SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-K
(Mark One) Annual Report Pursuant to Section 13 or 15(d)
[X] of the Securities Exchange Act of 1934
For the fiscal year ended September 30, 1997
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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 1-11684
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NEW YORK BANCORP INC.
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(Exact name of registrant as specified in its charter)
Delaware 11-2869250
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
241-02 Northern Boulevard, Douglaston, N. Y. 11362
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (718) 631-8100
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on which Registered
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Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-- --
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K of any
amendment to this Form 10-K. X
--
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the last reported sales price of such stock
on the New York Stock Exchange on December 1, 1997, was $581,840,564.
The number of shares outstanding of the registrant's Common Stock as of December
1, 1997 was 21,349,688.
Documents Incorporated by Reference
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The following documents are incorporated by reference:
Portions of the Registrant's 1997 Annual Report to Shareholders for the Fiscal
Year Ended September 30, 1997 - Part I, Part II.
Exhibit Index on Page 53.
NEW YORK BANCORP INC.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
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PART I
Item 1. Business............................................................................ 3
Item 2. Properties.......................................................................... 42
Item 3. Legal Proceedings................................................................... 43
Item 4. Submission of Matters to a Vote of Security Holders................................. 43
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters............................................................... 43
Item 6. Selected Financial Data............................................................. 43
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................... 43
Item 8. Financial Statements and Supplementary Data......................................... 44
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................................... 44
PART III
Item 10. Directors and Executive Officers of the Registrant.................................. 44
Item 11. Executive Compensation.............................................................. 46
Item 12. Security Ownership of Certain Beneficial Owners
and Management................................................................... 51
Item 13. Certain Relationships and Related Transactions...................................... 52
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K...................................................................... 52
2
PART I
ITEM 1 - BUSINESS
GENERAL DEVELOPMENT OF BUSINESS
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New York Bancorp Inc. ("New York Bancorp" or the "Company"), a Delaware business
corporation, is a savings and loan holding company which, together with its
subsidiary, Home Federal Savings Bank ("Home Federal" or the "Bank"), is
headquartered in Douglaston, New York. The Company was organized at the
direction of the Bank in connection with the Bank's conversion from mutual to
stock form of organization. The conversion was completed on February 4, 1988.
The primary activity of the Company at this time is its ownership of all of the
outstanding capital stock of the Bank. At September 30, 1997, the Company had
total assets of $3.2 billion, deposits of $1.7 billion and shareholders' equity
of $169.1 million.
Home Federal was organized in 1935 as a federally chartered savings and loan
association. In 1983, Home Federal changed its charter to a federal savings
bank, and in February 1988 converted from a mutual to its current stock form of
ownership. The Bank's business is primarily conducted in New York City, and
Nassau, Suffolk and Westchester Counties. At September 30, 1997, the Bank
maintained thirty-one full service branch offices located in Kings, Queens,
Nassau, Richmond and Suffolk Counties, and seven loan production offices located
in Kings, Queens, Nassau, Westchester, and Suffolk Counties.
In March 1992, New York Bancorp, through its subsidiary, the Bank, acquired
$203.8 million in assets and assumed $52.6 million in liabilities of the former
State Savings, FSB ("State Savings") from the Resolution Trust Corporation
("RTC"), as receiver of State Savings. In August and October 1992, New York
Bancorp, through its subsidiary, the Bank, additionally acquired $273.9 million
in assets and assumed $480.0 million in liabilities of the former Union Savings
Bank ("Union Savings") from the Federal Deposit Insurance Corporation (the
"FDIC"), as receiver of Union Savings. On January 27, 1995, Hamilton Bancorp,
Inc. ("Hamilton"), the parent company of Hamilton Federal Savings F. A.
("Hamilton Savings") with total assets of $810.6 million and shareholders'
equity of $84.1 million, was merged with and into New York Bancorp. This later
transaction has been accounted for as a pooling of interests, and, as a result,
the financial results for the periods prior to the merger reported herein
include the results of Hamilton.
On October 7, 1997, New York Bancorp signed a definitive merger agreement with
North Fork Bancorporation, Inc. ("North Fork") whereby the Company will be
merged with and into North Fork. Under the terms of the agreement, each share of
common stock of the Company outstanding at the time of the merger will be
converted into 1.19 shares of North Fork common stock. The transaction, which is
expected to be completed during the first quarter of calendar year 1998, is
subject to approval by the shareholders of both the Company and North Fork, the
approval of the appropriate regulatory authorities, as well as the satisfaction
of certain other conditions. The merger is expected to be accounted for as a
pooling of interests.
3
Home Federal has been, and continues to be, a community bank offering a variety
of deposit and lending services designed to meet the needs of the communities it
serves. The Bank's deposit customer base is drawn primarily from Kings, Queens,
Richmond, Nassau and Suffolk Counties, while its loan origination activity is
conducted primarily in the five boroughs of New York City, Nassau, Suffolk and
Westchester Counties, as well as some parts of Connecticut and New Jersey.
Deposits in the Bank are insured up to the applicable limits by the Federal
Deposit Insurance Corporation (the "FDIC") and the Bank is subject to extensive
regulation, supervision and examination by the Office of Thrift Supervision (the
"OTS") and by the FDIC. Additionally, the Bank is a member of the Federal Home
Loan Bank ("FHLB") System.
The Bank's principal business consists of attracting deposits from the general
public and investing these deposits, together with funds from ongoing operations
and borrowings, in the origination and purchase of residential and commercial
mortgage loans, cooperative residential loans and consumer loans. The Bank also
maintains a portion of its assets in mortgage-backed securities and debt and
equity securities, including obligations of the U. S. Government and federal
agencies, corporate notes and other securities.
During the past few years, the Bank has instilled a sales culture within its
thirty-one branches, creating a team of skilled employees who market the
products offered to customers. New checking accounts were emphasized as a means
of developing core banking relationships with new customers. Additionally, the
Bank introduced new products such as the debit card and Savings Bank Life
Insurance. Further, the Bank continued to sell annuity products at record
levels, bringing fee income from such activity up to $1.8 million for fiscal
year 1997. The Bank additionally maintains loan production offices throughout
the branch system to provide better loan related services to present and new
customers in the branch community. The Bank has also opened five full-service
branches in supermarkets, and is presently planning to open six additional
supermarket branches in fiscal year 1998.
NARRATIVE DESCRIPTION OF BUSINESS
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LENDING ACTIVITIES
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GENERAL. A component of the Bank's overall interest rate risk strategy
is to shorten the maturities and increase the interest rate sensitivity
of its assets primarily through the origination and purchase of
adjustable rate loans. With respect to fixed rate conventional mortgage
loans, the Bank either sells such loans or retains them if (i) they
have been funded with long-term borrowings or (ii) hedging techniques
can be used to protect the Bank against interest rate risk. The loan
products offered by Home Federal are affected by Federal and state
laws, the supply of funds available for lending purposes, market
forces, including the demand for loans, and competition.
4
LOAN PORTFOLIO COMPOSITION. The following table sets forth the
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composition of the Bank's total loan portfolio by dollar amount and
percent of total portfolio as of the dates indicated.
At September 30,
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1997 1996 1995 1994 1993
-------------------- -------------------- --------------------- --------------------- ---------------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
-------- -------- -------- -------- ------ -------- ------ -------- ------ ------------
(Dollars in Thousands)
FIRST MORTGAGE LOANS(1):
One-to four-
family
residential $ 970,617 47.49 % $ 1,046,763 55.82% $ 927,529 54.86% $ 719,421 49.16% $ 716,913 50.40%
Multifamily
residential 365,324 17.87 171,099 9.12 101,065 5.98 101,063 6.90 95,070 6.68
Commercial
real estate 450,596 22.05 383,181 20.43 355,507 21.02 337,468 23.06 296,808 20.86
Construction, net of
loans in
process 5,468 .27 4,369 .23 8,902 .52 4,966 .34 -- --
--------- ----- ------------ ----- --------- ------ ---------- ----- ---------- ------
Total first
mortgage
loans 1,792,005 87.68 1,605,412 85.60 1,393,003 82.38 1,162,918 79.46 1,108,791 77.94
----- ----- ----- ----- -----
Unamortized purchase
accounting premiums,
unearned purchase
accounting discounts,
unamortized premiums,
unearned discounts,
deferred loan fees
and allowance for
possible loan
losses (21,010) (19,366) (22,828) (28,036) (29,831)
--------- --------- --------- --------- ---------
Net first mortgage
loans.... 1,770,995 1,586,046 1,370,175 1,134,882 1,078,960
--------- --------- --------- --------- ---------
OTHER LOANS:
Consumer.... 12,302 .60 9,227 .49 8,580 .51 13,067 .89 16,944 1.19
Cooperative
residential 113,628 5.56 123,034 6.56 141,902 8.39 150,520 10.29 163,431 11.49
Home improvement 645 .03 1,035 .05 1,526 .09 9,637 .66 8,101 .57
Guaranteed
Student 45,674 2.23 51,151 2.73 56,673 3.35 54,693 3.74 55,180 3.88
Commercial.. 11,092 .54 12,351 .66 11,214 .66 15,336 1.05 7,085 .50
Secured by
deposits 7,056 .35 8,078 .43 7,917 .47 8,401 .57 7,411 .52
Second mortgage 1,540 .08 2,211 .12 2,147 .13 2,605 .18 2,819 .20
Home equity. 42,657 2.09 44,277 2.36 46,845 2.77 36,890 2.52 42,152 2.96
Purchased auto
leasing 17,178 .84 18,702 1.00 21,063 1.25 9,385 .64 10,665 .75
--------- ----- --------- ----- --------- ----- --------- ----- -------- -----
Total other
loans 251,772 12.32 270,066 14.40 297,867 17.62 300,534 20.54 313,788 22.06
----- ----- ----- ----- -----
Unamortized purchase
accounting premiums,
unearned purchase
accounting discounts,
unamortized premiums,
unearned discounts,
deferred loan fees and
allowance for
possible loan
losses (2,351) (2,950) (3,099) (3,062) (4,331)
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Net other loans 249,421 267,116 294,768 297,472 309,457
------- ------- ------- ------- -------
Total loans. $2,043,777 100.00% $ 1,875,478 100.00% $ 1,690,870 100.00% $ 1,463,452 100.00% $ 1,422,579 100.00%
========== ======= ============ ======= ============ ====== ============ ====== ============ =======
Total net
loans $2,020,416 $ 1,853,162 $ 1,664,943 $ 1,432,354 $ 1,388,417
========== ============ ============ ============ ============
(1)Of the amount in total first mortgage loans, $1,521,015, $1,324,063,
$1,016,693, $760,951 and $695,371 represent adjustable rate mortgage loans at
September 30, 1997, 1996, 1995, 1994 and 1993, respectively.
5
ORIGINATION, PURCHASE AND SALE OF LOANS. Set forth below is a table
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showing the Bank's total loan origination, purchase, sale, amortization
and repayment activities for the years indicated.
Year ended September 30,
1997 1996 1995
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(In Thousands)
FIRST MORTGAGE LOANS
At beginning of year................................ $ 1,605,412 $ 1,393,003 $ 1,162,918
First mortgage loans originated..................... 491,461 371,670 332,253
First mortgage loans purchased...................... 15,217 199,785 100,314
Securitization and transfer to mortgage-
backed securities available for sale............... -- (65,785) (11,695)
Transfer of loans to real estate owned.............. (2,569) (3,692) (3,879)
First mortgage loans sold........................... (43,634) (74,455) (37,942)
Amortization, prepayments and other................. (273,882) (215,114) (137,927)
Hamilton's net activity for the
quarter ended December 31, 1994(1)................. -- -- (11,039)
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At end of year...................................... $ 1,792,005 $ 1,605,412 $ 1,393,003
============== ============= =============
OTHER LOANS
At beginning of year................................ $ 270,066 $ 297,867 $ 300,534
Other loans originated.............................. 52,946 53,425 57,046
Other loans purchased............................... 7,174 6,174 14,427
Transfer of loans to real estate owned.............. (472) (770) (576)
Other loans sold.................................... (2,447) (3,017) (1,499)
Amortization, prepayments and other................. (75,495) (83,613) (69,229)
Hamilton's net activity for the
quarter ended December 31, 1994(1)................. -- -- (2,836)
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At end of year...................................... $ 251,772 $ 270,066 $ 297,867
============== ============= =============
(1) Hamilton's net activity for the quarter ended December 31, 1994
reflects an adjustment to conform Hamilton's calendar-based
year-end with that of the Company's.
Total loan originations increased to $544.4 million in fiscal year 1997
compared to $425.1 million for fiscal year 1996, and $389.3 million for
fiscal year 1995. The increase in loan originations in fiscal years
1997 and 1996 was primarily attributable to the development of a
multifamily lending department in fiscal year 1996 which originated
$213.3 million in such loans during its first full year in fiscal year
1997 and $80.0 million during fiscal year 1996. Loan purchases totaled
$22.4 million for fiscal year 1997, compared to $206.0 million in
fiscal year 1996 and $114.7 million in fiscal year 1995. The loan
purchases in each of these fiscal years were primarily adjustable rate
one-to-four family first mortgage loans.
Loan sales were $46.1 million, $77.5 million and $39.4 million for the
years ended September 30, 1997, 1996 and 1995, respectively. The level
of loan sales is directly related to the origination level of fixed
rate loans. It is the Company's policy to retain for portfolio
adjustable rate first mortgage loans, while generally selling fixed
rate first mortgage loans.
6
LOAN MATURITY. The following table sets forth the estimated contractual
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maturity of the Bank's loan portfolio, assuming no prepayments and
excluding mortgage-backed securities.
At September 30, 1997
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First Mortgage Loans
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One-
to Four-
Family Cooperative Consumer
Residential Multifamily Commercial Construction Residential and Other Total
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(In Thousands)
Amounts due:
Within 1 year......... $ 2,023 $ 6,002 $ 11,399 $ 4,950 $ 403 $ 3,149 $ 27,926
After 1 year(1):
1 to 2 years........ 1,045 1,070 11,353 -- 56 8,335 21,859
2 to 3 years........ 2,364 432 11,905 518 234 11,288 26,741
3 to 5 years........ 19,063 16,850 35,367 -- 1,026 7,501 79,807
5 to 10 years....... 66,750 30,114 291,633 -- 6,873 51,560 446,930
10 to 15 years...... 60,327 299,724 70,944 -- 14,101 18,239 463,335
Over 15 years....... 819,045 11,132 17,995 -- 90,935 38,072 977,179
------------ ----------- ----------- ---------- ---------- ----------- ------------
Total after 1 year 968,594 359,322 439,197 518 113,225 134,995 2,015,851
------------ ----------- ----------- ---------- ---------- ----------- ------------
Total amounts due $ 970,617 $ 365,324 $ 450,596 $ 5,468 $ 113,628 $ 138,144 2,043,777
============ ============ =========== ========== ========== ===========
Add (subtract):
Unearned purchase
accounting discounts
and premiums, net.... 3
Unearned discounts and
premiums, net........ 2,260
Deferred loan fees.... (6,929)
Allowance for possible
loan losses.......... (18,695)
------------
Loans receivable, net $ 2,020,416
============
(1) Of the $2,020,405 in loans due after one year, $1,652,804 are
adjustable rate loans and $363,047 are fixed rate loans.
