171,547 11,733,009
Provision for loan losses ........................... 950,000 200,000
---------------------------
Net interest income after provision for loan loss . 13,221,547 11,533,009
---------------------------
Non Interest Income
Service fees and other charges ...................... 371,740 303,233
International department services ................... 797,258 696,428
Fee income .......................................... 608,167 398,969
Securities gains, net ............................... 0 75,881
---------------------------
Total non interest income ......................... 1,777,165 1,474,511
---------------------------
Non Interest Expense
Salaries and employee benefits ...................... 4,161,258 3,860,017
Net occupancy ....................................... 653,500 644,939
Equipment ........................................... 217,226 229,264
Other expenses ...................................... 2,229,738 1,873,311
---------------------------
Total non interest expense ........................ 7,261,722 6,607,531
---------------------------
Income before income taxes ............................ 7,736,990 6,399,989
Provision for income taxes ............................ 2,686,408 2,190,430
- --------------------------------------------------------------------------------------
Net Income ....................................... $ 5,050,582 $ 4,209,559
- --------------------------------------------------------------------------------------
Earnings per share*:
Basic ............................................... $0.27 $0.21
Diluted ............................................. 0.27 0.21
======================================================================================
Comprehensive income
Net income ............................................ $ 5,050,582 $ 4,209,559
Other comprehensive income, net of tax:
Unrealized depreciation on securities available
for sale during the period ..................... (237,833) (1,514,384)
Reclassification for gains included in net income ..... 0 (75,881)
- --------------------------------------------------------------------------------------
Comprehensive income ................................ $ 4,812,749 $ 2,619,294
======================================================================================
</TABLE>
* Adjusted for 2-1 stock split, effective October 1999.
See accompanying notes to consolidated financial statements.
3
<PAGE>
Merchants New York Bancorp
Consolidated Statements of Changes in Stockholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
For the periods ended March 31, 2000 1999
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
Capital stock:
-----------------------------
Balance at beginning and end of period ................. $ 19,978 $ 19,978
-----------------------------
Surplus:
-----------------------------
Balance at beginning and end of period ................. 23,879,363 23,879,363
-----------------------------
Undivided profits:
Balance at beginning of year ........................... 95,012,110 86,304,445
Net income ............................................. 5,050,582 4,209,559
Cash dividends paid .................................... 2,360,080) (1,940,902)
Common stock issued from treasury stock ................ (472,874) (735,918)
-----------------------------
Balance at end of period ............................... 97,229,738 87,837,184
-----------------------------
Treasury stock:
Balance at beginning of year ........................... (12,570,633) (6,301,081)
Repurchase of 294,700 and 179,800 shares of common stock
in 2000 and 1999, respectively* ..................... (4,898,997) (3,042,925)
Issuance of 37,836 and 48,724 shares of common stock
in 2000 and 1999, respectively* ..................... 663,784 983,465
-----------------------------
Balance at end of period ............................... (16,805,846) (8,360,541)
-----------------------------
Accumulated other comprehensive income:
Net unrealized (depreciation) appreciation on securities
available for sale, net of tax effect
Balance at beginning of year ........................... (7,132,881) 9,075,500
Changes during the period, net of tax .................. (237,833) (1,514,384)
-----------------------------
Balance at end of period ............................... (7,370,714) 7,561,116
-----------------------------
Total stockholders' equity
Balance at beginning of year ........................... 99,207,937 112,978,205
Changes during the period, net ......................... (2,255,418) (2,041,105)
- ---------------------------------------------------------------------------------------------
Total ending balance ................................... $ 96,952,519 $110,937,100
=============================================================================================
</TABLE>
* Shares are adjusted for 2-1 stock split, effective October 1999.
See accompanying notes to consolidated financial statements.
