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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: March 31, 1996
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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 May 1, 1996: 11,619,572.
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NEW YORK BANCORP INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
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Item 1. Financial Statements:
Consolidated Statements of Financial Condition as
of March 31, 1996 and September 30, 1995 4
Consolidated Statements of Operations for the Three and
Six Months ended March 31, 1996 and 1995 5
Consolidated Statement of Changes in Shareholders'
Equity for the Six Months ended March 31, 1996 6
Consolidated Statements of Cash Flows for the
Six Months ended March 31, 1996 and 1995 7 - 8
Notes to Consolidated Financial Statements 9 - 12
Independent Auditors' Review Report 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 27
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings 28
Item 2. Changes in Securities 28
Item 3. Defaults Upon Senior Securities 28
Item 4. Submission of Matters to a Vote of Security Holder 28
Item 5. Other Information 28
Item 6. Exhibits and Reports on Form 8-K 28
Signature Page 29
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KPMG Peat Marwick LLP
345 Park Avenue
New York, NY 10154
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 March 31, 1996, and for the three and six
month periods ended March 31, 1996 and 1995 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.
Effective October 1, 1995 the Company adopted provisions of Statement of
Accounting Standards No. 114 (Accounting by Creditors for Impairment of a Loan),
No. 118 (Accounting by Creditors for Impairment of a Loan - Income Recognition
and Disclosures) and No. 122 (Accounting for Mortgage Servicing Rights).
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, 1995, 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 23,
1995, 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,
1995, 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
April 23, 1996
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION -----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
March 31, September 30,
1996 1995
-------------- -------------
ASSETS
Cash and due from banks.............................. $ 22,603 $ 31,189
Money market investments............................. 5,000 13,915
Trading account securities........................... -- 2,003
Investment in debt and equity securities, net:
Held to maturity (estimated market value of
$1,170 and $21,107 at March 31, 1996
and September 30, 1995, respectively)............. 1,167 21,179
Available for sale................................. 73,551 46,273
Mortgage-backed securities, net:
Held to maturity (estimated market value of
$557,420 and $637,503 at March 31, 1996
and September 30, 1995, respectively)............. 575,027 664,726
Available for sale................................. 317,927 206,794
Federal Home Loan Bank stock......................... 25,500 20,288
Loans receivable, net:
First mortgage loans............................... 1,412,727 1,389,776
Other loans........................................ 281,165 296,439
---------- ----------
1,693,892 1,686,215
Less allowance for possible loan losses............ (20,588) (21,272)
---------- ----------
Total loans receivable, net....................... 1,673,304 1,664,943
Accrued interest receivable.......................... 21,039 21,723
Premises and equipment, net.......................... 12,855 12,851
Other assets......................................... 26,464 25,708
---------- ----------
Total assets...................................... $2,754,437 $2,731,592
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits........................................... $1,748,145 $1,748,874
Borrowed funds..................................... 785,925 767,138
Mortgagors' escrow payments........................ 16,833 16,520
Accrued expenses and other liabilities............. 44,357 42,674
---------- ----------
Total liabilities................................. 2,595,260 2,575,206
---------- ----------
Commitments, contingencies and contracts (note 4)
SHAREHOLDERS' EQUITY (NOTES 4 AND 5):
Preferred stock, $.01 par value, 2,000,000
shares authorized; none issued.................... -- --
Common stock, $.01 par value, 30,000,000
shares authorized; 14,746,850 shares
issued at March 31, 1996 and September 30, 1995;
11,724,647 and 12,138,974 shares outstanding
at March 31, 1996 and September 30, 1995,
respectively...................................... 147 147
Additional paid-in capital......................... 64,482 63,575
Retained earnings, substantially restricted........ 135,902 125,593
Treasury stock, at cost, 3,022,203 and
2,607,876 shares at March 31, 1996 and
September 30, 1995, respectively.................. (42,642) (33,740)
Unrealized appreciation on securities
available for sale, net of tax effect............. 1,288 811
---------- ----------
Total shareholders' equity........................ 159,177 156,386
---------- ----------
Total liabilities and shareholders' equity......... $2,754,437 $2,731,592
========== ==========
See accompanying notes to consolidated financial statements.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF OPERATIONS -----
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
--------------------- ---------------------
1996 1995 1996 1995
-------- -------- -------- --------
(In Thousands, except per share amounts)
INTEREST INCOME:
Interest and fees on loans:
First mortgage loans............................... $ 28,450 $ 25,525 $ 56,862 $ 49,471
Other loans........................................ 6,185 6,393 12,714 12,639
-------- -------- -------- --------
Total interest and fees on loans.................. 34,635 31,918 69,576 62,110
Mortgage-backed securities.......................... 13,963 15,389 28,166 30,987
Money market investments............................ 91 302 198 560
Trading account securities.......................... -- 193 13 355
Debt and equity securities - taxable................ 1,402 1,188 2,797 2,403
-------- -------- -------- --------
Total interest income............................. 50,091 48,990 100,750 96,415
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits............................................ 15,363 15,395 31,244 30,384
Borrowed funds...................................... 10,378 9,465 21,488 17,286
-------- -------- -------- --------
Total interest expense............................ 25,741 24,860 52,732 47,670
-------- -------- -------- --------
Net interest income............................... 24,350 24,130 48,018 48,745
Provision for possible loan losses................... (300) (400) (600) (900)
-------- -------- -------- --------
Net interest income after provision
for possible loan losses......................... 24,050 23,730 47,418 47,845
-------- -------- -------- --------
OTHER OPERATING INCOME:
Loan fees and service charges....................... 790 588 1,421 1,351
Net gain (loss) on the sales of mortgage
loans and securities available for sale............ 1,529 (1,177) 2,036 (1,516)
Real estate operations, net......................... 46 (345) (87) (719)
Other............................................... 1,727 1,280 3,291 2,397
-------- -------- -------- --------
Total other operating income...................... 4,092 346 6,661 1,513
-------- -------- -------- --------
OTHER OPERATING EXPENSES:
Compensation and benefits........................... 5,433 5,905 10,950 12,183
Occupancy, net...................................... 2,200 2,209 4,240 4,247
Advertising and promotion........................... 594 686 1,449 1,431
Federal deposit insurance premiums.................. 932 1,208 1,897 2,349
Merger and restructuring............................ -- 19,024 -- 19,024
Other............................................... 2,472 2,850 5,005 5,505
-------- -------- -------- --------
