FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: December 31, 1997
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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)
(718) 631-8100
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
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
Number of shares of common stock, par value $.01 per share,
outstanding as of February 2, 1998: 21,462,036
.
NEW YORK BANCORP INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
- ------------------------------- ----
Item 1. Financial Statements:
Independent Auditors' Review Report 3
Consolidated Statements of Financial Condition as
of December 31, 1997 and September 30, 1997 4
Consolidated Statements of Income for the Three
Months ended December 31, 1997 and 1996 5
Consolidated Statement of Changes in Shareholders'
Equity for the Three Months ended December 31, 1997 6
Consolidated Statements of Cash Flows for the
Three Months ended December 31, 1997 and 1996 7 - 8
Notes to Consolidated Financial Statements 9 - 10
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 20
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signature Page 23
2
KPMG Peat Marwick LLP
One Jericho Plaza Telephone 516 822 9100 Telefax 516 822 4575
Jericho, NY 11753
Independent Auditors' Review Report
-----------------------------------
To the Board of Directors of New York Bancorp Inc.:
We have reviewed the condensed consolidated financial statements of New York
Bancorp Inc. and Subsidiary as of December 31, 1997, and for the three month
periods ended December 31, 1997 and 1996 as listed in the accompanying index.
These condensed consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of personnel responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial condition of New York Bancorp
Inc. and Subsidiary as of September 30, 1997, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for the
year then ended (not presented herein); and in our report dated October 27,
1997, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
condensed consolidated statement of financial condition as of September 30,
1997, is fairly stated, in all material respects, in relation to the
consolidated statement of financial condition from which it has been derived.
KPMG Peat Marwick LLP
January 20, 1998
3
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION -----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
December 31, September 30,
1997 1997
------------ -------------
ASSETS
- ------
Cash and due from banks..................................................... $ 25,921 $ 26,305
Investment in debt and equity securities, net:
Held to maturity (estimated market value of
$580 and $609 at December 31,1997
and September 30, l997, respectively).................................. 567 593
Available for sale....................................................... 109,598 107,150
Mortgage-backed securities, net:
Held to maturity (estimated market value of
$615,767 and $636,142 at December 31, 1997
and September 30, 1997, respectively)................................... 619,078 644,247
Available for sale....................................................... 343,854 334,641
Federal Home Loan Bank stock................................................ 54,119 54,119
Loans receivable, net:
First mortgage loans..................................................... 1,808,080 1,788,031
Other loans.............................................................. 248,910 251,080
--------------- ---------------
2,056,990 2,039,111
Less allowance for possible loan losses.................................. (18,639) (18,695)
--------------- ---------------
Total loans receivable, net............................................ 2,038,351 2,020,416
Accrued interest receivable................................................. 22,603 21,590
Premises and equipment, net................................................. 12,837 12,711
Other assets................................................................ 37,821 22,428
--------------- ---------------
Total assets........................................................... $ 3,264,749 $ 3,244,200
=============== ===============
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
LIABILITIES:
Deposits................................................................. $ 1,682,592 $ 1,684,419
Borrowed funds........................................................... 1,310,537 1,253,931
Mortgagors' escrow payments.............................................. 10,604 17,247
Due to brokers........................................................... -- 60,765
Accrued expenses and other liabilities................................... 82,807 58,775
--------------- ---------------
Total liabilities...................................................... 3,086,540 3,075,137
--------------- ---------------
Commitments, contingencies, and contracts (note 4)
SHAREHOLDERS' EQUITY (NOTES 3 AND 5):
Preferred stock, $.01 par value,
2,000,000 shares authorized; none issued................................ -- --
Common stock, $.01 par value, 30,000,000 shares
authorized; 29,493,166 shares issued at
December 31, 1997 and September 30, 1997;
21,359,427 and 21,318,644 shares outstanding at
December 31, 1997 and September 30, 1997, respectively.................. 295 295
Additional paid-in capital............................................... 66,495 66,495
Retained earnings, substantially restricted.............................. 189,627 181,851
Treasury stock, at cost, 8,133,739 and 8,174,522 shares at
December 31, 1997 and September 30, 1997, respectively.................. (79,838) (81,092)
Unrealized appreciation on securities
available for sale, net of tax effect................................... 1,630 1,514
--------------- ---------------
Total shareholders' equity............................................. 178,209 169,063
--------------- ---------------
Total liabilities and shareholders' equity............................. $ 3,264,749 $ 3,244,200
=============== ===============
4
See accompanying notes to consolidated financial statements.