4
<PAGE>
Merchants New York Bancorp
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
For the periods ended March 31, 2000 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities:
Net income.................................................................. $ 5,050,582 $ 4,209,559
-----------------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation ........................................................... 266,575 274,770
Amortization of premium, net of discounts .............................. 331,443 1,721,533
Provision for loan losses .............................................. 950,000 200,000
Gains on sales ......................................................... 0 (75,881)
(Decrease) increase in unearned discounts .............................. (12,548) 16,453
Decrease in other assets................................................ 271,903 1,595,405
Increase (decrease) in other liabilities ............................... 291,123 (1,489,539)
-----------------------------
Net cash provided by operating activities .......................... 7,149,078 6,452,300
-----------------------------
Investing activities:
Net decrease in federal funds sold ..................................... 36,000,000 5,000,000
Proceeds from redemptions of securities available for sale ............. 66,742,590 54,452,862
Proceeds from sales of securities available for sale ................... 0 15,015,000
Purchase of securities available for sale .............................. (2,985,938) (49,235,506)
Proceeds from redemptions of held to maturity securities ............... 7,497,599 11,815,343
Purchase of held to maturity securities ................................ (59,134,630) (14,445,458)
Net decrease in customer loans ......................................... 4,885,351 6,155,856
Net increase in bank premises and equipment ............................ (639,405) (61,244)
-----------------------------
Net cash provided by investing activities .......................... 52,365,567 28,696,853
----------------------------
Financing activities:
Increase (decrease) in demand deposits, NOW, savings
and money market accounts .......................................... 1,076,186 (4,696,284)
Net decrease in time deposit ........................................... (11,912,470) (20,697,919)
Increase (decrease) in securities sold under repurchase agreements ..... 20,000,000 (15,000,000)
Decrease in FHLB term advances ......................................... (35,000,000) 0
(Decrease) increase in other short-term borrowings ..................... (8,189,169) 755,591
Proceeds from issuance of common stock ................................. 190,910 247,547
Purchases of treasury stock ............................................ (4,898,997) (3,042,925)
Dividends paid ......................................................... (2,360,080) (1,940,902)
-----------------------------
Net cash used by financing activities .............................. (41,093,620) (44,374,892)
-----------------------------
Net increase (decrease) in cash and cash equivalents ........................ 18,421,025 (9,225,739)
Cash and cash equivalents at beginning of the period ........................ 32,940,883 38,435,946
Cash and cash equivalents at end of the period .............................. 51,361,908 29,210,207
============================================================================================================
Supplemental disclosure of cash flow information:
Interest paid .......................................................... 12,231,963 11,752,552
Taxes paid ............................................................. 76,871 89,714
============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
Merchants New York Bancorp
Notes to Consolidated Financial Statements
1. The consolidated financial statements include the accounts of Merchants New
York Bancorp (the "Company") and its wholly owned subsidiary, The Merchants Bank
of New York (the "Bank"), and the Bank's wholly-owned subsidiaries, Merchants
New York Commercial Corporation and MBNY Holdings Corporation and its
subsidiary, Merchants Capital Corporation. All material intercompany accounts
and transactions have been eliminated in consolidation.
The consolidated financial statements as of and for the interim periods ended
March 31, 2000 and 1999 are unaudited. All adjustments, which consist of normal
accruals necessary for the fair presentation of such periods have been made.
Certain reclassifications have been made to the 1999 financial statements to
conform to the 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, 1999.
2. Accumulated Other Comprehensive Income - Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income," establishes
standards for the reporting and display of comprehensive income and its
components in financial statements. Comprehensive income represents net income
and certain amounts reported directly in equity, such as the net unrealized
depreciation on available-for-sale securities. Other Comprehensive Income is
shown on the Balance Sheet net of tax. Below are gross amounts and the tax
benefit applicable as of March 31, 2000 and December 31, 1999.
03/31/00 12/31/99
---------- ---------
(In thousands)
Unrealized depreciation $ (11,340) $(12,783)
Tax benefit 3,969 5,650
---------- ---------
Net of tax amount $ (7,371) $( 7,133)
========== =========
3. In June 1998, the Financial Accounting Standards Board ("FASB"), issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes accounting and reporting standards for derivatives and
hedging activities. It requires that all derivatives be included as assets or
liabilities in the balance sheet and that such instruments be carried at fair
market value through adjustments to either other comprehensive income or current
earnings or both, as appropriate. In June 1999, FASB issued SFAS No. 137 which
deferred the effective date of SFAS No. 133 to fiscal years beginning after June
15, 2000. Management does not anticipate that the adoption of this standard will
have a material impact on the Company's consolidated financial statements.
4. Bancorp's Board of Directors declared a 2 for 1 stock split on August 17,
1999, to shareholders of record as of September 21, 1999, with an effective date
of October 1, 1999. As a result, adjustments have been made to the capital
accounts at the effective date, while retroactive adjustments have been made to
the number of shares used for the earnings per share calculation.