7
ONE-TO-FOUR FAMILY RESIDENTIAL MORTGAGE AND COOPERATIVE RESIDENTIAL
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LENDING. The Bank emphasizes the origination of conventional
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one-to-four family adjustable rate mortgage ("ARM") loans for retention
in its own portfolio. At September 30, 1997, one-to-four family
residential ARM loans outstanding, both originated and purchased by
Home Federal, comprised $793.9 million, or 81.7%, of the total
residential mortgage loan portfolio. The Bank's residential mortgage
loan originations are concentrated in the Bank's market area. Most
local residential loans are originated directly by the Bank. At
September 30, 1997, the Bank offered one, three and five year ARM loans
for a maximum term of 40 years with initial interest rates of 5.375%,
7.00% and 7.50%, respectively. The Bank, at September 30, 1997,
similarly offered a fixed rate one-to-four family loan at 7.25% which
amortizes in approximately 23 years based upon a biweekly payment
structure. At September 30, 1997, the Bank offered conventional 10, 15
and 30 year fixed rate mortgages with interest rates of 6.75%, 6.75%
and 7.25%, respectively, and a maximum loan amount equal to the
applicable Federal National Mortgage Association ("FNMA") and Federal
Home Loan Mortgage Corporation ("FHLMC") maximum loan amounts.
Additionally, the Bank offers convertible mortgage loans, which
typically mature in 15 or 30 years. These loans begin with an
adjustable interest rate and give the mortgagor an option to convert to
a fixed interest rate during years two through five. At September 30,
1997, the Bank offered convertible mortgage loans with an initial
interest rate of 5.625%. A 20% minimum downpayment is typically
required on all residential mortgage loans. Any loan with less than a
20% downpayment is required to have private mortgage insurance.
At September 30, 1997, the Bank had $113.6 million of loans secured by
assignment of leases and shares on cooperative residential apartments,
of which $88.4 million, or 77.8%, have adjustable rates. In recent
years, the Bank has curtailed its cooperative lending as a result of
the real estate market conditions for this type of lending.
For one-to-four family residential mortgage and cooperative residential
adjustable rate loans there is a lifetime adjustment cap not to exceed
6.00% above the initial offered rate. For most adjustable rate loans,
the maximum rate change is 2.00% to 2.75% per adjustment. During the
year ended September 30, 1997, the Bank originated $108.5 million of
residential ARM loans, or 70.5%, of the total residential mortgage loan
originations, which includes $8.8 million of cooperative residential
adjustable rate loans during that period. During the same period, the
Bank originated $45.5 million of fixed rate residential mortgage loans,
or 29.5%, of the total residential mortgage loans originated during
that period. A substantial portion of these fixed rate mortgage loans
were sold into the secondary market.
The Bank's one-to-four family residential mortgage loans customarily
include due-on-sale clauses giving the Bank the right to declare an
outstanding loan immediately due and payable in the event, among other
things, the borrower sells or otherwise disposes of the property. The
Bank has generally enforced due-on-sale clauses in its mortgage
contracts.
8
One-to-four family residential loan originations are generated by the
Bank's marketing efforts, its depositors, walk-in customers and
referrals from real estate brokers, mortgage brokers, and builders, as
well as the Bank employees. Loan applications are reviewed in
accordance with the underwriting standards approved by the Bank's Board
of Directors. Residential loans in excess of $1.0 million are approved
by the Loan Review Committee of the Bank's Board of Directors.
In underwriting one-to-four family residential real estate loans, the
Bank evaluates both the borrower's ability to make monthly payments and
the value of the property securing the loan. The Bank has adopted a
policy of generally limiting the loan-to-value ratio on originated and
purchased loans to 95% and requiring that loans exceeding 80% of the
appraised value of the property or its purchase price, whichever is
less, be insured by a mortgage insurance company approved by FNMA and
FHLMC in an amount sufficient to reduce the Bank's exposure to no
greater than an 80% level. The Bank requires the mortgagor to maintain
hazard (including fire) insurance on property securing residential real
estate loans. The Bank also requires flood insurance on property
located in designated flood hazard areas.
The Bank offers reverse annuity mortgages to qualified senior citizens
on one family properties up to a total indebtedness of $350,000. These
loans allow seniors the ability to supplement their income by borrowing
against the equity in their home. The loans require a maximum
loan-to-value ratio of 70% and a maximum term of fifteen years. As of
September 30, 1997, the Bank's reverse annuity mortgage portfolio
consisted of 26 loans with a total potential indebtedness of $5.7
million, of which $3.5 million is yet to be disbursed over the
remaining term of these loans.
There are unquantifiable risks resulting from increased costs to the
borrower as a result of periodic repricing of adjustable rate loans.
Despite the benefits of adjustable rate loans to the Bank's
asset/liability management program, they do pose potential additional
risks, primarily because as interest rates rise, the underlying
payments by the borrower rise, thereby increasing the potential for
default. At the same time, the marketability of the underlying property
may be adversely affected by higher interest rates. However, to reduce
such additional risk, the Bank reviews the borrower's application for
an adjustable rate loan based on the borrower's ability to make future
increased monthly payments assuming a fully indexed interest rate or
7.00%, whichever is greater.
MULTIFAMILY RESIDENTIAL LOANS. During fiscal year 1996, the Bank
-----------------------------
increased its origination of multifamily loans through the
establishment of a separate department staffed by personnel experienced
in the multifamily lending business. During fiscal year 1997,
originations of multifamily loans amounted to $213.3 million, as
compared to $80.0 million and $6.1 million in fiscal years 1996 and
1995, respectively. At September 30, 1997, the Bank had approximately
$365.3 million, or 17.87% of the total loan portfolio invested in
multifamily loans.
9
Multifamily loans generally involve a greater degree of risk than
one-to-four family residential mortgage loans. Because payments on
loans secured by multifamily properties are often dependent on the
successful operation or management of the properties, repayment of such
loans may be subject to a greater extent to adverse conditions in the
real estate market or the economy. The Bank seeks to minimize these
risks by originating such loans within market areas where it has
knowledge and experience.
Multifamily loans require a debt service coverage ratio of at least
120% and a loan to value ratio of no more than 70%. Generally, these
loans are 5 year ARM loans with a term of 10 to 15 years and an
amortization schedule of 25 years. Multifamily loans in excess of $1.5
million are approved by the Bank's Executive Committee of the Board of
Directors.
COMMERCIAL REAL ESTATE LOANS. Commercial real estate originations
----------------------------
amounted to $128.0 million during fiscal year 1997, as compared to
$75.5 million and $57.4 million for fiscal years 1996 and 1995,
respectively. At September 30, 1997, the Bank had approximately $450.6
million, or 22.05% of the total loan portfolio invested in commercial
real estate loans.
Commercial real estate lending entails significant additional risks as
compared with residential property lending. Commercial real estate
loans typically involve large loan balances to single borrowers or
groups of related borrowers. The repayment experience is typically
dependent on the successful operation of the real estate project. Since
these risks can be significantly affected by supply and demand
conditions in the market for office and retail space, and as such may
be subject to a greater extent to adverse conditions in the economy in
general, the Bank generally has limited itself to lending within its
market area where it has knowledge and experience of such items.
The majority of commercial real estate loans currently offered by the
Bank are underwritten for a term of ten years with a maximum rate
adjustment period of five years, typically with a maximum amortization
period of twenty years. In setting interest rates and origination fees
on new loans and loan extensions, management considers both current
cost of funds and its analysis of the risk associated with the
particular loan.
The Bank's underwriting policies with respect to commercial real estate
loans are designed to require that actual or anticipated cash flow will
be more than sufficient to cover operating expenses and debt service
payments. A detailed analysis of the project is undertaken by a lending
officer. Furthermore, an independent analysis of the project is
undertaken by the Bank's Credit Administration Department.
Loan-to-value ratios on new commercial real estate loans made by the
Bank generally do not exceed 65%, have personal guarantees from the
individual borrowers, and have net income to debt service coverage
ratios of at least 120%. All commercial real estate loans are appraised
by an independent appraiser who must be approved by the Board of
Directors. Commercial real estate loans in excess of $750,000 are
approved by the Loan Review Committee of the Bank's Board of Directors.
Home Federal requires that the borrower obtain title insurance and
hazard insurance in the amount of the loan, naming the Bank as loss
payee.
10
CONSTRUCTION LOANS. At September 30, 1997 the Bank's construction loan
------------------
portfolio consisted of 18 loans amounting to $17.5 million of which
$12.0 million remains as undisbursed.
Construction loans to individuals generally are made with floating
interest rates with maturities not in excess of two years. Construction
loans for developments and other projects generally are made with
floating interest rates with maturities not to exceed three years.
Progress disbursements are made on the basis of percentage of
completion as determined by an independent construction consultant. In
addition, the Bank conducts an analysis of the borrower's financial
capability.
OTHER LENDING. Federal regulations permit the Bank to engage in most
-------------
types of consumer lending. At September 30, 1997, the Bank's other loan
portfolio, exclusive of cooperative residential loans discussed above,
totaled $138.1 million and was comprised of $19.3 million of both
secured and unsecured personal loans, $17.2 million in purchased
automobile leases, $45.7 million in guaranteed student loans, $11.1
million in commercial business loans, $42.7 million in home equity
loans and $2.2 million in home improvement and second mortgage loans.
Such other loans, including cooperative residential loans, comprised
12.32% of the total loan portfolio.
The Bank's other loans (with the exception of cooperative residential
loans, guaranteed student loans, home equity loans and consumer home
improvement loans) have maturities of not greater than five years.
Consumer home improvement loans may have maturities of up to ten years
and student loans have maturities which vary according to the student's
tenure in school. Student loans are guaranteed by the New York State
Higher Education Services Corporation and the yield to the Bank varies
based upon a spread over U. S. Treasury Bills. Rates offered for
personal and home improvement loans as of September 30, 1997 ranged
from 9.25% to 13.25%. The Bank also offers home equity loans which
permit borrowers to draw down funds over a ten-year period at a
floating rate over prime, and are then amortized over a twenty-year
schedule.
Additionally, the Bank offers commercial loans to business entities and
individuals primarily in the New York Metropolitan area and generally
on a secured basis. These loans are to fund seasonal and other
short-term needs of business entities. The loans are for a period
usually not to exceed one year and are at a floating rate above the
prime rate. Commercial loans are reviewed in conformity with standards
approved by the Board of Directors.
Commercial business loans historically have had a higher degree of risk
than real estate loans. While real estate mortgage loans are secured by
real property whose value on a relative basis tends to be easily
ascertainable, commercial business loans typically are made on the
basis of the borrower's ability to make repayment from the cash flow of
its business or the conversion of current assets and are frequently
secured by business assets, such as accounts receivable, equipment and
inventory. As a result, the availability of funds for the repayment of
commercial business loans may be substantially dependent on the success
of the business itself.
11
LOAN PURCHASES. The Bank purchased $14.7 million of adjustable rate
--------------
first mortgage loans during the year ended September 30, 1997. The Bank
also purchased $7.2 million of auto lease/loans during fiscal 1997.
LOAN SERVICING. Mortgage servicing provides a relatively stable source
--------------
of fee income in that such income is a function of the size of the
servicing portfolio and not the interest rate on the related loans. In
addition to servicing fee income, which generally ranges from 0.25% to
0.50% per annum of outstanding principal balances, other fees such as
late charges are collected. The Bank has also benefited from the
generation of a relatively low cost source of funds from escrow
deposits, and the use of principal and interest payments prior to
remittance to investors. At September 30, 1997 and 1996, the Company
was servicing first mortgage loans of approximately $579.8 million and
$597.0 million, respectively, which are either partially or wholly
owned by others. Loan servicing fees amounted to $1.7 million for each
of the years ended September 30, 1997 and 1996.
The Bank's risk at September 30, 1997 with respect to servicing loans
for others is minimized due to the fact that loans serviced for others
are without recourse to the originator/servicer. However, there are
certain obligations the Bank has as servicer for the loans. To date,
the Bank has not suffered significant losses from its mortgage
servicing activities.
DELINQUENCIES. The Bank conducts a regular review and follow-up of all
-------------
loan delinquencies. When a borrower fails to make a scheduled payment
on a loan, the Bank takes steps to have the borrower cure the
delinquency. Most loan delinquencies are cured within 90 days and no
legal action is required. If the delinquency exceeds 90 days and is not
cured through the Bank's normal collection procedures, the Bank will
initiate measures to enforce its remedies resulting from the default,
including, in the case of mortgage loans, commencing foreclosure
action, or in the case of other secured loans, repossessing the
collateral. In certain cases, the Bank will also consider accepting
from the mortgagor a voluntary deed to the mortgaged premises in lieu
of foreclosure. Property acquired by the Bank as a result of
foreclosure or by deed in lieu of foreclosure is classified as "Real
Estate Owned." In the case of unsecured installment loans, the Bank
either commences legal action to collect the balances or negotiates a
"work-out" payment schedule over a period which may exceed the original
term of the loan. In certain instances the Bank will restructure loans
to assist borrowers in meeting their obligations.
It is the Bank's policy to discontinue the accrual of interest when a
mortgage loan, cooperative residential loan, or home equity loan
exceeds 90 days delinquent, and in some cases, before reaching 90 days
delinquent. At September 30, 1997, the Bank's ratio of nonaccrual loans
to total loans was .86%. Interest previously recognized as a receivable
on past due loans is charged to the allowance for loan losses when in
the opinion of management such interest is deemed to be uncollectible.
12
Additionally, at September 30, 1997, 1996, 1995, 1994 and 1993 the Bank
had $4.7 million, $4.4 million, $5.0 million, $4.0 million and $3.3
million, respectively, of consumer and other loans which are past due
90 days and still accruing interest at the dates indicated. Of the $4.7
million at September 30, 1997, $3.6 million represents loans guaranteed
by the United States Department of Education through the New York State
Higher Education Services Corporation. The following tables set forth
certain information regarding nonaccrual loans, real estate owned and
restructured loans. (See Management's Discussion and Analysis of
Financial Condition and Results of Operations contained in the 1997
Annual Report to Shareholders, portions of which are attached as
Exhibit 13, for a discussion on the interest that would have been
earned on nonaccrual loans and the decrease in nonaccrual loans.)
At September 30,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ------
(Dollars in Thousands)
Loans accounted for on a
nonaccrual basis............. $ 17,539 $ 25,552 $ 30,372 $ 36,533 $ 38,808
========== ========= ========= ========= ========
Real estate owned, net........ $ 1,363 $ 3,197 $ 1,967 $ 5,919 $ 6,609
========== ========= ========= ========= ========
Restructured loans............ $ 5,015 $ 5,818 $ 9,104 $ 9,481 $ 6,237
========== ========= ========= ========= ========
13
Summary of Loan Loss Experience
- -------------------------------
As of and
For the Year Ended September 30,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ------
(Dollars in Thousands)
Allowance for possible loan
losses, beginning of year............. $ 19,386 $ 21,272 $ 25,705 $ 26,828 $ 19,455
Charge-offs:
Commercial real estate............... (698) (974) (2,889) (879) (682)
Multifamily residential.............. -- -- (546) (853) --
Residential real estate.............. (1,114) (730) (1,422) (1,572) (1,586)
Other loans.......................... (1,148) (1,441) (1,442) (901) (1,731)
--------- --------- --------- --------- --------
Total charge-offs.................. (2,960) (3,145) (6,299) (4,205) (3,999)
--------- --------- --------- --------- --------
Less: Recoveries
Commercial real estate............. 71 -- -- 349 220
Residential real estate............ 27 -- 4 47 41
Other loans........................ 71 59 75 36 122
--------- --------- --------- --------- --------
Total recoveries................. 169 59 79 432 383
--------- --------- --------- --------- --------
Net charge-offs........................ (2,791) (3,086) (6,220) (3,773) (3,616)
Addition to allowance in connection
with the acquisition of Union Savings. -- -- -- -- 6,289
Hamilton's net activity for the quarter
ended December 31, 1994............... -- -- 87 -- --
Addition to allowance charged to
expense............................... 2,100 1,200 1,700 2,650 4,700
--------- --------- --------- --------- --------
Allowance at end of year............... $ 18,695 $ 19,386 $ 21,272 $ 25,705 $ 26,828
========= ========= ========= ========= ========
Asset Quality Ratios
- --------------------
Net charge-offs to average loans
outstanding during the period......... .14% .18% .40% .27% .25%
Allowance for possible loan
losses to total loans................. .92% 1.03% 1.26% 1.76% 1.89%
Allowance for possible loan
losses to nonaccrual loans............ 106.59% 75.87% 70.04% 70.36% 69.13%
Nonaccrual loans to total loans........ .86% 1.36% 1.80% 2.50% 2.73%
Total loans............................ $ 2,043,777 $ 1,875,478 $ 1,690,870 $ 1,463,452 $ 1,422,579
Average loans(1)....................... $ 1,959,717 $ 1,752,878 $ 1,560,706 $ 1,411,067 $ 1,425,134
Total assets........................... $ 3,244,200 $ 2,940,907 $ 2,731,592 $ 2,583,982 $ 2,250,605
(1) Nonaccruing loans have been included in the average loan amounts.
