FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-23526
LONG ISLAND BANCORP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-3198508
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
201 OLD COUNTRY ROAD, MELVILLE, NEW YORK 11747-2724
(Address of principal executive offices) (Zip Code)
(516) 547-2000
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all the
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
24,805,349 SHARES WERE OUTSTANDING AS OF JUNE 30, 1996
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LONG ISLAND BANCORP, INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
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ITEM 1. Financial Statements
Consolidated Statements of Financial Condition at
June 30, 1996 and September 30, 1995 3
Consolidated Statements of Operations for the three months and nine months ended
June 30, 1996 and 1995 4
Consolidated Statement of Changes in Stockholders' Equity for the
nine months ended June 30, 1996 5
Consolidated Statements of Cash Flows for the nine months
ended June 30, 1996 and 1995 6
Notes to the Consolidated Financial Statements 7 - 9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 22
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. Legal Proceedings 23
ITEM 2. Changes in Securities 23
ITEM 3. Defaults Upon Senior Securities 24
ITEM 4. Submission of Matters to a Vote of Security Holders 24
ITEM 5. Other Information 24
ITEM 6. Exhibits and Reports on Form 8-K 24
Signature Page 25
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LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, SEPTEMBER 30,
1996 1995
--------------- ---------------
A S S E T S
<S> <C> <C>
Cash and cash equivalents (including interest-earning assets of
$26,459 and $10,850, respectively) $ 86,679 $ 67,410
Investment in debt and equity securities, net:
Held-to-maturity, net (estimated fair value of
$0 and $55,871, respectively) --- 55,839
Available-for-sale 283,326 233,408
Mortgage-backed securities, net:
Held-to-maturity (estimated fair value of
$23,326 and $1,339,014, respectively) 23,326 1,337,903
Available-for-sale 1,693,011 938,847
Stock in Federal Home Loan Bank of New York, at cost 40,754 35,132
Loans held for sale, net 87,881 49,372
Loans receivable held for investment, net:
Real estate loans, net 2,683,028 1,900,204
Commercial loans, net 7,237 8,706
Other loans, net 140,727 120,189
--------------- ---------------
Loans, net 2,830,992 2,029,099
Less allowance for possible loan losses (34,105) (34,358)
--------------- ---------------
Total loans receivable held for investment, net 2,796,887 1,994,741
Office properties and equipment, net 91,444 86,239
Accrued interest receivable, net 32,564 31,752
Real estate owned, net 7,511 8,893
Investment in real estate, net 6,985 12,286
Prepaid expenses and other assets 53,649 38,472
Mortgage servicing rights, net 17,002 11,328
--------------- ---------------
Total assets $ 5,221,019 $ 4,901,622
=============== ===============
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
Liabilities:
Deposits, net $ 3,631,157 $ 3,573,529
Official checks outstanding 32,222 42,812
Borrowed funds 900,831 633,675
Mortgagors' escrow liabilities 44,574 71,400
Accrued expenses and other liabilities 90,524 54,032
--------------- ---------------
Total liabilities 4,699,308 4,375,448
Stockholders' equity:
Preferred stock ($0.01 par value, 5,000,000 shares authorized;
none issued)
--- ---
Common stock ($0.01 par value, 45,000,000 shares authorized; 26,816,464
shares issued, 24,805,349 and 26,076,486 outstanding,
respectively) 268 268
Additional paid-in capital 302,126 298,518
Unallocated Employee Stock Ownership Plan (19,634) (21,443)
Unearned Management Recognition & Retention Plan (6,016) (7,071)
Unrealized gain on securities available-for-sale, net of tax 2,341 6,947
Retained income-partially restricted 290,410 264,105
Treasury stock, at cost (2,011,115 and 739,978 shares, (47,784) (15,150)
respectively)
--------------- ---------------
Total stockholders' equity 521,711 526,174
--------------- ---------------
Total liabilities and stockholders' equity $ 5,221,019 $ 4,901,622
=============== ===============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------------------------
1996 1995 1996 1995
------------- ----------------------------- -------------
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Interest income:
Real estate loans $ 49,680 $ 37,643 $ 130,701 $ 102,326
Commercial loans 163 400 553 868
Other loans 3,714 3,657 10,994 11,273
Mortgage-backed securities 29,970 35,020 105,221 100,574
Debt and equity securities 4,335 5,989 12,682 19,412
------------- ------------- ------------- -------------
Total interest income 87,862 82,709 260,151 234,453
------------- ------------- ------------- -------------
Interest expense:
Deposits 38,427 36,558 116,785 100,973
Borrowed funds 10,296 7,491 27,697 18,309
------------- ------------- ------------- -------------
Total interest expense 48,723 44,049 144,482 119,282
------------- ------------- ------------- -------------
Net interest income 39,139 38,660 115,669 115,171
Provision for possible loan losses 1,600 1,500 4,700 4,970
------------- ------------- ------------- -------------
Net interest income after provision for possible 37,539 37,160 110,969 110,201
loan losses
Non-interest income:
Fees and other income:
Loan fees and service charges 837 635 2,273 1,746
Loan servicing fees 3,058 3,303 9,215 8,884
Income from insurance and securities commissions 442 253 1,240 590
Deposit service fees 1,463 1,449 4,419 4,471
------------- ------------- ------------- -------------
Total fee income 5,800 5,640 17,147 15,691
Other income 968 849 2,668 2,280
------------- ------------- ------------- -------------
Total fees and other income 6,768 6,489 19,815 17,971
Net gains on sale activity:
Net gains on loans and mortgage-backed securities 2,195 924 5,317 2,946
Net gains (losses) on investment in debt and equity 169 (349) 428 (1,925)
securities
------------- ------------- ------------- -------------
Total net gains on sale activity 2,364 575 5,745 1,021
Net gain on investment in real estate and premises 1,735 1,081 4,394 1,562
------------- ------------- ------------- -------------
Total non-interest income 10,867 8,145 29,954 20,554
Non-interest expense:
General and administrative expense:
Compensation, payroll taxes and fringe benefits 14,255 13,632 41,157 39,899
Advertising 1,836 801 4,267 2,378
Office occupancy and equipment 5,223 4,558 14,952 13,297
Federal insurance premiums 2,292 2,226 6,768 6,755
Other general and administrative expense 4,951 4,411 13,285 12,539
------------- ------------- ------------- -------------
Total general and administrative expense 28,557 25,628 80,429 74,868
Net loss on real estate owned 637 533 1,531 1,268
------------- ------------- ------------- -------------
Total non-interest expense 29,194 26,161 81,960 76,136
------------- ------------- ------------- -------------
Income before income taxes 19,212 19,144 58,963 54,619
Provision for income taxes 7,918 8,134 24,786 23,029
------------- ------------- ------------- -------------
Net income $ 11,294 $ 11,010 $ 34,177 $ 31,590
============= ============= ============= =============
Primary earnings per common share (a) $ 0.47 $ 0.45 $ 1.40 $ 1.29
============= ============= ============= =============
Fully diluted earnings per common share (a) $ 0.47 $ 0.45 $ 1.40 $ 1.29
============= ============= ============= =============
</TABLE>
(a) For the three and nine months ended June 30, 1996, primary and fully
diluted earnings per common share reflect the dilutive effect of stock
options. For the three and nine months ended June 30, 1995, stock options
were not materially dilutive.
