1
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: June 30, 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 July 29, 1996: 11,269,558.
2
NEW YORK BANCORP INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1. Financial Statements:
Consolidated Statements of Financial Condition as
of June 30, 1996 and September 30, 1995 4
Consolidated Statements of Income for the Three and
Nine Months ended June 30, 1996 and 1995 5
Consolidated Statement of Changes in Shareholders'
Equity for the Nine Months ended June 30, 1996 6
Consolidated Statements of Cash Flows for the
Nine Months ended June 30, 1996 and 1995 7 - 8
Notes to Consolidated Financial Statements 9 - 13
Independent Auditors' Review Report 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14 - 28
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings 29
Item 2. Changes in Securities 29
Item 3. Defaults Upon Senior Securities 29
Item 4. Submission of Matters to a Vote of Security Holder 29
Item 5. Other Information 29
Item 6. Exhibits and Reports on Form 8-K 29
Signature Page 30
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[KPMG Peat Marwick LLP LETTERHEAD]
One Jericho Plaza
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 June 30, 1996, and for the three-and nine-
month periods ended June 30, 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 the provisions of Statement of
Financial 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.
/s/ KPMG Peat Marwick LLP
July 23, 1996
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4
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION -----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
June 30, September 30,
1996 1995
---------- ------------
ASSETS
Cash and due from banks.............................. $ 22,700 $ 31,189
Money market investments............................. 6,500 13,915
Trading account securities........................... -- 2,003
Investment in debt and equity securities, net:
Held to maturity (estimated market value of
$1,159 and $21,107 at June 30, 1996
and September 30, 1995, respectively)............. 1,155 21,179
Available for sale................................. 93,910 46,273
Mortgage-backed securities, net:
Held to maturity (estimated market value of
$544,834 and $637,503 at June 30, 1996
and September 30, 1995, respectively)............. 562,785 664,726
Available for sale................................. 295,042 206,794
Federal Home Loan Bank stock......................... 30,944 20,288
Loans receivable, net:
First mortgage loans............................... 1,580,451 1,389,776
Other loans........................................ 275,733 296,439
---------- ----------
1,856,184 1,686,215
Less allowance for possible loan losses............ (19,735) (21,272)
----------- ----------
Total loans receivable, net....................... 1,836,449 1,664,943
Accrued interest receivable.......................... 22,134 21,723
Premises and equipment, net.......................... 12,839 12,851
Other assets......................................... 33,662 25,708
---------- ----------
Total assets...................................... $2,918,120 $2,731,592
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits.......................................... $1,746,975 $1,748,874
Borrowed funds..................................... 958,912 767,138
Mortgagors' escrow payments........................ 9,472 16,520
Accrued expenses and other liabilities............. 44,387 42,674
---------- ----------
Total liabilities................................. 2,759,746 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 June 30,
1996 and September 30, 1995; 11,491,858 and
12,138,974 shares outstanding at June 30, 1996
and September 30, 1995, respectively.............. 147 147
Additional paid-in capital......................... 64,694 63,575
Retained earnings, substantially restricted........ 142,723 125,593
Treasury stock, at cost, 3,254,992 and 2,607,876
shares at June 30, 1996 and September 30, 1995,
respectively ..................................... (48,335) (33,740)
Unrealized appreciation (depreciation) on
securities available for sale, net of tax effect.. (855) 811
---------- ----------
Total shareholders' equity........................ 158,374 156,386
---------- ----------
Total liabilities and shareholders' equity........ $2,918,120 $2,731,592
========== ==========
See accompanying notes to consolidated financial statements.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF INCOME -----
(UNAUDITED)
Three Months Ended Nine Months Ended
June 30, June 30,
-------------------- -------------------
1996 1995 1996 1995
------- ------- -------- ------
(In Thousands, except per share amounts)
INTEREST INCOME:
Interest and fees on loans:
First mortgage loans................ $29,952 $26,476 $86,814 $75,947
Other loans......................... 6,085 6,716 18,799 19,355
------- ------- ------- -------
Total interest and fees on loans... 36,037 33,192 105,613 95,302
Mortgage-backed securities........... 14,708 14,847 42,874 45,834
Debt and equity securities - taxable. 1,626 1,105 4,423 3,508
Money market investments............. 21 366 219 926
Trading account securities........... -- 204 13 559
------- ------- ------- -------
Total interest income.............. 52,392 49,714 153,142 146,129
------- ------- ------- -------
INTEREST EXPENSE:
Deposits............................. 14,804 15,976 46,048 46,360
Borrowed funds....................... 11,682 10,538 33,170 27,824
------- ------- ------- -------
Total interest expense............. 26,486 26,514 79,218 74,184
------- ------- ------- -------
Net interest income................ 25,906 23,200 73,924 71,945
Provision for possible loan losses.... (300) (400) (900) (1,300)
-------- -------- -------- --------
Net interest income after
provision for possible loan
losses............................ 25,606 22,800 73,024 70,645
------- ------- ------- -------
OTHER OPERATING INCOME:
Loan fees and service charges........ 673 610 2,094 1,961
Net gain (loss) on the sales of