6
<PAGE>
Item 2, Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison for the three months ended March 31, 2000 and March 31, 1999
Interest income on investments for the quarter ended March 31, 2000 was $14.9
million, an increase of $1.3 million when compared to $13.5 million for the same
period in 1999. The increase was the result of $218,000 from higher volume and
$1.2 million from an increase in interest rates. The average balance for the
investment portfolio increased to $844.5, up $12.6 million, from $831.9 million
for the same period in 1999.
Interest income on loans was $9.9 million, an increase of $2.6 million when
compared to $7.3 million for the same period in 1999. $1.7 million was from
higher volume and $870,000 from higher interest rates as the prime rate averaged
8.69% versus an average of 7.75% for the same period in 1999. The average loan
balance for the quarter increased to $425.9 million, up $76.9 million from
$349.0 million in 1999, primarily due to Merchants New York Commercial Corp.,
the Bank's asset-based lending subsidiary.
Non interest income increased $300,000 to $1.8 million in 2000 when compared to
$1.5 million in 1999. This was mainly the result of an increase in fee income of
$209,000, primarily attributable to the Bank's asset-based lending subsidiary.
In addition, International Department fees increased $101,000 from higher volume
of processing letters of credits.
Interest expense on interest bearing deposits increased slightly to $6.8 million
from $6.7 million for the same period in 1999. The increase was a result of
$389,000 from higher interest rates, offset by a decrease of $258,000 from lower
volume. Average interest bearing deposits decreased $7.9 million to $644.1
million compared to $652.0 million in 1999.
Interest expense on repurchase agreements increased to $2.7 million, an increase
of $733,000, when compared to $1.9 million for the same period last year. The
increase was the result of $406,000 from higher volume and $327,000 from an
increase in interest rates. The average balance for repurchase agreements
increased $29.0 million to $179.2, up from $150.2 million for the same period in
1999.
Interest expense on FHLB term advances increased to $1.4 million, up $760,000
from $602,000 for the same period in 1999. The increase was the result of
$672,000 from a higher volume and $88,000 from higher interest rates. The
average balance increased to $90 million, an increase of $45 million, when
compared to the average balance of $45 million for the same period in 1999.
Other short-term borrowings consist of Federal funds purchased and US Treasury
demand notes. At March 31, 2000, interest expense from other short- term
borrowings was $186,000, an increase of $98,000 when compared to $88,000 for the
same period last year. The increase was the result of $75,000 from higher volume
and $23,000 from higher interest rates.
Non interest expense increased to $7.3 million, up $654,000 from $6.6 million
for the same period in 1999. This was a result of increase of $301,000 in
salaries and benefits and a $353,000 increase in other operating expenses.
7
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Income tax expense at March 31, 2000 increased $496,000 to $2.7 million versus
$2.2 million for the same period in 1999. The increase was primarily due to an
increase in income before taxes of $1.3 million.
PROVISION FOR LOAN LOSSES
An addition of $950,000 was made to the Provision for Loan Losses for the first
quarter in 2000, versus $200,000 in 1999. The loan loss provision is based on
maintaining a loan loss reserve to cover all non-accrual and high risk loans.
The Bank's level of allowance follows industry standards, with the provision
rising and falling to reflect the status of our loan portfolio risk. The level
of allowance for loan losses is evaluated by management quarterly and is based
on several factors in addition to non-accrual loans, doubtful and substandard
loans including: charged-off loans, recoveries, changes in levels and
characteristics of total outstanding loans, and loans classified by management
as higher than normal credit risk.
The following table sets forth certain information with respect to the loan loss
experience for the quarter ended March 31, 2000 and 1999.
3/31/00 3/31/99
--------------------
(In thousands)
Balance at beginning of period $9,108 $7,965
Provision for loan losses ...................... 950 200
Charge offs .................................... 445 178
Recoveries:
Commercial ............................ 51 125
Installment ........................... 0 2
-------------------
Total .......................................... $9,664 $8,114
===================
PAST DUE LOANS AND NON PERFORMING ASSETS
Loans are generally placed on non-accrual status when principal or interest
becomes 90 days or more delinquent. Loans past due 90 days or more which are
still accruing, are either secured or are in the process of collection. Loans
remain on non-accrual status until principal and interest payments are current
or charged off. The following table sets forth the aggregate amount of
non-accrual and past due loans which are 90 days or more past due as to
principal or interest payments on the date indicated.