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF INCOME -----
(UNAUDITED)
Three Months Ended
December 31,
1997 1996
--------------------
---- ----
(In Thousands, except
per share amounts)
INTEREST INCOME:
Interest and fees on loans:
First mortgage loans......................................................... $ 37,501 $ 33,016
Other loans.................................................................. 5,403 5,745
---------- -----------
Total interest and fees on loans.......................................... 42,904 38,761
Mortgage-backed securities..................................................... 16,674 13,753
Debt and equity securities - taxable........................................... 2,738 2,893
Money market investments....................................................... 2 10
---------- -----------
Total interest income..................................................... 62,318 55,417
---------- -----------
INTEREST EXPENSE:
Deposits....................................................................... 13,795 14,094
Borrowed funds................................................................. 19,194 13,444
---------- -----------
Total interest expense.................................................... 32,989 27,538
---------- -----------
Net interest income....................................................... 29,329 27,879
Provision for possible loan losses................................................ (300) (300)
---------- -----------
Net interest income after provision
for possible loan losses................................................. 29,029 27,579
---------- -----------
NON-INTEREST INCOME:
Loan fees and service charges.................................................. 918 817
Banking service fees........................................................... 1,891 1,491
Fees from sale of investment products.......................................... 317 361
Net gain on the sale of mortgage
loans and securities available for sale...................................... 131 117
Other.......................................................................... 218 62
---------- -----------
Total non-interest income................................................. 3,475 2,848
---------- -----------
NON-INTEREST EXPENSE:
General and administrative:
Compensation and benefits.................................................... 6,757 6,525
Occupancy, net............................................................... 2,336 2,109
Advertising and promotion.................................................... 383 475
Federal deposit insurance premiums........................................... 486 759
Other........................................................................ 2,934 2,291
---------- -----------
Total general and administrative.......................................... 12,896 12,159
Real estate operations, net.................................................... 200 269
---------- -----------
Total non-interest expense................................................ 13,096 12,428
---------- -----------
Income before income tax expense.......................................... 19,408 17,999
---------- -----------
INCOME TAX EXPENSE:
Federal expense................................................................ 6,371 5,543
State and local expense........................................................ 1,045 2,192
---------- -----------
Total income tax expense.................................................. 7,416 7,735
---------- -----------
Net income................................................................ $ 11,992 $ 10,264
========== ===========
BASIC EARNINGS PER COMMON SHARE (NOTE 3).......................................... $ .56 $ .46 (1)
DILUTED EARNINGS PER COMMON SHARE (NOTE 3)........................................ $ .54 $ .45 (1)
(1) Per share amounts reflect the 4-for-3 stock split effective July 24, 1997.
See accompanying notes to consolidated financial statements.
5
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -----
THREE MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
Unrealized
Appreciation
Additional on Securities
Common Paid-in Retained Treasury Available
Stock Capital Earnings Stock for Sale Total
------ ---------- --------- -------- -------------- -----
(Dollars in Thousands, Except Per Share Data)
Balance at September 30, 1997........ $ 295 $ 66,495 $ 181,851 $ (81,092) $ 1,514 $ 169,063
Net income for the three months
ended December 31, 1997............. -- -- 11,992 -- -- 11,992
Dividends declared on
common stock........................ -- -- (3,205) -- -- (3,205)
Purchase of 4,553 shares
of treasury stock................... -- -- -- (160) -- (160)
Issuance of 45,336 shares upon
exercise of stock options........... -- -- (1,011) 1,414 -- 403
Change in unrealized
appreciation on
securities available for
sale, net of taxes.................. -- -- -- -- 116 116
------ ---------- ---------- ----------- -------- -----------
Balance at December 31, 1997......... $ 295 $ 66,495 $ 189,627 $ (79,838) $ 1,630 $ 178,209
====== ========== ========== ============ ======== ===========
See accompanying notes to consolidated financial statements.