mortgage loans and securities
available for sale.................. 742 125 2,778 (1,391)
Real estate operations, net.......... (253) 59 (340) (660)
Other................................ 2,008 1,316 5,299 3,713
------- ------- ------- -------
Total other operating income....... 3,170 2,110 9,831 3,623
------- ------- ------- -------
OTHER OPERATING EXPENSES:
Compensation and benefits............ 5,588 5,468 16,538 17,651
Occupancy, net....................... 2,123 2,353 6,363 6,600
Advertising and promotion............ 761 476 2,210 1,907
Federal deposit insurance premiums... 931 1,208 2,828 3,557
Merger and restructuring............. -- -- -- 19,024
Other................................ 2,311 3,028 7,316 8,533
------- ------- ------- -------
Total other operating expenses..... 11,714 12,533 35,255 57,272
------- ------- ------- -------
Income before income tax expense... 17,062 12,377 47,600 16,996
------- ------- ------- -------
INCOME TAX EXPENSE:
Federal expense...................... 5,154 3,755 14,385 9,138
State and local expense.............. 2,278 1,703 6,581 4,276
------- ------- ------- -------
Total income tax expense........... 7,432 5,458 20,966 13,414
------- ------- ------- -------
Net income......................... $ 9,630 $ 6,919 $26,634 $ 3,582
======= ======= ======= =======
EARNINGS PER COMMON SHARE............. $ .81 $ .51 $ 2.21 $ .26
See accompanying notes to consolidated financial statements.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -----
NINE MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
Unrealized
Appreciation
(Depreciation)
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 nine months
ended June 30, 1996............ -- -- 26,634 -- -- 26,634
Dividends declared on
common stock................... -- -- (7,000) -- -- (7,000)
Purchase of 807,758 shares
of treasury stock.............. -- -- -- (18,090) -- (18,090)
Exercise of 160,642 shares
of stock options and related
tax benefits................... -- 1,119 (2,504) 3,495 -- 2,110
Unrealized depreciation on
securities transferred from
held to maturity to
available for sale............. -- -- -- -- (223) (223)
Change in unrealized
appreciation (depreciation)
on securities available for
sale........................... -- -- -- -- (1,443) (1,443)
----- -------- --------- -------- ------ ----------
Balance at June 30, 1996........ $ 147 $64,694 $142,723 $(48,335) $ (855) $ 158,374
===== ======= ======== ======== ====== ==========
See accompanying notes to consolidated financial statements.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(UNAUDITED)
Nine Months Ended
June 30,
-------------------------
1996 1995
---------- ---------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................... $ 26,634 $ 3,582
---------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................... 1,611 1,560
Amortization and accretion of deferred fees,
discounts and premiums......................... 1,381 1,303
Provision for possible loan losses.............. 900 1,300
Provision for losses on foreclosed real
estate......................................... 488 326
Net (gain) loss on sale of foreclosed real
estate......................................... 89 (105)
Net (gain) loss on sale of mortgage loans and
securities available for sale.................. (2,778) 1,391
Deferred income taxes........................... 769 (2,237)
Amortization of ESOP and RRP compensation
expense........................................ -- 464
Termination of ESOP & RRP....................... -- 4,992
Net (increase) decrease in trading account...... 2,003 (552)
Increase in accrued interest receivable......... (411) (1,707)
Increase (decrease) in accrued interest
payable........................................ (452) 185
Increase in accrued expenses and other
liabilities.................................... 3,050 2,659
(Increase) decrease in other assets............. (846) 378
---------- ---------
Total adjustments............................... 5,804 9,957
---------- ---------
Net cash provided by operating activities........ 32,438 13,539
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments on loans...................... 216,640 136,777
Principal payments on mortgage-backed
securities...................................... 74,770 55,072
Principal payments, maturities and calls on debt
and equity securities........................... 56,427 15,284
Proceeds on sales of loans....................... 41,858 26,255
Proceeds on sales of mortgage-backed securities
available for sale.............................. 83,767 77,279
Proceeds on sales of debt and equity securities
available for sale.............................. 2,719 6,415
Investment in first mortgage loans............... (453,763) (274,430)
Investment in other loans........................ (45,157) (55,755)
Investment in mortgage-backed securities
available for sale.............................. (82,445) (45,789)
Investment in debt and equity securities
available for sale.............................. (91,708) (22,166)
Proceeds on sales of foreclosed real estate...... 2,206 6,794
Net purchases of Federal Home Loan Bank stock.... (10,656) 990
Net purchases of premises and equipment.......... (1,599) (837)
Proceeds from sale of interest rate floor
agreements...................................... -- 10,835
Investment in interest rate floor agreements..... -- (2,265)
---------- ---------
Net cash used in investing activities............ (206,941) (65,541)
---------- ---------
(Continued)
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(CONTINUED)
Nine Months Ended
June 30,
------------------------
1996 1995
---------- ----------
(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in non-interest bearing
demand, savings, money market, and NOW
accounts........................................ $ 15,017 $(167,847)
Net increase (decrease) in time deposits ........ (16,916) 134,538
Net increase (decrease) in borrowings with
original maturities of three months or less..... (155,176) 172,146
Proceeds from long-term borrowings............... 532,625 --