Total other operating expenses.................... 11,631 31,882 23,541 44,739
-------- -------- -------- --------
Income (loss) before income tax expense........... 16,511 (7,806) 30,538 4,619
-------- -------- -------- --------
INCOME TAX EXPENSE:
Federal expense..................................... 4,989 1,454 9,231 5,383
State and local expense............................. 2,346 544 4,303 2,573
--------- -------- -------- --------
Total income tax expense.......................... 7,335 1,998 13,534 7,956
-------- -------- -------- --------
Net income (loss)................................. $ 9,176 $ (9,804) $ 17,004 $ (3,337)
======== ======== ======== ========
EARNINGS (LOSS) PER COMMON SHARE..................... $ .76 $ (.73) $ 1.40 $ (.25)
See accompanying notes to consolidated financial statements.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -----
SIX MONTHS ENDED MARCH 31, 1996
(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, 1995......... $ 147 $ 63,575 $ 125,593 $ (33,740) $ 811 $ 156,386
Net income for the six months
ended March 31, 1996................. -- -- 17,004 -- -- 17,004
Dividends declared on
common stock......................... -- -- (4,704) -- -- (4,704)
Purchase of 546,806 shares
of treasury stock.................... -- -- -- (11,688) -- (11,688)
Exercise of 132,479 shares
of stock options and related
tax benefits......................... -- 907 (1,991) 2,786 -- 1,702
Unrealized depreciation on
securities transferred from
held to maturity to
available for sale................... -- -- -- -- (223) (223)
Change in unrealized
appreciation on securities
available for sale................... -- -- -- -- 700 700
----- -------- --------- --------- ------- ---------
Balance at March 31, 1996............. $ 147 $ 64,482 $ 135,902 $ (42,642) $ 1,288 $ 159,177
===== ======== ========= ========= ======= =========
See accompanying notes to consolidated financial statements.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(UNAUDITED)
Six Months Ended
March 31,
----------------------
1996 1995
--------- ----------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................. $ 17,004 $ (3,337)
--------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................................... 1,079 737
Amortization and accretion of deferred fees,
discounts and premiums......................................... 900 832
Provision for possible loan losses.............................. 600 900
Provision for losses on foreclosed real estate.................. 220 296
Net (gain) loss on sale of foreclosed real estate............... 68 (215)
Net (gain) loss on sale of mortgage loans and securities
available for sale............................................. (2,036) 1,516
Deferred income taxes........................................... (468) (1,521)
Amortization of ESOP and RRP compensation expense............... -- 464
Termination of ESOP & RRP....................................... -- 4,992
Net (increase) decrease in trading account...................... 2,003 (355)
(Increase) decrease in accrued interest receivable.............. 684 (870)
Decrease in accrued interest payable............................ (1,363) (299)
Increase in accrued expenses and other liabilities ............. 3,699 6,587
Increase in other assets........................................ (139) (5,665)
---------- ----------
Total adjustments............................................... 5,247 7,399
---------- ----------
Net cash provided by operating activities......................... 22,251 4,062
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments on loans....................................... 132,778 92,363
Principal payments on mortgage-backed securities.................. 42,466 38,746
Principal payments, maturities and calls on debt
and equity securities............................................ 56,011 6,659
Proceeds on sales of loans........................................ 35,403 18,441
Proceeds on sales of mortgage-backed securities
available for sale............................................... 84,281 65,861
Proceeds on sales of debt and equity securities
available for sale............................................... 2,719 6,328
Investment in first mortgage loans................................ (214,012) (197,991)
Investment in other loans......................................... (29,259) (39,321)
Investment in mortgage-backed securities available for sale....... (82,445) (45,789)
Investment in debt and equity securities available for sale....... (65,330) (7,166)
Proceeds on sales of foreclosed real estate....................... 1,240 4,823
Net purchases of Federal Home Loan Bank stock..................... (5,212) (541)
Net purchases of premises and equipment........................... (1,083) (238)
Investment in interest rate floor agreements...................... -- (2,265)
---------- ----------
Net cash used in investing activities............................. (42,443) (60,090)
---------- ----------
(Continued)
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(CONTINUED)
Six Months Ended
March 31,
-----------------------
1996 1995
----------- ----------
(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in non-interest bearing demand,
savings, money market, and NOW accounts.......................... $ (6,746) $ (127,115)
Net increase in time deposits .................................... 6,017 87,978
Net increase (decrease) in borrowings with original
maturities of three months or less............................... (254,163) 117,920
Proceeds from long-term borrowings................................ 458,000 --
Repayment of long-term borrowings................................. (185,050) (20,267)
Purchase of common stock for treasury or retirement............... (11,688) (4,106)
Payment of common stock dividends................................. (4,787) (2,923)
Exercise of stock options......................................... 795 499
Proceeds from sale of treasury stock.............................. -- 4,530
Increase in mortgagors' escrow accounts........................... 313 1,195
---------- ----------
Net cash provided by financing activities......................... 2,691 57,711
---------- ----------
Net increase (decrease) in cash and cash equivalents.............. (17,501) 1,683
Hamilton Bancorp, Inc. activity for the three months ended
December 31, 1994................................................ -- (5,771)
Cash and cash equivalents at beginning of period.................. 45,104 41,865
---------- ----------
Cash and cash equivalents at end of period........................ $ 27,603 $ 37,777
========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid..................................................... $ 55,177 $ 46,118
========== ==========
Income taxes paid................................................. $ 7,583 $ 9,008
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Transfer of loans to real estate owned............................ $ 2,208 $ 1,847
========== =========
Transfer of mortgage-backed securities available
for sale to mortgage-backed securities held to
maturity......................................................... $ 15,421 $ --
========== =========
Transfer of mortgage-backed securities held to maturity
to mortgage-backed securities available for sale................. $ 84,109 $ 69,817
========== =========
Transfer of debt and equity securities held to maturity
to debt and equity securities available for sale................. $ 15,000 $ 7,465
========== =========
Securitization and transfer of loans to
mortgage-backed securities available for sale.................... $ 65,364 $ --
========== =========
See accompanying notes to consolidated financial statements
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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 "Savings Bank") and Subsidiaries, as of March
31, 1996 and September 30, 1995 and for the three and six month periods
ended March 31, 1996 and 1995.