6
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(UNAUDITED)
Three Months Ended
December 31,
-----------------------
1997 1996
-----------------------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.............................................................. $ 11,992 $ 10,264
-------------- --------------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization......................................... 691 584
Amortization and accretion of deferred fees,
discounts and premiums, net.......................................... (227) 239
Provision for possible loan losses.................................... 300 300
Provision for losses on foreclosed real estate........................ 54 136
Net loss on sale of foreclosed real estate............................ 45 67
Net gain on sale of mortgage loans and securities
available for sale................................................... (131) (117)
Payment of SAIF recapitalization...................................... --- (9,432)
Deferred income taxes................................................. (378) 3,357
Increase in accrued interest receivable............................... (1,013) (505)
Decrease in accrued interest payable.................................. (752) (1,103)
Increase in accrued expenses and other liabilities.................... 24,644 14,649
(Increase) decrease in other assets................................... (15,329) 893
--------------- --------------
Total adjustments..................................................... 7,904 9,068
-------------- --------------
Net cash provided by operating activities............................... 19,896 19,332
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments on loans............................................. 93,522 82,288
Principal payments on mortgage-backed securities........................ 65,599 25,780
Principal payments, maturities and calls on debt
and equity securities.................................................. 20,025 12
Proceeds on sales of loans.............................................. 11,402 16,931
Proceeds on sales of debt and equity securities
available for sale..................................................... --- 1,314
Investment in first mortgage loans...................................... (106,020) (125,902)
Investment in other loans............................................... (17,207) (17,715)
Investment in mortgage-backed securities available for sale............. (110,680) (39,829)
Investment in debt and equity securities available for sale............. (22,000) (5,000)
Proceeds on sales of foreclosed real estate............................. 716 1,774
Net purchases of Federal Home Loan Bank stock........................... --- (3,306)
Net purchases of premises and equipment................................. (817) (226)
--------------- --------------
Net cash used in investing activities................................... (65,460) (63,879)
--------------- --------------
(Continued)
7
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(CONTINUED)
Three Months Ended
December 31,
----------------------
1997 1996
---- ----
(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in non-interest bearing demand,
savings, money market, and NOW accounts................................ $ 8,445 $ 5,068
Net decrease in time deposits .......................................... (10,272) (20,305)
Net increase in borrowings with original
maturities of three months or less..................................... 101,251 93,118
Proceeds from long-term borrowings...................................... 29,416 224,000
Repayment of long-term borrowings....................................... (74,061) (256,859)
Purchase of common stock for treasury................................... (160) (2,225)
Payment of common stock dividends....................................... (3,199) (2,220)
Exercise of stock options............................................... 403 200
Decrease in mortgagors' escrow accounts................................. (6,643) (6,092)
--------------- ---------------
Net cash provided by financing activities............................... 45,180 34,685
-------------- --------------
Net decrease in cash and cash equivalents............................... (384) (9,862)
Cash and cash equivalents at beginning of period........................ 26,305 23,745
-------------- --------------
Cash and cash equivalents at end of period.............................. $ 25,921 $ 13,883
============== ==============
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid........................................................... $ 33,066 $ 30,021
============== ==============
Income taxes paid....................................................... $ -- $ 5,050
============== ==============
Noncash investing and financing activities:
Transfer of loans to real estate owned................................ $ 576 $ 1,355
============== ==============
See accompanying notes to consolidated financial statements
8
NEW YORK BANCORP INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of New York Bancorp Inc. ("New York Bancorp"
or the "Company") and its wholly-owned subsidiary, Home Federal
Savings Bank ("Home Federal" or the "Bank") and Subsidiaries, as
of December 31, 1997 and September 30, 1997 and for the three
month periods ended December 31, 1997 and 1996.
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management all
necessary adjustments, consisting only of normal recurring
accruals necessary for a fair presentation, have been included.
The results of operations for the three month period ended
December 31, 1997 are not necessarily indicative of the results
that may be expected for the entire fiscal year.
NOTE 2: MERGER AGREEMENT
On October 7, 1997, New York Bancorp entered into 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 merger agreement, each outstanding
share of common stock of the Company will be converted into 1.19
shares of common stock of North Fork. The merger, which is
expected to close during the quarter ending March 31, 1998, has
been approved by the shareholders of both the Company and North
Fork, and is pending the approval of the appropriate regulatory
authorities of both the Company and North Fork, as well as the
satisfaction of certain other conditions.
NOTE 3: EARNINGS PER SHARE
During the quarter ended December 31, 1997, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" ("SFAS No. 128"). The Statement requires restatement of all
prior-period earnings per share ("EPS") data presented. It
replaces the presentation of primary EPS with basic EPS, and
requires dual presentation of basic and diluted EPS on the face of
the income statement. Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock. The following table presents the computation of EPS.
9
Three Months Ended
December 31,
------------------
1997 1996 (1)
---- ----
(In Thousands, except
per share amounts)
BASIC EPS:
Income available to common shareholders............. $ 11,992 $ 10,264
========== ==========
Average common shares outstanding................... 21,339 22,164
========== ==========
Basic EPS........................................... $ .56 $ .46
======= =======
DILUTED EPS:
Income available to common shareholders............. $ 11,992 $ 10,264
========== ==========
Average common shares outstanding................... 21,339 22,164
Dilutive potential common shares outstanding
due to common stock options....................... 687 539
---------- ----------
Average number of common shares
and dilutive potential common shares outstanding.. 22,026 22,703
========== ==========
Diluted EPS......................................... $ .54 $ .45
======= =======
(1) Share and per share information reflect the 4-for-3 stock split effective
July 24, 1997.
NOTE 4: COMMITMENTS, CONTINGENCIES AND CONTRACTS
At December 31, 1997, Home Federal had commitments of $67.9
million to originate first mortgage and cooperative residential
loans. Of this amount, adjustable rate mortgage loans represented
$55.9 million and fixed rate mortgage loans, with interest rates
ranging from 6.75% to 10.25%, represented $12.0 million. At
December 31, 1997, Home Federal also had commitments to sell $9.2
million of qualified fixed rate first mortgage loans at prices
which approximate the carrying value of the loans.