Repayment of long-term borrowings................ (185,675) (50,892)
Purchase of common stock for treasury or
retirement...................................... (18,090) (22,248)
Payment of common stock dividends................ (7,129) (5,628)
Exercise of stock options........................ 991 828
Proceeds from sale of treasury stock............. -- 4,530
Decrease in mortgagors' escrow accounts.......... (7,048) (4,598)
---------- ---------
Net cash provided by financing activities........ 158,599 60,829
---------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... (15,904) 8,827
Hamilton Bancorp, Inc. net cash flows 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....... $ 29,200 $ 44,921
========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid.................................... $ 81,619 $ 72,589
========== =========
Income taxes paid................................ $ 19,183 $ 14,908
========== =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Transfer of loans to real estate owned........... $ 3,380 $ 3,277
========== =========
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 $ 11,418
========== =========
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 June 30,
1996 and September 30, 1995 and for the three and nine month periods
ended June 30, 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, based upon
current information, will not collect all amounts due, both principal
and interest, 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 which, for the Company, include
one-to-four family first mortgage loans and consumer and commercial
loans whose principal balance is less than $500,000, other than those
modified in a troubled debt restructuring (TDR). A loan is considered a
TDR by the Company when modifications of a concessionary nature are
made to the loan's original contractual terms due to the borrower's
financial difficulties. 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.
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Loans reviewed for impairment by the Company are limited to one-to-four
family first mortgage loans and consumer and commercial loans in excess
of $500,000, loans modified in a TDR, and commercial real estate loans.
At June 30, 1996, the measurement value of the Company's impaired loans
was based upon the estimated market value of the underlying collateral.
The Company's impaired loan identification and measurement processes
are conducted in conjunction with the Company's review of classified
assets and adequacy of its allowance for loan losses. Specific factors
utilized in the impaired loan identification process include, but are
not limited to, delinquency status, loan-to-value ratio, and debt
coverage. Cash receipts on an impaired loan are applied to principal
and interest in accordance with the contractual terms of the loan
unless full payment of principal is not expected, in which case the
full payment is applied as a reduction of the carrying value of the
loan. If the estimated market value of the underlying collateral,
including guarantees, is less than the principal balance of an impaired
loan, a loss is either charged to the allowance for possible loan
losses or an impairment reserve is allocated to reduce the book value
of the loan to the estimated market value of the underlying collateral.
Interest income on impaired loans is recorded on a cash basis, except
for a TDR which has performed under its restructured terms for at least
six months, at which time the accrual basis is utilized.
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.
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 nine month
periods ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the entire fiscal year.
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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 June 30,
1996, the Company's recorded investment in impaired loans was $13.8
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 June 30, 1996. Interest income of $.1 million
and $.3 million was recognized on these loans during the three and nine
months ended June 30, 1996, respectively. This represents actual
interest payments received. The average recorded investment in impaired
loans during the three and nine months ended June 30, 1996 amounted to
$14.8 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 June 30, 1996, Home Federal had commitments of $104.3 million to
originate first mortgage and cooperative residential loans. Of this
amount, adjustable rate mortgage loans represented $85.7 million and
fixed rate mortgage loans with interest rates ranging from 7.125% to
10.25%, represented $18.6 million. Home Federal also had commitments to
sell $8.5 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 June 30,
1996, outstanding notional amounts of interest rate swap arrangements
totaled $635.0 million as follows:
Fixed Variable
Notional Interest Rate Interest Rate
Amount Paying Receiving Maturity
------- ------------- -------------- -----------
$ 35,000 6.515% 5.000% September 1996
100,000 5.260% 5.496% December 1996 (1)
100,000 5.265% 5.496% December 1996 (1)
50,000 4.785% 5.496% June 1997 (2)
50,000 4.780% 5.496% June 1997
50,000 4.770% 5.496% June 1997
50,000 4.774% 5.496% June 1997 (2)
50,000 4.748% 5.496% June 1997
50,000 4.743% 5.496% June 1997 (2)
50,000 4.700% 5.496% June 1997
50,000 4.700% 5.496% June 1997 (2)
---------
$ 635,000
=========
-----------
(1) These $200 million in interest rate swaps have been extended
through June 1997 whereby the fixed interest pay rate will be
4.69% beginning in December 1996.
(2) In an effort to secure the hedge position provided against
interest rate risk, the Savings Bank in July 1996 terminated its
position as a party to $200.0 million of interest rate swaps for
the six month period December 1996 through June 1997. The gain of
$1.5 million from these terminated interest rate swaps is being
deferred, and will be amortized as a reduction of interest expense
over the period December 1996 through June 1997.
