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: December 31, 1996
------------------------
Commission File Number 1-11684
------------------------
NEW YORK BANCORP INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2869250
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
241-02 Northern Boulevard, Douglaston, N. Y. 11362
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(718) 631-8100
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(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 January 31, 1997: 16,587,003.
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 December 31, 1996 and September 30, 1996 4
Consolidated Statements of Income for the Three
Months ended December 31, 1996 and 1995 5
Consolidated Statement of Changes in Shareholders'
Equity for the Three Months ended December 31, 1996 6
Consolidated Statements of Cash Flows for the
Three Months ended December 31, 1996 and 1995 7 - 8
Notes to Consolidated Financial Statements 9 - 11
Independent Accountants' Review Report 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12 - 21
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings 22
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holder 22
Item 5. Other Information 23
Item 6. Exhibits and Reports on Form 8-K 23
Signature Page 24
2
3
KPMG Peat Marwick LLP
One Jericho Plaza
Jericho, NY 11753
Independent Accountants' Review Report
--------------------------------------
To the Board of Directors of New York Bancorp Inc.:
We have reviewed the condensed consolidated financial statements of New York
Bancorp Inc. and Subsidiary as of December 31, 1996, and for the three month
periods ended December 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.
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, 1996, 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 29,
1996, 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,
1996, 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
January 24, 1997
3
4
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION -----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
December 31, September 30,
1996 1996
------------ -------------
ASSETS
- ------
Cash and due from banks.......................... $ 13,883 $ 13,045
Money market investments......................... -- 10,700
Investment in debt and equity securities, net:
Held to maturity (estimated market value of
$629 and $641 at December 31, 1996
and September 30, 1996, respectively)......... 631 643
Available for sale............................. 140,715 136,133
Mortgage-backed securities, net:
Held to maturity (estimated market value of
$525,387 and $534,602 at December 31, 1996
and September 30, 1996, respectively)......... 538,056 550,817
Available for sale............................. 438,055 280,429
Federal Home Loan Bank stock..................... 31,244 27,938
Loans receivable, net:
First mortgage loans........................... 1,651,152 1,603,769
Other loans.................................... 264,261 268,779
------------- ------------
1,915,413 1,872,548
Less allowance for possible loan losses........ (18,958) (19,386)
------------- ------------
Total loans receivable, net................... 1,896,455 1,853,162
Accrued interest receivable...................... 22,367 21,862
Premises and equipment, net...................... 12,569 12,927
Other assets..................................... 28,042 33,251
------------- ------------
Total assets.................................. $ 3,122,017 $ 2,940,907
============= ============
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
LIABILITIES:
Deposits....................................... $ 1,700,722 $ 1,715,959
Borrowed funds................................. 1,069,045 1,008,786
Mortgagors' escrow payments.................... 8,895 14,987
Due to brokers................................. 129,887 --
Accrued expenses and other liabilities......... 54,418 49,272
------------- ------------
Total liabilities............................. 2,962,967 2,789,004
------------- ------------
Commitments, contingencies and contracts (note 3)
SHAREHOLDERS' EQUITY (NOTES 2, 3 AND 4) (1):
Preferred stock, $.01 par value,
2,000,000 shares authorized; none issued...... -- --
Common stock, $.01 par value, 30,000,000 shares
authorized; 22,120,275 shares issued at
December 31, 1996 and September 30, 1996;
16,569,681 and 16,648,200 shares outstanding
at December 31, 1996 and September 30, 1996,
respectively.................................. 221 221
Additional paid-in capital..................... 65,457 65,429
Retained earnings, substantially restricted.... 153,226 145,686
Treasury stock, at cost, 5,550,594 and 5,472,075
shares at December 31, 1996 and September 30,
1996, respectively............................ (60,658) (58,871)
Unrealized appreciation (depreciation) on
securities available for sale, net of tax
effect........................................ 804 (562)
------------- ------------
Total shareholders' equity..................... 159,050 151,903
------------- ------------
Total liabilities and shareholders' equity.....$ 3,122,017 $ 2,940,907
============= ============
- --------------------
(1) Share information has been restated to fully reflect the 3-for-2 stock split
effective January 23, 1997.