On October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment
of a Loan" ("SFAS No. 114") and Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan -
Income Recognition and Disclosures" (SFAS No. 118") which amended SFAS
No. 114, (collectively the "Statements"). Under the Statements, a loan
is considered impaired when it is probable that the Company will not
collect all amounts due according to the contractual terms of the loan
agreement. Certain loans are exempt from the provisions of the
Statements, including large groups of smaller-balance homogenous loans
that are collectively evaluated for impairment, such as residential
mortgage loans and consumer loans. The Statements require that impaired
loans that are within the scope of these Statements be measured based
on the present value of expected future cash flows discounted at the
loan's effective interest rate or, as a practical expedient, at the
loan's observable market price or the fair value of the collateral if
the loan is collateral dependent. The adoption of SFAS Nos. 114 and 118
did not have a significant effect on the Company's financial
statements.
On October 1, 1995, the Company adopted Statement of Financial
Accounting Standards No. 122, "Accounting for Mortgage Servicing
Rights" (SFAS No. 122"). The Statement establishes accounting standards
for mortgage servicing rights, which are the contractual right to
service loans owned by others, typically for a fee. Prior to this
Statement, only purchased mortgage servicing rights were capitalized as
an asset. SFAS No. 122 requires originated mortgage servicing rights
("OMSR") to be capitalized as an asset. OMSR represents mortgage
servicing rights acquired when an institution originates and
subsequently sells or securitizes mortgage loans but retains the
servicing rights. The Statement also requires all capitalized mortgage
servicing rights to be evaluated for impairment based on their value.
The adoption of SFAS No. 122 did not have a significant effect on the
Company's operating results or financial position.
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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 and six month periods
ended March 31, 1996 are not necessarily indicative of the results that
may be expected for the entire fiscal year.
NOTE 2: INVESTMENT IN DEBT AND EQUITY SECURITIES AND MORTGAGE-BACKED SECURITIES
As permitted under guidance issued by the Financial Accounting
Standards Board in November 1995, during the quarter ended December 31,
1995, the Company transferred $99.1 million of its mortgage-backed
securities and debt and equity securities previously classified as held
to maturity to the available for sale classification. Additionally,
mortgage-backed securities with a carrying value and market value of
approximately $15.4 million, previously classified as available for
sale, were transferred to the held to maturity portfolio.
NOTE 3: LOANS RECEIVABLE, NET
In connection with the adoption of SFAS Nos. 114 and 118, at March 31,
1996, the Company's recorded investment in impaired loans was $15.3
million, all of which were on nonaccrual status. Due to charge-offs, or
the crediting of interest payments to principal, the loans do not have
an impairment reserve at March 31, 1996. Interest income of $.2 million
was recognized on these loans during the three and six months ended
March 31, 1996. This represents actual interest payments received. The
average recorded investment in impaired loans during the three and six
months ended March 31, 1996 amounted to $14.2 million and $14.5
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.
NOTE 4: COMMITMENTS, CONTINGENCIES AND CONTRACTS
At March 31, 1996, Home Federal had commitments of $91.9 million to
originate first mortgage and cooperative residential loans. Of this
amount, adjustable rate mortgage loans represented $51.7 million and
fixed rate mortgage loans with interest rates ranging from 5.875% to
10.25%, represented $40.2 million. Home Federal also had commitments to
sell $2.2 million of qualified fixed rate first mortgage loans at
prices which approximate the carrying value of the loans.
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The Savings Bank is a party to interest rate swap arrangements to
extend the repricing or maturity of its liabilities in order to create
a more consistent and predictable interest rate spread. At March 31,
1996, outstanding notional amounts of interest rate swap arrangements
totaled $245.0 million. These interest rate swap arrangements have
maturities ranging from April 1996 to December 1996.
The Savings Bank has also entered into $600.0 million of interest rate
swap arrangements, $400.0 million of which begin in June 1996 and
mature in June 1997, and $200.0 million of which begin in December 1996
and mature in June 1997.
At March 31, 1996, the Savings Bank was servicing first mortgage loans
of approximately $592.9 million, which are either partially or
wholly-owned by others.
NOTE 5: STOCK REPURCHASE PLAN
During the quarter ended March 31, 1996, New York Bancorp repurchased
286,806 shares under its present stock repurchase plan, bringing total
purchases during the current fiscal year to 546,806 shares. At March
31, 1996, the total number of Treasury shares amounted to 3,022,203.
Additionally, at March 31, 1996, the Company had authority to
repurchase up to an additional 840,472 shares. Repurchases may be made
from time to time in open market transactions, subject to availability
of shares at prices deemed appropriate by New York Bancorp.
NOTE 6: RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the FASB issued Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets To Be Disposed Of" ("SFAS No. 121"). The
Statement is effective for financial statements issued for fiscal years
beginning after December 15, 1995. The Statement establishes accounting
standards for, among other things, the impairment of long-lived assets.
The Statement requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Based upon a
review of the Statement, management does not believe that the adoption
of SFAS No. 121 would have a materially adverse effect on the Company.
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In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation" ("SFAS No.
123"). The Statement is effective for fiscal years beginning after
December 15, 1995. The Statement establishes accounting and reporting
standards for stock-based employee compensation awards granted in
fiscal years that begin after December 15, 1994. Examples of such plans
are stock purchase plans, stock options, restricted stock, and stock
appreciation rights. The Statement defines a fair value based method of
accounting for employee stock options or similar equity instruments and
encourages all entities to adopt that method of accounting. Entities
may elect, however, to remain with previous accounting standards which
do not require the fair value method of accounting. Those entities
electing not to adopt the fair value method of accounting must make pro
forma disclosures of net income and earnings per share as if the fair
value method of accounting defined in the Statement were adopted. Under
the fair value based method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the service
period, which is usually the vesting period. Management has not yet
performed a review to determine the effect this Statement could have on
the Company.