14
The allowance for possible loan losses is established and maintained
through provisions for possible loan losses charged to expense. During
the year ended September 30, 1993, the Bank also had additions to its
allowance for possible loan losses resulting from its acquisition of
Union Savings. Loans are charged-off against the allowance for possible
loan losses when management believes the collectibility of the full
principal balance is unlikely ("Charge-offs"). As part of the Bank's
determination of the adequacy of the allowance for loan losses, the
Bank monitors its loan portfolio through its Asset Classification
Committee. The Committee, which meets no less than quarterly, consists
of employees who are independent of the loan origination process and
members of management. This Committee reviews individual loans with the
lending officers and assesses risks relating to the collectibility of
these loans. The Asset Classification Committee determines the adequacy
of the allowance for possible loan losses through ongoing analysis of
historical loss experience, the composition of the loan portfolios,
delinquency levels, underlying collateral values and cash flow values.
Utilizing these procedures, management believes that the allowance for
possible loan losses at September 30, 1997 is sufficient to cover
anticipated losses inherent in the loan portfolios. (See notes 1 (E)
and 9 of Notes to Consolidated Financial Statements in the 1997 Annual
Report to Shareholders, portions of which are attached as Exhibit 13.)
At September 30, 1997, 1996, 1995, 1994 and 1993 the allowance for
possible loan losses was allocated as follows:
At September 30,
------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------------- --------------------- -------------------- -------------------- ------------------
Percent of Percent of Percent of Percent of Percent of
Loans in Loans in Loans in Loans in Loans in
Category Category Category Category Category
to Total to Total to Total to Total to Total
Allowance Loans Allowance Loans Allowance Loans Allowance Loans Allowance Loans
---------------------------------------------------------------------------------------------------------------
(Dollars in Thousands)
Construction
loans. $ 30 .27% $ 20 .23% $ 39 .52% $ 25 .34% $ -- . --%
Commercial
loans. 113 .54 122 .66 92 .66 71 1.05 61 .50
Multifamily
residential
loans. 2,008 17.87 1,008 9.12 505 5.98 1,051 6.90 1,328 6.68
Commercial
real estate
loans. 7,653 22.05 7,192 20.43 8,057 21.02 10,627 23.06 12,035 20.86
Residential
and other
loans. 2,698 59.27 4,426 69.56 4,037 71.82 6,270 68.65 6,513 71.96
Unallocated 6,193 . -- 6,618 . -- 8,542 . -- 7,661 . -- 6,891 . --
------- ------ -------- ------ ------- ------ ------- ------ ------- ------
Total $18,695 100.00% $19,386 100.00% $21,272 100.00% $25,705 100.00% $26,828 100.00%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
15
INVESTMENT ACTIVITIES
- ---------------------
Debt and mortgage-backed securities which the Company has the positive intent
and ability to hold until maturity are carried at cost, adjusted for
amortization of premiums and accretion of discounts. Debt and mortgage-backed
securities to be held for indefinite periods of time and not intended to be held
to maturity and marketable equity securities are classified as available for
sale securities and are recorded at fair value, with unrealized appreciation and
depreciation reported, net of tax, as a separate component of shareholders'
equity.
MORTGAGE-BACKED SECURITIES. Home Federal invests a portion of its
--------------------------
assets in mortgage-backed securities. Home Federal considers its
investment in mortgage-backed securities as a separate investment
category from mortgage loans because of the liquidity characteristics
of these instruments. At September 30, 1997, the Bank's portfolios of
mortgage-backed securities totaled $978.9 million, or 30.2% of total
assets. Approximately 6.1% of this portfolio includes mortgage-backed
securities with underlying loans which are guaranteed by either the
FHLMC, Government National Mortgage Association ("GNMA") or FNMA. The
remainder of the portfolio consists of Real Estate Mortgage Investment
Conduit ("REMIC"), Collateralized Mortgage Obligation ("CMO") and
private-issue pass-through mortgage-backed securities virtually all of
which are rated no less than AAA by nationally recognized rating
services. Management anticipates the full collection of principal
balances and contractual interest amounts on these securities over
their lives, as none of these securities are considered to be residual
interests.
Included in the Bank's mortgage-backed securities portfolio at
September 30, 1997 are REMIC and CMO securities with a principal
balance of $892.7 million. This portfolio has an average estimated life
of 4.3 years at September 30, 1997. Changes in interest rates and
underlying collateral values can affect the average life of the REMIC
and CMO securities. Assuming an immediate and parallel shift in the
yield curve of 300 basis points from the rate environment at September
30, 1997, it is estimated that the average life of this portfolio would
be extended to 5.9 years. Credit enhancement for the Bank's REMIC, CMO
and private-issue pass-through securities are provided in several
structures available for these types of securities which provide for
payment to "classes" within the security on a preferential basis. The
Bank purchases securities with ownership interests in the higher, or
preferred, classes. At September 30, 1997 the Bank's REMIC and CMO
portfolio consisted of 32.6% in Sequential Payment Securities, 26.7% in
Targeted Amortization Securities, 16.9% in Scheduled Payment
Securities, and 23.8% in other Securities. Sequential Payment
Securities are securities in which principal payments are remitted to a
class until that class is paid to zero. Targeted Amortization and
Scheduled Payment Securities are securities in which principal is
repaid on a predetermined schedule using a stated prepayment
assumption, with preference given to higher classes. (See Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Asset/Liability Management and notes 6 and 7 to the Notes
to Consolidated Financial Statements in the 1997 Annual Report to
Shareholders, portions of which are attached as Exhibit 13.)
16
The following table sets forth the composition of the Bank's
mortgage-backed securities held to maturity portfolio as of the dates
indicated:
September 30,
-----------------------------------------------
1997 1996 1995
------------ ------------- --------
(In Thousands)
CARRYING VALUES:
FHLMC(1)........................................ $ 3,257 $ 14,595 $ 21,461
FNMA(2)......................................... 5,127 6,075 34,148
GNMA............................................ 1,141 1,423 --
Private-issue pass-through...................... 48 1,258 --
REMIC and CMO(3)................................ 633,979 525,823 604,722
------------ ------------- -------------
Total mortgage-backed securities
held to maturity(4).......................... 643,552 549,174 660,331
Add: Unamortized premiums...................... 1,836 2,733 6,519
Less: Unearned discounts....................... (1,141) (1,090) (2,124)
------------ ------------- -------------
Total carrying value.......................... $ 644,247 $ 550,817 $ 664,726
============ ============= =============
ESTIMATED MARKET VALUE............................ $ 636,142 $ 534,602 $ 637,503
============ ============= =============
(1) Includes $3,257,000, $3,816,000 and $4,736,000 of adjustable
rate securities at September 30, 1997, 1996 and 1995, respectively.
(2) Includes $5,127,000, $6,075,000 and $8,370,000 of adjustable
rate securities at September 30, 1997, 1996 and 1995, respectively.
(3) Includes $4,111,000 of adjustable rate securities at September
30, 1995.
(4) Includes $10,803,000 and $41,897,000 of pools with underlying
loans having five and seven year balloon maturities, at September
30, 1996 and 1995, respectively (none at September 30, 1997).
The following table sets forth the composition of the Bank's
mortgage-backed securities available for sale portfolio as of the dates
indicated:
September 30,
-----------------------------------------------
1997 1996 1995
------------ ------------- --------
(In Thousands)
CARRYING VALUES:
FHLMC........................................... $ 28,950 $ 61,125 $ 74,344
FNMA............................................ 13,645 48,583 36,831
GNMA............................................ 6,481 7,596 10,854
REMIC and CMO .................................. 258,751 139,146 56,199
Private-issue pass-through...................... 23,555 25,833 30,295
------------ ------------- -------------
Total mortgage-backed securities
available for sale........................... 331,382(1) 282,283 208,523
Add: Unamortized premiums...................... 1,839 1,836 1,091
Less: Unearned discounts........................ (1,386) (4,167) (3,818)
Add: Unrealized appreciation
on securities available for sale...... 2,806 477 998
------------ ------------- -------------
Total carrying and
estimated market value....................... $ 334,641 $ 280,429 $ 206,794
============ ============= =============
(1) Of the $331,382,000 in mortgage-backed securities available for
sale at September 30,1997, $8,415,000 represents pools with
underlying loans having five and seven year balloon maturities.
17
The following table sets forth, by issuer, the aggregate amortized cost
and estimated fair value of the Company's REMIC, CMO and private-issue
pass-through mortgage-backed securities portfolio, both held to
maturity and available for sale, that at September 30, 1997 exceeded
10% of stockholders' equity.
Amortized Estimated
Cost Fair Value
--------- ----------
(In Thousands)
Federal National Mortgage Association................................ $ 200,085 $ 199,270
GE Capital Mortgage Services, Inc.................................... 127,458 126,742
Prudential Home Mortgage Securities Company, Inc..................... 80,647 79,291
Residential Funding Mortgage Securities I, Inc., .................... 80,136 79,912
Chase Mortgage Finance Corporation................................... 78,187 76,703
Countrywide Funding Corporation...................................... 54,569 55,247
PNC Mortgage Securities Corporation.................................. 47,402 47,430
Federal Home Loan Mortgage Corporation............................... 46,963 46,852
Housing Securities, Inc.............................................. 41,629 41,112
Securitiezed Asset Sales, Inc........................................ 40,321 40,393
Bear Stearns Mortgage Securities, Inc................................ 39,900 38,345
Citicorp Mortgage Securities, Inc.................................... 18,757 18,557
Saxon Mortgage Securities Corporation................................ 17,126 17,428
MONEY MARKET INVESTMENTS AND DEBT AND EQUITY SECURITIES. The Bank's
-------------------------------------------------------
investment policy, which is established by its Board of Directors, is
to invest funds among various categories of investments and maturities
based upon the Bank's asset/liability policies, investment quality and
marketability standards, liquidity needs and performance objectives.
At September 30, 1997, the Company had $107.1 million in debt and
equity securities available for sale and $.6 million in debt securities
held to maturity, representing 3.3% of total assets, in the aggregate.
It is the Company's policy to purchase only issues rated investment
grade. An "A" rating, as assigned by several generally recognized
independent rating agencies, is the third highest of the four rating
grades which are considered to be "investment grade" by the rating
agencies and by most financial institutions. "Baa" is the fourth
highest rating. At September 30, 1997, 100% of such issues owned by the
Company were considered to be investment grade by the rating agencies.
(See notes 4, and 5 of Notes to Consolidated Financial Statements in
the 1997 Annual Report to Shareholders, portions of which are attached
as Exhibit 13.)
18
The following table sets forth certain information regarding the
Company's investment portfolio at the dates indicated:
September 30,
----------------------------------------------
1997 1996 1995
------------ ------------ --------
(Dollars In Thousands)
DEBT SECURITIES HELD TO MATURITY:
Agency obligations................................. $ -- $ -- $ 20,000
Corporate notes ................................... 593 643 1,179
------------ ------------ ------------
Total debt securities held to
maturity......................................... 593 643 21,179
------------ ------------ ------------
DEBT AND EQUITY SECURITIES AVAILABLE FOR SALE:
U. S. Government and agency obligations............. 106,244 131,245 41,740
Common stocks ...................................... -- 5,326 4,082
Stock in FNMA....................................... 2 2 2
Other............................................... 1,143 1,028 --
------------ ------------ ------------
Total debt and equity securities
available for sale............................... 107,389 137,601 45,824
Unrealized appreciation (depreciation)
on securities available for sale................... (239) (1,468) 449
------------ ------------ ------------
Net debt and equity securities
available for sale............................... 107,150 136,133 46,273
------------ ------------ ------------
FEDERAL HOME LOAN BANK STOCK.......................... 54,119 27,938 20,288
------------ ------------ ------------
MONEY MARKET INVESTMENTS:
Securities purchased under resale
agreements......................................... -- 10,700 8,400
FHLB overnight deposits............................. -- -- 4,997
Federal funds sold.................................. -- -- 500
Other............................................... -- -- 18
------------ ------------ ------------
Total money market investments.................... -- 10,700 13,915
------------ ------------ ------------
TOTAL INVESTMENT PORTFOLIO............................ $ 161,862 $ 175,414 $ 101,655
============ ============ ============
AVERAGE LIFE, IN YEARS, OF TOTAL INVESTMENT
PORTFOLIO, EXCLUDING EQUITY SECURITIES............... 2.5 6.6 3.6
=== === ===
The table below sets forth certain information regarding the carrying
and market values, average yields and maturities of the Bank's
investment in debt securities.
At September 30, 1997
-------------------------------------------------------------------------------------------------------------------
One Year 1 to 5 to More than
or Less 5 Years 10 Years 10 Years Total Debt and Equity Securities
----------------- ----------------- ----------------- ----------------- -------------------------------------
Average
Carrying Average Carrying Average Carrying Average Carrying Average Life Carrying Market Average
Value Yield Value Yield Value Yield Value Yield in Years Value Value Yield
-------- -------- ------- -------- -------- -------- ------- -------- -------- -------- -------- -----
(Dollars in Thousands)
Agency
obligations
and other $40,570 5.84 % $ 66,524 6.34% $ -- . -- % $-- .--% 2.5 $107,094 $107,094 6.13%
======= ====== ========= ===== ======== ======= ======= ===== ==== ========= ========= =====
Corporate
notes... $ -- .-- % $ -- .--% $ -- . -- % $593 5.97% 8.2 $ 593 $ 609 5.97%
======= ====== ========= ===== ======== ======= ======= ===== ==== ======== ========= =====
19
SUBSIDIARIES OF THE BANK
- ------------------------
The Bank has one wholly owned subsidiary, Home Fed Realty Corporation, which is
included in the consolidated financial statements. This subsidiary operates as a
real estate investment trust. The Bank additionally has seven wholly owned
unconsolidated subsidiaries, three of which are inactive. At September 30, 1997,
the Bank's aggregate investment in these subsidiaries amounted to $368,000. Of
the active subsidiaries, one subsidiary, Alameda Advantage Corp. ("AAC"), is a
limited partner in the partnership which owns the property used for the Bank's
executive and administrative offices. Two of the subsidiaries, Home Fed
Services, Inc. and HF Investors, Inc., were primarily established to offer
annuities through the Bank's branch system. Another subsidiary, Home Fed Funding
Corp., operates as a mortgage broker for the purpose of obtaining, for the Bank,
loan applications outside of New York State.
SOURCES OF FUNDS
- ----------------
The Bank's lending and investment activities are predominately funded by
deposits, Federal Home Loan Bank of New York ("FHLB-NY") advances, reverse
repurchase agreements with primary government securities dealers or the FHLB-NY,
scheduled amortization and prepayments of its loan and investment portfolio, and
funds provided by operations. Although not viewed as a primary source of funds,
the Bank will, from time to time, sell certain of the Bank's mortgages and
securities which have been designated as available for sale. The primary purpose
of these sales has been to reduce the Bank's interest rate risk position.
Further, the Bank utilizes subordinated capital notes as an additional source of
funds.