See accompanying notes to consolidated financial statements.
4
5
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF INCOME -----
(UNAUDITED)
Three Months Ended
December 31,
--------------------
1996 1995
-------- --------
(In Thousands, except
per share amounts)
INTEREST INCOME:
Interest and fees on loans:
First mortgage loans......................... $33,016 $ 28,412
Other loans.................................. 5,745 6,529
------- --------
Total interest and fees on loans............ 38,761 34,941
Mortgage-backed securities.................... 13,753 14,203
Debt and equity securities - taxable.......... 2,893 1,395
Money market investments...................... 10 107
Trading account securities.................... -- 13
------- --------
Total interest income....................... 55,417 50,659
------- --------
INTEREST EXPENSE:
Deposits ..................................... 14,094 15,881
Borrowed funds................................ 13,444 11,110
------- --------
Total interest expense...................... 27,538 26,991
------- --------
Net interest income......................... 27,879 23,668
Provision for possible loan losses.............. (300) (300)
------- --------
Net interest income after provision
for possible loan losses................... 27,579 23,368
------- --------
NON-INTEREST INCOME:
Loan fees and service charges................. 817 631
Net gain on the sale of mortgage
loans and securities available for sale...... 117 507
Other......................................... 1,914 1,564
------- --------
Total non-interest income................... 2,848 2,702
------- --------
NON-INTEREST EXPENSE:
General and administrative:
Compensation and benefits.................... 6,525 5,517
Occupancy, net............................... 2,109 2,040
Advertising and promotion.................... 475 855
Federal deposit insurance premiums........... 759 965
Other........................................ 2,291 2,533
------- --------
Total general and administrative............ 12,159 11,910
Real estate operations, net.................. 269 133
------- --------
Total non-interest expense.................. 12,428 12,043
------- --------
Income before income tax expense............ 17,999 14,027
------- --------
INCOME TAX EXPENSE:
Federal expense............................... 5,543 4,242
State and local expense....................... 2,192 1,957
------- --------
Total income tax expense.................... 7,735 6,199
------- --------
Net income.................................. $10,264 $ 7,828
======= ========
EARNINGS PER COMMON SHARE (note 2).............. $ .60 $ .43(1)
- -----------------
(1) Per share amounts have been restated to fully reflect the 3-for-2 stock
split effective January 23, 1997.
See accompanying notes to consolidated financial statements.
5
6
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -----
THREE MONTHS ENDED DECEMBER 31, 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, 1996..... $ 221 $ 65,429 $ 145,686 $ (58,871) $ (562) $ 151,903
Net income for the three months
ended December 31, 1996.......... -- -- 10,264 -- -- 10,264
Dividends declared on
common stock..................... -- -- (2,487) -- -- (2,487)
Purchase of 97,986 shares
of treasury stock................ -- -- -- (2,225) -- (2,225)
Exercise of 19,467 shares
of stock options................. -- 28 (237) 438 -- 229
Change in unrealized
appreciation (depreciation) on
securities available for sale,
net of taxes..................... -- -- -- -- 1,366 1,366
----- --------- ---------- --------- ------- -----------
Balance at December 31, 1996 $ 221 $ 65,457 $ 153,226 $ (60,658) $ 804 $ 159,050
====== ========= ========== ========= ======= ===========
See accompanying notes to consolidated financial statements.