NOTE 7: PROPOSED LEGISLATIVE MATTERS
Pending Federal legislation currently provides for a one-time, special
assessment on all SAIF insured deposits of approximately $.85 per $100
of deposits. If the assessment is made at the proposed rates, the
effect on the Savings Bank would be a charge in the period enacted of
approximately $6.8 million on an after-tax basis. It is anticipated
that if the one-time assessment is levied, the Savings Bank may see a
decrease in the annual deposit insurance premium in future periods.
There have also been proposals to merge the SAIF with the BIF,
eliminate the Federal Thrift Charter and, under certain conditions,
require institutions to recapture a portion of their Federal, state and
local bad debt reserves maintained for income tax purposes. If the bad
debt recapture is made at the income tax rates currently in effect, the
Company could have a one-time charge to future earnings of
approximately $5.0 million on an after-tax basis related to the state
and local bad debt recapture.
No assurance can be given as to whether or when legislation as
discussed above will be enacted or, if enacted, what the terms of such
legislation would be.
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NEW YORK BANCORP INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL POSITION
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 "Savings Bank"), operates as a
community savings bank. The Savings 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 Savings 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.
On January 27, 1995, Hamilton Bancorp, Inc. was merged with and into
New York Bancorp. The merger was accounted for as a pooling of interests, and
as a result, the Company's consolidated financial statements for the six
months ended March 31, 1995 includes the consolidated amounts of Hamilton
Bancorp, Inc. for that same period.
B. FINANCIAL POSITION
Total assets at March 31, 1996 amounted to approximately $2.8 billion,
reflecting a $22.8 million increase from the amount reported at September 30,
1995. As permitted under guidance issued by the Financial Accounting
Standards Board in November 1995, during the quarter ended December 31, 1995,
the Company transferred $99.1 million of its mortgage-backed securities and
debt and equity securities previously classified as held to maturity to the
available for sale classification. Additionally, mortgage-backed securities
with a carrying value and market value of approximately $15.4 million,
previously classified as available for sale, were transferred to the held to
maturity portfolio.
During the quarter ended March 31, 1996, the Company disclosed in a
Form F-11 filing that it had purchased 377,560 shares, or 7.84%, of the
outstanding common shares of North Side Savings Bank located in Floral Park,
New York.
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C. 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 positive 9.7% at March 31, 1996 as compared to a negative 8.8%
at March 31, 1995 and a negative 12.5% at September 30, 1995. The movement to
a positive one year gap was primarily achieved through interest rate swap
arrangements. Management believes that the shift in the one year gap
positions the Company well in the current interest rate environment.
A positive gap denotes asset sensitivity which in a given period will
result in more assets than liabilities being subject to repricing. Generally,
asset sensitive gaps would result in a net positive effect on net interest
margin and, consequently, net income in an increasing interest rate
environment. Alternatively, asset sensitive gaps would generally result in a
net negative effect on net interest margin and, consequently, net income in a
decreasing 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 3.70% in the second quarter of
fiscal year 1996, compared to 3.74% in the second quarter of fiscal year
1995. However, the net interest margin of 3.70% for the current quarter
reflects a 9 basis point increase from the net margin of 3.61% for the
quarter ended December 31, 1995.
At March 31, 1996, the Savings 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 March 31, 1996, 54.61% of such
interest-earning assets were adjustable rate assets.
Within the framework of the targeted one year gap, the Savings 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. At March 31, 1996 Home Federal maintained interest rate swap
arrangements with a notional amount of $245.0 million. The Savings Bank
receives a variable rate (which is matched against the related variable rate
borrowing) and pays a fixed rate, thus locking in a spread on fixed rate
mortgage loans or fixed rate mortgage-backed securities during the term of
the swap. Such swaps have maturities ranging from April 1996 to December
1996.
14
15
The Savings Bank has also entered into $600.0 million of interest rate
swap arrangements, $400.0 million of which will begin in June 1996 and mature
in June 1997 and $200.0 million of which will begin in December 1996 and
mature in June 1997. In accordance with the provisions under the $600.0
million of interest rate swap arrangements, the Savings Bank will receive a
variable rate (which will be matched against the related variable rate
borrowing) and pay a fixed rate during the term of the swap.
In connection with its asset/liability management strategy, the
Savings Bank also uses interest rate cap and interest rate floor arrangements
to assist in further insulating the Savings Bank from volatile interest rate
changes. At March 31, 1996, the amount of unamortized gain on terminated
interest rate floor arrangements amounted to $5.9 million.
At March 31, 1996 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 October 1999. The Savings
Bank uses stock indexed call options for purposes of hedging its MarketSmart
CD's and MarketSmart I.R.A. CD's. The Savings Bank ceased offering
MarketSmart CD's during fiscal year 1995 due to its inability to purchase
stock indexed call options.
D. 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 5%. The Savings Bank's ratio was 5.39% during March 1996 and 5.28%
during September 1995.
The Savings 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
Savings Bank does not foresee any problems in generating liquidity to meet
its operational and regulatory requirements.
The Savings Bank's lending and investment activities are predominately
funded by deposits, Federal Home Loan Bank of New York advances, reverse
repurchase agreements with primary government securities dealers,
subordinated capital notes, scheduled amortization and prepayments, and funds
provided by operations.
During the quarter ended March 31, 1996, New York Bancorp repurchased
286,806 shares under its present stock repurchase plan, bringing total
purchases during the current fiscal year to 546,806 shares. At March 31,
1996, the total number of Treasury shares amounted to 3,022,203.
Additionally, at March 31, 1996, the Company had authority to repurchase up
to an additional 840,472 shares. Repurchases may be made from time to time in
open market transactions, subject to availability of shares at prices deemed
appropriate by New York Bancorp.