DEPOSITS. Home Federal has a number of programs designed to attract
--------
both short-term and long-term savings from the general public by
providing a wide assortment of accounts bearing interest rates
consistent with federal regulations and market conditions. Included
among these programs are savings accounts, negotiable order of
withdrawal ("NOW") accounts, money market deposit accounts ("MMDA"),
fixed rate and variable rate Individual Retirement and Keogh Accounts,
fixed rate and variable rate certificates of deposit, and non-interest
bearing demand accounts. Additionally, included in deposits at
September 30, 1997 is $2.3 million of MarketSmart CD deposit
liabilities, which enable depositors to earn an annual percentage yield
based on the changes in the Standard & Poor's ("S&P") 500 Composite
Stock Price Index during each of the 5 year terms of the CD. The Bank
utilizes stock indexed call options to hedge the risks associated with
this product. The Bank ceased offering the MarketSmart CDs during
fiscal year 1995 due to its inability to purchase such small quantities
of stock indexed call options.
20
Savings accounts (passbook or statement), which accounted for
approximately 40.65% of the Bank's total deposits at September 30,
1997, earned interest as of that date at an annual rate of 2.42% with
an effective annual yield of 2.45%. Interest on savings accounts is
compounded daily and credited monthly. A savings account must have a
balance of at least $200 to earn interest. At September 30, 1997,
approximately 39.05% of all deposits were in certificate accounts with
original maturities ranging from three months to seven years. Interest
on certificate accounts of six months or less is based on simple
interest and credited monthly. Interest on all other certificate
accounts is compounded daily and credited quarterly. At September 30,
1997, approximately 8.86% of all deposits were in MMDAs which bear a
fluctuating rate of interest that is reviewed regularly by the Bank.
Additionally, NOW accounts represented 8.90% of the Bank's total
deposits at September 30, 1997. Interest on NOW accounts is compounded
daily and credited monthly. Non-interest bearing demand accounts
represented 2.54% of the Bank's total deposits at September 30, 1997.
The following table sets forth the distribution of the Bank's deposit
accounts at the dates indicated and the weighted average interest
rates, excluding the effect of interest rate floors, interest rate
collars, and interest rate swaps:
At September 30,
---------------------------------------------------------------------
September 30, 1997 1996 1995
---------------------- ---------------------- ------------------
1997
Weighted
Average Percent Percent Percent
Nominal of of of
Rate Amount Deposits Amount Deposits Amount Deposits
-------- --------- -------- -------------------- ---------- ---------
(Dollars in Thousands)
Non-interest bearing
demand accounts....... . --% $ 42,808 2.54% $ 37,013 2.16% $ 32,821 1.88%
NOW accounts........... 1.00 150,010 8.90 130,831 7.63 116,726 6.67
Variable rate money
market deposit
accounts.............. 3.13 149,200 8.86 133,528 7.78 102,937 5.89
Passbook savings and
club accounts......... 2.42 684,667 40.65 716,827 41.77 751,374 42.96
---- ------------- ------- ------------ ------ ------------ -------
2.21 1,026,685 60.95 1,018,199 59.34 1,003,858 57.40
---- ------------- ------- ------------ ------ ------------ -------
Certificate accounts:
With original
maturities of:
3 months.......... 3.99 15,626 .93 19,382 1.13 15,516 .89
6 months.......... 4.06 58,863 3.50 83,943 4.89 98,674 5.64
7 months.......... 4.67 19,576 1.16 17,967 1.05 37,848 2.16
12 months.......... 4.47 88,773 5.27 140,815 8.21 191,469 10.95
13 months.......... 4.91 55,604 3.30 93,965 5.47 84,778 4.85
18 months.......... 5.30 61,347 3.64 30,461 1.78 8,387 .48
30 months.......... 5.60 39,797 2.36 34,784 2.03 46,807 2.68
36 months.......... 6.09 23,003 1.37 25,049 1.46 26,762 1.53
48 months.......... 5.71 7,242 .43 6,396 .37 6,404 .37
60 months.......... 6.34 148,925 8.84 161,180 9.39 173,716 9.93
Other.............. 5.12 138,978 8.25 83,818 4.88 54,655 3.12
----- ------------- ------- ------------ ------ ------------ -------
5.24 657,734 39.05 697,760 40.66 745,016 42.60
----- ------------- ------- ------------ ------ ------------ -------
Total deposits....... 3.40% $ 1,684,419 100.00% $ 1,715,959 100.00% $ 1,748,874 100.00%
===== ============= ====== ============ ======= ============ =======
21
The following table presents the deposit activity of the Bank for the
years indicated:
September 30,
----------------------------------------------------
1997 1996 1995
--------------- -------------- --------------
(In Thousands)
Deposits........................................... $ 3,350,432 $ 2,847,234 $ 2,909,582
Withdrawals........................................ (3,440,705) (2,943,187) (3,011,924)
--------------- --------------- --------------
Withdrawals in excess of deposits.................. (90,273) (95,953) (102,342)
Interest credited.................................. 58,733 63,038 67,670
Hamilton's net activity for the
quarter ended December 31, 1994................... -- -- (7,968)
--------------- --------------- --------------
Net increase (decrease) in deposits................ $ (31,540) $ (32,915) $ (42,640)
=============== =============== ==============
The following table presents the weighted average nominal interest
rates (excluding the effect of related interest rate swaps, interest
rate collars and interest rate floors) on certificate accounts
outstanding at September 30, 1997 by periods of maturity.
Weighted
Percent of Average Remaining maturity
-------------------------------------------------------------
Total Nominal 6 months 6 months 1 year 3 years 5 years
Quarter Ended Amount Certificates Rate or less to 1 year to 3 years to 5 years to 10 years
- ------------- ------ ------------ -------- -------- --------- ---------- ---------- -----------
(Dollars in Thousands)
December 31, 1997 $150,044 22.81% 4.68% $150,044
March 31, 1998. 126,412 19.22 4.98 126,412
June 30, 1998.. 116,916 17.78 5.09 $ 116,916
September 30, 1998 80,592 12.25 5.27 80,592
December 31, 1998 28,829 4.38 5.24 $ 28,829
March 31, 1999. 14,379 2.19 5.34 14,379
June 30, 1999.. 27,183 4.13 5.95 27,183
September 30, 1999 21,915 3.33 5.69 21,915
December 31, 1999 15,544 2.36 6.19 15,544
March 31, 2000. 22,031 3.35 6.87 22,031
June 30, 2000.. 18,448 2.80 6.81 18,448
September 30, 2000 5,231 .80 5.74 5,231
December 31, 2000 3,528 .54 5.71 $3,528
March 31,2001.. 2,201 .33 5.20 2,201
June 30, 2001.. 4,373 .67 5.85 4,373
September 30, 2001 2,781 .42 5.64 2,781
December 31, 2001 2,357 .36 5.55 2,357
March 31, 2002. 2,388 .36 6.22 2,388
June 30, 2002.. 6,919 1.05 6.22 6,919
September 30, 2002 4,514 .69 6.07 4,514
December 31, 2002 956 .15 5.90 $ 956
June 30, 2003. 193 .03 6.77 193
---------- ------- ------ ---------- ---------- --------- ---------- ----------
$ 657,734 100.00% 5.24% $ 276,456 $ 197,508 $ 153,560 $ 29,061 $ 1,149
========== ======= ====== ========== ========== ========= ========== ==========
22
Historically, most of the Bank's certificates of deposit accounts renew
upon maturity. Consequently, and given the sources of funds available
to the Bank, the short-term nature of the maturity for certificate of
deposit accounts should not have a material adverse effect on the
Company's operations or liquidity.
At September 30, 1997, the Bank had outstanding certificate accounts in
amounts of $100,000 or more maturing as follows:
Quarter Ended Amount
------------- ------
(In Thousands)
December 31, 1997....................... $ 20,563
March 31, 1998.......................... 21,436
June 30, 1998........................... 20,828
September 30, 1998...................... 12,038
December 31, 1998....................... 4,797
March 31, 1999.......................... 4,649
June 30, 1999........................... 10,680
September 30, 1999...................... 8,435
December 31, 1999....................... 7,007
March 31, 2000.......................... 10,692
June 30, 1999........................... 10,613
September 30, 2000...................... 2,043
December 31, 2000....................... 1,414
March 31, 2001.......................... 1,310
June 30, 2001........................... 2,608
September 30, 2001...................... 1,070
December 31, 2001....................... 654
March 3l, 2002.......................... 600
June 30, 2002........................... 2,188
September 30, 2002...................... 1,735
December 3l, 2002....................... 507
June 30, 2003........................... 113
------------
$ 145,980
============
BORROWED FUNDS. Although deposits are the Bank's primary source of
--------------
funds, the Bank's policy has been to utilize borrowed funds when they
are a less costly source of funds or can be invested at a positive
interest rate spread. These borrowings are generally short-term or
variable rate and, therefore, present greater interest rate and
liquidity risk to the Bank. The Bank attempts to manage this risk and
utilizes off-balance sheet financial instruments to a limited extent to
manage its risks. The Bank will enter into longer term borrowings when
they can be matched with assets with similar duration.
Home Federal obtains advances from the FHLB-NY upon the security of its
residential mortgage loans and mortgage-backed securities. Such
advances are made pursuant to several different credit programs, each
of which has its own interest rate and range of maturities.
Home Federal also employs repurchase agreements as a means of borrowing
funds. It is the Bank's policy to enter into these agreements only with
primary government dealers or the FHLB-NY.
23
At September 30, 1997, the Bank had outstanding $740.3 million of fixed
rate reverse repurchase agreements with a weighted average interest
rate of 5.73% and a weighted average remaining maturity of seventeen
months. The Bank may substitute collateral in the form of U. S.
Treasury, mortgage-backed certificates, or agency obligations. At
September 30, 1997, the borrowings were collateralized by FNMA, FHLMC,
REMIC, non-agency pass-through certificates and agency obligations
having a carrying value of approximately $773.7 million and a market
value of approximately $766.6 million.
At September 30, 1997, the Bank had outstanding a $100.0 million
variable rate reverse repurchase agreement with an interest rate of
5.59% and remaining maturity of four months. The Bank may substitute
collateral in the form of U. S. Treasury, GNMA, FNMA, FHLMC, REMIC, CMO
or non-agency pass-through certificates rated no less than AA. At
September 30, 1997, the borrowings were collateralized by REMIC and
non-agency pass-through certificates having a carrying value of
approximately $105.7 million and a market value of approximately $105.0
million.
On November 18, 1988, the Bank issued $25.0 million in 10.95% (Series A
Notes) and $5.0 million in 10.52% (Series B Notes) subordinated capital
notes (collectively as the "Notes"). During the years ended September
30, 1991 and 1990, the Bank repaid $6.0 million and $5.0 million,
respectively, of its Series A Notes at prices substantially equal to
its carrying value. Interest on the Notes is payable in semiannual
installments. The remaining principal on the Series A Notes and Series
B Notes is payable in annual installments of $2.8 million and $1.0
million, respectively. As of September 30, 1997, the Bank had $7.6
million of the Notes outstanding, which are fully subordinated to
savings deposit accounts and other general liabilities of the Bank.
Further, at September 30, 1997, $.5 million of the Notes qualified as
supplemental capital for purposes of meeting the regulatory risk-based
capital requirements. The Notes are redeemable in whole or in part,
with a prepayment premium, at the option of the Bank, subject to
regulatory approval, at any time. Deferred issuance costs are being
amortized over the period to maturity of the Notes.
On February 3, 1989 the Bank established a Mortgage-Backed Medium-Term
Note, Series A (the "Medium-Term Notes") program. The Medium-Term Notes
can be issued from time to time in designated principal amounts, up to
a total remaining aggregate amount of $180.0 million, with interest
rates to be established at the time of issuance, and with maturities to
be set ranging from nine months to fifteen years from the date of
issuance. No amounts were outstanding under this program at September
30, 1997.
24
The following table sets forth certain information regarding borrowed
funds for the dates indicated:
At September 30,
----------------------------------------
1997 1996 1995
------------- -------------- ------------
(In Thousands)
Notes payable--fixed rate advances from the FHLB-NY:
4.13% to 8.45%, due in 1996................................ $ -- $ -- $ 22,375
8.10%, due in 1997......................................... -- 375 375
5.68% to 5.71%, due in 1998................................ 155,000 -- --
------------- ------------- -------------
155,000 375 22,750
------------- ------------- -------------
Notes payable--variable rate advances from the FHLB-NY:
5.88% to 6.63%, due in 1996................................ -- -- 363,000
5.37% to 5.99%, due in 1997................................ -- 542,000 20,000
5.63% to 6.63%, due in 1998................................ 249,500 -- --
------------- ------------- -------------
249,500 542,000 383,000
------------- ------------- -------------
Securities sold under agreements to repurchase:
Fixed rate agreements:
5.79% to 6.00%, due in 1996............................... -- -- 190,160
5.37% to 6.15%, due in 1997............................... -- 353,698 --
5.61% to 5.73%, due in 1998............................... 367,001 -- --
5.70% to 5.73%, due in 1999............................... 117,330 -- --
5.57% to 6.55%, due in 2000............................... 137,000 -- --
5.68% to 5.98%, due in 2002............................... 119,000 -- --
------------- ------------- -------------
740,331 353,698 190,160
------------- ------------- -------------
Variable rate agreements:
5.79% to 6.03%, due in 1996............................... -- -- 150,000
5.59% in 1997 and 5.09% in 1996, due in 1998.............. 100,000 100,000 --
------------- ------------- -------------
100,000 100,000 150,000
------------- ------------- -------------
Other collateralized borrowings:
Fixed rate flexible reverse repurchase
agreements:
7.85%, due in 1996........................................ -- -- 4,700
------------- ------------- -------------
Subordinated capital notes, fixed rate - 10.84%:
Due in 1996................................................ -- -- 3,800
Due in 1997................................................ -- 3,800 3,800
Due in 1998................................................ 3,800 3,800 3,800
Due in 1999................................................ 3,800 3,800 3,800
------------- ------------- -------------
7,600 11,400 15,200
------------- ------------- -------------
Treasury, tax and loan notes-callable, 5.56%, 5.84%
and 5.75% at September 30, 1997, 1996 and 1995,
respectively.............................................. 1,500 1,313 1,328
------------- ------------- -------------
Total borrowed funds...................................... $ 1,253,931 $ 1,008,786 $ 767,138
============= ============= =============
25
The following table sets forth the maximum month-end balance, average
balance and weighted average interest rate of short-term borrowings
based on remaining maturities for the periods indicated. Average
balances and rates are computed on the basis of daily balances. The
rates shown in the table exclude the effect of related interest rate
swaps and interest rate collars.
Year Ended September 30,
-------------------------------------------
1997 1996 1995
-------------------------------------------
(Dollars in Thousands)
FHLB-NY advances--due in one year or less:
Maximum month-end balance............................... $ 552,375 $ 611,875 $ 385,375
Balance at end of year.................................. 404,500 542,375 385,375
Average balance......................................... 429,383 480,574 293,268
Weighted average interest rate:
On balance at end of year............................ 5.92% 5.48% 6.13%
On average balance................................... 5.66% 5.65% 5.75%
Other borrowings--principally reverse repurchase
agreements, due in one
year or less:
Maximum month-end balance............................... $ 650,255 $ 358,811 $ 349,988
Balance at end of year.................................. 472,301 358,811 349,988
Average balance......................................... 517,906 262,251 259,685
Weighted average interest rate:
On balance at end of year............................ 5.87% 5.66% 5.96%
On average balance................................... 5.74% 5.86% 5.72%
Total short-term borrowings:
Maximum month-end balance............................... $ 1,047,898 $ 901,186 $ 735,363
Balance at end of year.................................. 876,801 901,186 735,363
Average balance......................................... 947,289 742,825 548,560
Weighted average interest rate:
On balance at end of year............................ 5.89% 5.55% 6.05%
On average balance................................... 5.71% 5.72% 5.74%
MARKET AREA AND COMPETITION
- ---------------------------
Home Federal has been, and continues to be, a community-oriented savings bank
offering a variety of financial services to its community. The Bank, however,
has substantial competition for both loans and deposits. The New York City
metropolitan area has a high density of financial institutions, many of which
are substantially larger and have substantially greater financial resources than
the Bank, and all of which are competitors of the Bank to varying degrees. The
Bank faces significant competition, both in making mortgage and consumer loans
and in attracting deposits. The Bank's competition for loans comes principally
from savings and loan associations, savings banks, mortgage banking companies,
insurance companies, and commercial banks. Its most direct competition for
deposits has historically come from savings and loan associations, savings
banks, commercial banks, credit unions and securities dealers. The Bank faces
additional competition for deposits from short-term money market funds and other
corporate and government securities funds.