<TABLE>
<CAPTION>
3/31/00 12/31/99
--------------------------
(Dollars in thousands)
<S> <C> <C>
Non - accrual loans............................................... $ 874 $428
Loans past due 90 days or more,
and still accruing....................................... 217 496
------------------------
Total.................................................... $1,091 $924
========================
Restructured loans included in non - accrual loans $ 274 $292
Non - accrual loans as a % of reserve............................. 9.04% 4.70%
Non - accrual loans as a % of total average loans................. .21 .11
Interest income that would have been earned on non- accrual loans $8 $57
</TABLE>
8
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
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.
The Bank's liquidity continues to be strong, with average cash and short term
investments totaling $79.4 million at March 31, 2000 compared with $55 million
at December 31, 1999, accounting for 5.8% and 4.2% of the Bank's total average
assets, respectively. Management considers overall liquidity at March 31, 2000
to be adequate to meet current obligations, to support expectations for future
changes in asset and liability levels and to carry on normal operations.
Scheduled loan payments and payments of principal and interest from the
investment portfolio provided additional liquidity. Through principal repayments
and redemptions, the investment portfolio generated $74 million for the first
quarter of 2000, and a total of $214 million for the year ended December 31,
1999 for reinvestment and/or liquidity.
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 total deposits was
$956 million for the three months ended March 31, 2000, compared to $913 million
for the year ended December 31, 1999. The Bank continues to retain a substantial
portion of its average deposits in the form of noninterest-bearing funds, which
were 32.6% at March 31, 2000 and 30% at December 31, 1999, or $311.7 million and
$278 million, respectively.
CAPITAL
The primary source of capital growth is through retention of earnings. Undivided
profits increased to $97 million as of March 31, 2000 as compared to $95 million
as of December 31, 1999. On February 29, 2000, the Company's Board of Directors
declared its 267th consecutive quarterly dividend in the amount of $.125 per
share of common stock payable to its shareholders, for the first quarter of
2000. The Company believes that cash dividends are an important component of
shareholder value and at its current level of performance, dividend payments
will continue into the future.
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 the risk based ratios and leverage ratio, as shown below, in
excess of the required "Well Capitalized" level of 10% and 5%, respectively.
Required 3/31/00 12/31/99
----------------------------------
Tier I Capital Ratio.......... 4.00% 15.35% 14.88%
Total Capital Ratio........... 8.00 16.60 16.13
Leverage Ratio................ 3.00 7.45 7.54
9
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
There was an overall decrease of $2.3 million in capital from December 31, 1999
to March 31, 2000. Of this change, there was an increase in undivided profits of
$2.2 million, a decrease in the change in market value of available for sale
securities (net of tax effect) of $200 thousand and net increase of $4.2 million
in Treasury stock transactions.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995, which are based on
management's current expectations regarding economic, legislative and regulatory
issues that may impact the Company's earnings in future periods. Factors that
could cause future results to vary from current management's expectations
include, but are not limited to general economic conditions: changes in interest
rate, deposit flows, loan demand, real estate values and competition; changes in
accounting principles, policies or guidelines; changes in legislation and
regulation; and other economic, competitive, governmental, regulatory and
technological factors affecting the Company's operations, pricing, products and
services.
10
<PAGE>
Item 3, Quantitative and Qualitative Disclosure About Market Risk
MARKET RISK MANAGEMENT
Market risk is the risk of loss in a financial instrument arising from adverse
changes in market rates/ prices such as interest rates, foreign currency
exchange rates, commodity prices and equity prices. The Bank's primary market
risk exposure is interest rate risk, with foreign exchange, commodity and equity
price risk not arising in the ordinary course of business. The ongoing
monitoring and management of this risk is an important component of the Bank's
asset/liability process which is governed by policies, established by its Board
of Directors, that are reviewed and approved annually. The Board of Directors
delegates responsibility for carrying out the asset/liability management
policies to the Asset/Liability Committee (ALCO). In this capacity, ALCO
develops guidelines and strategies impacting the Bank's asset/liability
management related activity based upon estimated market risk sensitivity, policy
limit and overall market interest rate levels/trends.
The objectives of the Bank's interest rate risk management activities are to
define an acceptable level of risk based on the Bank's business focus, capital
and liquidity requirements and to manage interest rate risk and maintain net
interest margins in a changing rate environment. The Bank does not currently
engage in trading activities or use of off balance sheet derivative instruments
to control interest rate risk. The Board of Directors have authorized management
to use derivatives if management deems it beneficial to the Bank.