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED JUNE 30, 1996
(IN THOUSANDS, EXCEPT SHARE DATA)
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UNALLOCATED UNEARNED UNREALIZED
EMPLOYEE MANAGEMENT GAIN ON RETAINED
ADDITIONAL STOCK RECOGNITION SECURITIES INCOME -
COMMON PAID-IN OWNERSHIP & RETENTION AVAILABLE PARTIALLY TREASURY
STOCK CAPITAL PLAN PLAN FOR SALE RESTRICTED STOCK TOTAL
-------- ----------- ----------- ------------ ------------ ------------ --------- ---------
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Balance at September 30, $ 268 $ 298,518 $ (21,443) $ (7,071) $ 6,947 $ 264,105 $(15,150) $ 526,174
1995
Net income 34,177 34,177
Allocation of ESOP stock 1,997 1,809 3,806
Amortization of award of
MRP stock and related tax 1,203 1,055 2,258
benefits
Change in unrealized gain
on securities
available-for-sale, net
of taxes (11,340) (11,340)
Dividends (6,910) (6,910)
Repurchase of common stock
(1,341,554 shares) (34,409) (34,409)
Exercise of stock options
(70,417 shares) and related 408 (962) 1,775 1,221
tax benefits
Net unrealized gain on
securities reclassified as
available for sale,
net of taxes 6,734 6,734
---------- ------------ ------------ ------------- ------------- ------------- ---------- ----------
Balance at June 30, 1996 $ 268 $ 302,126 $ (19,634) $ (6,016) $ 2,341 $ 290,410 $(47,784) $ 521,711
========== ============ ============ ============= ============= ============= ========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
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<CAPTION>
FOR THE NINE MONTHS ENDED
JUNE 30,
--------------------------------
1996 1995
------------ -------------
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Operating activities:
Net income $ 34,177 $ 31,590
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Provision for possible loan losses 4,700 4,970
Write-off of real estate owned and investment in real estate 298 316
Gains on sale of real estate owned and investment in real estate (200) (367)
Depreciation and amortization 7,626 5,877
Amortization of premiums, net of discount accretion-debt, equity and
mortgage-backed
securities 1,840 (893)
Accretion of discounts, net of amortization of premiums-purchase accounting (976) (1,214)
& goodwill amortization
Employee Stock Ownership Plan/Management Recognition & Retention Plan 5,305 3,093
expense
Gains on sales of loans and mortgage-backed securities, net (5,317) (2,946)
Originations from sale of loans held-for-sale, net of proceeds (33,283) (38,631)
(Gains) losses on sales of debt and equity securities, net (379) 46
Provision for (gain) loss on investment in debt and equity securities (49) 1,879
Increase in accrued interest receivable (812) (2,650)
Increase in accrued and other liabilities 36,492 8,991
Increase (decrease) in official checks outstanding (10,590) 3,569
Increase in prepaids and other assets (11,113) (626)
Net increase (decrease) in unearned income (7,219) 480
------------ -------------
Net cash provided by operating activities 20,500 13,484
------------ -------------
Investing activities:
Proceeds from sales of debt and equity securities, available-for-sale 82,207 38,847
Proceeds from sales of mortgage-backed securities, available-for-sale 345,564 141,836
Proceeds from maturities of and principal payments on debt and equity 317,919 831,560
securities
Principal payments on mortgage-backed securities 473,586 228,345
Purchases of debt and equity securities, available-for-sale (394,852) (764,331)
Purchases of debt and equity securities, held-to-maturity --- (7,128)
Purchases of Federal Home Loan Bank Stock (5,622) (4,372)
Purchases of mortgage-backed securities, available-for-sale (154,154) (112,871)
Purchases of mortgage-backed securities, held-to-maturity --- (311,240)
Originations and purchases on loans held-for-investment, net of principal (916,321) (371,131)
payments
Proceeds from sale of real estate owned 10,694 8,754
Purchases of office properties and equipment (11,467) (8,743)
Purchase of mortgage servicing rights (5,618) (10,017)
------------ -------------
Net cash used by investing activities (258,064) (340,491)
------------ -------------
Financing activities:
Net decrease in demand deposits, NOW accounts and savings accounts (27,485) (404,208)
Net decrease in mortgagors' escrow accounts (26,826) (12,963)
Net increase in certificates of deposit 85,113 384,560
Costs to repurchase common stock (34,409) (7,028)
Proceeds from the exercise of stock options 812 833
Cash dividends paid on common stock (7,528) (5,284)
Net increase (decrease) in short-term borrowings (210,000) 30,000
Net increase in long-term borrowings 477,156 228,942
------------ -------------
Net cash provided by financing activities 256,833 214,852
------------ -------------
Increase (decrease) in cash and cash equivalents 19,269 (112,155)
Cash and cash equivalents at the beginning of the period 67,410 175,990
------------ -------------
Cash and cash equivalents at the end of the period $ 86,679 $ 63,835
============ =============
Supplemental disclosures of cash flow information: Cash paid during the periods
for:
Interest on deposits and borrowed funds $ 144,685 $ 119,855
============ =============
Income taxes $ 16,310 $ 10,085
============ =============
Non-cash investing activity:
Additions to real estate owned, net $ 6,850 $ 7,451
============ =============
Securitization of loans $ 109,415 $ -
============ =============
SFAS 115 Transfer $ 11,713 $ -
============ =============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE>
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of Long Island Bancorp, Inc. ("Company") and its
wholly-owned subsidiary The Long Island Savings Bank, FSB ("Bank"). In
connection with the conversion of the Bank on April 14, 1994 and
completion of the Company's initial public offering ("IPO") of stock,
the Company acquired all of the Bank's outstanding common stock. Prior
to this date, the Company had no significant activity.
The unaudited consolidated financial statements included herein reflect
all adjustments which are, in the opinion of management, necessary for
the fair presentation of the Company's interim financial condition as
of the dates indicated and the results of operations for the periods
shown. In preparing the accompanying consolidated financial statements,
management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the
consolidated statements of financial condition and statements of
operations for the periods presented. The results of operations for the
three months and nine months ended June 30, 1996 are not necessarily
indicative of the results of operations to be expected for the
remainder of the year. Certain information and note disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission ("SEC").
These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Annual Report to Shareholders
and Form 10-K for the fiscal year ended September 30, 1995.
Certain reclassifications have been made to conform the prior periods'
consolidated financial statements to the current presentation.
2. EARNINGS PER SHARE OF COMMON STOCK
Primary earnings per share ("EPS") is calculated by dividing net income
by the weighted average number of shares of the Company's common stock
outstanding and the common stock equivalents related to shares issuable
under the Company's stock benefit plans that have a dilutive effect.
Fully diluted EPS is calculated by dividing net income by the sum of
the weighted average number of shares of common stock outstanding and
the common stock equivalents related to shares issuable under the
Company's stock benefit plans that have the maximum dilutive effect. In
accordance with the provisions of the American Institute of Certified
Public Accountants ("AICPA") Statement of Position 93-6 ("SOP 93-6"),
"Employers' Accounting for Employee Stock Ownership Plans," unallocated
shares of the Company's common stock held by the Employee Stock
Ownership Plan ("ESOP") are not considered outstanding for financial
reporting purposes. The Company does include, however, a ratable number
of unallocated ESOP shares to be allocated at the end of the year in
its weighted average number of shares outstanding for interim financial
reporting. ESOP shares that were considered to be outstanding for the
three months and nine months ended June 30, 1996 were 313,954 and
265,320, respectively. The weighted average number of shares
outstanding for primary and fully diluted EPS calculations for the
three months and nine months ended June 30, 1996 and 1995 are presented
on page 19 herein.
<PAGE>
3. CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and short-term loans to commercial
banks with original terms to maturity of less than three months.
4. ACCOUNTING CHANGES
Effective July 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 122 ("SFAS 122"), "Accounting for Mortgage
Servicing Rights." SFAS 122 amends Statement of Financial Accounting
Standards No. 65 ("SFAS 65"), "Accounting for Certain Mortgage Banking
Activities", to require that a mortgage banking enterprise recognize as
separate assets rights to service mortgage loans for others, however
acquired. For mortgage servicing rights that are created through the
origination of mortgage loans, and where the loans are subsequently
sold or securitized with servicing rights retained, SFAS 122 requires
that the total cost of the mortgage loans should be allocated to the
mortgage servicing rights and the loans based on their relative fair
values. SFAS 122 also requires the assessment of capitalized mortgage
servicing rights for impairment be based on the current fair value of
those rights and recognized through a valuation allowance. The adoption
of SFAS 122 did not have a material effect on the Company's financial
condition and results of operations.
Effective October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114 ("SFAS 114"), "Accounting by Creditors for
Impairment of a Loan," and Statement of Financial Accounting Standards
No. 118 ("SFAS 118"), "Accounting by Creditors for Impairment of a Loan
- Income Recognition and Disclosures." SFAS 114 requires impairment to
be measured based upon the present value of expected future cash flows
or fair value of the loan's collateral. SFAS 118 amends SFAS 114 and
addresses the mandated disclosures about the recorded investment in
certain impaired loans and the appropriate method to recognize interest
income related to those impaired loans. The adoption of SFAS 114 and
SFAS 118 did not have a material effect on the Company's financial
condition and results of operations.
Effective December 31, 1995, the Company reassessed its securities
portfolio in accordance with the Special Report on Statement of
Financial Accounting Standards No. 115 ("SFAS 115"), "Accounting for
Certain Investments in Debt and Equity Securities" issued in November
1995. This Special Report permitted entities to perform a one-time
re-evaluation of the appropriateness of the classifications of all
securities held by December 31, 1995. The reassessment of the Company's
securities resulted in mortgage-backed securities and debt securities
in the amounts of $1.2 billion and $78.6 million, respectively,
previously classified as held-to-maturity to be classified as
available-for-sale and resulted in an increase of $6.7 million, net of
tax, to stockholders' equity as of the reclassification date.