26
The Bank competes for loans principally through competitive pricing and the
efficiency and quality of services it provides borrowers and their real estate
brokers. It competes for deposits through pricing and service and by offering a
variety of deposit accounts. New powers for thrift institutions provided by New
York State and Federal legislation enacted in recent years have resulted in
increased competition between savings banks and other financial institutions for
both deposits and loans.
EMPLOYEES
- ---------
At September 30, 1997, Home Federal had 596 employees, including 170 part-time
employees. The Bank's employees are not represented by any collective bargaining
group. The Bank considers its employee relations to be excellent.
REGULATION
- ----------
GENERAL. The Company, as a savings and loan holding company, is
-------
required to file certain reports with, and otherwise comply with the
rules and regulations of the OTS. As a publicly owned company, the
Company is required to file certain reports with the Securities and
Exchange Commission ("SEC") under the Federal securities laws. The Bank
is a member of the FHLB System and approximately 82% of its deposit
accounts are insured up to applicable limits by the FDIC under the
Savings Association Insurance Fund ("SAIF"). In addition, approximately
18%, representing the remaining deposit accounts, are insured up to
applicable limits by the FDIC under the Bank Insurance Fund ("BIF").
The Bank is subject to extensive regulation by the OTS, as its
chartering agency, and the FDIC, as the deposit insurer. The Bank must
file reports with the OTS and the FDIC concerning its activities and
financial condition, in addition to obtaining regulatory approvals
prior to entering into certain transactions such as mergers with or
acquisitions of other savings institutions. There are periodic
examinations by the OTS and the FDIC to examine whether the Bank is in
compliance with various regulatory requirements. This regulation and
supervision establishes a comprehensive framework of activities in
which an institution can engage and is intended primarily to ensure the
safe and sound operation of the Bank for the protection of the
insurance fund and depositors. The regulatory structure also gives the
regulatory authorities extensive discretion in connection with their
supervisory and enforcement activities and examination policies,
including policies with respect to the classification of assets and the
establishment of an adequate allowance for possible loan losses for
regulatory purposes. Any change in such regulation, whether by the OTS,
the FDIC or the United States Congress could have a material adverse
impact on the Company, the Bank and its operations. Certain of the
regulatory requirements applicable to the Bank and to the Company are
referred to below or elsewhere herein.
27
HOLDING COMPANY REGULATION. The Company is a unitary savings and loan
--------------------------
holding company within the meaning of the Home Owners Loan Act of 1933,
as amended ("HOLA"). As such, the Company is required to be registered
with the OTS and is subject to OTS regulations, examinations,
supervision and reporting requirements. Among other things, the OTS has
enforcement authority which permits the OTS to restrict or prohibit
activities that are determined to be a serious risk to the subsidiary
savings institution. The Bank must notify the OTS 30 days before
declaring any dividend to the Company.
As a unitary savings and loan holding company, the Company generally is
not restricted under existing laws as to the types of business
activities in which it may engage, provided that the Bank continues to
meet the qualified thrift lender ("QTL") test. Upon any acquisition by
the Company, which would be subject to prior regulatory approval, of
another qualifying institution except for a supervisory acquisition,
the Company would become a multiple savings and loan holding company
(if the acquired institution is held as a separate subsidiary) and
would be subject to extensive limitations on the types of business
activities in which it could engage. In general, such holding company
would be limited primarily to activities permissible for bank holding
companies under the Bank Holding Company Act of 1956, as amended, and
other activities authorized by OTS regulations and activities in which
multiple savings and loan holding companies were authorized by
regulation to engage on March 5, 1987. Such activities include, without
limitation, mortgage banking, consumer finance, operation of a trust
company, and certain types of securities brokerage.
The HOLA prohibits a savings and loan holding company, directly or
indirectly, or through one or more subsidiaries, from acquiring more
than 5% of the voting stock of another savings institution or holding
company thereof, without prior written approval of the OTS. Further,
savings and loan holding companies must receive OTS approval prior to
acquiring another savings association by merger, consolidation or
purchase of assets. In evaluating applications by holding companies to
acquire savings institutions, the OTS must consider the financial and
managerial resources and future prospects of the company and
institution involved, the effect of the acquisition on the risk to the
insurance funds, the convenience and needs of the community and
competitive factors.
The OTS is prohibited from approving any acquisition that would result
in a multiple savings and loan holding company controlling savings
institutions in more than one state, subject to two exceptions: (i) the
approval of interstate supervisory acquisitions by savings and loan
holding companies; and (ii) the acquisition of a savings institution in
another state if the laws of the state of the target savings
institution specifically permit such acquisitions.
28
Federal law generally provides that no "person" (including a company),
acting directly or indirectly or through or in concert with one or more
other persons, may acquire "control" of a Federally-insured savings
institution without giving at least 60 days' written notice to the OTS
and providing the OTS an opportunity to disapprove the proposed
acquisition (or in the case of a company, complying with OTS holding
company application requirements.) "Control" is defined for this
purpose as the power, directly or indirectly, to direct the management
or policies of an institution or to vote 25% or more of any class of
voting securities of a savings institution. In addition, existing
regulations established various presumptions of control, which, among
other things, generally contemplate that ownership of more than 10% of
any class of voting securities of an insured savings institution (when
combined with certain other control factors) constitute control.
On August 26, 1996, Mr. Patrick E. Malloy, III, Chairman of the Board
of the Company, and Mr. Michael A. McManus, Jr., President and Chief
Executive Officer of the Company, received approval from the OTS to
extend the application they had filed to acquire up to 20% of the
outstanding common stock of the Company. This approval to acquire
additional shares expired on August 25, 1997. As of September 30, 1997,
Messrs. Malloy and McManus beneficially owned a total of 15.73% of the
outstanding common stock of the Company.
On May 13, 1996, Mr. Josiah T. Austin, a Director of the Company, and
Mrs. Valer Austin received approval from the OTS to extend the
application they had filed to acquire up to 20% of the outstanding
common stock of the Company. This approval to acquire additional shares
expired on May 12, 1997. As of September 30, 1997, Mr. and Mrs. Austin
beneficially own a total of 11.84% of the outstanding common stock.
FEDERAL SAVINGS INSTITUTION REGULATION
--------------------------------------
BUSINESS ACTIVITIES. The activities of federal savings institutions are
-------------------
governed by the HOLA and, in certain respects, the Federal Deposit
Insurance Act ("FDI Act") and the regulations that have been issued
pursuant to those statutes. These laws and regulations delineate the
nature and extent of the activities in which federal savings
associations may engage. In particular, authority for certain types of
loans, e.g., commercial, nonresidential real property loans and
consumer loans, is limited to a percentage of the institution's capital
or assets. The description of statutory provisions and regulations
applicable to savings and loan institutions set forth in this Form 10-K
do not purport to be a complete description of such statutes and
regulations and their effects on the Bank.
REGULATORY CAPITAL REQUIREMENT. The Bank is required to meet minimum
------------------------------
capital standards, promulgated by the OTS, having three components: a
leverage limit or "core capital" requirement, a "tangible capital"
requirement, and a "risk-based capital" requirement. The OTS
regulations require that in meeting the leverage ratio, tangible, and
risk-based capital standards, the institution must deduct investments
in and loans to subsidiaries engaged in certain activities not
permissible for national banks.
29
The leverage limit requires a savings institution to maintain "core
capital" in an amount not less than 3% of adjusted total assets. Core
capital is defined as common stockholders' equity (including retained
earnings), certain noncumulative perpetual preferred stock and related
surplus, and minority interests in the equity accounts of consolidated
subsidiaries, less intangibles other than certain servicing rights. The
tangible capital requirements call for "tangible capital" in an amount
not less than 1.5% of adjusted total assets. As a result of the
phaseout of the includability of certain intangible assets in core
capital, tangible capital is in most cases the same as core capital.
Generally, savings institutions with a leverage ratio (core capital) of
less than 4.0% will be deemed "undercapitalized" under the prompt
corrective rule and, therefore, the leverage ratio requirement has
effectively been increased to 4.0%. (See Prompt Corrective Action
Regulations.)
The risk-based capital requirement calls for an institution to maintain
capital in an amount not less than 8% of its risk weighted assets.
Under the risk-based capital standards, assets are categorized and
assigned risk weights by the regulation so that assets which are deemed
to involve a greater credit risk require more capital than assets with
less credit risk. Risk-based capital may include two components, core
and supplementary. Core capital is as defined previously. Supplementary
capital may be included in an amount up to 100% of core capital. The
components of supplementary capital may include cumulative preferred
stock, long-term preferred stock, mandatory convertibles securities,
subordinated debt and intermediate preferred stock and the general
allowance for loan and lease losses. The general allowance for loan and
lease losses allowable in supplementary capital is limited to a maximum
of 1.25% of risk-adjusted assets.
30
In August 1993, the OTS adopted a final rule incorporating an interest
rate risk component into the existing risk-based capital standard.
Under the final rule, savings institutions with "above normal" interest
rate risk exposure are subject to a deduction for total capital for
purposes of calculating risk-based capital requirements. A savings
institution's interest rate risk is measured by the decline in the net
portfolio value of its assets (i.e., the difference between incoming
and outgoing discounted cash flows from assets, liabilities and
off-balance sheet contracts) that would result from a hypothetical 200
basis point increase or decrease in market interest rates (except when
the 3-month Treasury bond equivalent yield falls below 4.0%, then the
decrease will be equal to one-half of that Treasury rate) divided by
the estimated economic value of the institution's assets, as calculated
in accordance with guidelines set forth by the OTS. A savings
institution whose measured interest rate risk exposure exceeds 2.0%
must deduct an interest rate component in calculating its total capital
under the risk-based capital rule. The interest rate risk component is
an amount equal to one-half of the difference between the institutions
measured interest rate risk and 2.0%, multiplied by the estimated
economic value of the institutions assets. The dollar amount is
deducted from an institutions total capital in calculating compliance
with its risk-based capital requirement. The rule provides that the
director of the OTS may waive or defer an institution's interest rate
risk component on a case-by-case basis. For the present time, the OTS
has delayed implementation of the automatic capital deduction of the
interest rate risk component. The Bank's risk-based capital requirement
would not have been materially affected based on interest rate risk at
September 30, 1997. As of September 30, 1997, the Bank exceeded all of
its regulatory capital requirements. (See note 17 of Notes to
Consolidated Financial Statements contained in the 1997 Annual Report
to Shareholders, portions of which are attached as Exhibit 13.)
31
PROMPT CORRECTIVE REGULATORY ACTION. Under the OTS prompt corrective
-----------------------------------
action regulations, the OTS is required to take certain supervisory
actions against undercapitalized institutions, the severity of which
depends upon the institution's degree of undercapitalization.
Generally, a savings institution is considered "well capitalized" if
its ratio of total capital to risk-weighted assets is at least 10%, its
ratio of Tier I (core) capital to risk-weighted assets is at least 6%,
its ratio of core capital to total assets is at least 5%, and it is not
subject to any order or directive by the OTS to meet a specific capital
level. A savings institution generally is considered "adequately
capitalized" if its ratio of total capital to risk-weighted assets is
at least 8%, its ratio of Tier I (core) capital to risk-weighted assets
is at least 4%, and its ratio of core capital to total assets is at
least 4% (3% if the institution receives the highest CAMELS rating). A
savings institution that has a ratio of total capital to risk-weighted
assets of less than 8%, a ratio of Tier I (core) capital to
risk-weighted assets of less than 4% or a ratio of core capital to
total assets of less than 4% (3% or less for institutions with the
highest examination rating) is considered to be "undercapitalized." A
savings institution that has a total risk-based capital ratio less than
6%, a Tier I risk-based capital ratio of less than 3% or a leverage
ratio that is less than 3% is considered to be "significantly
undercapitalized" and a savings institution that has a tangible capital
to assets ratio equal to or less than 2% is deemed to be "critically
undercapitalized." Subject to a narrow exception, the banking regulator
is required to appoint a receiver or conservator for an institution
that is "critically undercapitalized." The regulation also provides
that a capital restoration plan must be filed with the OTS within 45
days of the date a savings institution receives notice that it is
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." Compliance with the plan must be guaranteed by any
parent holding company. In addition, numerous mandatory supervisory
actions become immediately applicable to an undercapitalized
institution, including, but not limited to, increased monitoring by
regulators and restrictions on growth, capital distributions and
expansion. The OTS could also take any one of a number of discretionary
supervisory actions, including the issuance of a capital directive and
the replacement of senior executive officers and directors. At
September 30, 1997, the Bank is considered "well capitalized" under the
prompt corrective action regulations.
INSURANCE OF DEPOSIT ACCOUNTS. Approximately 82% of the deposits of the
-----------------------------
Bank are presently insured up to applicable limits by the FDIC under
the SAIF. The remainder are insured up to applicable limits by the FDIC
under the BIF, the deposit insurance fund that covers most commercial
bank deposits. Under federal law, both the SAIF and BIF are statutorily
required to be capitalized at 1.25% of insured reserve deposits ratio.
The BIF achieved the 1.25% ratio during the first half of calendar year
1995. As a result, the FDIC has reduced the BIF assessment schedule for
calendar year 1996 so that most BIF members were paying the statutory
minimum annual assessment of $2,000. With respect to SAIF deposits, the
FDIC retained the assessment rate schedule applicable to SAIF deposits
of 23 to 31 basis points through September 30, 1996.
32
On September 30, 1996, Congress passed, and the President signed, the
Deposit Insurance Funds Act of 1996 (the "Funds Act") that
recapitalized the SAIF. Under the major provisions of the Funds Act,
savings institutions, such as the Bank, were assessed a one-time
assessment of 65.7 basis points per $100 of SAIF-assessable deposits as
of March 31, 1995, payable in November 1996. Consequently, the Company
recorded a one-time charge of $9.4 million during the fourth quarter of
fiscal year 1996. The one-time assessment was paid in the first quarter
of fiscal year 1997.
As a result of the Funds Act, and the one-time assessment, the deposit
insurance premium for SAIF members was reduced, effective January 1,
1997, to the same schedule as BIF members, ranging from 0 to 27 basic
points rather than the previous range of 23 to 31 basis points. In
addition, the FDIC reduced the assessment rate for SAIF members to 18
to 27 basis points for the quarter ending December 31, 1996, the amount
necessary to cover the Financing Corporation ("FICO") obligations.
Effective January 1, 1997, SAIF deposits are also assessed 6.3 basis
points, and BIF deposits are assessed 1.3 basis points, to cover the
cost of FICO obligations, until December 31, 1999. Full pro rata
sharing of the FICO payments between SAIF and BIF members will occur on
the earlier of January 1, 2000 or the date the SAIF and BIF are merged.
The Funds Act specifies that the SAIF and BIF will be merged on January
1, 1999 provided no savings association remains as of that time. As a
result of this legislation, the Bank has seen a decrease in deposit
insurance premiums. However, management cannot predict the level of
FDIC insurance assessments on an on-going basis, whether the savings
association charter will be eliminated, or whether the SAIF and BIF
will eventually be merged.
Under the FDI Act, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations,
or has violated any applicable law, regulation, rule, order or
condition imposed by the FDIC or the OTS. The management of the Bank
does not know of any practice, condition or violation that might lead
to termination of its deposit insurance.