At June 30, 1996, the Savings Bank was servicing first mortgage
loans of approximately $577.6 million, which are either partially
or wholly-owned by others.
NOTE 5: STOCK REPURCHASE PLAN
During the quarter ended June 30, 1996, New York Bancorp repurchased
260,952 shares under its present stock repurchase plan, bringing total
purchases during the current fiscal year to 807,758 shares. At June 30,
1996, the total number of Treasury shares amounted to 3,254,992.
Additionally, at June 30, the Company had authority to repurchase up to
an additional 579,520 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.
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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.
The Company is planning to implement this Statement on October 1, 1996.
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. The Company plans to implement this Statement on October
1, 1996.
NOTE 7: PROPOSED LEGISLATIVE MATTERS
Proposed Federal legislation would provide 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, based on total
insured deposits as of March 31, 1995. 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.
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 nine
months ended June 30, 1995 includes the consolidated amounts of Hamilton
Bancorp, Inc. for that same period.
B. FINANCIAL POSITION
Total assets at June 30, 1996 amounted to approximately $2.9 billion.
This $186.5 million increase in total assets from the amount reported at
September 30, 1995 is primarily attributable to a $171.5 million increase in
loans receivable which was primarily funded through a $191.8 million increase
in borrowed funds. 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.
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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 negative 14.0% at June 30, 1996 as compared to a positive 9.7%
at March 31, 1996 and a negative 12.5% at September 30, 1995. The shift in
the one year gap during the current quarter reflected the effect of $600
million in interest rate swaps which at June 30, 1996 had a remaining
maturity of 11 1/2 months, compared to 14 1/2 months at March 31, 1996.
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 increased to 3.74% in the third
quarter of fiscal year 1996, compared to 3.58% in the third quarter of fiscal
year 1995. In addition, the net interest margin of 3.74% for the current
quarter reflects a 4 basis point increase from the net margin of 3.70% for
the quarter ended March 31, 1996.
At June 30, 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 June 30, 1996, 56.6% of such
interest-earning assets were adjustable rate assets.
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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 June 30, 1996 Home Federal maintained interest rate swap
arrangements with a notional amount of $635.0 million as follows:
Fixed Variable
Notional Interest Rate Interest Rate
Amount Paying Receiving Maturity
-------- ------------- ------------- -----------
$ 35,000 6.515% 5.000% September 1996
100,000 5.260% 5.496% December 1996 (1)
100,000 5.265% 5.496% December 1996 (1)
50,000 4.785% 5.496% June 1997 (2)
50,000 4.780% 5.496% June 1997
50,000 4.770% 5.496% June 1997
50,000 4.774% 5.496% June 1997 (2)
50,000 4.748% 5.496% June 1997
50,000 4.743% 5.496% June 1997 (2)
50,000 4.700% 5.496% June 1997
50,000 4.700% 5.496% June 1997 (2)
---------
$ 635,000
=========
-------------
(1) These $200 million in interest rate swaps have been extended through June
1997 whereby the fixed interest pay rate will be 4.69% beginning in
December 1996.
(2) In an effort to secure the hedge position provided against interest rate
risk, the Savings Bank in July 1996 terminated its position as a party to
$200.0 million of interest rate swaps for the six month period December
1996 through June 1997. The gain of $1.5 million from these terminated
interest rate swaps is being deferred, and will be amortized as a
reduction of interest expense over the period December 1996 through June
1997.
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 June 30, 1996, the amount of unamortized gain on terminated
interest rate floor arrangements amounted to $5.1 million.
At June 30, 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 5.15% during June 1996 and 5.28%
during September 1995.
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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 June 30, 1996, New York Bancorp repurchased
260,952 shares under its present stock repurchase plan, bringing total
purchases during the current fiscal year to 807,758 shares. At June 30, 1996,
the total number of Treasury shares amounted to 3,254,992. Additionally, at
June 30, 1996, the Company had authority to repurchase up to an additional
579,520 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.
As of June 30, 1996, Home Federal 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............ $142,605 4.89% $142,605 4.89% $152,642 11.00%
Minimum regulatory
requirement......... 43,783 1.50 87,566 3.00 111,056 8.00
-------- ---- -------- ---- -------- -----
Excess............... $ 98,822 3.39% $ 55,039 1.89% $ 41,586 3.00%
======== ==== ======== ==== ======== =====
(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.
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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.