6
7
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(UNAUDITED)
Three Months Ended
December 31,
----------------------
1996 1995
---------- ---------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................... $ 10,264 $ 7,828
---------- ---------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization...................... 584 531
Amortization and accretion of deferred fees,
discounts and premiums............................ 239 510
Provision for possible loan losses................. 300 300
Provision for losses on foreclosed real estate..... 136 156
Net loss on sale of foreclosed real estate......... 67 42
Net gain on sale of mortgage loans and
securities available for sale..................... (117) (507)
Payment of SAIF recapitalization................... (9,432) --
Deferred income taxes.............................. 3,357 607
Net decrease in trading account.................... -- 2,003
(Increase) decrease in accrued interest receivable. (505) 116
Increase (decrease) in accrued interest payable.... (1,103) 605
Increase (decrease) in accrued expenses and
other liabilities................................. 14,649 (2,865)
(Increase) decrease in other assets................ 893 (1,855)
---------- ---------
Total adjustments.................................. 9,068 (357)
---------- ---------
Net cash provided by operating activities........... 19,332 7,471
---------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments on loans......................... 82,288 64,508
Principal payments on mortgage-backed securities.... 25,780 20,839
Principal payments, maturities and calls
on debt and equity securities...................... 12 37,000
Proceeds on sales of loans.......................... 16,931 16,386
Proceeds on sales of debt and equity securities
available for sale................................. 1,314 2,718
Investment in first mortgage loans.................. (125,902) (63,988)
Investment in other loans........................... (17,715) (15,012)
Investment in mortgage-backed securities
available for sale................................. (39,829) --
Investment in debt and equity securities available
for sale........................................... (5,000) (28,284)
Proceeds on sales of foreclosed real estate......... 1,774 616
Net purchases of Federal Home Loan Bank Stock....... (3,306) (2,768)
Net purchases of premises and equipment............. (226) (330)
---------- ---------
Net cash provided by (used in) investing activities. (63,879) 31,685
---------- ---------
(Continued)
7
8
NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(CONTINUED)
Three Months Ended
December 31,
------------------
1996 1995
---- ----
(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in non-interest bearing
demand, savings, money market, and NOW accounts.... $ 5,068 $ 3,127
Net increase (decrease) in time deposits............ (20,305) 5,210
Net increase (decrease) in borrowings with original
maturities of three months or less................. 93,118 (18,221)
Proceeds from long-term borrowings.................. 224,000 --
Repayment of long-term borrowings................... (256,859) (19,425)
Purchase of common stock for treasury............... (2,225) (5,332)
Payment of common stock dividends................... (2,220) (2,412)
Exercise of stock options........................... 200 --
Decrease in mortgagors' escrow accounts............. (6,092) (5,523)
---------- ---------
Net cash provided by (used in) financing activities. 34,685 (42,576)
---------- ---------
Net decrease in cash and cash equivalents........... (9,862) (3,420)
Cash and cash equivalents at beginning of year...... 23,745 45,104
---------- ---------
Cash and cash equivalents at end of year............ $ 13,883 $ 41,684
========== =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid....................................... $ 30,021 $ 24,703
========== =========
Income taxes paid................................... $ 5,050 $ 7,180
========== =========
Noncash Investing and Financing Activities:
Transfer of loans to real estate owned............. $ 1,355 $ 1,578
========== =========
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
========== =========
Transfer of debt and equity securities held to maturity
to debt and equity securities available for sale . $ -- $ 15,000
========== =========
See accompanying notes to consolidated financial statements.
8
9
NEW YORK BANCORP INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of New York Bancorp Inc. ("New York Bancorp" or the
"Company") and its wholly-owned subsidiary, Home Federal Savings Bank
("Home Federal" or the "Bank") and Subsidiaries, as of December 31,
1996 and September 30, 1996 and for the three month periods ended
December 31, 1996 and 1995.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management all necessary adjustments, consisting only of normal
recurring accruals necessary for a fair presentation, have been
included. The results of operations for the three month periods ended
December 31, 1996 are not necessarily indicative of the results that
may be expected for the entire fiscal year.
NOTE 2: EARNINGS PER SHARE
A 3-for-2 common stock split, effected in the form of a stock dividend,
was distributed on January 23, 1997 to shareholders of record on
January 9, 1997. Accordingly, information with respect to shares of
common stock and earnings per share have been restated in all periods
presented to fully reflect the stock split. Earnings per share is
computed by dividing net income by the weighted average number of
shares of common stock and common stock equivalents outstanding. The
weighted average number of common stock and common stock equivalents
outstanding for the calculation of primary earnings per share for the
quarters ended December 31, 1996 and 1995 was 17,239,250 and
18,329,355.
NOTE 3: COMMITMENTS, CONTINGENCIES AND CONTRACTS
At December 31, 1996, Home Federal had commitments of $68.3 million to
originate first mortgage and cooperative residential loans. Of this
amount, adjustable rate mortgage loans represented $54.7 million and
fixed rate mortgage loans with interest rates ranging from 6.875% to
10.25%, represented $13.6 million. At December 31, 1996, Home Federal
also had commitments to sell $6.5 million of qualified fixed rate first
mortgage loans at prices which approximate the carrying value of the
loans.