15
16
As of March 31, 1996, Home Federal is considered a "well capitalized"
institution under the prompt corrective action regulations and continues to
exceed all regulatory capital requirements as detailed in the following
table:
TANGIBLE CAPITAL CORE CAPITAL (1) RISK-BASED CAPITAL (2)
------------------- ------------------- -------------------
Amount Percentage Amount Percentage Amount Percentage
-------- ---------- -------- ---------- -------- ----------
(Dollars in Thousands)
Capital for regulatory
purposes..................... $142,698 5.19% $142,698 5.19% $153,140 11.85%
Minimum regulatory
requirement.................. 41,259 1.50 82,519 3.00 103,390 8.00
-------- ---- -------- ---- -------- ----
Excess........................ $101,439 3.69% $ 60,179 2.19% $ 49,750 3.85%
======== ==== ======== ==== ======== ====
- -----------------
(1) Beginning December 19, 1992, 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) In August 1993, 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. Implementation of this regulation has been
delayed by the OTS. The Savings Bank does not anticipate that its
risk-based capital requirement will be materially affected as a result of
this regulation.
(3) For purposes of determining capital for regulatory purposes, unrealized
appreciation (depreciation) on securities available for sale, net of tax
effect, is excluded.
(4) For tangible and core capital, the ratio is to adjusted total assets. For
risk-based capital, the ratio is to total risk- weighted assets.
E. 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 and investments, and the cost of deposits
and borrowings. 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 borrowings.
Net income is further affected by other operating income, other operating
expenses and taxes.
16
17
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 March 31,
-----------------------------------------------------------------------
1996 1995
--------------------------------- ----------------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
----------- -------- ------ ----------- -------- ------
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans......................... $ 1,405,470 $ 28,450 8.10% $ 1,210,453 $ 25,525 8.44%
Other loans.................................. 284,523 6,185 8.72 305,825 6,393 8.40
----------- -------- --------- --------
Total loans................................ 1,689,993 34,635 8.20 1,516,278 31,918 8.43
Mortgage-backed securities................... 834,273 13,963 6.70 934,796 15,389 6.58
Money market investments..................... 6,795 91 5.40 21,116 302 5.80
Trading account securities................... -- -- -- 13,198 193 5.95
Debt and equity securities................... 89,909 1,402 6.25 72,591 1,188 6.57
----------- -------- ----------- --------
Total interest-earning assets.................. 2,620,970 50,091 7.65 2,557,979 48,990 7.67
-------- --------
Non-interest-earning assets.................... 51,906 53,496
----------- -----------
Total assets................................. $ 2,672,876 $ 2,611,475
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Deposits..................................... $ 1,747,091 15,363 3.54 $ 1,755,573 15,395 3.56
Borrowed funds............................... 725,158 10,378 5.75 655,497 9,465 5.83
----------- -------- --------- --------
Total interest-bearing liabilities............. $ 2,472,249 25,741 4.19 2,411,070 24,860 4.17
-------- --------
Other liabilities.............................. 39,800 28,790
---------- -----------
Total liabilities............................ 2,512,049 2,439,860
Shareholders' equity........................... 160,827 171,615
---------- -----------
Total liabilities and
shareholders' equity........................ $2,672,876 $ 2,611,475
========== ===========
NET INTEREST INCOME/INTEREST RATE
SPREAD.......................................... $ 24,350 3.46% $ 24,130 3.50%
======== ==== ======== ====
NET EARNING ASSETS/NET
INTEREST MARGIN................................. $ 148,721 3.70% $ 146,909 3.74%
========== ==== ========== ====
PERCENTAGE OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES................. 106.02% 106.09%
====== ======
17
18
Six Months Ended March 31,
-------------------------------------------------------------------------
1996 1995
---------------------------------- ---------------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
----------- -------- ------ ----------- --------- ------
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans................... $ 1,395,811 $ 56,862 8.15% $ 1,193,367 $ 49,471 8.29%
Other loans............................ 288,127 12,714 8.83 303,118 12,639 8.35
----------- -------- ----------- ---------
Total loans.......................... 1,683,938 69,576 8.26 1,496,485 62,110 8.30
Mortgage-backed securities............. 847,994 28,166 6.64 945,766 30,987 6.55
Money market investments............... 7,352 198 5.39 20,258 560 5.54
Trading account securities............. 439 13 5.70 13,108 355 5.44
Debt and equity securities............. 86,865 2,797 6.44 73,570 2,403 6.54
----------- -------- ----------- ---------
Total interest-earning assets............ 2,626,588 100,750 7.67 2,549,187 96,415 7.57
-------- ---------
Non-interest-earning assets.............. 49,660 41,391
----------- -----------
Total assets........................... $ 2,676,248 $ 2,590,578
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Deposits............................... $ 1,746,627 31,244 3.58 $ 1,765,856 30,384 3.45
Borrowed funds......................... 730,008 21,488 5.89 620,930 17,286 5.58
----------- -------- ----------- --------
Total interest-bearing liabilities....... 2,476,635 52,732 4.26 2,386,786 47,670 4.00
-------- --------
Other liabilities........................ 41,054 29,715
----------- -----------
Total liabilities...................... 2,517,689 2,416,501
Shareholders' equity..................... 158,559 174,077
----------- -----------
Total liabilities and
shareholders' equity.................. $ 2,676,248 $ 2,590,578
=========== ===========
NET INTEREST INCOME/INTEREST RATE
SPREAD.................................... $ 48,018 3.41% $ 48,745 3.57%
======== ==== ======== ====
NET EARNING ASSETS/NET
INTEREST MARGIN........................... $ 149,953 3.66% $ 162,401 3.82%
=========== ==== =========== ====
PERCENTAGE OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES........... 106.05% 106.80%
====== ======
18
19
F. COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995
General
-------
New York Bancorp's net income for the quarter ended March 31, 1996 was
$9.2 million, or $.76 per share, compared to a net loss of $9.8 million for
the quarter ended March 31, 1995 which included $16.8 million in
non-recurring charges on an after-tax basis incurred in connection with the
Hamilton Bancorp merger. Other 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 March
31, 1996 increased by $1.1 million, or 2.2%, to $50.1 million compared to the
quarter ended March 31, 1995. The increase in interest income is attributable
to a $63.0 million increase in average interest-earning assets which,
however, was partially offset by a 2 basis point decline in yield.