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 June 30,
------------------------------------------------------------
1996 1995
---------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-------- -------- ------ ---------- -------- ------
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans............. $1,495,526 $ 29,952 8.01% $ 1,272,994 $26,476 8.32%
Other loans...................... 277,095 6,085 8.81 308,879 6,716 8.71
Mortgage-backed securities....... 876,543 14,708 6.71 907,686 14,847 6.54
Debt and equity securities....... 105,966 1,626 6.15 62,680 1,105 7.06
Money market investments......... 1,588 21 5.21 24,070 366 6.10
Trading account securities....... -- -- -- 13,391 204 6.09
---------- ------- ----------- -------
Total interest-earning assets...... 2,756,718 52,392 7.61 2,589,700 49,714 7.68
------- -------
Non-interest-earning assets........ 49,241 39,746
---------- -----------
Total assets.......... $2,805,959 $ 2,629,446
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Deposits......................... $1,752,352 14,804 3.40 $ 1,751,044 15,976 3.66
Borrowed funds................... 854,455 11,682 5.49 681,729 10,538 6.20
---------- ------- ----------- -------
Total interest-bearing
liabilities....................... 2,606,807 26,486 4.08 2,432,773 26,514 4.37
------- -------
Other liabilities.................. 39,675 29,792
---------- -----------
Total liabilities................ 2,646,482 2,464,565
Shareholders' equity............... 159,477 166,881
---------- -----------
Total liabilities and
shareholders' equity............ $2,805,959 $ 2,629,446
========== ===========
NET INTEREST INCOME/INTEREST RATE
SPREAD.............................. $25,906 3.53% $23,200 3.31%
======= ====== ======= ======
NET EARNING ASSETS/NET
INTEREST MARGIN.......... $ 149,911 3.74% $ 156,927 3.58%
========== ====== =========== ======
PERCENTAGE OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES..... 105.75% 106.45%
====== ======
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Nine Months Ended June 30,
------------------------------------------------------------
1996 1995
---------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-------- -------- ------ ---------- -------- ------
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans............... $1,428,928 $ 86,814 8.10% $ 1,219,910 $75,947 8.30%
Other loans........................ 284,463 18,799 8.82 305,038 19,355 8.47
Mortgage-backed securities......... 857,475 42,874 6.67 933,073 45,834 6.55
Debt and equity securities......... 93,208 4,423 6.33 69,936 3,508 6.69
Money market investments........... 5,438 219 5.38 21,529 926 5.75
Trading account securities......... 293 13 5.70 13,202 559 5.66
---------- -------- ----------- -------
Total interest-earning assets........ 2,669,805 153,142 7.65 2,562,688 146,129 7.60
-------- -------
Non-interest-earning assets.......... 49,523 40,900
---------- -----------
Total assets....................... $2,719,328 $ 2,603,588
---------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Deposits........................... $1,748,528 46,048 3.52 $ 1,761,082 46,360 3.52
Borrowed funds..................... 771,339 33,170 5.74 641,197 27,824 5.80
---------- -------- ----------- -------
Total interest-bearing liabilities... 2,519,867 79,218 4.20 2,402,279 74,184 4.13
-------- -------
Other liabilities.................... 40,598 32,879
---------- -----------
Total liabilities.................. 2,560,465 2,435,158
Shareholders' equity................. 158,863 168,430
---------- -----------
Total liabilities and
shareholders' equity.............. $2,719,328 $ 2,603,588
========== ===========
NET INTEREST INCOME/INTEREST RATE
SPREAD................................ $ 73,924 3.45% $71,945 3.47%
======== ==== ======= ====
NET EARNING ASSETS/NET
INTEREST MARGIN....................... $ 149,938 3.69% $ 160,409 3.74%
========= ==== =========== ====
PERCENTAGE OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES....... 105.95% 106.68%
====== ======
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F. COMPARISON OF THREE MONTHS ENDED JUNE 30, 1996 AND 1995
General
-------
New York Bancorp's net income for the quarter ended June 30, 1996 was
$9.6 million, or $.81 per share, compared to net income of $6.9 million, or
$.51 per share, for the quarter ended June 30, 1995. 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 June
30, 1996 increased by $2.7 million, or 5.4%, to $52.4 million compared to the
quarter ended June 30, 1995. The increase in interest income is attributable
to a $167.0 million increase in average interest-earning assets which,
however, was partially offset by a 7 basis point decline in yield.
Interest and fee income on loans for the quarter ended June 30, 1996
increased by $2.8 million, or 8.6%, to $36.0 million compared to $33.2
million for the same quarter in 1995. The increase in loan income reflects a
$190.7 million increase in the average loan balance to $1.773 billion and a
10 basis point increase in yield on other loans which, however, were
partially offset by a 31 basis point decline in yield on first mortgage
loans. Interest on mortgage-backed securities for the quarter ended June 30,
1996 decreased by $.1 million to $14.7 million as compared to the same
quarter in 1995. This decrease in income is primarily due to a $31.1 million
decrease in the average balance which, however, was partially offset by a 17
basis point increase in yield. Interest and dividends on debt and equity
securities increased by $.5 million to $1.6 million in the current quarter
compared to $1.1 million in the comparable prior year quarter. The increase
in such income is attributed to a $43.3 million increase in the average
balance, partially offset by a 91 basis point decline in yield. Money market
investment income decreased $.3 million as an 89 basis point decrease in
yield was coupled with a $22.5 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 Expense
----------------
Interest expense on interest-bearing liabilities for the quarter ended
June 30, 1996 amounted to $26.5 million, unchanged from the quarter ended
June 30, 1995, as a $174.0 million increase in the average balance was offset
by a 29 basis point decline in the cost on interest-bearing liabilities. The
impact of the Savings Bank's use of interest rate swaps and other off-balance
sheet instruments was to decrease interest expense by $.9 million for the
quarter ended June 30, 1996 and decrease interest expense by $.5 million for
the quarter ended June 30, 1995. Further, the impact of the Savings Bank's
use of reverse repurchase agreements with imbedded interest rate caps, all of
which had matured by June 30, 1995, was to decrease interest expense by $.1
million during the quarter ended June 30, 1995.