The Bank is a party to $700.0 million of interest rate collar
arrangements which mature in August 1998. These interest rate
collars provide for the Bank to receive payment when three month
LIBOR exceeds 7.50%, and requires the Bank to pay when three month
LIBOR is less than 5.00%. At December 31, 1997, three month LIBOR
was 5.8125 %.
At December 31, 1997, the Bank was servicing first mortgage loans
of approximately $574.4 million, which are either partially or
wholly-owned by others.
NOTE 5: STOCK REPURCHASE PLAN
During the quarter ended December 31, 1997, New York Bancorp
terminated its stock repurchase plan in connection with the
execution of the Company's merger agreement with North Fork.
Shares repurchased during the current quarter represent shares
surrendered by employees in connection with their exercise of
stock options.
10
NEW YORK BANCORP INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
A. GENERAL
New York Bancorp Inc. ("New York Bancorp" or the "Company") is
a savings and loan holding company. The Company, through its
subsidiary, Home Federal Savings Bank ("Home Federal" or the "Bank"),
operates as a community savings bank. 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, multifamily
and commercial mortgage loans, cooperative residential loans and
consumer loans. The Bank 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, money market
investments, corporate notes and other securities.
B. MERGER AGREEMENT
On October 7, 1997, New York Bancorp entered into 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 merger agreement, each outstanding share of common stock
of the Company will be converted into 1.19 shares of common stock of
North Fork. The merger, which is expected to close during the quarter
ending March 31, 1998, has been approved by the shareholders of both
the Company and North Fork, and is pending the approval of the
appropriate regulatory authorities of both the Company and North Fork,
as well as the satisfaction of certain other conditions.
C. FINANCIAL POSITION
Total assets at December 31, 1997 amounted to approximately
$3.3 billion, reflecting a $20.5 million increase from the amount
reported at September 30, 1997. The increase in total assets primarily
reflects the increase of $17.9 million in total loans.
D. ASSET/LIABILITY MANAGEMENT
The Company is subject to interest rate risk to the extent
that its interest-bearing liabilities reprice or mature more or less
frequently, or on a different basis, than its interest-earning assets.
The Company utilizes gap management as part of its approach to
controlling interest rate risk and maximizing net interest margin. The
Company does not have a mandated targeted one year gap, but
historically has managed the gap so that it will range from a modest
positive to a modest negative position, which would generally result in
upper-end ranges of positive to negative positions of 15%. The size and
direction of the gap is determined by management, reflecting its views
on the direction of interest rates and general market conditions. The
Company's cumulative one year gap as a percent of total
interest-earning assets amounted to a negative 5.8% at December 31,
1997, as compared to a negative 8.2% at September 30, 1997.
11
A negative gap denotes liability sensitivity which in a given
period will result in more liabilities than assets being subject to
repricing. Generally, liability sensitive gaps would result in a net
positive effect on net interest margin and, consequently, net income in
a declining interest rate environment. Alternatively, liability
sensitive gaps would generally result in a net negative effect on net
interest margin and, consequently, net income in an increasing interest
rate environment. Assets and liabilities with similar repricing
characteristics, however, may not reprice to the same degree. As a
result, the Company's gap position does not necessarily predict the
impact of changes in general levels of interest rates on net interest
margin. The Company's net interest margin decreased to 3.73% in the
first quarter of fiscal year 1998, compared to 3.90% in the first
quarter of fiscal year 1997. The net interest margin of 3.73% for the
current quarter is 3 basis points higher than the quarter ended
September 30, 1997.
At December 31, 1997, the Bank's interest-earning assets
principally consisted of adjustable rate mortgage and other loans and
securities, multi-tranched fixed rate REMIC securities and an
assortment of fixed rate mortgage and other loans. At December 31,
1997, 58.1% of such interest-earning assets were adjustable rate
assets.
Within the framework of the targeted one year gap, the Bank
may choose to extend the maturity of its funding source and/or reduce
the repricing mismatches by using interest rate swaps and financial
futures arrangements. Additionally, the Bank uses interest rate collar,
interest rate floor, and interest rate cap arrangements to assist in
further insulating the Bank from volatile interest rate changes.
At December 31, 1997, the Bank maintained $700.0 million of
interest rate collar arrangements which mature in August 1998. These
interest rate collars provide for the Bank to receive payment when
three month LIBOR exceeds 7.50%, and requires the Bank to pay when
three month LIBOR is less than 5.00%. At December 31, 1997, three month
LIBOR was 5.8125%. Further, at December 31, 1997, the amount of
unamortized gain on terminated interest rate floor arrangements
amounted to $.4 million.