THRIFT RECHARTERING LEGISLATION. Various proposals to eliminate the
-------------------------------
Federal thrift charter, create a uniform financial institutions charter
and abolish the OTS have been introduced in Congress. The bills would
require Federal savings institutions to convert to a national bank or
some type of state charter by a specified date under some bills, or
they would automatically become national banks. Under some proposals,
converted Federal thrifts would generally be required to conform their
activities to those permitted for the charter selected and divestiture
of nonconforming assets would be required over a two year period,
subject to two possible one year extensions. State chartered thrifts
would become subject to the same Federal regulation as applies to state
commercial banks. A more recent bill passed by the House Banking
Committee would allow savings institutions to continue to exercise
activities being conducted when they convert to a bank regardless of
whether a national bank could engage in the activity. Holding companies
for savings institutions would become subject to the same regulation as
holding companies that control commercial banks, with a limited
grandfather provision for savings and loan holding company activities.
The Bank is unable to predict whether such legislation would be enacted
or the extent to which the legislation would restrict or disrupt its
operations.
33
LOANS TO ONE BORROWER. Under the HOLA, savings institutions are
---------------------
generally subject to the national bank limits on loans to one borrower.
The Bank is generally not permitted, with certain exceptions, to make
new loans to a single or related group of borrowers in excess of 15% of
the Bank's unimpaired capital and unimpaired surplus, plus up to an
additional 10% for loans fully secured by readily marketable
collateral. Real estate is not included in the definition of "readily
marketable collateral." At September 30, 1997, the maximum amount which
Home Federal could loan to one borrower (and related entities) under
the limit was approximately $27.6 million. At September 30, 1997, the
Bank's largest aggregate amount of loans to one borrower was $16.9
million.
QUALIFIED THRIFT LENDER TEST. All savings institutions, including the
----------------------------
Bank, are required to meet a QTL test to avoid extensive restrictions
on their operations under the HOLA, as amended. Under the QTL test, a
savings institution is required to maintain at least 65% of its
"portfolio assets" (total assets less (i) specified liquid assets up to
20% of total assets, (ii) specified intangibles, including goodwill,
and (iii) the value of property used to conduct business) in certain
"qualified thrift investments" (primarily residential mortgages and
related investments, including certain mortgage-backed and
mortgage-related securities) on a monthly basis in at least 9 out of
every 12 months. A savings institution that fails the QTL test must
either convert to a bank charter or operate under certain restrictions.
At September 30, 1997, the Bank met the test with qualified thrift
investments equal to approximately 83.6% of its portfolio assets, and
has always met the test since its effectiveness.
LIMITATION ON CAPITAL DISTRIBUTIONS. The OTS regulations impose
-----------------------------------
limitations upon all capital distributions by savings institutions,
such as dividends, payments to repurchase or otherwise acquire their
shares, payments to shareholders of another institution in a cash-out
merger and other distributions charged against capital. The rule
establishes three tiers of institutions, based primarily on an
institution's capital level. An institution that exceeds all capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of
more than normal supervision, could, after prior notice, to the OTS,
make capital distributions during a calendar year equal to the greater
of: (i) 100% of its net income to date during the calendar year plus
the amount that would reduce by one-half its "surplus capital ratio"
(the excess capital over its capital requirements) at the beginning of
the calendar year, or (ii) 75% of its net income for the previous four
quarters. Any additional capital distributions would require prior
regulatory approval.
The Bank is a Tier 1 institution. In the event the Bank's capital fell
below its requirement or the OTS notified it that it was in need of
more than normal supervision, the Bank's ability to make capital
distributions could be restricted. In addition, the OTS may prohibit a
proposed capital distribution by any institution, which would otherwise
be permitted by the regulation, if the OTS determines that such
distribution would constitute an unsafe or unsound practice.
Furthermore, federal law prohibits the Bank from making any capital
distribution if, after the distribution, the Bank would have: (i) a
total risk-based capital ratio of less than 8.0%, (ii) a Tier 1
risk-based capital ratio of less than 4.0%, or (iii) a leverage capital
ratio of less than 4.0% (3.0% in the event the Bank was assigned a 1
MACRO rating, the highest examination rating of the OTS for rating
institutions).
34
LIQUIDITY. The Bank is required, for each calendar month, to maintain
---------
an average daily balance of liquid assets (as defined in the
regulations) equal to a monthly average of not less than a specified
percentage of its net withdrawable deposit accounts plus short-term
borrowings. This liquidity requirement may be changed from time to time
by the OTS to any amount within the range of 4% to 10%, depending upon
economic conditions and the deposit flows of member savings
institutions, and at September 30, 1997 was 5%. OTS regulations also
require each member institution to maintain an average daily balance of
short-term liquid assets at a specified percentage (1% at September 30,
1997) of the total of its net withdrawable deposit accounts and
borrowings payable in one year or less during the preceding calendar
month. For the month of September 1996, the Bank was in compliance with
the OTS liquidity requirements, having an average daily liquidity ratio
and a short-term liquidity ratio of 5.2% and 2.2%, respectively.
Monetary penalties may be imposed for failure to meet liquidity
requirements. The Bank has never had monetary penalties imposed for
failure to meet its liquidity requirement. Effective November 1997, the
OTS lowered its liquidity requirement from 5% to 4% and eliminated the
1% short-term liquid asset requirement.
ASSESSMENTS. Savings institutions are required by OTS regulation to pay
-----------
assessments to the OTS to fund the operations of the OTS. The general
assessment, to be paid on a semi-annual basis, is computed upon the
savings institution's total assets, including consolidated
subsidiaries, as reported in the institution's latest quarterly thrift
financial report. The Bank's total assessment for the fiscal year 1997
was approximately $.5 million.
TRANSACTIONS WITH RELATED PARTIES. The Bank's authority to engage in
---------------------------------
transactions with related parties or "affiliates" (i.e., any company
that controls or is under common control with Home Federal, including
the Company and the Bank's subsidiaries), or to make loans to certain
insiders, is limited by Sections 23A and 23B of the Federal Reserve Act
("FRA"). Section 23A limits the aggregate amount of transactions with
any individual affiliate to 10% of the capital and surplus of the
savings institution and also limits the aggregate amount of
transactions with all affiliates to 20% of the savings institution's
capital and surplus. Loans and certain other extensions of credit are
required to be secured by collateral in an amount and of a type
described in Section 23A and the purchase of low quality assets from
affiliates, or the receipt of such assets as collateral, is generally
prohibited. Section 23B provides that certain transactions with
affiliates, including loans and asset purchases, must be on terms and
under circumstances, including credit standards, that are substantially
the same or at least as favorable to the institution as those
prevailing at the time for comparable transactions with nonaffiliated
individuals or entities. In the absence of comparable transactions,
such transactions may only occur under terms and circumstances,
including credit standards, that in good faith would be offered to or
would apply to nonaffiliated individuals or entities. Notwithstanding
Sections 23A and 23B, savings institutions are prohibited from lending
to any affiliate that is engaged in activities that are not permissible
for bank holding companies under Section 4(c) of the Bank Holding
Company Act ("BHC Act"). Further, no savings institution may invest in
the securities of any affiliate other than a subsidiary.
35
The Bank's authority to extend credit to executive officers, directors
and 10% shareholders, as well as entities controlled by such persons,
are currently governed by Sections 22(g) and 22(h) of the FRA, and
Regulation O thereunder. Among other things, these regulations require
that such loans be made on terms substantially the same as to those
offered to unaffiliated individuals and involve no more than the normal
risk of collectibility, place limits on the amount of loans the Bank
may make to such persons based, in part, on the Bank's capital
position, and require certain approval procedures to be followed. The
Bank is currently in compliance with such regulations. The OTS
regulations, with minor variances, apply Regulation O to savings
institutions.
ENFORCEMENT. Under the FDI Act, the OTS has primary enforcement
-----------
responsibility over savings institutions and has the authority to bring
enforcement action against any savings institution and all
"institution-related parties," including shareholders, and any
attorneys, appraisers and accountants who knowingly or recklessly
participate in wrongful action likely to have an adverse effect on an
insured institution. Civil penalties cover a wide range of violations
and actions and can amount to $5,000 per day, or even up to $1.0
million per day for a finding of knowing or reckless disregard causing
substantial loss to the savings institution. Criminal penalties for
most financial institution crimes include fines of up to $1.0 million
and imprisonment for up to 30 years. In addition, regulators have
substantial discretion to impose enforcement action on an institution
that fails to comply with its regulatory requirements. Possible
enforcement action ranges from the requirement for an approved capital
plan and the imposition of a directive, to receivership,
conservatorship or the termination of deposit insurance. Under the FDI
Act, the FDIC has the authority to recommend to the Director of OTS
that enforcement action be taken with respect to a particular savings
institution. If action is not taken by the Director, the FDIC has
authority to take such action under certain circumstances. Management
is not aware of any material violations that would trigger any
enforcement action or civil penalties.
STANDARDS FOR SAFETY AND SOUNDNESS. The federal banking agencies have
----------------------------------
adopted Interagency Guidelines Prescribing Standards for Safety and
Soundness ("Guidelines") and a final rule to implement safety and
soundness standards required under the FDI Act. The Guidelines set
forth the safety and soundness standards that the federal banking
agencies use to identify and address problems at insured depository
institutions before capital becomes impaired. The standards set forth
in the guidelines address internal controls and information systems;
internal audit systems; credit underwriting; loan documentation;
interest rate risk exposure; asset growth; asset quality; earnings
standards; and compensation, fees and benefits. If the appropriate
federal banking agency determines that an institution fails to meet any
standard prescribed by the Guidelines, the agency may require the
institution to submit to the agency an acceptable plan to achieve
compliance with the standard, as required by the FDI Act. The final
rule establishes deadlines for the submission and review of such safety
and soundness compliance plans when such plans are required. Management
believes that the Bank is in material compliance with the Guidelines.
36
FEDERAL HOME LOAN BANK SYSTEM
- -----------------------------
The Bank is a member of the FHLB System which consists of 12 regional FHLB
Banks. The FHLB provides a central credit facility primarily for member
institutions. The Bank, as a member of the FHLB-NY, is required to acquire and
hold shares of capital stock of the FHLB-NY in an amount at least equal to 1% of
the aggregate principal amount of its unpaid residential mortgage loans, and
similar obligations at the beginning of each year, or 5% of its advances
(borrowings) from the FHLB-NY, whichever is greater. The Bank is in compliance
with this requirement, with an investment in FHLB-NY stock of $54.1 million at
September 30, 1997. FHLB advances are required to be secured by specific types
of collateral and long-term advances may be obtained primarily for the purpose
of providing funds for residential housing finance.
The FHLBs are required to provide funds out of their earnings for the resolution
of insolvent thrifts and to allocate funds for affordable housing programs. The
requirements could reduce the amount of dividends that the FHLBs pay to their
members and could also result in the FHLBs imposing a higher rate of interest on
advances to members. For the year ended September 30, 1997 dividends from the
FHLB-NY to the Bank amounted to $2.6 million, or 3.2%, of the Bank's pre-tax
income. If dividends were reduced, or interest on FHLB advances increased, the
Bank's net interest income would likely also be reduced. Further, there can be
no assurance that future legislation involving the FHLB's will not also cause a
decrease in the amount of dividends or in the value of the FHLB-NY stock held by
the Bank.
FEDERAL RESERVE SYSTEM
- ----------------------
Although the Bank is not a member of the Federal Reserve System, it is subject
to FRB regulations which require it to maintain non-interest earning reserves
against certain of its transaction accounts (primarily NOW and regular checking
accounts). Because reserves must generally be maintained in cash or in
non-interest bearing accounts, the effect of the reserve requirements is to
increase the Bank's cost of funds. FHLB System members are also authorized to
borrow from the Federal Reserve "discount window," but Federal Reserve Board
regulations require institutions to exhaust all FHLB sources before borrowing
from a Federal Reserve Bank. The FRB regulations generally require the
maintenance of reserves of 3% against net transaction accounts of $49.3 million
or less (subject to annual adjustment by the FRB) and reserves of $1.5 million
plus 10% (subject to adjustment by the FRB between 8% and 14%) against that
portion of net transaction accounts in excess of $49.3 million. The first $4.4
million of otherwise reservable balances (subject to adjustment by the FRB) are
exempt from the reserve requirements. The balances maintained to meet the
reserve requirements imposed by the FRB may be used to satisfy liquidity
requirements imposed by the OTS. The Bank is in compliance with the foregoing
requirements.
37
TAXATION
- --------
FEDERAL. New York Bancorp files a calendar year consolidated Federal
-------
income tax return with Home Federal and its subsidiaries, and reports
its income and expenses using the accrual method of accounting.
Savings institutions are generally taxed in the same manner as other
corporations. However, unlike other corporations, qualifying savings
institutions such as Home Federal, for tax years beginning prior to
January 1, 1996, were allowed to establish a reserve for bad debts and
were permitted to deduct additions to that reserve for each tax year.
For purposes of computing the deductible addition to the Bank's bad
debt reserve, the loans were separated into "qualifying real property
loans" (in general, loans secured by interests in improved real
property) and all other loans ("non-qualifying loans"). The deduction
with respect to qualifying real property loans was allowed using the
most favorable of the following two methods: (i) a method based on the
institution's actual loss experience (the "experience method"), or (ii)
a method based on a specified percentage of the institution's taxable
income (the "percentage of taxable income method"). The addition to the
reserve for non-qualifying loans was computed under the experience
method. The percentage of taxable income method was allowed only if the
Bank maintained at least 60% of its total assets in qualifying assets,
as defined. If qualifying assets fell below 60%, the Bank would be
required to recapture essentially all of its bad debt reserve for
Federal income tax purposes. The Bank's qualifying assets exceeded 60%
for the past five fiscal years. The net effect of this special bad debt
deduction was that the maximum effective Federal income tax rate on
income, computed without regard to actual bad debts and certain other
factors, for qualifying institutions using the percentage of taxable
income method was 32.2%, exclusive of any minimum or environmental tax,
as compared to the generally applicable maximum corporate Federal
income tax rate of 35.0%. The Bank used the experience method for 1995
and 1993 and percentage of taxable income method in calendar year 1994.
Hamilton used the percentage of taxable income method for 1993 and
1994. Each tax year, the Bank selected the most favorable method to
calculate the maximum deduction available with respect to an addition
to the tax bad debt reserve.
Under legislation enacted in August 1996, the Bank is no longer
permitted to use the percentage of taxable income method for Federal
tax purposes, but will be permitted to deduct bad debts only as they
are incurred. The legislation also requires the recapture of the excess
of tax bad debt reserves at December 31, 1995 over those established as
of December 31, 1987 (the "base year"). The Bank's tax bad debt
reserves of $27.9 million as of December 31, 1995 do not exceed those
of the base year. Therefore, the Bank will not be required to recapture
any such excess bad debt reserves. Such reserve reflects the cumulative
Federal income tax bad debt deductions to that date. The base year
reserves will continue to be subject to recapture, and the Bank could
be required to recognize a tax liability, under certain circumstances,
including (1) the Bank fails to qualify as a "bank" for Federal income
tax purposes; (2) certain distributions are made with respect to the
stock of the Bank; (3) the bad debt reserves are used for any purpose
other than to absorb bad debt losses; and (4) there is a change in
Federal tax law. However, management is currently not aware of the
occurrence of any such circumstances.
38
STATE AND LOCAL. The Bank files combined New York State franchise and
---------------
New York City financial corporation tax returns with its subsidiaries
and New York Bancorp on a calendar year basis.