Even with the Bank's active role in managing interest rate risk, the potential
for changing interest rates is an uncertainty that could have an adverse affect
on the earnings of the Bank. When interest-bearing liabilities mature or reprice
more quickly than interest-earning assets in a given period, a significant
increase in market interest rates could adversely affect net interest income.
Conversely, in a falling interest rate environment, these same interest-bearing
liabilities reprice more quickly than earning assets, producing a beneficial
effect on our net interest income.
In addition, management seeks to reduce the vulnerability of the Bank's
operating results to changes in interest rates and to manage the ratio of
interest rate sensitive assets to interest sensitive liabilities within
specified maturities or repricing periods, as set forth in the following
interest rate sensitivity gap analysis.
11
<PAGE>
Quantitative and Qualitative Disclosure About Market Risk
INTEREST RATE SENSITIVITY GAP ANALYSIS
As of March 31, 2000
(Dollars in thousands)
<TABLE>
<CAPTION>
Less Than 3 to 12 1 to 5 Over
3 Months Months Years 5 Years Total
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
Interest Earning Assets
- -------------------------------------------------------------------------------------------------------------------
Securities available for sale* $ 26,725 $ 79,450 $265,953 $226,500 $598,628
Securities held to maturity* 9,622 25,022 139,659 75,321 249,624
Loans 410,843 1,508 14,204 5,275 431,830
Other 14,848 -- -- -- 14,848
- -------------------------------------------------------------------------------------------------------------------
Total interest earning assets 462,038 105,980 419,816 307,096 1,294,930
===================================================================================================================
Interest Bearing Liabilities
- -------------------------------------------------------------------------------------------------------------------
Interest bearing deposits 536,154 92,774 18,197 84 647,209
Securities sold under
repurchase agreements 60,000 135,000 10,000 -- 205,000
FHLB term advances 20,000 50,000 -- -- 70,000
Other short-term borrowings 11,781 -- -- -- 11,781
- -------------------------------------------------------------------------------------------------------------------
Total interest bearing liabilities 627,935 277,774 28,197 84 933,990
===================================================================================================================
Net interest rate sensitivity gap (165,897) (171,794) 391,619 307,012 360,940
Cumulative gap position (165,897) (337,691) 53,928 360,940
Cumulative gap/total earning assets:
At March 31, 2000 (12.81)% (26.08)% 4.16% 27.87%
At March 31, 1999 (16.83)% (22.13)% 13.13% 29.30%
</TABLE>
* Adjusted for weighted average maturity dates and prepayments for mortgage back
securities. All securities are disclosed at book value.
In managing the Bank's asset/liability position, management attempts to minimize
interest rate risk while enhancing net interest margins. Management continues to
believe that the increased net interest income resulting from a mismatch in
maturity of the Bank's assets and liability portfolio can, during periods of
declining or stable interest rates and periods in which there is a substantial
positive difference between long - and short-term interest rates, provide high
enough returns to justify the increased exposure to sudden and unexpected
increases in interest rates. Consequently, the Bank's results of operations and
net portfolio values remain vulnerable to increases in interest rates and to
fluctuations in the difference between long-and short-term interest rates.
Consistent with its asset/liability management philosophy, the Bank has taken
several steps to manage its interest rate risk. First, the Bank's loan
portfolio, as of March 31, 2000, totaled $431.8 million, consisting of virtually
all adjustable rate loans. Second, a majority of the Bank's securities are U.S.
Government and Agency mortgaged-backed securities, with an ending book value of
$848.3 million, and an expected weighted average maturity of approximately four
years or less. Third, the Bank has a significant amount of deposits which are
non-interest bearing or are only minimally sensitive to interest rate
fluctuations,
12
<PAGE>
Quantitative and Qualitative Disclosure About Market Risk
including $311.7 million in average demand deposits and $284.5 million in
average money market, NOW and savings accounts.
One approach used by management to quantify interest rate risk is the net
portfolio value (NPV) analysis. In essence, this approach calculates the
difference between the present value of the liabilities and the present value of
expected cash flows from assets and off balance sheet contracts. The following
table sets forth, as of March 31, 2000, an analysis of the Bank's interest rate
risk as measured by the estimated changes in NPV resulting from instantaneous
and sustained parallel shifts in the yield curve (+200 basis points measured in
100 basis point increments). For comparative purposes, the table also shows the
estimated percentage increase (decrease) in NPV at March 31, 1999.