Interest and fee income on loans for the quarter ended March 31, 1996
increased by $2.7 million, or 8.5%, to $34.6 million compared to $31.9
million for the same quarter in 1995. The increase in loan income reflects a
$173.7 million increase in the average loan balance to $1.690 billion and a
32 basis point increase in yield on other loans which, however, were
partially offset by a 34 basis point decline in yield on first mortgage
loans. Interest on mortgage-backed securities for the quarter ended March 31,
1996 decreased by $1.4 million to $14.0 million as compared to the same
quarter in 1995. This decrease in income is primarily due to a $100.5 million
decrease in the average balance which, however, was partially offset by a 12
basis point increase in yield. Money market investment income decreased $.2
million as a 40 basis point decrease in yield was coupled with a $14.3
million decrease in the average balance. Interest on trading account
securities decreased $.2 million in the current quarter as compared to the
prior year period as funds were not maintained in a trading account in the
current period. The decrease in the average balance of money market
investments and trading account securities is due to the Company investing
these funds in higher yielding assets and/or utilizing the funds to reduce
certain short-term borrowed funds. Interest and dividends on debt and equity
securities increased by $.2 million to $1.4 million in the current quarter
compared to $1.2 million in the comparable prior year quarter. The increase
in such income is attributed to a $17.3 million increase in the average
balance, partially offset by a 32 basis point decline in yield.
Interest Expense
----------------
Interest expense on interest-bearing liabilities for the quarter ended
March 31, 1996 increased by $.9 million, or 3.5%, to $25.7 million compared
to the quarter ended March 31, 1995. The increase in interest expense for the
quarter primarily reflects a $61.2 million growth in interest-bearing
liabilities to $2.472 billion, coupled with a 2 basis point increase in cost
on interest-bearing liabilities to 4.19%. The impact of the Savings Bank's
use of interest rate swaps and other off-balance sheet instruments was to
decrease interest expense by $.6 million for the quarter ended March 31, 1996
and increase interest expense by $21,000 for the quarter ended March 31,
1995.
19
20
Interest expense on deposits of $15.4 million for the quarter ended
March 31, 1996 was substantially unchanged from the quarter ended March 31,
1995. The average cost of deposits declined slightly from 3.56% in 1995 to
3.54% in 1996, while the average balance of deposits declined by $8.5 million
to $1.747 billion during the quarter ended March 31, 1996. Interest expense
on borrowed funds increased $.9 million to $10.4 million for the quarter
ended March 31, 1996 as compared to the quarter ended March 31, 1995. This
increase reflects a $69.7 million increase in the average balance of borrowed
funds to $725.2 million which, however, was partially offset by an 8 basis
point decline in the average cost of borrowed funds from 5.83% during the
quarter ended March 31, 1995 to 5.75% during the quarter ended March 31,
1996.
Provision for Possible Loan Losses
----------------------------------
Home Federal provided $.3 million and $.4 million for possible loan
losses during the quarters ended March 31, 1996 and 1995, respectively. The
Savings Bank's ratio of its allowance for possible loan losses to total
nonaccrual loans amounted to 67.3% and 67.0% at March 31, 1996 and 1995,
respectively.
At March 31, 1996, the Company's recorded investment in impaired loans
was $15.3 million, all of which were on nonaccrual status. Due to
charge-offs, or the crediting of interest payments to principal, the loans do
not have an impairment reserve at March 31, 1996. Interest income of $.2
million was recognized on these loans during the quarter ended March 31,
1996. This represents actual interest payments received. The average recorded
investment in impaired loans during the current quarter was $14.2 million.
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 Savings Bank's determination of the adequacy of the
allowance for loan losses, the Savings 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
March 31, 1996 is sufficient to cover anticipated losses inherent in the loan
portfolios.
Nonaccrual loans at March 31, 1996 amounted to $30.6 million, or 1.8%
of total loans, as compared to $30.4 million, or 1.8% of total loans, at
September 30, 1995 and as compared to $38.2 million, or 2.4% of total loans,
at March 31, 1995.
20
21
The following table sets forth the Savings Bank's nonaccrual loans at
the dates indicated:
March 31, September 30,
1996 1995
-------- -------------
(In Thousands)
Nonaccrual Loans
- ----------------
First mortgage loans:
One to four family conventional residential........ $ 13,134 $ 13,391
Commercial real estate.............................. 15,250 14,447
-------- --------
28,384 27,838
Other loans - Cooperative residential loans........... 2,219 2,534
-------- --------
Total nonaccrual loans............................ $ 30,603 $ 30,372
======== ========
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 $803,000 and $966,000 for the three month periods ended March 31,
1996 and 1995, respectively. The amount of interest income that was recorded
on these loans was $338,000 and $278,000 for the three month periods ended
March 31, 1996 and 1995 respectively.
Additionally, at March 31, 1996, the Savings Bank had $2.8 million in
real estate owned as compared to $2.0 million at September 30, 1995 and as
compared to $3.2 million at March 31, 1995. Further, at March 31, 1996 the
Savings Bank also had 16 restructured commercial real estate loans amounting
to approximately $7.6 million 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 Savings Bank also has $4.0 million of consumer and other loans
which are past due 90 days and still accruing interest as of March 31, 1996.
Of the $4.0 million, $2.9 million represent loans guaranteed by the United
States Department of Education through the New York State Higher Education
Services Corporation.
The Savings Bank's allowance for possible loan losses at March 31,
1996 was $20.6 million, which represented 67.3% of nonaccrual loans or 1.2%
of total loans, compared to $21.3 million at September 30, 1995, which
represented 70.0% of nonaccrual loans or 1.3% of total loans.