The New York State and City taxes on banking corporations are each
imposed in an annual amount equal to the greater of (i) 9% of the
Bank's "Entire Net Income" allocable to New York State (and to New York
City for purposes of the City tax) during the taxable year; or (ii) the
applicable alternative minimum tax. The applicable alternative minimum
tax is generally the greater of (i) a percentage (.01%, .004%, or
.002%, for the New York State tax, depending upon the nature and mix of
the Bank's assets and on the ratio of its net worth to the average
value of its assets, and .01% for the New York City tax) of the average
value of the Bank's assets allocable to New York State (and to New York
City for the City tax) with certain modifications; (ii) 3% of the
Bank's "Alternative Entire Net Income" allocable to New York State (and
to New York City for the City tax); or (iii) a minimum tax. In addition
to the foregoing, the New York State Tax Law also imposes a 17%
metropolitan surcharge on the portion of the New York State franchise
tax otherwise payable which is attributable to the Bank's activities in
New York City and in several other New York counties.
Further, beginning in calendar year 1990, New York State Tax Law also
imposes a temporary surcharge equal to 15% of that portion of the New
York State franchise tax otherwise payable. The surcharge rate is
reduced to 12 1/2% for tax years ending after June 30, 1994 and before
July 1, 1995, 7 1/2% for tax years ending after June 30, 1995 and
before July 1, 1996, and 2 1/2% for tax years ending after June 30,
1996 and before July 1, 1997 (no surcharge for tax years ending after
June 30, 1997).
For tax years beginning before January 1, 1996, New York State and New
York City also allowed a bad debt deduction for thrift institutions,
such as the Bank, provided the same method was used for the thrift's
Federal tax return. However, for the most recent calendar year 1996,
the effective allowable percentage used in computing the bad debt
deduction under the percentage of taxable income method was 32%, rather
than the 8% amount for Federal purposes.
In response to the aforementioned Federal legislation enacted in August
1996, the New York State and New York City tax laws have been amended
to generally prevent a recapture of existing tax bad debt reserves and
to allow for the continued use of the percentage of taxable income
method to determine the bad debt deduction in computing New York State
and New York City tax liability. The percentage of the taxable income
method is allowed if the Bank maintains at least 60% of its total
assets in qualifying assets, as defined. If the Bank fails to meet the
qualifying assets test, it would be required to recapture the reserves
established after December 31, 1995, the base year, which amounted to
approximately $16 million as of December 31, 1996. The Bank has not
provided any deferred taxes for these tax bad debt reserves as the Bank
has met, and continues to meet, the qualifying asset requirement.
Additionally, all existing tax bad debt reserves for New York State and
New York City, amounting to approximately $85 million as of December
31, 1996, would be subject to recapture under certain conditions,
including the merger of the Bank into a commercial bank, such as North
Fork.
39
As a Delaware business corporation, New York Bancorp is required to
file annual returns with and pay annual fees to the Secretary of the
State of Delaware. The Company is also subject to a minimal annual
Delaware franchise tax.
SUPPLEMENTAL ITEM
- -----------------
The following table sets forth certain information regarding executive officers
of the Company, who are not also directors.
Name Age Position Held
---- --- -------------
George J. Amentas 49 First Vice President, Treasurer
Robert J. Anrig 49 First Vice President, Commercial Lending
Carmine Bracco 59 First Vice President, EDP and Operations
Joseph P. Bryant 50 First Vice President, Residential Lending
Dennis Hodne 51 First Vice President, Retail Banking
Richard F. Rothschild 50 First Vice President, Marketing
Edward J. Steube 53 First Vice President, Business Development
Terrence S. Walsh 50 First Vice President, Multifamily Lending
George J. Amentas has been First Vice President, Treasurer of the Company and
the Bank since November 1996. From 1993 through 1996, Mr. Amentas was Senior
Vice President and Treasurer of Centerbank. Prior to 1993 Mr. Amentas served as
Senior Vice President, Chief Investment Officer and Treasurer for Village Bank.
Robert J. Anrig has been First Vice President, Commercial Lending of the Company
and the Bank since May 1992. Prior to May 1992 Mr. Anrig served as a business
and real estate consultant in Long Island, New York.
Carmine Bracco has been First Vice President, EDP and Operations of the Company
and the Bank since October 1995. From December 1993 to October 1995, Mr. Bracco
served as Vice President, Internal Audit of the Bank. Prior to December 1993,
Mr. Bracco served at National Westminster Bank as Senior Vice President,
Financial Services.
Joseph P. Bryant has been First Vice President, Residential Lending of the
Company and the Bank since August 1997. From November 1993 to August 1997, Mr.
Bryant served as Executive Vice President-Chief Mortgage Officer at The Long
Island Savings Bank. Prior to this, Mr. Bryant served as Senior Vice President
at Prudential Residential Services Co.
Dennis Hodne has been First Vice President, Retail Banking of the Company and
the Bank since October 1995. Previously, from January 1995 through September
1995 he was First Vice President, Strategic Planning for the Company and the
Bank. Prior to January 1995, Mr. Hodne served as Senior Vice President, Retail
Banking for Hamilton Federal Savings, F.A.
Richard F. Rothschild has been First Vice President, Marketing of the Company
and the Bank since October 1995. Previously, he served as First Vice President,
Banking Services of the Company and the Bank.
40
Edward J. Steube has been First Vice President, Business Development of the
Company and the Bank since September 1992.
Terrence S. Walsh became First Vice President, Multifamily Lending of the
Company and the Bank in October 1996. From January 1996 through September 1996
Mr. Walsh served as Vice President, Multifamily Lending. Previously, in 1995 Mr.
Walsh was involved in private consulting. Prior to 1995 Mr. Walsh served as
Senior Vice President, Mortgage Lending for Metro Bancshares Inc.
41
ITEM 2 - PROPERTIES
The Bank conducts its business through thirty-one full-service branch offices,
seven loan production offices, an operations center and one executive office
located in Kings, Queens, Nassau, Westchester, Richmond, and Suffolk Counties.
The following table sets forth information relating to each of the Bank's
offices at September 30, 1997. The total net book value of the Bank's premises
and equipment at September 30, 1997 was $12.7 million.
Date Lease Net
Owned Leased Expiration Book Value
or or Including at
Location Leased Acquired Options Sept. 30, 1997
- -------- ------ -------- --------- --------------
(In Thousands)
Branch Offices:
70-01 Forest Avenue, Ridgewood, NY (1)........... Owned 1949 -- $ 1,111
70-24 Myrtle Avenue, Glendale, NY................ Owned 1976 -- 457
83-24 Woodhaven Blvd., Glendale, NY.............. Leased 1991 2011 690
155-14 Cross Bay Blvd., Howard Beach, NY......... Leased 1974 1999 184
248-40 Northern Blvd., Little Neck, NY........... Owned 1963 -- 303
145-15 243rd Street, Rosedale, NY................ Owned 1961 -- 263
7401 13th Avenue, Brooklyn, NY................... Owned 1979 -- 921
413 86th Street., Brooklyn, NY (1)............... Owned 1948 -- 563
9502 3rd Avenue, Brooklyn, NY.................... Leased 1991 2000 71
420 Court Street, Brooklyn, NY................... Owned 1930 -- 609
2123 Avenue U, Brooklyn, NY...................... Leased 1990 1998 60
179 Avenue U, Brooklyn, NY....................... Owned 1973 -- 216
6501 11th Avenue, Brooklyn, NY................... Owned 1976 -- 798
1710 Avenue Y, Brooklyn, NY...................... Leased 1996 2016 230
195 Rockaway Avenue, Valley Stream, NY........... Leased 1974 1999 68
210 Mineola Blvd., Mineola, NY (1)............... Leased 1992 2007 277
41 Forest Avenue, Glen Cove, NY.................. Leased 1992 2007 443
35 Merrick Avenue, Merrick, NY................... Owned 1978 -- 523
77 Lincoln Avenue, Rockville Centre, NY.......... Leased 1992 2007 191
155 East Main Street, Huntington, NY............. Owned 1992 -- 483
143 Alexander Avenue, Lake Grove, NY............. Leased 1992 2015 105
46 E. Hoffman Avenue, Lindenhurst, NY............ Leased 1994 2009 94
800 Montauk Highway, Shirley, NY................. Leased 1992 2000 137
356 Middle Country Road, Coram, NY............... Leased 1992 2003 99
62 South Ocean Avenue, Patchogue, NY (1)......... Owned 1992 -- 994
366 Route 25A, Rocky Point, NY................... Leased 1992 2003 37
43 Main Street, Westhampton Beach, NY............ Owned 1992 -- 389
1730 Veterans Memorial Highway, Islandia, NY..... Leased 1995 2000 198
985 Richmond Avenue, Staten Island, NY........... Leased 1995 2000 153
Nichols Road, Stony Brook, NY.................... Leased 1997 2002 194
158 Route 25A, Setauket, NY...................... Leased 1997 2002 285
Loan Production Offices:
241-02 Northern Blvd., Douglaston, NY............ Leased 1989 1999 168
One Depot Plaza, Mamaroneck, NY.................. Leased 1986 1997 15
100 Jericho Quadrangle, Jericho, NY.............. Leased 1996 2002 252
Executive Office:
241-02 Northern Blvd., Douglaston, NY............ Leased 1989 1999 659
Operations Center:
100 Jericho Quadrangle, Jericho, NY (1).......... Leased 1993 2002 471
---------
$ 12,711
=========
(1) Loan Centers are also located at these locations.
42
ITEM 3 - LEGAL PROCEEDINGS
In the normal course of its business, the Company is a defendant in certain
claims and legal actions arising in the ordinary course of business. In the
opinion of management, after consultation with legal counsel, the ultimate
disposition of these matters will not have a material adverse effect on the
consolidated financial condition of the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The information contained on page 50 of the 1997 Annual Report to Shareholders
is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information contained on page 9 of the 1997 Annual Report to Shareholders
under the caption "Selected Consolidated Financial & Other Data" is incorporated
herein by reference and is contained herein as Exhibit 13.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The information contained on pages 10 through 20 of the 1997 Annual Report to
Shareholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations" is incorporated herein by
reference and is contained herein as Exhibit 13.
43
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements and the Independent Auditors' Report appearing on pages
21 through 48 of the 1997 Annual Report to Shareholders are incorporated herein
by reference and is contained herein as Exhibit 13.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth, as of December 1, 1997, the names of and certain
other information concerning the directors and certain executive officers,
including the amount and percent of Common Stock beneficially owned by each
individual and all directors and executive officers as a group. Ownership
information is based upon information furnished by the individuals listed in the
table.
Ownership
Expiration Amount and Nature as a
of Term of Beneficial Percent
Name, Age and Business Experience Director as Ownership of of
For Past Five Years Since Director Common Stock (1) Class
- --------------------------------- -------- ---------- ----------------- ----------
Josiah T. Austin; Age 50 1996 1999 2,530,733 (2) (3) 11.83%
Director of the Bank since 1995.
Rancher and Investor. Owner and operator of
the El Coronado Ranch and Cattle Co.
Stan I. Cohen; Age 42 1995 1998 257,810 (4) 1.20%
Director of the Bank since 1995. Senior Vice
President, Controller and Secretary of the
Company and Bank since 1991 and Senior Vice
President, Chief Financial Officer and Secretary
of the Bank since 1993. Mr. Cohen is a
certified public accountant.
Geraldine A. Ferraro; Age 62 1993 2000 49,500 (5) .23%
Director of the Bank since 1993. TV Co-Host
"Crossfire" for CNN. Partner in the
CEO Perspective Group, a
consulting firm, since August 1996. Attorney,
author and lecturer. Candidate for U. S.
Senate in 1992 and U. S. Vice Presidential
Candidate in 1984.
44
Ownership
Expiration Amount and Nature as a
of Term of Beneficial Percent
Name, Age and Business Experience Director as Ownership of of
For Past Five Years Since Director Common Stock (1) Class
- --------------------------------- -------- ---------- ----------------- ----------
Peter D. Goodson; Age 55 1991 2000 -- --
Director of the Bank since 1991. President
of the Goodson Family Foundation,
serving youth at risk, since July 1992.
Formerly, a Principal of Clayton,
Dubilier & Rice, Inc., an industrial
investment firm engaged in purchasing and
managing businesses. Prior thereto, Mr.
Goodson was a member of the Management
Committee and a Managing Director of Kidder,
Peabody & Co., Incorporated.
John E. D. Grunow, Jr.; Age 51 1992 1998 109,500 (6) .51%
Director of the Bank since 1992. President and
Chairman of the Board of The Grunow Group
Capital Management, Inc., a firm providing
investment banking services. Previously, Mr.
Grunow was Chief Executive Officer and
Chairman of the Board of International Marine
Holdings, Inc., a marine equipment and
accessories firm. Mr. Grunow is a certified
public accountant.
Patrick E. Malloy, III; Age 55 1990 1999 2,803,664 (2) (7) 12.90%
Chairman of the Board of the Company since
October 1991. Director of the Bank since 1991.
Chairman of the Bank since
January 1992. President of Malloy Enterprises,
Inc., a real estate and
investment firm.
Michael A. McManus, Jr.; Age 54 1990 1999 586,107 (2) (8) 2.70%
Director of the Bank since 1991 and Vice
Chairman of the Bank since October 1991.
President and Chief Executive Officer
of the Company since October 1991 and
President and Chief Executive Officer of
the Bank since March 1995. Director of
Arrhythmia Research & Technology Inc.,
Document Imaging Systems Corp., National
Wireless Holdings, Inc., and the United
States Olympic Committee.
Walter R. Ruddy; Age 74 1987 1999 47,374 (9) .22%
Director of the Bank since 1967 and Vice
Chairman of the Bank since October 1991.
Retired former Administrative Engineering
Manager of Facilities at the Swiss Bank Corp.,
New York Branch.
Gene A. Washington; Age 50 1996 1998 49,500 (6) .23%
Director of the Bank since 1996. Director of
Football Development for the National Football
League since 1993. Prior to joining the National
Football League was Assistant Athletic Director
at Stanford University.
45
Ownership
Expiration Amount and Nature as a
of Term of Beneficial Percent
Name, Age and Business Experience Director as Ownership of of
For Past Five Years Since Director Common Stock (1) Class
- --------------------------------- -------- ---------- ----------------- ----------
NAMED EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Robert J. Anrig; Age 49 -- -- 13,491 (10) .06%
First Vice President, Commercial Lending of the
Company and the Bank.
Edward Steube; Age 53 -- -- 33,115 (11) .16%
First Vice President, Business Development of
the Company and the Bank.
All nominees, directors and executive officers as -- -- 6,600,386 (12) 29.39%
a group (seventeen persons)
(1) Unless otherwise indicated, each person effectively exercises sole (or
shares with spouse) voting and dispositive power as to shares reported.
(2) See Item 12 Security Ownership of Certain Beneficial Owners.
(3) Includes 49,500 shares which may be acquired pursuant to presently
exercisable stock options under the Company's stock option plans for
Outside Directors. Does not include 27,949 shares of Common Stock that are
beneficially owned by the Clark Family Foundation, Inc. and 7,800 shares of
Common Stock that are beneficially owned by three separate trusts for which
Valer and Josiah T. Austin each serves as a trustee and for which they
disclaim beneficial ownership.
(4) Includes 138,858 shares which may be acquired pursuant to presently
exercisable stock options under the Company's stock option plans.
(5) Includes 36,167 shares which may be acquired pursuant to presently
exercisable stock options under the Company's stock option plans for
Outside Directors .
(6) Includes 49,500 shares which may be acquired pursuant to presently
exercisable stock options under the Company's stock option plans for
Outside Directors.
(7) Does not include 117,442 shares held by two separate trusts established for
the benefit of Mr. Malloy's children, as to which Mr. Malloy disclaims
beneficial ownership. Includes 389,866 shares which may be acquired
pursuant to presently exercisable stock options under the Company's stock
option plans.
(8) Includes 164 shares held in his name as custodian for his son. Includes
340,326 shares which may be acquired pursuant to presently exercisable
stock options under the Company's stock option plans.
(9) Does not include 18,546 shares owned by Mr. Ruddy's wife and 7,380 shares
owned by Mr. Ruddy's children and grandchildren, as to all of which Mr.