At December 31, 1997 the Company had approximately $2.6
million in contracts for purposes of hedging the "Standard & Poor's
500" index. The call options maturities range from March 1999 through
August 1999. The Bank uses stock indexed call options for purposes of
hedging its MarketSmart CD's and MarketSmart I.R.A. CD's. The Bank
ceased offering MarketSmart CD's during fiscal year 1995 due to its
inability to efficiently purchase such small quantities of stock
indexed call options.
12
E. LIQUIDITY AND CAPITAL RESOURCES
Home Federal is required to maintain minimum levels
of liquid assets as defined by the Office of Thrift Supervision (the
"OTS") regulations. This requirement, which may be varied by the OTS,
is based upon a percentage of withdrawable deposits and short-term
borrowings. The required ratio is currently 4%. The Bank's ratio was
4.05% during December 1997 and 5.15% during September 1997.
The Bank's liquidity levels will vary depending upon savings
flows, future loan fundings, operating needs and general prevailing
economic conditions. Because of the multitude of available funding
sources, the Bank does not foresee any problems in generating liquidity
to meet its operational and regulatory requirements.
The Bank's lending and investment activities are predominately
funded by deposits, advances from and reverse repurchase agreements
with the Federal Home Loan Bank of New York, reverse repurchase
agreements with primary government securities dealers, subordinated
capital notes, scheduled amortization and prepayments, and funds
provided by operations.
As of December 31, 1997, Home Federal was categorized "well
capitalized" under the OTS "prompt corrective action regulations" and
continued to exceed all regulatory capital requirements as detailed in
the following table:
TANGIBLE CAPITAL CORE CAPITAL(1) RISK-BASED CAPITAL(2)
---------------------- ---------------------- -----------------------
Amount Percentage(3) Amount Percentage(3) Amount Percentage(3)
------ ------------- ------ ------------- -------- -------------
(Dollars in Thousands)
Capital for regulatory
purposes............ $ 164,096 5.03% $ 164,096 5.03% $ 181,796 11.53%
Minimum regulatory
requirement......... 48,976 1.50 97,952 3.00 126,173 8.00
---------- -------- ---------- ------- ---------- --------
Excess............... $ 115,120 3.53% $ 66,144 2.03% $ 55,623 3.53%
========== ======== ========== ======= ========== ========
(1) Under the OTS prompt corrective action regulations, the core
capital requirement was effectively increased to 4.00% since OTS
regulations stipulate that as of that date an institution with
less than 4.00% core capital will be deemed to be classified as
"undercapitalized."
(2) The OTS adopted a final regulation which incorporates an interest
rate risk component into its existing risk-based capital standard.
The regulation requires certain institutions with more than a
"normal level" of interest rate risk to maintain capital in
addition to the 8.0% risk-based capital requirement. Although the
OTS has delayed implementation of this regulation, the Bank does
not anticipate that its risk-based capital requirement will be
materially affected as a result of the new regulation.
(3) For tangible and core capital, the ratio is to adjusted total
assets. For risk-based capital, the ratio is to total
risk-weighted assets.
13
F. ANALYSIS OF CORE EARNINGS
The Company's profitability is primarily dependent
upon net interest income, which represents the difference between
interest and fees earned on loans, mortgage-backed securities,
investments in debt and equity securities and money market investments,
and the cost of deposits and borrowed funds. Net interest income is
dependent on the difference between the average balances and rates
earned on interest-earning assets versus the average balances and rates
paid on interest-bearing deposits and borrowed funds. Net income is
further affected by other operating income, other operating expenses
and taxes.
The following tables set forth certain information
relating to the Company's average consolidated statements of financial
condition and reflect the average yield on assets and average cost of
liabilities for the periods indicated. Such yields and costs are
derived by dividing annualized income or expense by the average balance
of assets (which include nonaccrual loans) or liabilities,
respectively, for the periods shown.