5. RECENT DEVELOPMENTS
On April 15, 1996, the Company announced the commencement of its third
stock repurchase program. The Company is authorized to repurchase up to
1,243,131 shares, which represented 5% of its 24,862,625 outstanding
common shares at that date, by April 14, 1997. As of June 30 1996,
90,000 shares have been repurchased under this program. Additionally,
32,724 shares have been reissued upon the exercise of stock options
during the period April 15, 1996 through June 30, 1996.
On June 25, 1996, the Company announced the declaration of its seventh
consecutive quarterly dividend of ten cents ($0.10) per common share.
The dividend is payable on August 16, 1996 to shareholders of record at
the close of business on July 17, 1996.
On June 28, 1996, the Company announced the acquisition of two mortgage
origination offices from Fleet Mortgage Corp. of Columbia, South
Carolina. These offices are located in Horsham, Pennsylvania and
Raleigh, North Carolina.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
- ---------------------------------------------
GENERAL
The Company was incorporated in the State of Delaware in December 1993 at the
direction of the Board of Directors of the Bank for the purpose of becoming a
holding company to own all of the outstanding capital stock of the Bank upon its
conversion from a mutual to a stock form of organization. The mutual-to-stock
conversion was completed on April 14, 1994. In connection with the conversion
the Company issued 26,040,214 shares of common stock to the Bank's depositors
and its tax-qualified employee stock benefit plans, and an additional 776,250
shares to the Bank's Management Recognition and Retention Plans ("MRPs") at a
price of $11.50 per share. The Company realized net proceeds of $264.2 million
from the sale of its common stock and utilized approximately $164.0 million to
purchase 100% of the issued and outstanding shares of the Bank's common stock.
FINANCIAL CONDITION
Total assets at June 30, 1996 were $5.2 billion, an increase of $319.4 million,
or 6.5%, from September 30, 1995. The increase in assets is principally due to
an increase in loans receivable held for investment, net of $802.1 million, or
40.2%, to $2.8 billion at June 30, 1996 from $2.0 billion at September 30, 1995.
Partially offsetting this increase is a decrease in mortgage-backed securities
of $560.4 million, or 24.6%, to $1.7 billion at June 30, 1996 from $2.3 billion
at September 30, 1995.
Non-performing assets decreased by $4.2 million, or 6.5%, to $60.4 million at
June 30, 1996 from $64.6 million at September 30, 1995. This decline was
comprised of a $2.8 million decrease in non-performing loans and a $1.4 million
decrease in real estate owned. The ratio of non-performing assets to total
assets decreased to 1.16% at June 30, 1996 from 1.32% at September 30, 1995 and
the ratio of non-performing loans to total gross loans decreased to 1.81% at
June 30, 1996 from 2.67% at September 30, 1995.
Total deposits at June 30, 1996 were $3.6 billion, an increase of $57.6 million,
or 1.6%, from September 30, 1995. Borrowed funds increased by $267.2 million,
or 42.2%, to $900.8 million at June 30, 1996 from $633.7 million at September
30, 1995.
Stockholders' equity decreased by $4.5 million, or 0.8%, to $521.7 million at
June 30, 1996 from $526.2 million at September 30, 1995. The decrease primarily
reflects the declaration of $6.9 million in dividends, the purchase of treasury
stock, net of shares issued for the exercise of stock options, of $32.6 million
and the decline in unrealized gains on securities classified as
available-for-sale, of $4.6 million. This reduction was partially offset by
earnings of $34.2 million and $5.4 million related to the Company's stock
benefit plans. At June 30, 1996, the Company's ratio of stockholders' equity to
total assets was 9.99% and book value per share was $21.03.
LIQUIDITY, REGULATORY CAPITAL AND CAPITAL RESOURCES
GENERAL. The Company's primary sources of funds are deposits, principal and
interest payments on loans and mortgage-backed securities, retained income and
borrowings. On June 27, 1996 the Bank issued a funding note in the amount of
$181.4 million which was collateralized by a pool of adjustable rate residential
mortgage loans. Payments of principal and interest on the funding note shall be
paid monthly based on the scheduled payments due on the underlying loans. The
interest on the funding note changes monthly and bears interest at a rate of 50
basis points over the one month London Interbank Offered Rate ("LIBOR").
Proceeds from the sale of securities and loans are also a source of funding.
While maturities and scheduled amortization of loans and mortgage-backed
securities are predictable sources of funds, deposit flows and mortgage
prepayments are greatly influenced by general interest rates, economic
conditions and competition.
The Bank is required to maintain minimum levels of liquid assets as defined by
Office of Thrift Supervision ("OTS") regulations. This requirement, which may be
varied at the direction of the OTS depending upon economic conditions and
deposit flows, is based upon a percentage of deposits and short-term borrowings.
The required ratio is currently 5.00%. The Bank's liquidity ratio declined to
7.61% at June 30, 1996 from 12.35% at September 30, 1995 which reflects the
deployment of funds into real estate loans. Currently, the Bank maintains a
liquidity ratio above the regulatory requirements in accordance with its
investment objective of investing in short-term debt securities.
Future levels may vary.
The Company's most liquid assets are cash and short-term investments. The levels
of these assets are dependent on the Company's operating, financing, lending and
investing activities during any given period.
The primary investment activity of the Bank is the origination of real estate
loans and other loans. During the quarter ended June 30, 1996, the Bank
originated or purchased real estate loans in the amount of $847.2 million,
including $305.5 million which represents the bulk purchase of loans, and other
loans in the amount of $24.8 million, respectively. The Bank purchases and
originates mortgage-backed securities to maintain its liquidity to meet its
funding demand. Purchases and originations of mortgage-backed securities totaled
$56.5 million and $109.4 million, respectively, for the quarter ended June 30,
1996. These activities were funded primarily by principal repayments on loans
and mortgage-backed securities, maturities and principal repayments on debt and
equity securities and from growth in deposits. Other investing activities
included the acquisition of U.S. government securities, federal agency
obligations and asset-backed securities.
Liquidity management of the Company is both a daily and long-term component of
management's strategy. Excess funds are generally invested in short-term and
intermediate-term securities. In the event that the Bank should require funds
beyond its ability to generate them internally, additional sources of funds are
available through the use of Federal Home Loan Bank ("FHLB") advances and
reverse repurchase agreements. In addition, the Bank may access funds, if
necessary, through various lines of credit totaling $125.0 million at June 30,
1996 from the FHLB.
At the time of conversion, the Bank was required by the OTS to establish a
liquidation account which will be reduced to the extent that eligible account
holders reduce their qualifying deposits. In the unlikely event of a complete
liquidation of the Bank, each eligible account holder will be entitled to
receive a distribution from the liquidation account. The Bank is not permitted
to declare or pay a dividend on or repurchase any of its capital stock if the
effect would be to cause the Bank's regulatory capital to be reduced below the
amount required for the liquidation account. Unlike the Bank, the Company is not
subject to OTS regulatory restrictions on the declaration or payment of
dividends to its stockholders, although the source of such dividends could
depend upon dividend payments from the Bank. The Company is subject, however, to
the requirements of Delaware law, which generally limit dividends to an amount
equal to the excess of its net assets (the amount by which total assets exceed
total liabilities) over its stated capital or, if there is no such excess, to
its net profits for the current and/or immediately preceding fiscal year.
REGULATORY CAPITAL POSITION. Under OTS capital regulations, the Bank is required
to comply with each of three separate capital adequacy standards. At June 30,
1996, the Bank exceeded each of the three OTS capital requirements, as
illustrated on page 19 herein.
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED JUNE 30,1996 AND 1995
GENERAL. The Company had net income of $11.3 million and primary and fully
diluted EPS of $0.47 for the quarter ended June 30, 1996 ("1996 quarter"). For
the quarter ended June 30, 1995 ("1995 quarter"), net income was $11.0 million
and primary and fully diluted EPS was $0.45.
NET INTEREST INCOME. Net-interest income increased by $0.4 million, or 1.2%, to
$39.1 million in the 1996 quarter from $38.7 million in the 1995 quarter. The
increase in net interest income is primarily attributable to the investment of
additional borrowed funds, which on average increased by $206.6 million over the
1995 period, at a positive interest rate spread which increased net interest
income while creating downward pressure on the net interest margin. The primary
investment vehicle used by the Company for the additional borrowed funds was
real estate loans. Average real estate loans increased by $733.8 million to $2.6
billion at June 30, 1996 as compared with $1.8 billion at June 30, 1995.