Ruddy disclaims beneficial ownership.
(10) Includes 7,333 shares which may be acquired pursuant to presently
exercisable stock options under the Company's stock option plans.
(11) Includes 8,667 shares which may be acquired pursuant to presently
exercisable stock options under the Company's stock option plans.
(12) Includes 5,490,320 shares owned by the directors and executive officers and
1,130,066 shares which may be acquired by the directors and executive
officers pursuant to presently exercisable stock options under the
Company's stock option plans.
46
ITEM 11 - EXECUTIVE COMPENSATION
DIRECTORS' COMPENSATION
- -----------------------
Directors' Fees
- ---------------
Directors who are officers of the Company or the Bank are not paid an additional
fee for their services as directors or attendance at meetings of the Board of
the Company or the Bank or committees thereof. During the fiscal year ended
September 30, 1997, Directors of the Company and Bank received an annual fee of
$18,000 and $500 for each Board and Committee meeting attended.
Directors' Stock Option Plans
- -----------------------------
The Board of Directors of the Company has adopted the New York Bancorp Inc. 1993
Stock Option Plan for Outside Directors (the "Directors' Option Plan"), which
provides for the automatic one-time grant of non-statutory stock options to
purchase 49,500 shares of Common Stock at the fair market value on the date of
grant to each outside director who did not serve as a member of the Board prior
to December 31, 1992. The exercise price per share of each option is the fair
market value of the shares of Common Stock on the date the option is granted
(which is the date an eligible director is first elected to the Board). Options
become exercisable one year from the date of grant and expire upon the earlier
of five years following the date of grant or one month following the date the
optionee ceases to serve as a director for any reason other than removal for
cause.
47
Executive Compensation
- ----------------------
Summary Compensation Table
The following table sets forth the compensation paid by the Company and
its wholly-owned subsidiary for services rendered during the fiscal years ended
September 30, 1997,1996, and 1995, to the Chief Executive Officer and the four
highest paid executive officers who received salary and bonus in excess of
$100,000 in fiscal year 1997 (the "Named Executive Officers").
Long- Term
Annual Compensation Compensation
----------------------------------------- ----------------------------------------
Other Securities
Annual Restricted Underlying All Other
Name and Salary Bonus Compen- Stock Options/ Compen-
Principal Position Year $(1) $(2) sation $(3) Awards ($) SARs#(4) sation $(5)
- ----------------------- ----- ---------------- ----------- ---------- ----------- ------------ -----------
Michael A. McManus, Jr. 1997 $ 320,650 $ 515,000 -- -- --- $ 36,161
President, Chief 1996 291,500 425,000 -- -- 68,000 35,825
Executive 1995 265,000 369,000 -- -- 112,000 31,722
Officer
Patrick E. Malloy, III 1997 225,000 515,000 -- -- -- 29,615
Chairman of the Board 1996 150,000 425,000 -- -- 68,000 28,749
1995 125,000 369,000 -- -- 112,000 24,719
Stan I. Cohen 1997 199,650 355,000 -- -- -- 24,284
Senior Vice President, 1996 181,500 300,000 -- -- 40,000 24,075
Controller, Secretary 1995 165,000 213,000 -- -- 70,000 18,916
Edward J. Steube 1997 139,926 110,000 -- -- 9,333 12,840
First Vice President 1996 135,850 120,000 -- -- 10,000 12,792
Business Development 1995 130,000 95,000 -- -- 16,000 11,260
Robert J. Anrig 1997 146,687 35,000 -- -- 8,667 5,216
First Vice President, 1996 142,415 25,000 -- -- 10,000 3,687
Commercial Lending 1995 136,282 25,000 -- -- 12,000 3,879
(1) Includes amounts deferred by the individual pursuant to the Bank's 401(k)
Plan and Deferred Compensation Plan.
(2) Includes bonuses awarded pursuant to the Bank's incentive bonus plan.
(3) For fiscal year 1997, there were no (a) perquisites amounting to the lesser
of $50,000 or 10% of the individual's total salary and bonus for the year;
(b) payments of above market or preferential earning on deferred
compensation; (c) payments of earnings with respect to long term incentive
plans prior to settlement or maturity; (d) tax payment reimbursements; or
(e) preferential discounts on stock.
(4) The Company maintains various stock option and long-term incentive plans
which provide for the award of stock options and stock appreciation rights.
See "Stock Option Plans."
(5) Includes amounts contributed by the Bank on behalf of the named individuals
pursuant to the Bank's 401(k) Plan and Executives Supplemental Benefits
Plan. Such amounts were $4,750 and $31,411 for Mr. McManus; $4,750 and
$24,865 for Mr. Malloy; $4,750 and $19,534 for Mr. Cohen; $4,750 and $8,090
for Mr. Steube; and $4,750 and $466 for Mr. Anrig.
48
Stock Option Plans
The Company maintains several stock option plans which provide for
discretionary option awards to officers and key employees of the Company and
Bank as determined by the Compensation Committee. The following table lists all
grants of options under such plans to the Named Executive Officers for fiscal
year 1997 and contains certain information regarding potential value of those
options based upon certain assumptions as to the appreciation of the Company's
stock over the term of the option.
Option Grants in Last Fiscal Year
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term (3)
- ----------------------------------------------------------------------------------------- ----------------------------
Percentage of
Number of Total
Securities Options
Underlying Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted #(1) Fiscal Year $/share (2) Date 5%$ 10%$
- ----------------- ------------------- --------------- --------------- ------------ ------------- -----------
Michael A. McManus, Jr. -- -- -- -- -- --
Patrick E. Malloy, III -- -- -- -- -- --
Stan I. Cohen -- -- -- -- -- --
Edward J. Steube 9,333 7.91% $23.44 02/27/07 $137,566 $348,619
Robert J. Anrig 8,667 7.34 23.44 02/27/07 127,749 323,741
(1) Options granted to Named Executive Officers vest 33 1/3 per cent per annum
commencing February 27, 1998, and are for a term of ten years. All options
become 100% exercisable upon death, disability, retirement or a change in
control of the Company or Bank, as defined under the plans. In addition, the
vesting of non-statutory stock options may be accelerated by the
Compensation Committee.
(2) The purchase price may be made in whole or in part through the
surrender of previously held shares of Common Stock.
(3) The amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock and overall market
conditions. There can be no assurance that the amounts reflected in this
table will be realized.
49
The following table shows options and SARs exercised by the Named Executive
Officers during fiscal year 1997, including the aggregate value of gains
realized on the date of exercise. Also reported are the number of shares of
Common Stock represented by outstanding stock options held by the Named
Executive Officers as of September 30, 1997, and values for "in-the-money"
options and SARs, which represent the positive spread between the year-end
market value of the Common Stock and the exercise price of any existing stock
options.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End Option/
SAR Values:
Number of Securities
Underlying Value of Unexercised
Unexercised in-the-Money
Options/SARs Options/SARs
at Fiscal Year-End # at Fiscal Year End $ (2)
-------------------- ------------------------
Number
of Shares/SARs
Acquired
on Value Exercisable/ Exercisable/
Name Exercise Realized $(1) Unexercisable Unexercisable
---- ------------------ ------------- --------------------- -------------------
Michael A. McManus, Jr. 11,137 / $ 109,886 / 302,328 / 82,669 $ 6,554,346 / 1,604,462
98,800 1,926,278 20,000 / -- 465,410 / --
Patrick E. Malloy, III 22,667 / 296,088 / 351,866 / 82,667 7,887,059 / 1,604,424
118,800 2,192,810
Stan I. Cohen 11,140 / 110,960 / 114,853 / 50,005 2,341,418 / 972,183
39,600 719,799
Edward J. Steube 8,250 / 87,825 / 16,199 / 21,334 327,468 / 295,434
-- --
Robert J. Anrig 14,658 / 195,291 / -- / 19,334 -- / 263,758
-- --
(1) Represents the difference between the fair market value on the date of
exercise and the exercise price.
(2) Represents the difference between the market value of the underlying
Common Stock of $29.9375 per share at September 30, 1997 and a weighted
average exercise/base price of $8.26 per share for exercisable options,
$10.53 per share for unexercisable options, and $6.67 for SARs for Mr.
McManus; $7.52 per share for exercisable options, and $10.53 per share for
unexercisable options for Mr. Malloy; $9.55 per share for exercisable
options, and $10.50 per share for unexercisable options for Mr. Cohen; $0
per share for exercisable options and $16.30 per share for unexercisable
options for Mr. Anrig; and $9.72 per share for exercisable options and
$16.09 per share for unexercisable options for Mr. Steube.
50
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information, as of December 1, 1997, as
to those persons or groups who are beneficial owners of more than 5% of the
Company's Common Stock. The information below is based on the most recent filing
with the Securities and Exchange Commission (the "SEC") by such persons or
groups and upon information otherwise made known to the Company. Other than
those persons listed below, the Company is not aware of any person or group that
owns more than 5% of the Common Stock as of December 1, 1997.
Name and Address Amount and Percent
of Beneficial Owner Nature of Ownership (1) of Class
------------------- ----------------------- --------
Patrick E. Malloy, III 3,389,771 (2) (3) 15.35%
Michael A. McManus, Jr.
c/o Malloy Enterprises, Inc.
Bay Street at Waterfront
Sag Harbor, New York 11963
Valer and Josiah T. Austin 2,530,733 (4) 11.83%
El Coronado Ranch
Star Route Box 395
Pearce, Arizona 85625
(1) Unless otherwise indicated, each person effectively exercises sole voting
and dispositive power as to shares reported.
(2) Mr. Malloy beneficially owns and has sole power to vote and dispose of
2,803,664 shares. Does not include 117,442 shares held by two separate
trusts established for the benefit of Mr. Malloy's children, as to which
Mr. Malloy disclaims beneficial ownership. Mr. McManus beneficially owns
and has sole power to vote and dispose of 585,943 shares as well as 164
shares held in his name as custodian for his son. Messrs. Malloy and
McManus each disclaims beneficial ownership of the shares of Common Stock
beneficially owned by the other.
(3) Includes 389,866 shares which may be acquired by Mr. Malloy pursuant to the
Company's stock option plans. Also included are 340,326 shares which may be
acquired by Mr. McManus pursuant to the Company's stock option plans.
(4) Mr. And Mrs. Austin beneficially own and have shared power to vote and
dispose of 2,481,233 shares. Includes 49,500 shares which may be acquired
by Mr. Austin pursuant to the Company's stock option plans for Outside
Directors. Does not include 27,949 shares of Common Stock that are
beneficially owned by the Clark Family Foundation, Inc. and 7,800 shares of
Common Stock that are beneficially owned by three separate trusts for which
Valer and Josiah T. Austin each serves as a trustee and for which they
disclaim beneficial ownership.
51
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has made loans to its directors, officers and parties related to them.
All loans to directors and officers were made in the ordinary course of
business, were made on substantially the same terms, including interest rates
and collateral, as those prevailing at the time for comparable transactions with
other persons, and did not involve more than the normal risk of collectibility
or present other unfavorable features.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS
--------------------
The following financial statements are included in the Company's Annual Report
to Shareholders for the year ended September 30, 1997, portions of which are
attached as an exhibit to this report:
- Consolidated Statements of Financial Condition at September 30,
1997 and 1996
- Consolidated Statements of Income for each of the years in the
three-year period ended September 30, 1997
- Consolidated Statements of Changes in Shareholders' Equity for
each of the years in the three-year period ended September 30,
1997
- Consolidated Statements of Cash Flows for each of the years in
the three-year period ended September 30, 1997
- Notes to Consolidated Financial Statements
- Independent Auditors' Report
(2) FINANCIAL STATEMENT SCHEDULES
-----------------------------
Financial statement schedules are omitted because they are not required or
because the required information is set forth in the consolidated financial
statements or notes thereto.
52
(3) EXHIBITS
--------
The following exhibits are either filed as part of this report or are
incorporated herein by reference to documents previously filed by the Company
with the SEC.
Exhibit
Number Description
------ -----------
3.1 Certificate of Incorporation of New York Bancorp Inc., as amended(9)
3.2 Bylaws of New York Bancorp Inc., as amended(6)
10.2 New York Bancorp Inc. Incentive Stock Option Plan(1)
10.3 New York Bancorp Inc. Option Plan for Outside Directors(2)
10.8 Home Federal Savings Bank Employee Stock Purchase Plan(3)
10.9 New York Bancorp Inc. 1990 Incentive Stock Option Plan(4)
10.10 New York Bancorp Inc. 1990 Option Plan for Outside Directors(5)
10.13 Home Federal Savings Bank Supplemental Executives Benefit Plan, as amended(8)
10.14 Home Federal Savings Bank Deferred Compensation Plan, as amended(8)
10.17 New York Bancorp Inc. 1993 Long-Term Incentive Plan(6)
10.18 New York Bancorp Inc. 1993 Stock Option Plan for Outside Directors(7)
11 Statement re: computation of per share earnings
13 Portions of New York Bancorp Inc.'s Annual Report to Shareholders for the fiscal year
ended September 30, 1997 incorporated herein by reference
21 Subsidiaries of New York Bancorp Inc.
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
(1) Incorporated by reference to Exhibits filed with Registration Statement on
Form S-8, No. 33-23468
(2) Incorporated by reference to Exhibits filed with Registration Statement on
Form S-8, No. 33-23478
(3) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
1989 Form 10-K
(4) Incorporated by reference to Annex A of the Company's Proxy Statement
furnished to shareholders in connection with the Annual Meeting of
Shareholders held on January 23, 1991
(5) Incorporated by reference to Annex B of the Company's Proxy Statement
furnished to shareholders in connection with the Annual Meeting of
Shareholders held on January 23, 1991
(6) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
1992 Form 10-K
(7) Incorporated by reference to Exhibit A of the Company's Proxy
Statement furnished to shareholders in
connection with the Annual Meeting of Shareholders held on January 25, 1994
(8) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
1994 Annual Report on Form 10-K
(9) Incorporated be reference to Exhibits filed with New York Bancorp Inc.'s
1996 Form 10-K
(b) REPORTS ON FORM 8-K
-------------------
A Form 8-K was filed with the Securities and Exchange Commission on
October 15, 1997 concerning the Company entering into a definitive merger
agreement with North Fork whereby the Company will be merged with and into
North Fork. A copy of the merger agreement was included as Exhibit 2.1 to
the Form 8-K.
A Form 8-K was filed with the Securities and Exchange Commission on
October 29, 1997 concerning issuance of a press release announcing
earnings for the fourth quarter and year ended September 30, 1997. A copy
of the press release was included as Exhibit 99 to the Form 8-K.
53
SIGNATURES
Pursuant to the requirements of Section 13 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.
NEW YORK BANCORP INC.
By: /s/ Michael A. McManus, Jr.
----------------------
Michael A. McManus, Jr.
President and
Chief Executive Officer
Date: December 22, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below on December 22, 1997 by the following persons
on behalf of the Registrant and in the capacities indicated.
/s/ Patrick E. Malloy, III /s/ John E. D. Grunow, Jr.
------------------------------- ---------------------------
Patrick E. Malloy, III John E. D. Grunow, Jr.
Chairman of the Board Director
/s/ Josiah T. Austin /s/ Michael A. McManus, Jr.
------------------------------- ---------------------------
Josiah T. Austin Michael A. McManus, Jr.
Director Director, President
and Chief Executive Officer
/s/ Stan I. Cohen /s/ Walter R. Ruddy
-------------------------------- ---------------------------
Stan I. Cohen Walter R. Ruddy
Director, Senior Vice President, Director
Controller and Secretary
/s/ Geraldine A. Ferraro /s/ Gene A. Washington
-------------------------------- ---------------------------
Geraldine A. Ferraro Gene A. Washington
Director Director
/s/ Peter D. Goodson
--------------------------------
Peter D. Goodson
Director
54