Quarter Ended December 31,
------------------------------------------------------------------------------
1997 1996
------------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-------- -------- ----- ------- -------- ------
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans........ $ 1,793,472 $ 37,501 8.36% $ 1,623,430 $ 33,016 8.13%
Other loans................. 250,155 5,403 8.60 267,482 5,745 8.56
------------- --------- ------------- ---------
Total loans............... 2,043,627 42,904 8.39 1,890,912 38,761 8.19
Mortgage-backed securities.. 965,097 16,674 6.91 821,857 13,753 6.69
Debt and equity securities.. 165,545 2,738 6.60 165,747 2,893 6.97
Money market investments.... 146 2 5.26 663 10 6.03
------------- --------- ------------- ---------
Total interest-earning assets. 3,174,415 62,318 7.85 2,879,179 55,417 7.69
--------- ---------
Non-interest-earning assets... 54,158 64,624
------------- -------------
Total assets................ $ 3,228,573 $ 2,943,803
============= =============
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Interest-bearing liabilities:
Deposits.................... $ 1,679,195 13,795 3.26 $ 1,707,909 14,094 3.27
Borrowed funds.............. 1,304,809 19,194 5.84 1,006,384 13,444 5.30
------------- --------- ------------- ---------
Total interest-bearing
liabilities.................. 2,984,004 32,989 4.39 2,714,293 27,538 4.02
--------- ---------
Other liabilities............. 70,409 73,371
------------- -------------
Total liabilities........... 3,054,413 2,787,664
Shareholders' equity.......... 174,160 156,139
------------- -------------
Total liabilities and
shareholders' equity....... $ 3,228,573 $ 2,943,803
============= =============
NET INTEREST INCOME/INTEREST
RATE SPREAD.................... $ 29,329 3.46% $ 27,879 3.67%
========= ======= ========= =======
NET EARNING ASSETS/NET
INTEREST MARGIN................ $ 190,411 3.73% $ 164,886 3.90%
============= ======= ============= =======
PERCENTAGE OF INTEREST-EARNING
ASSETS TO INTEREST-BEARING
LIABILITIES.................... 106.38% 106.07%
====== =======
14
G. COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1997 AND 1996
General
-------
New York Bancorp's net income for the quarter ended December
31, 1997 was $12.0 million, or $.56 per basic common share, compared to
net income of $10.3 million, or $.46 per basic common share, for the
quarter ended December 31, 1996. Comments regarding the components of
net income are detailed in the following paragraphs.
Interest Income
---------------
Interest income on interest-earning assets for the quarter
ended December 31, 1997 increased by $6.9 million, or 12.5%, to $62.3
million compared to the quarter ended December 31, 1996. The increase
in interest income is attributable to a $295.2 million increase in
average interest-earning assets, coupled with a 16 basis point increase
in yield.
Interest and fee income on loans for the quarter ended
December 31, 1997 increased by $4.1 million, or 10.7%, to $42.9 million
compared to the same quarter in 1996. The increase in loan income
reflects a $152.7 million increase in the average loan balance to $2.0
billion, a 23 basis point increase in yield on first mortgage loans and
a 4 basis point increase in yield on other loans. Interest on
mortgage-backed securities for the quarter ended December 31, 1997
increased by $2.9 million to $16.7 million as compared to the same
quarter in 1996. This increase in income is primarily due to a $143.2
million increase in the average balance, coupled with a 22 basis point
increase in yield to 6.91%. Interest and dividends on debt and equity
securities decreased by $.2 million to $2.7 million in the current
quarter compared to the comparable prior year quarter. The decrease in
such income is primarily attributable to a 37 basis point decrease in
yield.
Interest Expense
----------------
Interest expense on interest-bearing liabilities for the
quarter ended December 31, 1997 amounted to $ 33.0 million, an increase
of $5.5 million from the quarter ended December 31, 1996. The increase
in interest expense for the quarter reflects a $269.7 million growth in
interest-bearing liabilities to $3.0 billion coupled with a 37 basis
point increase in the cost on interest-bearing liabilities. The impact
of the Bank's use of interest rate swaps and other off-balance sheet
instruments was to decrease interest expense by $.6 million and $1.5
million for the quarters ended December 31, 1997 and 1996,
respectively. The Bank had no interest rate swap arrangements
outstanding at December 31, 1997.
15
Interest expense on deposits amounted to $13.8 million for the
quarter ended December 31, 1997, reflecting a $.3 million decrease,
compared to the quarter ended December 31,1996. This decrease primarily
reflects a $28.7 million decline in the average balance of deposits to
$1.68 billion during the quarter ended December 31, 1997. Interest
expense on borrowed funds increased $5.8 million to $19.2 million for
the quarter ended December 31, 1997 as compared to the quarter ended
December 31,1996. This increase reflects a $298.4 million increase in
the average balance of borrowed funds to $1.30 billion, coupled with a
54 basis point increase in the average cost of borrowed funds from
5.30% during the quarter ended December 31, 1996 to 5.84% during the
quarter ended December 31, 1997. The increase in the cost of borrowings
is due to the Bank's decreased use of interest rate swaps, which
increased the average cost of borrowed funds 1 basis point in the
current quarter as compared to decreasing the cost of borrowed funds by
32 basis points in the comparable prior year quarter, coupled with an
increase in the prevailing market rates during the current quarter as
compared to the prior year period.
Provision for Possible Loan Losses
----------------------------------
Home Federal provided $.3 million for possible loan losses
during each of the quarters ended December 31, 1997 and 1996. The
Bank's ratio of its allowance for possible loan losses to total
nonaccrual loans amounted to 103.3% and 106.6% at December 31, 1997 and
September 30, 1997, respectively.