21
22
Summary of Loan Loss Experience
-------------------------------
The following is a summary of the activity in the Savings Bank's
allowance for possible loan losses for the quarters ended March 31:
1996 1995
-------- --------
(In Thousands)
Allowance for possible loan losses, beginning of quarter................. $ 20,723 $ 25,838
Charge-offs:
Commercial real estate.................................................. (44) (160)
Residential real estate................................................. (178) (134)
Other loans............................................................. (224) (377)
-------- --------
Total charge-offs...................................................... (446) (671)
Less recoveries - other loans........................................... 11 12
-------- --------
Net charge-offs......................................................... (435) (659)
-------- --------
Addition to allowance charged to expense................................ 300 400
-------- --------
Allowance for possible loan losses, end of quarter...................... $ 20,588 $ 25,579
======== ========
Net Interest Income After Provision for Possible Loan Losses
------------------------------------------------------------------
Net interest income after provision for possible loan losses for the
quarter ended March 31, 1996 amounted to $24.1 million, representing an
increase of $.3 million from the quarter ended March 31, 1995. This increase
primarily reflects a $63.0 million increase in average interest earning
assets, which was partially offset by a 4 basis point decline in the Savings
Bank's net interest margin from 3.74% in 1995 to 3.70% in 1996.
Other Operating Income
----------------------
Other operating income amounted to $4.1 million for the quarter ended
March 31, 1996, compared to $.3 million for the prior year quarter, primarily
reflecting a $2.7 million improvement in net gain (loss) on the sales of
mortgage loans and securities available for sale, a $.4 million improvement
in net real estate operations, and a $.4 million increase in banking related
fees.
22
23
Other Operating Expenses
------------------------
Other operating expenses totaled $11.6 million, or 1.75% of average
assets, during the quarter ended March 31, 1996, compared to $31.9 million
during the quarter ended March 31, 1995, which included $19.0 million in
merger and restructuring charges incurred in connection with the Hamilton
Bancorp merger. Without the merger and restructuring expenses, other
operating expenses would have totaled $12.9 million, or 1.96% of average
assets, during the quarter ended March 31, 1995. Excluding the merger and
restructuring expenses, other operating expenses declined $1.3 million for
the current quarter compared to the comparable prior year quarter. This was
primarily attributed to a $.5 million decrease in compensation and benefits
and a $.4 million decrease in other expenses primarily as a result of
consolidation efficiencies from the merger with Hamilton Bancorp in January
1995. Additionally, Federal deposit insurance premium expense was down by $.3
million, primarily reflecting the reduced premium relative to the Savings
Bank's BIF insured deposits acquired in connection with its acquisition of
Union Savings Bank in 1992.
Income Tax Expense
------------------
Income taxes increased $5.3 million to $7.3 million for an effective
tax rate of 44.4% during the quarter ended March 31, 1996. The quarter ended
March 31, 1995 included $2.0 million in income tax expense, which reflected
the non-deductibility of certain merger and restructuring charges.
G. COMPARISON OF SIX MONTHS ENDED MARCH 31, 1996 AND 1995
General
-------
New York Bancorp's net income for the six months ended March 31, 1996
was $17.0 million, or $1.40 per share, compared to a net loss of $3.3 million
for the six months ended March 31, 1995, which included $16.8 million in
non-recurring charges on an after-tax basis incurred in connection with the
Hamilton Bancorp merger. Other comments regarding the components of net
income are detailed in the following paragraphs.
Interest Income
---------------
Interest income on interest-earning assets for the six months ended
March 31, 1996 increased by $4.3 million, or 4.5%, to $100.8 million compared
to the six months ended March 31, 1995. The increase in interest income is
attributable to a $77.4 million increase in average interest-earning assets,
coupled with a 10 basis point increase in yield.
23
24
Interest and fee income on loans for the six months ended March 31,
1996 increased by $7.5 million, or 12.0%, to $69.6 million compared to $62.1
million for the same period in 1995. The increase in loan income reflects a
$187.5 million increase in the average loan balance to $1.684 billion and a
48 basis point increase in yield on other loans which, however, were
partially offset by a 14 basis point decline in yield on first mortgage
loans. Interest on mortgage-backed securities for the six months ended March
31, 1996 decreased by $2.8 million to $28.2 million as compared to the same
period in 1995. This decrease in income is primarily due to a $97.8 million
decrease in the average balance which, however, was partially offset by a 9
basis point increase in yield. Money market investment income decreased $.4
million due to a $12.9 million decrease in the average balance and a 15 basis
point decline in yield. Interest on trading account securities decreased $.3
million in the current six month period as compared to the prior year period
as an increase in the yield of 26 basis points was more than offset by a
decrease in the average balance of $12.7 million. The decrease in the average
balance of money market investments and trading account securities is due to
the Company investing these funds in higher yielding assets and/or utilizing
the funds to reduce certain short-term borrowed funds. Interest and dividends
on debt and equity securities increased by $.4 million to $2.8 million in the
current six month period compared to $2.4 million in the comparable prior
year period. The increase in such income is attributed to a $13.3 million
increase in the average balance which, however, was partially offset by a 10
basis point decline in yield.
Interest Expense
----------------
Interest expense on interest-bearing liabilities for the six months
ended March 31, 1996 increased by $5.1 million, or 10.6%, to $52.7 million
compared to the six months ended March 31, 1995. The increase in interest
expense for the six months primarily reflects an $89.8 million growth in
average interest-bearing liabilities to $2.477 billion coupled with a 26
basis point increase in cost on interest-bearing liabilities to 4.26%. The
impact of the Savings Bank's use of interest rate swaps and other off-
balance sheet instruments was to decrease interest expense by $1.3 million
for the six months ended March 31, 1996 and increase interest expense by $.1
million for the six months ended March 31, 1995.
Interest expense on deposits increased by $.9 million to $31.2 million
for the six months ended March 31, 1996, compared to the six months ended
March 31, 1995. This 2.8% increase reflects a 13 basis point increase in the
average cost of deposits from 3.45% in 1995 to 3.58% in 1996. This increase,
however, was partially offset by a $19.2 million decrease in the average
balance of deposits to $1.747 billion in 1996. Interest expense on borrowed
funds increased $4.2 million to $21.5 million for the six months ended March
31, 1996 as compared to the six months ended March 31, 1995. This increase
reflects a $109.1 million increase in the average balance of borrowed funds
to $730.0 million, coupled with a 31 basis point increase in the average cost
of borrowed funds from 5.58% in 1995 to 5.89% in 1996.
24
25
Provision for Possible Loan Losses
----------------------------------
Home Federal provided $.6 million and $.9 million for possible loan
losses during the six months ended March 31, 1996 and 1995, respectively. The
reduction in the provision for possible loan losses reflects the improvement
in management's assessment for anticipated losses inherent in the loan
portfolios.