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Interest expense on deposits decreased by $1.2 million to $14.8
million for the quarter ended June 30, 1996 compared to the quarter ended
June 30, 1995. The average cost of deposits declined 26 basis points from
3.66% in 1995 to 3.40% in 1996, which more than offset an increase in the
average balance of deposits of $1.3 million to $1.752 billion during the
quarter ended June 30, 1996. Interest expense on borrowed funds increased
$1.2 million to $11.7 million for the quarter ended June 30, 1996 as compared
to the quarter ended June 30, 1995. This increase reflects a $172.7 million
increase in the average balance of borrowed funds to $854.5 million which,
however, was partially offset by a 71 basis point decline in the average cost
of borrowed funds from 6.20% during the quarter ended June 30, 1995 to 5.49%
during the quarter ended June 30, 1996.
Provision for Possible Loan Losses
----------------------------------
Home Federal provided $.3 million and $.4 million for possible loan
losses during the quarters ended June 30, 1996 and 1995, respectively. The
Savings Bank's ratio of its allowance for possible loan losses to total
nonaccrual loans amounted to 72.9% and 66.3% at June 30, 1996 and 1995,
respectively.
At June 30, 1996, the Company's recorded investment in impaired loans
was $13.8 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 June 30, 1996. Interest income of $.1
million was recognized on these loans during the quarter ended June 30, 1996.
This represents actual interest payments received. The average recorded
investment in impaired loans during the current quarter was $14.8 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 possible 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 June 30, 1996 is sufficient to cover anticipated losses inherent
in the loan portfolios.
Nonaccrual loans at June 30, 1996 amounted to $27.1 million, or 1.5%
of total loans, as compared to $30.4 million, or 1.8% of total loans, at
September 30, 1995 and as compared to $37.0 million, or 2.3% of total loans,
at June 30, 1995.
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The following table sets forth the Savings Bank's nonaccrual loans at
the dates indicated:
June 30, September 30,
1996 1995
---------- -------------
(In Thousands)
Nonaccrual Loans
- ----------------
First mortgage loans:
One to four family conventional residential..... $11,557 $13,391
Commercial real estate.......................... 13,796 14,447
------- -------
25,353 27,838
Other loans - Cooperative residential loans....... 1,718 2,534
------- -------
Total nonaccrual loans........................ $27,071 $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 $706,000 and $977,000 for the three month periods ended June 30,
1996 and 1995, respectively. The amount of interest income that was recorded
on these loans was $237,000 and $292,000 for the three month periods ended
June 30, 1996 and 1995 respectively.
Additionally, at June 30, 1996, the Savings Bank had $2.7 million in
real estate owned as compared to $2.0 million at September 30, 1995 and as
compared to $2.6 million at June 30, 1995. Further, at June 30, 1996 the
Savings Bank also had 15 restructured commercial real estate loans amounting
to approximately $5.8 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 $4.7 million of consumer and other loans
which are past due 90 days and still accruing interest as of June 30, 1996.
Of the $4.7 million, $3.6 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 June 30, 1996
was $19.7 million, which represented 72.9% of nonaccrual loans or 1.1% 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.
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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 June 30:
1996 1995
------ ------
(In Thousands)
Allowance for possible loan losses, beginning of quarter... $20,588 $25,579
Charge-offs:
Commercial real estate.................................... (134) (625)
Residential real estate................................... (394) (421)
Other loans............................................... (640) (472)
------- -------
Total charge-offs........................................ (1,168) (1,518)
Less recoveries - other loans............................. 15 49
------- -------
Net charge-offs........................................... (1,153) (1,469)
------- -------
Addition to allowance charged to expense.................. 300 400
------- -------
Allowance for possible loan losses, end of quarter........ $19,735 $24,510
======= =======
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 June 30, 1996 amounted to $25.6 million, representing an
increase of $2.8 million from the quarter ended June 30, 1995. This increase
reflects a $167.0 million increase in average interest earning assets and a
16 basis point increase in the Savings Bank's net interest margin from 3.58%
in 1995 to 3.74% in 1996.
Other Operating Income
----------------------
Other operating income amounted to $3.2 million for the quarter ended
June 30, 1996, reflecting an increase of 50.2% compared to $2.1 million for
the prior year quarter. This improvement primarily reflects a $.6 million
increase in net gain on the sales of mortgage loans and securities available
for sale and a $.7 million, or 52.6% increase in banking related fees from
the prior year's comparable quarter. Included in the $.7 million net gain on
the sales of mortgage loans and securities available for sale during the
current quarter is $1.1 million reflecting the gain on sale of 145,000 of the
377,560 shares of North Side Savings Bank owned by the Company.