At December 31, 1997, the Company's recorded investment in
impaired loans was $5.0 million, all of which were on nonaccrual
status, compared to $4.9 million at September 30, 1997. Due to
charge-offs, or the crediting of interest payments to principal, the
loans do not have an impairment reserve at December 31, 1997. Interest
income of $29,000 and $146,000 was recognized on these loans during the
quarters ended December 31, 1997 and 1996, respectively. This
represents actual interest payments received. The average recorded
investment in impaired loans during the quarters ended December 31,
1997 and 1996 was $6.4 million and $12.9 million, respectively. The
allowance for possible loan losses contains additional amounts for
impaired loans, as deemed necessary, to maintain reserves at levels
considered adequate by management.
As part of the Bank's determination of the adequacy of the
allowance for possible 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 at December 31, 1997
is sufficient to cover anticipated losses inherent in the loan
portfolios.
16
Nonaccrual loans at December 31, 1997 amounted to $18.1
million, or .88% of total loans, as compared to $17.5 million, or .86%
of total loans, at September 30, 1997.
The following table sets forth the Bank's nonaccrual loans at
the dates indicated:
December 31, September 30,
1997 1997
------------ -------------
(In Thousands)
Nonaccrual Loans
----------------
First mortgage loans:
One- to- four family conventional residential.. $ 11,833 $ 11,399
Multifamily residential........................ 796 752
Commercial real estate......................... 4,195 4,165
----------- -----------
16,824 16,316
Other loans - cooperative residential loans...... 1,227 1,223
----------- -----------
Total nonaccrual loans....................... $ 18,051 $ 17,539
=========== ===========
The amount of interest income on nonaccrual loans that would
have been recorded had these loans been current in accordance with
their original terms was $474,000 and $804,000 for the three month
periods ended December 31, 1997 and 1996, respectively. The amount of
interest income that was recorded on these loans was $144,000 and
$304,000 for the three month periods ended December 31, 1997 and 1996,
respectively.
Additionally, at December 31, 1997, the Bank had $1.1 million
in real estate owned as compared to $1.4 million at September 30, 1997.
Further, at December 31, 1997 the Bank also had 12 restructured
commercial real estate loans amounting to approximately $5.0 million,
the same as at September 30, 1997, for which interest is being recorded
in accordance with the loans' restructured terms. The amount of the
interest income lost on these restructured loans is immaterial.
The Bank also has $4.0 million of consumer and other loans
which are past due 90 days and still accruing interest as of December
31, 1997. Of the $4.0 million, $3.1 million represent loans guaranteed
by the United States Department of Education through the New York State
Higher Education Services Corporation.
The Bank's allowance for possible loan losses at December 31,
1997 was $18.6 million, which represented 103.3 % of nonaccrual loans
or .91% of total loans, compared to $18.7 million at September 30,
1997, which represented 106.6% of nonaccrual loans or .92% of total
loans.
17
Summary of Loan Loss Experience
-------------------------------
The following is a summary of the activity in the Bank's
allowance for possible loan losses for the quarters ended December 31:
1997 1996
------------ -------
(In Thousands)
Allowance for possible loan losses, beginning of quarter.... $ 18,695 $ 19,386
Charge-offs:
Commercial real estate.................................. -- (19)
Residential real estate................................. (352) (678)
Other loans............................................. (52) (52)
------------- -----------
Total charge-offs..................................... (404) (749)
Less recoveries - other loans............................. 48 21
------------ -----------
Net charge-offs........................................... (356) (728)
------------ -----------
Addition to allowance charged to expense.................. 300 300
------------ -----------
Allowance for possible loan losses, end of quarter........ $ 18,639 $ 18,958
============ ===========
The charge-offs recorded in each of the quarters shown above
primarily relate to delinquent loans for which reserves had been
provided in prior periods. Upon resolution of these delinquent loans,
the loss incurred was charged to the allowance.
Net Interest Income After Provision for Possible Loan Losses
------------------------------------------------------------
Net interest income after provision for possible loan losses
for the quarter ended December 31, 1997 amounted to $29.0 million,
representing an increase of $1.5 million from the quarter ended
December 31, 1996. This increase reflects a $295.2 million increase in
average interest earning assets which, however, was partially offset by
a 17 basis point decrease in the Bank's net interest margin from 3.90%
in 1996 to 3.73% in 1997. The net interest margin of 3.73% for the
current quarter is 3 basis points higher than the quarter ended
September 30, 1997.
Non-Interest Income
-------------------
Non-interest income amounted to $3.5 million for the quarter
ended December 31, 1997, compared to $2.8 million for the prior year
comparable quarter. This increase primarily reflects a $.4 million or
26.8% increase in banking service fee income.
18
Non-Interest Expense
--------------------
The general and administrative expense component of
non-interest expense totaled $12.9 million or 1.58% of average assets,
for the quarter ended December 31, 1997, compared to $12.2 million, or
1.64% of average assets, for the quarter ended December 31, 1996. The
increase is due, in large part, to costs incurred with the proposed
issuance of convertible trust preferred stock, which was withdrawn
following the signing of the merger agreement with North Fork.