NET PORTFOLIO VALUE ANALYSIS FOR INTEREST RATE RISK
<TABLE>
<CAPTION>
March 31, 2000
-------------------------------------------------------------
Estimated Increase (Decrease) in NPV* Percent Increase
Change in Interest Rates Estimated NPV -------------------------------------- (Decrease) in NPV at
Basis Points Amount Amount Percent March 31, 1999
- -----------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
+200 114,138 (55,849) (32.85%) (26.7%)
+100 143,003 (26,984) (15.87%) (12.2%)
- ---- 169,987 -- -- --
- -100 188,575 18,588 10.93% 3.42%
- -200 193,801 23,814 14.01% 2.85%
</TABLE>
* Pre- Tax
Certain assumptions are employed in preparing the preceding table. These
assumptions relate to interest rates, loan prepayment rates, deposit decay rates
and the market values of certain assets under the various interest rate
scenarios. It was also assumed that delinquency rates will not change as a
result of changes in interest rates, although there can be no assurance that
this will be the case. Even if the interest rates change in the designated
amounts, there can be no assurance that the Bank's assets and liabilities would
perform as set forth above. In addition, a change in U.S. Treasury rates in the
designated amounts accompanied by a change in the slope of the Treasury yield
curve would cause significantly different changes to the NPV than indicated in
the chart.
13
<PAGE>
Part II - Other Information
Item 6, Exhibits and Reports on Form 8 - K
(a) Exhibits:
Exhibit 11 - Computation of Earnings Per Share
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 5, 2000 /s/ James G. Lawrence
-----------------------------------
James G. Lawrence
President & Chief Executive Officer
Date: May 5, 2000 /s/ M. Nasette Aranda
-----------------------------------
M. Nasette Aranda
Vice President & Comptroller
14
Exhibit 11 - Computation of Earnings Per Share
Earnings Per Share (EPS), presented below is the calculation of basic and
diluted EPS for the Company for the three months ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
2000 1999*
--------------------------------
<S> <C> <C>
Income before minority interest $ 5,052,438 $ 4,211,415
Less: minority interest 1,856 1,856
----------- -----------
Net income $ 5,050,582 $ 4,209,559
Weighted average shares outstanding 18,889,907 19,414,304
Plus: effect of stock options as dilutive securities 71,168 181,378
----------- -----------
Adjusted weighted average shares assuming dilution 18,961,075 19,595,682
EPS - Basic $ 0.27 $ .21
EPS - Diluted $ 0.27 $ .21
* Adjusted for the 2-1 stock split, effective October 1999.
- -------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 50,514,180
<INT-BEARING-DEPOSITS> 847,728
<FED-FUNDS-SOLD> 14,000,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 587,288,043
<INVESTMENTS-CARRYING> 249,624,576
<INVESTMENTS-MARKET> 245,457,472
<LOANS> 431,830,559
<ALLOWANCE> 9,664,291
<TOTAL-ASSETS> 1,364,722,192
<DEPOSITS> 948,141,924
<SHORT-TERM> 286,858,331
<LIABILITIES-OTHER> 32,769,418
<LONG-TERM> 0
0
0
<COMMON> 19,978
<OTHER-SE> 96,932,541
<TOTAL-LIABILITIES-AND-EQUITY> 1,364,722,192
<INTEREST-LOAN> 9,865,595
<INTEREST-INVEST> 14,881,474
<INTEREST-OTHER> 468,845
<INTEREST-TOTAL> 25,215,914
<INTEREST-DEPOSIT> 6,830,378
<INTEREST-EXPENSE> 11,044,367
<INTEREST-INCOME-NET> 14,171,547
<LOAN-LOSSES> 950,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 7,261,722
<INCOME-PRETAX> 7,736,990
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,050,582
<EPS-BASIC> 0.27
<EPS-DILUTED> 0.27
<YIELD-ACTUAL> 4.58
<LOANS-NON> 874,000
<LOANS-PAST> 217,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 9,108,000
<CHARGE-OFFS> 445,000
<RECOVERIES> 51,000
<ALLOWANCE-CLOSE> 9,664,000
<ALLOWANCE-DOMESTIC> 9,664,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