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Other Operating Expenses
------------------------
Other operating expenses totaled $11.7 million, or 1.68% of average
assets, during the quarter ended June 30, 1996, compared to $12.5 million, or
1.91% of average assets during the quarter ended June 30, 1995. The decrease
of $.8 million, or 6.5%, was primarily attributed to a $.7 million decrease
in other expenses as a result of certain cost reductions achieved in
connection with the merger of 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 $2.0 million to $7.4 million for an effective
tax rate of 43.6% during the quarter ended June 30, 1996 versus an effective
tax rate of 44.1% during the quarter ended June 30, 1995.
G. COMPARISON OF NINE MONTHS ENDED JUNE 30, 1996 AND 1995
General
-------
New York Bancorp's net income for the nine months ended June 30, 1996
was $26.6 million, or $2.21 per share, compared to net income of $3.6
million, or $.26 per share, for the nine months ended June 30, 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 nine months ended
June 30, 1996 increased by $7.0 million, or 4.8%, to $153.1 million compared
to the nine months ended June 30, 1995. The increase in interest income is
attributable to a $107.1 million increase in average interest-earning assets,
coupled with a 5 basis point increase in yield.
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25
Interest and fee income on loans for the nine months ended June 30,
1996 increased by $10.3 million, or 10.8%, to $105.6 million compared to
$95.3 million for the same period in 1995. The increase in loan income
reflects a $188.4 million increase in the average loan balance to $1.713
billion and a 35 basis point increase in yield on other loans which, however,
were partially offset by a 20 basis point decline in yield on first mortgage
loans. Interest on mortgage-backed securities for the nine months ended June
30, 1996 decreased by $3.0 million to $42.9 million as compared to the same
period in 1995. This decrease in income is due to a $75.6 million decrease in
the average balance which, however, was partially offset by a 12 basis point
increase in yield. Interest and dividends on debt and equity securities
increased by $.9 million to $4.4 million in the current nine month period
compared to $3.5 million in the comparable prior year period. The increase in
such income is attributed to a $23.3 million increase in the average balance
which, however, was partially offset by a 36 basis point decline in yield.
Money market investment income decreased $.7 million due to a $16.1 million
decrease in the average balance and a 37 basis point decline in yield.
Interest on trading account securities decreased $.5 million in the current
nine month period as compared to the prior year period as an increase in the
yield of 4 basis points was more than offset by a decrease in the average
balance of $12.9 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 Expense
----------------
Interest expense on interest-bearing liabilities for the nine months
ended June 30, 1996 increased by $5.0 million, or 6.8%, to $79.2 million
compared to the nine months ended June 30, 1995. The increase in interest
expense for the nine months primarily reflects a $117.6 million growth in
average interest-bearing liabilities to $2.520 billion coupled with a 7 basis
point increase in cost on interest-bearing liabilities to 4.20%. The impact
of the Savings Bank's use of interest rate swaps and other off-balance sheet
instruments was to decrease interest expense by $2.2 million for the nine
months ended June 30, 1996 and decrease interest expense by $.4 million for
the nine months ended June 30, 1995. Further, the impact of the Savings
Bank's use of reverse repurchase agreements with imbedded interest rate caps,
all of which had matured by June 30, 1995, was to decrease interest expense
by $1.5 million during the nine month period ended June 30, 1995.
Interest expense on deposits decreased by $.3 million to $46.0 million
for the nine months ended June 30, 1996, compared to the nine months ended
June 30, 1995. This decrease is attributed to a $12.6 million decrease in the
average balance of deposits to $1.749 billion, as the average cost of
deposits remained unchanged at 3.52% in the current nine month period
compared to the prior year period. Interest expense on borrowed funds
increased $5.3 million to $33.2 million for the nine months ended June 30,
1996 as compared to the nine months ended June 30, 1995. This increase
reflects a $130.1 million increase in the average balance of borrowed funds
to $771.3 million, which, however, was partially offset by a 6 basis point
decrease in the average cost of borrowed funds from 5.80% in 1995 to 5.74% in
1996.
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26
Provision for Possible Loan Losses
----------------------------------
Home Federal provided $.9 million and $1.3 million for possible loan
losses during the nine months ended June 30, 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
nine months ended June 30, 1996 amounted to $73.0 million, representing an
increase of $2.4 million from the $70.6 million amount during the nine months
ended June 30, 1995. This increase primarily reflects a $107.1 million
increase in average interest-earning assets which was partially offset by a 5
basis point decrease in the Savings Bank's net interest margin from 3.74% in
1995 to 3.69% in 1996.
Other Operating Income
----------------------
Other operating income amounted to $9.8 million for the nine months
ended June 30, 1996, compared to $3.6 million for the prior year period,
primarily reflecting a $4.2 million improvement in net gain (loss) on the
sales of mortgage loans and securities available for sale, a $1.6 million
increase in banking related fees, and a $.3 million improvement in net real
estate operations.