PROVISION FOR POSSIBLE LOAN LOSSES. The provision for possible loan losses
increased marginally by $0.1 million, or 6.7%, to $1.6 million in the 1996
quarter from $1.5 million in the 1995 quarter. This increase reflects
management's assessment of the level of non-performing loans, which at June 30,
1996 was $52.9 million compared with $55.1 million at June 30, 1995. At June 30,
1996, the ratio of the allowance for possible loan losses to non-performing
loans improved to 64.50% from 63.87% at June 30, 1995. Although management
considers the allowance for possible loan losses to be adequate at June 30,
1996, if general economic trends and real estate values were to decline, the
level of non-performing loans may increase. Such an increase could result in
greater provisions for possible loan losses thereby adversely affecting future
operating results.
NON-INTEREST INCOME. Total non-interest income increased by $2.8 million, or
33.4%, to $10.9 million during the 1996 quarter as compared with $8.1 million
for the 1995 quarter. The improvement in total non-interest income primarily
reflects an increase in net gains on sale activity which amounted to $2.4
million during the 1996 quarter as compared with $0.6 million during the 1995
quarter. As interest rates began to rise during the 1996 quarter, the Company
recognized profits in its available-for-sale portfolios. This strategy allowed
the Company to enhance net earnings, increase liquidity and improve its ability
to take advantage of higher yielding investments. Net gain on investment in real
estate and premises increased by $0.6 million, or 60.5%, to $1.7 million during
the 1996 quarter as compared with $1.1 million for the 1995 quarter. The
increase reflects the refund of real estate taxes stemming from tax certiorari
proceedings and the disposition, at a slight profit, of two non-strategic
properties. Total fees and other income increased to $6.8 million in the 1996
quarter from $6.5 million in the 1995 quarter principally from commissions
generated from the activities of the Company's insurance and securities
subsidiary coupled with increased loan fees and service charges stemming from
the growth of the mortgage servicing portfolio.
NON-INTEREST EXPENSE. Total non-interest expense increased by $3.0 million, or
11.6%, to $29.2 million in the 1996 quarter from $26.2 million in the 1995
quarter. This increase is primarily due to increased expenditures of $1.0
million for advertising and promotion costs related to the recent media campaign
to promote the mortgage and consumer banking businesses, greater compensation
costs related to stock based benefit plans of $0.6 million reflecting the
appreciation of the Company's common stock and greater depreciation and
occupancy costs of $0.7 million resulting from the Company's recent expansion
and technological investments.
PROVISION FOR INCOME TAXES. Income tax expense decreased by $0.2 million, or
2.7%, to $7.9 million in the 1996 quarter from $8.1 million in the 1995 quarter.
This decrease is primarily attributable to a 128 basis point reduction in the
effective tax rate to 41.21% in the 1996 quarter from 42.49% in the 1995
quarter. The decline in the effective tax rate primarily reflects the decrease
in the Company's deferred tax valuation allowance pursuant to Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes."
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
GENERAL. The Company had net income of $34.2 million and primary and fully
diluted EPS of $1.40 for the nine months ended June 30, 1996 ("1996 period").
Net income for the nine months ended June 30, 1995 ("1995 period") was $31.6
million and primary and fully diluted EPS was $1.29.
NET INTEREST INCOME. Net interest income increased by $0.5 million, or 0.4%, to
$115.7 million in the 1996 period from $115.2 for the 1995 period due to higher
interest rates. The higher interest rates in the 1996 period created downward
pressure on the net interest margin which declined 20 basis points to 3.30% from
3.50% in the 1995 period. In order to minimize the impact of rising interest
rates on net interest income in the 1996 period, the Company increased its level
of borrowed funds, which on average increased by $188.4 million over the 1995
period, and combined with the growth in average deposit liabilities, invested
them at a positive interest rate spread resulting in an increase in net interest
income. The primary investment vehicles for these additional funds were real
estate loans, which on average increased by $520.2 million over the 1995 period.
PROVISION FOR POSSIBLE LOAN LOSSES. The provision for possible loan losses
decreased by $0.3 million to $4.7 million in the 1996 period from $5.0 million
in the 1995 period. The decrease in the provision reflects lower net charge-offs
in the 1996 period, as compared with the 1995 period and improvement in the
Company's asset quality ratios. The ratio of non-performing loans to total gross
loans improved by 84 basis points and the ratio of non-performing assets to
total assets improved by 20 basis points at June 30, 1996 as compared with June
30, 1995. The coverage provided by the allowance for possible loan losses as a
ratio of non-performing loans increased to 64.50% at June 30, 1996 from 63.87%
at June 30, 1995.
NON-INTEREST INCOME. Total non-interest income increased by $9.4 million, or
45.7% to $30.0 million in the 1996 period from $20.6 million in the 1995 period.
The increase in total non-interest income was due to improvements in several
categories. Loan fees and service charges increased by $0.5 million reflecting
the Company's growth in the real estate loan portfolio. During the 1996 period,
the Company originated or purchased real estate loans totalling $1.7 billion, an
increase of $1.0 billion over the 1995 period. Loan servicing fees increased by
$0.3 million reflecting the growth in the mortgage loan servicing portfolio. The
Company's strategic plan includes the continued growth in its mortgage loan
servicing portfolio through opportunities that may exist in the market to
purchase servicing or through the retention of servicing rights upon the sale of
the underlying mortgage loans. During the 1996 period, the Company purchased
mortgage servicing rights in the amount of $5.6 million. Income from insurance
and securities commissions increased by $0.6 million, or 110.2%, to $1.2 million
in the 1996 period from $0.6 million in the 1995 period. The increase reflects
market conditions and the culmination of the Company's efforts that began in the
1995 period to provide a broad range of diversified financial products and
services to its customers. Net gains on loans and mortgage-backed securities and
net gains (losses) on investments in debt and equity securities each increased
by $2.4 million during the 1996 period as compared with the 1995 period. The
improvement in net gains on sale activity represents the execution of
management's strategy of periodically taking profits in the Company's loan,
available-for-sale and funding portfolios. As interest rates began to rise
during the 1996 period and funding costs began to increase, the Company
recognized profits in the available-for-sale portfolios which resulted in
additional liquidity and improved the Company's ability to take advantage of
higher yielding investments as they become available. Further contributing to
the improvement in net gain on sales was the 1995 writedown of $1.8 million
stemming from the Company's investment in Nationar, a failed bank service
corporation. Net gain on investment in real estate and premises improved by $2.8
million primarily due to the disposition of five non-strategic investment
properties coupled with the refund of real estate taxes stemming from tax
certiorari proceedings.
NON-INTEREST EXPENSE. Total non-interest expense increased by $5.9 million, or
7.6%, to $82.0 million in the 1996 period from $76.1 million in the 1995 period.
The increase in total non-interest expense was due to changes in several
categories. Advertising costs increased by $1.9 million, or 79.4%, to $4.3
million in the 1996 period from $2.4 million in the 1995 period. The increase is
principally the result of a recently instituted media campaign to promote the
Company's mortgage and consumer banking businesses. Office occupancy and
equipment costs increased by $1.7 million, or 12.4%, to $15.0 million in the
1996 period from $13.3 million in the 1995 period. The increase reflects the
Company's major upgrade of its technological support to continue the expansion
of its mortgage operations and the modernization of consumer banking.
Compensation and benefit costs increased by $1.3 million, or 3.2%, to $41.2
million in the 1996 period from $39.9 million in the 1995 period. This increase
is primarily due to the increase in stock based compensation costs and the
November 30, 1994 acquisitions of the operations of Entrust Financial
Corporation and Developer's Mortgage Corporation. The increase in stock-based
compensation is directly related to the improvement in the market price of the
Company's common stock. Other general and administrative expenses increased by
$0.8 million, or 5.9%, to $13.3 million in the 1996 period from $12.5 million in
the 1995 period.
PROVISION FOR INCOME TAXES. The provision for income taxes increased by $1.8
million, or 7.6%, to $24.8 million in the 1996 period from $23.0 million in the
1995 period. The increase is principally due to an increase in pre-tax income
partially offset by a 13 basis point decrease in the effective tax rate to
42.04% in the 1996 period from 42.16% in the 1995 period.