Net Interest Income After Provision for Possible Loan Losses
------------------------------------------------------------
Net interest income after provision for possible loan losses for the
six months ended March 31, 1996 amounted to $47.4 million, representing a
decrease of $.4 million from the $47.8 million amount during the six months
ended March 31, 1995. This decrease primarily reflects a 16 basis point
decrease in the Savings Bank's net interest margin from 3.82% in 1995 to
3.66% in 1996, which was partially offset by a $77.4 million increase in
average interest-earning assets.
Other Operating Income
----------------------
Other operating income amounted to $6.7 million for the six months
ended March 31, 1996, compared to $1.5 million for the prior year period,
primarily reflecting a $3.6 million improvement in net gain (loss) on the
sales of mortgage loans and securities available for sale, a $.9 million
increase in banking related fees, and a $.6 million improvement in net real
estate operations.
Other Operating Expenses
------------------------
Other operating expenses totaled $23.5 million, or 1.76% of average
assets, during the six months ended March 31, 1996, compared to $44.7 million
the six months ended March 31, 1995, which included $19.0 million in merger
and restructuring charges incurred in connection with the Hamilton Bancorp
merger. Without the merger and restructuring expenses, other operating
expenses would have totaled $25.7 million, or 1.99% of average assets during
the six months ended March 31, 1995. Excluding the merger and restructuring
expenses, other expenses declined $2.2 million for the current six month
period compared to the prior year period. This was primarily attributed to a
$1.2 million decrease in compensation and benefits and a $.5 million decrease
in other expenses primarily as a result of consolidation efficiencies from
the merger with Hamilton Bancorp in January 1995. Additionally, Federal
deposit insurance premium expense decreased by $.5 million, primarily
reflecting the reduced premium relative to the Savings Bank's BIF insured
deposits acquired in connection with its acquisition of Union Savings Bank in
1992.
25
26
Income Tax Expense
------------------
Income taxes increased $5.6 million to $13.5 million for an effective
tax rate of 44.3% during the six months ended March 31, 1996. The prior year
period reflected the non-deductibility of certain merger and restructuring
expenses and lower pre-tax income.
26
27
H. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data.
Three Months Ended Six Months Ended
March 31, March 31,
----------------------- -----------------------
1996 1995 1996 1995
--------- --------- --------- --------
(Dollars in Thousands, except per share amounts)
FINANCIAL RATIOS (1)
- --------------------
Average Yield:
First mortgage loans...................................... 8.10% 8.44% 8.15% 8.29%
Other loans............................................... 8.72 8.40 8.83 8.35
Money market investments.................................. 5.40 5.80 5.39 5.54
Trading account securities................................ N/A 5.95 5.70 5.44
Debt and equity securities................................ 6.25 6.57 6.44 6.54
Mortgage-backed securities................................ 6.70 6.58 6.64 6.55
All interest-earning assets............................ 7.65 7.67 7.67 7.57
Average cost:
Deposits.................................................. 3.54 3.56 3.58 3.45
Borrowed funds............................................ 5.75 5.83 5.89 5.58
All interest-bearing liabilities....................... 4.19 4.17 4.26 4.00
Net interest rate spread..................................... 3.46 3.50 3.41 3.57
Net interest margin.......................................... 3.70 3.74 3.66 3.82
Average interest-earning assets to
average interest-bearing liabilities....................... 106.02 106.09 106.05 106.80
Return on average assets..................................... 1.37 (1.50) 1.27 (.26)
Return on average common equity.............................. 22.95 (22.85) 21.45 (3.93)
Operating expense to average assets.......................... 1.75 4.87 1.76 3.45
Equity to asset ratio at March 31............................ 5.78 6.45 5.78 6.45
Cumulative one year gap as a percent of total
interest-earning assets at March 31........................ +9.7% -8.8% +9.7% -8.8%
SHARE INFORMATION:
- -----------------
Earnings per share........................................ $ .76 $ (.73) $ 1.40 $ (.25)
Weighted average number of common shares
and equivalents outstanding............................. 12,130,549 13,377,124 12,176,481 13,191,066
Number of shares outstanding at March 31.................. 11,724,647 13,523,935 11,724,647 13,523,935
Book value per share at March 31.......................... $13.58 $12.59 $13.58 $12.59
NET INTEREST POSITION:
- ---------------------
Excess of average interest-earning assets
over average interest-bearing liabilities............... $ 148,721 $ 146,909 $ 149,953 $ 162,401
LOAN HIGHLIGHTS:
- ---------------
Loan originations......................................... $ 80,660 $ 134,448 $ 151,280 $ 223,619
Loan purchases............................................ $ 82,804 $ 5,506 $ 91,315 $ 14,112
Loan sales................................................ $ 18,880 $ 4,827 $ 35,176 $ 18,893
Loans serviced for others at March 31..................... $ 592,919 $ 518,102 $ 592,919 $ 518,102
Loan servicing fees....................................... $ 438 $ 433 $ 841 $ 870
ADJUSTABLE RATE ASSETS AT MARCH 31:
- ----------------------------------
First mortgage loans and mortgage-backed
securities.............................................. $ 1,225,262 $ 926,552 $1,225,262 $ 926,552
Other loans, money market investments, trading
account securities and debt and equity securities....... $ 244,803 $ 286,861 $ 244,803 $ 286,861
Total adjustable rate assets as a percent
of total interest-earning assets........................ 54.61% 47.21% 54.61% 47.21%
- ----------------
(1) Selected financial ratios were computed using daily average balances
and annualized, where applicable.
27
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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
- ------------------------------------------------------------
Not applicable
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)
11 Statements re: computation of per share earnings
27 Financial Data Schedule
(1) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
1992 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
-------------------
None
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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: May 14, 1996 By: /s/ Michael A. McManus, Jr.
-----------------------------------
Michael A. McManus, Jr.
President and
Chief Executive Officer
Date: May 14, 1996 By: /s/ Stan I. Cohen
-----------------------------------
Stan I. Cohen
Senior Vice President,
Controller and Secretary
29