Other Operating Expenses
------------------------
Other operating expenses totaled $35.3 million, or 1.73% of average
assets, during the nine months ended June 30, 1996, compared to $57.3 million
for the nine months ended June 30, 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 $38.3 million, or 1.96% of average
assets during the nine months ended June 30, 1995. Excluding the merger and
restructuring expenses, other expenses declined $3.0 million for the current
nine month period compared to the prior year period. This was primarily
attributed to a $1.1 million decrease in compensation and benefits and a $1.2
million decrease in other expenses primarily as a result of certain cost
reductions achieved in connection with the merger of Hamilton Bancorp in
January 1995. Additionally, Federal deposit insurance premium expense
decreased by $.7 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.
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27
Income Tax Expense
------------------
Income taxes increased $7.6 million to $21.0 million for an effective
tax rate of 44.0% during the nine months ended June 30, 1996. The prior year
period reflected the non-deductibility of certain merger and restructuring
expenses and lower pre-tax income.
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H. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data.
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------ -----------------------
1996 1995 1996 1995
------- -------- -------- ---------
(Dollars in Thousands, except per share amounts)
FINANCIAL RATIOS (1)
- --------------------
Average Yield:
First mortgage loans................... 8.01% 8.32% 8.10% 8.30%
Other loans............................ 8.81 8.71 8.82 8.47
Mortgage-backed securities............. 6.71 6.54 6.67 6.55
Debt and equity securities............. 6.15 7.06 6.33 6.69
Money market investments............... 5.21 6.10 5.38 5.75
Trading account securities............. N/A 6.09 5.70 5.66
All interest-earning assets......... 7.61 7.68 7.65 7.60
Average cost:
Deposits............................... 3.40 3.66 3.52 3.52
Borrowed funds......................... 5.49 6.20 5.74 5.80
All interest-bearing liabilities.... 4.08 4.37 4.20 4.13
Net interest rate spread.................. 3.53 3.31 3.45 3.47
Net interest margin....................... 3.74 3.58 3.69 3.74
Average interest-earning assets to
average interest-bearing liabilities.... 105.75 106.45 105.95 106.68
Return on average assets.................. 1.38 1.05 1.31 .55
Return on average common equity........... 24.29 16.63 22.39 2.84
Efficiency ratio (2)...................... 40.98 49.88 43.36 49.28
Operating expense to average assets....... 1.68 1.91 1.73 2.94
Equity to asset ratio at June 30.......... 5.43 6.04 5.43 6.04
Cumulative one year gap as a percent of
total interest-earning assets at
June 30 ................................ -14.0% -10.9% -14.0% -10.9%
SHARE INFORMATION:
- -----------------
Earnings per share..................... $ .81 $ .51 $ 2.21 $ .26
Weighted average number of common
shares and equivalents outstanding.... 11,858,241 13,461,005 12,073,824 13,594,718
Number of shares outstanding at
June 30............................... 11,491,858 12,652,256 11,491,858 12,652,256
Book value per share at June 30........ $13.78 $12.70 $13.78 $12.70
NET INTEREST POSITION:
- ---------------------
Excess of average interest-earning
assets over average interest-bearing
liabilities.......................... $ 149,911 $ 156,927 $ 149,938 $ 160,409
LOAN HIGHLIGHTS:
- ---------------
Loan originations...................... $ 162,433 $ 79,766 $ 313,713 $ 303,385
Loan purchases......................... $ 93,202 $ 13,769 $ 184,517 $ 27,881
Loan sales............................. $ 7,020 $ 7,891 $ 42,196 $ 26,784
Loans serviced for others at June 30... $ 577,605 $ 525,725 $ 577,605 $ 525,725
Loan servicing fees.................... $ 446 $ 408 $ 1,287 $ 1,278
ADJUSTABLE RATE ASSETS AT JUNE 30:
- ----------------------------------
First mortgage loans and mortgage-
backed securities..................... $1,365,384 $1,032,800 $1,365,384 $1,032,800
Other loans, money market investments,
trading account securities and debt
and equity securities................. $ 246,816 $ 297,159 $ 246,816 $ 297,159
Total adjustable rate assets as a
percent of total interest-earning
assets................................ 56.64% 51.25% 56.64% 51.25%
- -------------
(1) Selected financial ratios were computed using daily average balances and
annualized, where applicable.
(2) The Company's efficiency ratio is computed by dividing general and
administrative expenses (exclusive of merger and restructuring expenses) by
the sum of net interest income and other operating income (exclusive of
gains (losses) on the sales of mortgage loans and securities available for
sale and real estate operations, net).
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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
1994 Form 10-K
(2) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
1992 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: August 2, 1996 By: /s/ Michael A. McManus, Jr.
--------------------------------
Michael A. McManus, Jr.
President and
Chief Executive Officer
Date: August 2, 1996 By: /s/ Stan I. Cohen
--------------------------------
Stan I. Cohen
Senior Vice President,
Controller and Secretary
30