IMPACT OF NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("SFAS 121"), "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." SFAS 121 is effective for fiscal years beginning after December 15, 1995
and establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. This statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity should estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows is less than the carrying amount of the asset, an
impairment loss should be recognized. This statement requires that long-lived
assets and certain identifiable intangibles to be disposed of be reported at the
lower of carrying amount or fair value less cost to sell, except for assets that
are covered by Accounting Principle Board Opinion ("APB") No. 3, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The Company does not currently expect SFAS 121 to have a
significant effect on its financial statements.
In October 1995, the FASB issued Statement of Financial Accounting Standards No.
123 ("SFAS 123"), "Accounting for Stock-Based Compensation." SFAS 123 applies to
all transactions in which an entity acquires goods or services by issuing equity
instruments or by incurring liabilities where the payment amounts are based on
the entity's common stock price, except for employee stock ownership plans. SFAS
123 covers transactions with employees and non-employees and is applicable to
both public and non-public entities.
SFAS 123 establishes a new method of accounting for stock-based compensation
arrangements with employees. The new method is a fair value based method rather
than the intrinsic value based method that is contained in APB 25. Entities are
not required to adopt the new fair value based method for purposes of preparing
their basic financial statements and may continue to use the APB 25 method. The
SFAS 123 fair value based method is considered by the FASB to be preferable to
the APB 25 method, and thus, once the fair value based method is adopted, an
entity cannot change back to the APB 25 method. Also, the selected method
applies to all of an entity's compensation plans and transactions. For entities
not adopting the SFAS 123 fair value based method, SFAS 123 requires the entity
to display in the footnotes to the financial statements pro forma net income and
earnings per share information as if the fair value based method had been
adopted.
The accounting requirements of SFAS 123 are effective for transactions entered
into in fiscal years that begin after December 15, 1995, though they may be
adopted on issuance. The disclosure requirements are effective for financial
statements for fiscal years beginning after December 15, 1995, or for an earlier
fiscal year for which SFAS 123 is initially adopted for recognizing compensation
cost. Pro forma disclosures required for entities that elect to continue to
measure compensation cost using the APB 25 method must include the effects of
all awards granted in fiscal years that begin after December 15, 1994. Pro forma
disclosures for awards granted in the first fiscal year beginning after December
15, 1994, need not be included in financial statements for that fiscal year but
should be presented subsequently whenever financial statements for that fiscal
year are presented for comparative purposes with financial statements for a
later fiscal year. The Company intends to continue its present method of
accounting for stock-based compensation; accordingly, the adoption of the
Statement will not have an effect on the financial statements with the exception
of expanded disclosures required under the Statement.
In June 1996, the FASB issued Statement of Financial Accounting No. 125 ("SFAS
125"), "Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities." SFAS 125 provides accounting and reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities based on consistent application of a financial-components approach
that focuses on control. Under this approach, after a transfer of financial
assets, an entity recognizes the financial and servicing assets it controls and
the liabilities it has incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished. This statement
provides consistent standards for distinguishing transfers of financial assets
that are sales from transfers that are secured borrowings. This statement
supersedes Statement of Financial Accounting Standards No. 76, "Extinguishment
of Debt", and No. 77, "Reporting by Transferors for Transfers of Receivable with
Recourse", and SFAS 122 and amends SFAS 115 and SFAS 65.
The provisions of SFAS 125 are effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after December 31,
1996 and is to be applied prospectively. Earlier or retroactive application is
not permitted. The Company is currently in the process of reviewing SFAS 125.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Form 10-Q Report includes certain forward looking statements based on
current management expectations. The Company's actual results could differ
materially from those management expectations. Factors that could cause future
results to vary from current management expectations include, but are not
limited to, general economic conditions, legislative and regulatory changes,
monetary and fiscal policies of the federal government, changes in interest
rates, deposit flows, the cost of funds, demand for loan products, demand for
financial services, competition, changes in the quality or composition of the
Bank's loan and investment portfolios, changes in accounting principles,
policies or guidelines, and other economic, competitive, governmental and
technological factors affecting the Company's operations, markets, products,
services and prices. Additional factors are described in the Company's other
public reports filed with the SEC.
<PAGE>
AVERAGE BALANCE SHEET
The following table sets forth certain information relating to the Company's
average unaudited consolidated statements of financial condition and the
consolidated statements of operations for the three months ended June 30, 1996
and 1995, and reflects the annualized average yield on assets and average cost
of liabilities for the periods indicated. Such annualized yields and costs are
derived by dividing income or expense by the average balance of assets or
liabilities, respectively, for the periods shown. Average balances are derived
from the average daily balances. The yields and costs include fees which are
considered adjustments to yields.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------------------
1996 1995
----------------------------------------- -----------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD\ AVERAGE YIELD\
BALANCE INTEREST COST BALANCE INTEREST COST
-------------- ------------ ----------- -------------- ------------ -----------
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS
<S> <C> <C> <C> <C> <C> <C>
Interest-earning cash
equivalents $ 36,134 $ 471 5.24 % $ 28,665 $ 402 5.61 %
Debt and equity securities
and FHLB-NY stock, net (1) 272,201 3,864 5.68 376,920 5,587 5.93
Mortgage-backed securities, 1,766,240 29,970 6.79 2,125,002 35,020 6.59
net (1)
Real estate loans, net (2) 2,558,200 49,680 7.77 1,824,390 37,643 8.25
Commercial and other loans, 129,150 3,877 12.01 116,888 4,057 13.88
net (2)
-------------- ------------ --------- -------------- ------------ --------
Total interest-earning assets 4,761,925 87,862 7.38 4,471,865 82,709 7.40
Other non-interest-earning 269,453 229,151
assets
-------------- ------------ -------------- ------------
Total assets $ 5,031,378 $ 87,862 $ 4,701,016 $ 82,709
============== ============ ============== ============
INTEREST BEARING LIABILITIES
Deposits, net $ 3,664,799 $ 38,427 4.22 % $ 3,558,235 $ 36,558 4.12 %
Borrowed funds 727,132 10,296 5.70 520,555 7,491 5.77
-------------- ------------ --------- -------------- ------------ --------
Total interest-bearing 4,391,931 48,723 4.46 4,078,790 44,049 4.33
liabilities
Non-interest-bearing 120,721 103,097
liabilities
-------------- --------------
Total liabilities 4,512,652 4,181,887
Total stockholders' equity 518,726 519,129
-------------- ------------ --------- -------------- ------------ --------
Total liabilities and
stockholders' equity $ 5,031,378 $ 48,723 $ 4,701,016 $ 44,049
============== ------------ ============== ------------
Net interest income/spread (3) $ 39,139 2.92 % $ 38,660 3.07 %
============ ========= ============ ========
Net interest margin as %
of interest-earning assets 3.29 % 3.46 %
(4)
========= ========
Ratio of interest-earning
assets to interest-bearing 108.42 % 109.64 %
liabilities
========= ========
</TABLE>
(1) Debt and equity and mortgage-backed securities are shown including the
average market value appreciation of $7.6 million and $1.2 million, before
tax, from SFAS 115 for the three months ended June 30, 1996 and 1995,
respectively.
(2) Net of unearned discounts, premiums, deferred loan fees, purchase accounting
discounts and premiums and allowance for possible loan losses, and including
non-performing loans and loans held for sale.
(3) Interest rate spread represents the difference between the average rate on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin represents net interest income divided by average
interest-earning assets.