Income Tax Expense
------------------
Income tax expense decreased $.3 million to $7.4 million for
an effective tax rate of 38.2% during the quarter ended December 31,
1997 versus an effective tax rate of 43.0% during the quarter ended
December, 1996. The reduction in the effective tax rate reflects the
benefit derived from certain tax planning strategies implemented during
the third quarter of fiscal year 1997.
19
H. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data.
Three Months Ended
December 31,
-----------------------
1997 1996
-------------------------
(Dollars in Thousands,
except per share amounts)
FINANCIAL RATIOS (1)
- --------------------
Average Yield:
First mortgage loans........................................................ 8.36% 8.13%
Other loans.............................................................. 8.60 8.56
Mortgage-backed securities............................................... 6.91 6.69
Debt and equity securities - taxable..................................... 6.60 6.97
Money market investments................................................. 5.26 6.03
All interest-earning assets............................................ 7.85 7.69
Average cost:
Deposits................................................................. 3.26 3.27
Borrowed funds........................................................... 5.84 5.30
All interest-bearing liabilities....................................... 4.39 4.02
Net interest rate spread.................................................... 3.46 3.67
Net interest margin......................................................... 3.73 3.90
Average interest-earning assets to
average interest-bearing liabilities....................................... 106.38 106.07
Return on average assets.................................................... 1.47 1.38
Return on average common equity ............................................ 27.32 26.08
Efficiency ratio............................................................ 39.47 39.72
General and administrative expense to average assets........................ 1.58 1.64
Equity to asset ratio at December 31 ....................................... 5.46 5.09
Cumulative one year gap as a percent of total
interest-earning assets at December 31 .................................... -5.8% -4.2%
SHARE INFORMATION (2):
- ---------------------
Basic earnings per common share............................................. $ .56 $ .46
Diluted earnings per common share........................................... $ .54 $ .45
Weighted average number of common shares and
dilutive potential common shares outstanding............................... 22,026,425 22,702,835
Number of shares outstanding at December 31................................. 21,359,427 22,092,908
Book value per share at December 31......................................... $ 8.34 $ 7.20
NET INTEREST POSITION:
- ---------------------
Excess of average interest-earning assets
over average interest-bearing liabilities.................................. $ 190,411 $ 164,886
LOAN HIGHLIGHTS:
- ---------------
Loan originations........................................................... $ 123,037 $ 133,552
Loan purchases.............................................................. $ 668 $ 11,209
Loan sales.................................................................. $ 11,575 $ 16,981
Loan serviced for others at December 31..................................... $ 574,415 $ 597,408
Loan servicing fees......................................................... $ 420 $ 445
ADJUSTABLE RATE ASSETS AT DECEMBER 31:
- -------------------------------------
First mortgage loans and
mortgage-backed securities................................................. $ 1,626,593 $ 1,459,851
Other loans, money market investments,
and debt and equity securities............................................. $ 224,463 $ 223,516
Total adjustable rate assets as a percent
of total interest-earning assets.......................................... 58.13% 54.94%
- ----------------
(1) Selected financial ratios were computed using daily average balances and
annualized, where applicable.
(2) Share and per share information reflect the 4-for-3 stock split effective
July 24, 1997.
20
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- ----------------------------
Not applicable
Item 2. Changes in Securities
- --------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
- ------------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- --------------------------------------------------------------
(a) A Special Meeting of Shareholders was held January 30, 1998.
(b) Not applicable
(c) At such meeting, the shareholders approved the merger agreement
with North Fork Bancorporation, Inc.
Votes For 19,171,847
Votes Against 130,195
Abstentions 17,198
(d) Not applicable
21
Item 5. Other Information
- ----------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- -------------------------------------------
(a) Exhibits
--------
Exhibit
Number Description
------- -----------
3.1 Certificate of Incorporation of New York Bancorp Inc.,
as amended(1)
3.2 Bylaws of New York Bancorp Inc., as amended(2)
27 Financial Data Schedule
(1) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
1996 Form 10-K
(2) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
1994 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.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
NEW YORK BANCORP INC.
(Registrant)
Date: February 4, 1998 By: /s/ Michael A. McManus, Jr.
----------------------------------
Michael A. McManus, Jr.
President and
Chief Executive Officer
Date: February 4, 1998 By: /s/ Stan I. Cohen
----------------------------------
Stan I. Cohen
Senior Vice President,
Controller and Secretary
EXHIBITS
--------
Exhibit
Number Description
------- -----------
3.1 Certificate of Incorporation of New York Bancorp Inc.,
as amended(1)
3.2 Bylaws of New York Bancorp Inc., as amended(2)
27 Financial Data Schedule
- -------------
(1) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
1996 Form 10-K
(2) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
1994 Form 10-K