<PAGE>
AVERAGE BALANCE SHEET
The following table sets forth certain information relating to the Company's
average unaudited consolidated statements of financial condition and the
consolidated statements of operations for the nine months ended June 30, 1996
and 1995, and reflects the annualized average yield on assets and average cost
of liabilities for the periods indicated. Such annualized yields and costs are
derived by dividing income or expense by the average balance of assets or
liabilities, respectively, for the periods shown. Average balances are derived
from the average daily balances. The yields and costs include fees which are
considered adjustments to yields.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED JUNE 30,
--------------------------------------------------------------------------------------
1996 1995
----------------------------------------- -----------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
-------------- ------------ ----------- -------------- ------------ -----------
(DOLLARS IN THOUSANDS)
INTEREST-EARNING ASSETS
<S> <C> <C> <C> <C> <C> <C>
Interest-earning cash
equivalents $ 32,938 $ 1,330 5.39 % $ 52,531 $ 2,117 5.37 %
Debt and equity securities
and FHLB-NY stock, net (1) 270,104 11,352 5.60 406,920 17,295 5.67
Mortgage-backed securities, 2,043,011 105,221 6.87 2,124,016 100,574 6.31
net (1)
Real estate loans, net (2) 2,206,548 130,701 7.90 1,686,361 102,326 8.09
Commercial and other loans, 122,142 11,547 12.61 120,131 12,141 13.48
net (2)
-------------- ------------ --------- -------------- ------------ --------
Total interest-earning assets 4,674,743 260,151 7.42 4,389,959 234,453 7.12
Other non-interest-earning 263,668 222,649
assets
-------------- ------------ -------------- ------------
Total assets $ 4,938,411 $ 260,151 $ 4,612,608 $ 234,453
============== ============ ============== ============
INTEREST-BEARING LIABILITIES
Deposits, net $ 3,649,092 $ 116,785 4.27 % $ 3,559,680 100,973 3.79 %
Borrowed funds 644,324 27,697 5.74 455,934 18,309 5.37
-------------- ------------ --------- -------------- ------------ --------
Total interest-bearing 4,293,416 144,482 4.50 4,015,614 119,282 3.97
liabilities
Non-interest-bearing 119,507 90,803
liabilities
-------------- --------------
Total liabilities 4,412,923 4,106,417
Total stockholders' equity 525,488 506,191
-------------- ------------ --------- -------------- ------------ --------
Total liabilities and
stockholders' equity $ 4,938,411 $ 144,482 $ 4,612,608 $ 119,282
============== ------------ ============== ------------
Net interest income/spread (3) $ 115,669 2.92 % $ 115,171 3.15 %
============ ========= ============ ========
Net interest margin as %
of interest-earning assets 3.30 % 3.50 %
(4)
========= ========
Ratio of interest-earning
assets to interest-bearing 108.88 % 109.32 %
liabilities
========= ========
</TABLE>
(1) Debt and equity and mortgage-backed securities are shown including the
average market value appreciation/(depreciation) of $15.8 million and
($7.1) million, before tax, from SFAS 115 for the nine months ended June
30, 1996 and 1995, respectively.
(2) Net of unearned discounts, premiums, deferred loan fees, purchase
accounting discounts and premiums and allowance for possible loan losses,
and including non-performing loans and loans held for sale.
(3) Interest rate spread represents the difference between the average rate on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin represents net interest income divided by average
interest-earning assets.
<PAGE>
RATE/VOLUME ANALYSIS
The following table presents the extent to which changes in interest rates and
changes in the volume of interest-earning assets and interest-bearing
liabilities have affected the Company's interest income and expense during the
periods indicated. Information is provided in each category with respect to (i)
changes attributable to changes in volume (changes in volume multiplied by prior
rate), (ii) changes attributable to changes in rate (changes in rate multiplied
by prior volume), and (iii) the net change. The changes attributable to the
combined impact of volume and rate have been allocated proportionately to the
changes due to volume and the changes due to rate.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1996 NINE MONTHS ENDED JUNE 30, 1996
COMPARED TO COMPARED TO
THREE MONTHS ENDED JUNE 30, 1995 NINE MONTHS ENDED JUNE 30, 1995
INCREASE/(DECREASE) INCREASE/(DECREASE)
----------------------------------------- -----------------------------------
DUE TO DUE TO
----------------------------------------- -----------------------------------
VOLUME RATE NET VOLUME RATE NET
------------ ------------- ------------ ---------- ---------- ----------
(IN THOUSANDS)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C>
Interest-earning cash
equivalents(1) $ 97 $ (28) $ 69 $ (795) $ 8 $ (787)
Debt and equity securities(2)(3) (1,495) (228) (1,723) (5,752) (191) (5,943)
Mortgage-backed securities(3) (6,062) 1,012 (5,050) (3,936) 8,583 4,647
Real estate loans(4) 14,364 (2,327) 12,037 30,867 (2,492) 28,375
Commercial and other loans(4) 401 (581) (180) 201 (795) (594)
------------ ------------- ------------ --------- -------- ---------
Total 7,305 (2,152) 5,153 20,585 5,113 25,698
------------ ------------- ------------ ---------- ---------- ----------
Interest-bearing liabilities:
Deposits 1,050 819 1,869 2,606 13,206 15,812
Borrowed funds 2,907 (102) 2,805 8,037 1,351 9,388
------------ ------------- ------------ ---------- ---------- ----------
Total 3,957 717 4,674 10,643 14,557 25,200
------------ ------------- ------------ ---------- ---------- ----------
Net change in interest income $ 3,348 $ (2,869) $ 479 $ 9,942 $ (9,444) $ 498
============ ============= ============ ========== ========== ==========
</TABLE>
(1) Cash equivalents include amounts due from banks and short-term loans to
commercial banks with original terms to maturity of less than three months.
(2) Includes FHLB-NY stock.
(3) Debt and equity and mortgage-backed securities are shown including the
average market value appreciation of $7.6 million and $1.2 million, before
tax, from SFAS 115 for the three months ended June 30, 1996 and 1995,
respectively, and $15.8 million and ($7.1) million for the nine months
ended June 30, 1996 and 1995, respectively.
(4) In computing the volume and rate components of net interest income for
loans, non-performing loans and loans held for sale have been included.
<PAGE>
LONG ISLAND BANCORP, INC.
AND SUBSIDIARY
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
AT OR FOR THE AT OR FOR THE
THREE MONTHS NINE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------------------------- ----------------------------------
1996 1995 1996 1995
-------------- --------------- --------------- ---------------
SELECTED FINANCIAL RATIOS: (a)
<S> <C> <C> <C> <C>
Return on average assets 0.90% 0.94% 0.92% 0.91%
Return on average stockholders' equity 8.71 8.48 8.67 8.32
Average stockholders' equity to average assets 10.31 11.04 10.64 10.97
Stockholders' equity to total assets 9.99 10.90 9.99 10.90
Interest rate spread during period 2.92 3.07 2.92 3.15
Net interest margin 3.29 3.46 3.30 3.50
Operating expenses to average assets 2.27 2.18 2.17 2.16
Efficiency ratio (b) 62.21 56.76 59.36 56.23
Net interest income to operating expenses 1.37x 1.51x 1.44x 1.54x
Average interest-earning assets to average
interest-bearing 108.42 109.64 108.88 109.32
liabilities
SELECTED DATA:
Primary earnings per share (c) $ 0.47 $0.45 $ 1.40 $1.29
Weighted average number of shares outstanding
for primary 23,979,330 24,516,712 24,356,153 24,462,599
earnings per share computation
Fully diluted earnings per share (c) $0.47 $0.45 $1.40 $1.29
Weighted average number of shares outstanding
for fully 24,029,679 24,516,712 24,462,925 24,462,599
diluted earnings per share computation
Book value per share $21.03 $19.66 $21.03 $19.66
Number of shares outstanding for book value per
share 24,805,349 26,504,111 24,805,349 26,504,111
computation
Cash dividends declared per share $0.10 $0.10 $0.30 $0.30
Dividend payout ratio 21.28% 22.22% 21.43% 23.26%
AT JUNE 30,
----------------------------
1996 1995
------------ -----------
ASSET QUALITY RATIOS:
Non-performing loans to total gross loans 1.81% 2.65%
Non-performing assets to total assets 1.16 1.36
Allowance for possible loan losses to non-performing loans 64.50 63.87
REGULATORY CAPITAL AT JUNE 30, 1996 FOR THE LONG ISLAND SAVINGS BANK, FSB:
REGULATORY REGULATORY EXCESS
CAPITAL CAPITAL CAPITAL
REQUIREMENT LEVEL LEVEL
----------- ----- -----
AMOUNT PERCENT (D) AMOUNT PERCENT (D) AMOUNT PERCENT (D)
------ ----------- ------ ----------- ------ -----------
(DOLLARS IN THOUSANDS)
Tangible capital (e) $ 77,487 1.50% $421,464 8.16% $343,977 6.66%
Core capital (e) 154,973 3.00 421,464 8.16 266,491 5.16
Risk-based capital (f) 211,791 8.00 454,569 17.17 242,778 9.17
</TABLE>
(a) Ratios for the three and nine months ended June 30, 1996 and 1995 were
calculated on an annualized basis.
(b) Amount is determined by dividing total general and administrative expense
by net interest income (before the provision for possible loan losses) plus
total fee income.
(c) For the three and nine months ended June 30, 1996, primary and fully
diluted earnings per common share reflect the dilutive effect of stock
options. For the three and nine months ended June 30, 1995, stock options
were not materially dilutive.
(d) Tangible and core capital levels are shown as a percentage of total
adjusted assets, as computed based on regulatory guidelines. Risk-based
capital levels are shown as a percentage of risk-weighted assets.
(e) This figure represents GAAP capital excluding the effect of SFAS 115 and
goodwill.
(f) The difference between GAAP capital and regulatory risk-based capital
represents the exclusion of the effect of SFAS 115 and goodwill and an
addition for the allowance for possible loan losses.
<PAGE>
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The following is a summary of the Company's provisions and allowance for
possible loan losses:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ ------------------------------
1996 1995 1996 1995
------------ ------------- ------------ -------------
(In thousands)
<S> <C> <C> <C> <C>
Opening allowance $34,349 $35,696 $34,358 $35,713
Provision 1,600 1,500 4,700 4,970
Net charge-offs (1,844) (1,976) (4,953) (5,463)
------------- ------------ ------------ -------------
Ending allowance $34,105 $35,220 $34,105 $35,220
============= ============ ============ =============
</TABLE>
NON-PERFORMING ASSETS
Loans are considered non-performing if they are in foreclosure and/or are 90 or
more days delinquent (excluding those restructured loans that have been returned
to performing status after developing a satisfactory payment history, generally
six months). Loans, other than education loans, accrue interest until considered
doubtful of collection by management, but in no case beyond 90 days delinquent.
Consumer loans (other than education loans) are generally written off upon
becoming 120 days delinquent in the case of installment loans and 180 days in
the case of revolving credit lines. Delinquent interest on education loans
continues to accrue, however, since these loans are backed by a government
agency guarantee and all interest and principal is ultimately expected to be
received. Once management reaches a decision to place a loan on non-accrual
status, all delinquent previously accrued interest on such loan is reversed
against previously recorded income.
The level of non-performing residential property loans is also affected by the
Company's loan restructuring activities. Where borrowers have encountered
hardship, but are able to demonstrate to the Company's satisfaction an ability
and willingness to resume regular monthly payments, the Company seeks to provide
them with an opportunity to restructure their loans. Where successful, these
restructurings avoid the cost of completing the foreclosure process, as well as
any losses on acquisition of the properties and the costs of maintaining and
disposing of real estate owned. Once restructured residential loans comply with
the terms of their restructure agreement for a satisfactory period (generally
six months), the Company returns such loans to performing status.
Management also believes that a portion of the Company's non-performing assets
is attributable to the low documentation loans (as defined below) previously
originated by the Company. During the 1986 to 1989 period, the Company
originated a significant number of one-to-four family mortgage loans without
verification of the borrower's financial condition or employer verification of
the borrower's level of income if the borrower's stated income was considered
reasonable for the employment position held ("low documentation loans"). The
Company has experienced higher delinquency and default rates on such loans, as
compared to fully underwritten one-to-four family loans, and in recognition
thereof, the Company discontinued the origination of low documentation loans in
1990. The Company is unable to determine the aggregate dollar amount of low
documentation loans originated between 1986 and 1989 which still remain
outstanding. At June 30, 1996, approximately $554.1 million, or 26.14% of the
Company's one-to-four family residential loan and co-operative apartment loan
portfolio consisted of loans originated during the 1986 to 1989 period, as
compared with $604.2 million, or 42.52%, and $710.5 million, or 51.42%, at
September 30, 1995 and 1994 respectively. To the extent such loans include a
significant amount of low documentation loans, the Company's delinquency and
default rates could be adversely impacted and may result in material losses.
From time to time, on a selective basis, the Company originates loans that
involve limited verification of the borrower's level of income or financial
condition ("limited documentation loans"). All such limited documentation loans
are intended to meet secondary market investor guidelines and are primarily
originated for sale to investors.
The following table sets forth information regarding the components of
non-performing assets for the periods indicated. Restructured loans that have
not yet demonstrated a sufficient payment history to warrant a return to
performing status are included with non-performing loans.
<TABLE>
<CAPTION>
JUNE 30, SEPTEMBER 30,
1996 1995
------------------- ---------------------
(DOLLARS IN THOUSANDS)
Non-performing loans (1):
Residential:
<S> <C> <C>
One-to-four family $38,579 $39,661
Co-operative apartments 830 1,572
Home equity 3,980 4,915
Second mortgage 193 226
Multi-family 1,253 1,512
-------- --------
Total residential 44,835 47,886
Non-residential:
Commercial real estate 4,321 4,093
Construction 453 453
Land 675 836
-------- --------
Total real estate loans (2) 50,284 53,268
Other loans (3) 2,596 2,408
------- --------
Total non-performing loans 52,880 55,676
Real estate owned net 7,511 8,893
------- -------
Total non-performing assets $60,391 $64,569
======= =======
Non-performing loans to total gross loans 1.81% 2.67%
Non-performing assets to total assets 1.16 1.32
Allowance for possible loan losses to non-performing loans 64.50 61.71
</TABLE>
(1) All non-performing loans are in non-accrual status. There are no loans 90
days or more past due and still accruing interest (other than education
loans which are guaranteed).
(2) At June 30, 1996, includes $8.6 million of loans considered impaired in
accordance with SFAS 114 for which there is a related allowance for
possible loan losses. At September 30, 1995, includes $14.8 million of
restructured loans that have not yet complied with the terms of their
restructure agreement for a satisfactory period (generally six months).
(3) At June 30, 1996, includes $0.1 million of commercial loans considered
impaired in accordance with SFAS 114 for which there is a related allowance
for possible loan losses. At September 30, 1995, includes $0.8 million of
impaired commercial loans.
<PAGE>
INTEREST SENSITIVE GAP ANALYSIS
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at June 30, 1996, which are anticipated
by the Company, based upon certain assumptions, to reprice or mature in each of
the future time periods shown. Except as stated below, the amounts of assets and
liabilities shown to reprice or mature during a particular period were
determined in accordance with the earlier of term to repricing or the
contractual terms of the asset or liability. Prepayment assumptions ranging from
0% to 15% per year were applied, dependent upon the loan type and coupon.
Run-off rate assumptions for passbook savings, statement savings, NOW and money
market accounts, in the one year or less category, were 51%, 51%, 40% and 100%
respectively, rather than the OTS assumptions which, in the one year or less
period, are 17%, 17%, 37% and 79%, respectively. These withdrawal rates and
prepayment assumptions are based on assumptions and analyses prepared internally
and are used in preparing the Regulatory Thrift Bulletin-13 Report and the
quarterly management reports. These assumptions were used rather than the
assumptions published by the OTS because management believes they are more
indicative of the actual prepayments and withdrawals experienced by the Company.
The assumptions do not reflect any increases or decreases in interest rates paid
on various categories of deposits (whether by the Company or in general) since
June 30, 1996.
<TABLE>
<CAPTION>
INTEREST RATE SENSITIVITY GAP ANALYSIS
AT JUNE 30, 1996
---------------------------------------------------------------------------------------------
MORE THAN MORE THAN MORE THAN MORE THAN
3 MONTHS 3 MONTHS 6 MONTHS 1 YEAR 3 YEARS MORE THAN
OR LESS TO 6 MONTHS TO 1 YEAR TO 3 YEARS TO 5 YEARS 5 YEARS TOTAL
------------ ------------ ------------ ------------ ------------ ----------- ------------
(IN THOUSANDS)
Interest-earning assets(1):
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate loans (2) $ 248,936 $ 334,189 $ 682,258 $ 1,009,636 $ 221,425 $ 224,140 $ 2,720,584
Commercial loans (2) 6,529 --- --- --- --- 54 6,583
Other loans (2) 66,368 3,343 6,690 23,828 17,551 21,045 138,825
Mortgage-backed 396,403 347,756 594,953 234,412 37,477 98,085 1,709,086
securities (3)
Interest-earning 20,879 --- --- --- --- --- 20,879
cash equivalents
Debt and equity 22,303 6,250 88,797 51,091 4,738 113,090 286,269
securities (3)
Stock in FHLB-NY --- --- --- --- --- 40,754 40,754
------------ ------------ ------------ ------------ ------------ ----------- ------------
Total 761,418 691,538 1,372,698 1,318,967 281,245 497,114 4,922,980
interest-earning assets
Interest-bearing liabilities:
Passbook accounts 127,975 101,707 120,968 111,221 106,587 116,592 685,050
Statement savings 121,422 96,753 115,052 105,768 101,361 110,869 651,225
accounts
NOW accounts 36,531 4,725 9,450 37,800 36,225 1,575 126,306
Checking & demand
deposit accounts 2,677 1,147 2,294 --- --- --- 6,118
Money market 87,012 16,314 32,628 --- --- --- 135,954
accounts
Certificate accounts 438,447 327,759 418,608 490,275 241,469 9,147 1,925,705
Borrowings 246,370 188,461 --- 466,000 --- --- 900,831
------------ ------------ ------------ ------------ ------------ ----------- ------------
Total 1,060,434 736,866 699,000 1,211,064 485,642 238,183 4,431,189
interest-bearing
liabilities
------------ ------------ ------------ ------------ ------------ ----------- ------------
Interest sensitivity $ (299,016) $ (45,328) $ 673,698 $ 107,903 $ (204,397) $ 258,931 $ 491,791
gap per period
============ ============ ============ ============ ============ =========== ============
Cumulative interest $ (299,016) $ (344,344) $ 329,354 $ 437,257 $ 232,860 $ 491,791
sensitivity gap
============ ============ ============ ============ ============ ===========
Cumulative interest
sensitivity gap as
a percentage of (5.73) % (6.60) % 6.31 % 8.37 % 4.46 % 9.42 %
total assets (4)
Cumulative net
interest-earning
assets as a
percentage of net
interest-bearing 71.80 80.84 113.19 111.79 105.55 111.10
liabilities
</TABLE>
(1) Excludes non-performing loans, net of unearned discounts and premiums,
deferred loan fees, purchase accounting discounts and premiums.
(2) For purposes of gap analysis, the allowance for possible loan losses is
excluded.
(3) Mortgage-backed and debt and equity securities are shown excluding the
market value appreciation of $4.3 million, before tax, resulting from SFAS
115.
(4) Amounts for fixed rate loans are based on scheduled payment dates and loans
for which there is no amortization schedule are included as three months or
less.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
- ---------------------------------
A. On March 28, 1994, the Company received notice that it had been
named as a defendant in a class action lawsuit filed in the Supreme Court of the
State of New York, County of Queens against the Bank, the Company, the members
of the Board of Directors of the Company, Merrill Lynch, Pierce, Fenner & Smith
and the OTS. The lawsuit was entitled Herbert Z. Kadison, on behalf of himself
and all others similarly situated against The Long Island Savings Bank, FSB, et
at. The Complaint sought to have the court, among other things, declare that the
defendants had breached their fiduciary duty and other duties to the plaintiffs
and all other depositors similarly situated, declare that the Bank's proposed
mutual to stock conversion allowing the individual defendants to acquire stock
options to be issued pursuant to the Bank's amended plan of conversion was a
nullity, cancel the Management Recognition and Retention Plans and Trusts and
stock option plans, and amend the plan to provide that the subscription rights
be freely traded and assignable and that suitable arrangement be made to provide
a market for subscription rights.
On May 18, 1994, all the defendants moved to dismiss the complaint. In
September 1994, the court granted the motion and dismissed the complaint. In
December 1994, plaintiffs served a notice of appeal with the Appellate Division
of the Supreme Court, Second Department. The appeal was perfected, oral argument
heard and the Appellate Division rendered a Decision and order dated March 4,
1996 affirming the dismissal of the complaint for lack of subject matter
jurisdiction. The plaintiffs had until April 25, 1996 to apply for leave to
appeal to the Court of Appeals. The plaintiffs have not filed such an
application. Accordingly, this lawsuit is now concluded.
B. On August 15, 1989 the Bank and its former wholly owned subsidiary,
The Long Island Savings Bank of Centereach, FSB ("Centereach") filed suit
against the United States seeking damages or other appropriate relief on the
grounds, among others, that the government had breached the terms of the 1983
assistance agreement between the Bank and the Federal Savings and Loan Insurance
Corporation pursuant to which the Bank acquired Centereach ("Assistance
Agreement"). The Assistance Agreement, among other things, provided for the
inclusion of supervisory goodwill as an asset on Centereach's balance sheet to
be amortized over 40 years for regulatory purposes and to be included in
capital.
The suit is pending before Chief Judge Loren Smith in the United
State Court of Federal Claims and is entitled The Long Island Savings Bank, FSB
et al. vs the United States. The case has been stayed pending disposition by
the United States Supreme Court of three related supervisory goodwill cases
(the Winstar cases). On July 1, 1996 the Supreme Court ruled in the Winstar
cases and held that the government had breached its contracts with the Winstar
parties and was liable in damages for those breaches. On July 30, 1996 Chief
Judge Smith held a hearing in all of the related supervisory goodwill cases
pending in the Court of Federal Claims to consider various procedural matters
concerning the management of the cases going forward. The Court is expected to
issue a case management order in the near future.
In its complaint, the Bank did not specify the amount of damages it
was seeking from the United States. There have been no decisions determining
damages in any of the supervisory goodwill cases. The Bank is unable to
predict the outcome of its claim against the United States and the amount of
damages that may be awarded to the Bank, if any, in the event that judgment is
rendered in the Bank's favor. Consequently, no assurances can be given as to
the results of this claim or the timing of any proceedings in relation thereto.
Item 2. Changes in Securities.
- -------------------------------------
NONE.
Item 3. Defaults Upon Senior Securities.
- -----------------------------------------------
NONE.
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------------
NONE.
Item 5. Other Information.
- ---------------------------------
NONE.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - The following exhibit is filed as part of this
report:
Regulation S-K Exhibit Reference Number
11. Statement re: Computation of Per Share Earnings (In
thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------- ------------------------------
1996 1995 1996 1995
--------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Net Income $ 11,294 $ 11,010 $ 34,177 $ 31,590
=============== ============ ============= ============
Total weighted average common shares and
equivalents outstanding 23,979 24,517 24,356 24,463
=============== ============ ============= ============
Primary earnings per common share (1) $ 0.47 $ 0.45 $ 1.40 $ 1.29
=============== ============ ============= ============
Total shares for fully dilutive earnings per 24,030 24,517 24,463 24,463
share
=============== ============ ============= ============
Fully diluted earnings per common share (1) $ 0.47 $ 0.45 $ 1.40 $ 1.29
=============== ============ ============= ============
</TABLE>
(1) For the three and nine months ended June 30, 1996, primary
and fully diluted earnings per common share reflect the
dilutive effect of shares issuable under the Company's
benefit plans. For the three and nine months ended June 30,
1995, shares issuable under the Company's stock benefit
plans were not materially dilutive.
(b) Reports on Form 8-K
On April 10, 1996, April 15, 1996, April 23, 1996, June 25, 1996
and June 28, 1996, the Company filed with the SEC Current Reports
on Form 8-K which contained press releases. The April press
releases announced the Company's award of Savings Bank Life
Insurance policies in excess of $17 million, the commencement of
the Company's third stock repurchase program and the earnings for
the three months ended March 31, 1996 and 1995. The June press
releases announced the declaration of the Company's seventh
consecutive quarterly dividend and the acquisition of two
mortgage origination offices.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LONG ISLAND BANCORP, INC.
DATED: 8/6/96 BY: /s/ John J. Conefry, Jr.
------ ------------------------
John J. Conefry, Jr.
Chairman of the
Board and Chief
Executive Officer
DATED: 8/6/96 BY: /s/ Mark Fuster
------ ---------------
Mark Fuster
Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
condensed Consolidated Statements of Financial Condition as of June 30, 1996
(unaudited) and the condensed Consolidated Statements of Operations For the
Nine Months Ended June 30. 1996 (unaudited) and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000916837
<NAME> Long Island Bancorp, Inc.
<MULTIPLIER> 1000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-01-1995
<PERIOD-END> Jun-30-1996
<EXCHANGE-RATE> 1
<CASH> 60220
<INT-BEARING-DEPOSITS> 26459
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1976337
<INVESTMENTS-CARRYING> 23326
<INVESTMENTS-MARKET> 23326
<LOANS> 2918873
<ALLOWANCE> 34105
<TOTAL-ASSETS> 5221019
<DEPOSITS> 3631157
<SHORT-TERM> 65000
<LIABILITIES-OTHER> 167320
<LONG-TERM> 835831
0
0
<COMMON> 268
<OTHER-SE> 521443
<TOTAL-LIABILITIES-AND-EQUITY> 5221019
<INTEREST-LOAN> 142248
<INTEREST-INVEST> 117903
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 260151
<INTEREST-DEPOSIT> 116785
<INTEREST-EXPENSE> 144482
<INTEREST-INCOME-NET> 115669
<LOAN-LOSSES> 4700
<SECURITIES-GAINS> 5745
<EXPENSE-OTHER> 0
<INCOME-PRETAX> 58963
<INCOME-PRE-EXTRAORDINARY> 34177
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 34177
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 3.30
<LOANS-NON> 52880
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 34358
<CHARGE-OFFS> 6315
<RECOVERIES> 1362
<ALLOWANCE-CLOSE> 34105
<ALLOWANCE-DOMESTIC> 34105
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