9
10
The 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 December 31, 1996,
outstanding notional amounts of interest rate swap arrangements totaled
$400.0 million. The Bank pays a fixed weighted average rate of 4.72%,
and receives a variable rate (5.375% at December 31, 1996) which
adjusts monthly based on one month LIBOR. These interest rate swap
arrangements mature in June 1997.
Further, at December 31, 1996, the Bank maintained $700.0 million of
interest rate collar arrangements which mature in August 1998. These
interest rate collars provide for the Bank to receive payment when
three month LIBOR exceeds 7.5%, and requires the Bank to pay when three
month LIBOR is less than 5.00%, thereby reducing the Bank's exposure to
a rising interest rate environment. At December 31, 1996 three month
LIBOR was 5.5625%.
At December 31, 1996, the Bank was servicing first mortgage loans of
approximately $597.4 million, which are either partially or wholly-
owned by others.
NOTE 4: STOCK REPURCHASE PLAN
During the quarter ended December 31, 1996, New York Bancorp
repurchased 97,986 shares under its present stock repurchase plan. At
December 31, 1996, the total number of Treasury shares amounted to
5,550,594. Additionally, at December 31, 1996, the Company had
authority to repurchase up to an additional 1,805,256 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 5: RECENT ACCOUNTING PRONOUNCEMENTS
In June 1996, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("SFAS No. 125"). The Statement is effective for
transactions occurring after December 31, 1996. The Statement provides
accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. Those standards
are based on consistent application of a financial - components
approach that focuses on control. Under that approach, after a transfer
of financial assets, an entity recognizes the financial and servicing
assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes
liabilities when extinguished. This Statement provides consistent
standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings.
10
11
In December 1996, the FASB issued Statement of Financial Accounting
Standards No. 127, "Deferral of the Effective Date of Certain
Provisions of FASB Statement No. 125" ("SFAS No. 127"). The statement
delays for one year the implementation of SFAS No. 125, as it relates
to (1) secured borrowings and collateral, and (2) for the transfers of
financial assets that are part of repurchase agreement, dollar-roll,
securities lending and similar transactions.
The Company has adopted portions of SFAS No. 125 (those not deferred by
SFAS No. 127) effective January 1, 1997. Adoption of these portions did
not have a significant effect on the Company's financial condition or
results of operations. Based on its review of SFAS No. 125, management
does not believe that adoption of the portions of SFAS No. 125 which
have been deferred by SFAS No. 127 will have a material effect on the
Company.
11
12
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 "Bank"), operates as a community
savings bank. The Bank's principal business consists of attracting deposits
from the general public and investing these deposits, together with funds
from ongoing operations and borrowings, in the origination and purchase of
residential, multifamily and commercial mortgage loans, cooperative
residential loans and consumer loans. The Bank maintains a portion of its
assets in mortgage-backed securities and debt and equity securities,
including obligations of the U. S. Government and federal agencies, money
market investments, corporate notes and other securities.
A 3-for-2 common stock split, effected in the form of a stock
dividend, was distributed on January 23, 1997 to shareholders of record on
January 9, 1997. Accordingly, information with respect to shares of common
stock and earnings per share have been restated in all periods presented to
fully reflect the stock split.
B. FINANCIAL POSITION
Total assets at December 31, 1996 amounted to approximately $3.1
billion, reflecting a $181.1 million increase from the amount reported at
September 30, 1996. The increase primarily reflects a $144.9 million increase
in mortgage-backed securities and a $43.3 million increase in loans
receivable. The growth in assets was funded by a $60.3 million increase in
borrowed funds and a $129.9 million increase in due to brokers. The amount in
due to brokers represents amounts owed for December 1996 purchases of
mortgage-backed securities which settle in January 1997. The Bank has
arranged for borrowings as of the settlement date to fund these obligations.
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 4.2% at December 31, 1996 as compared to a negative
2.9% at September 30, 1996.
12
13
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 3.90% in the first
quarter of fiscal year 1997, compared to 3.61% in the first quarter of fiscal
year 1996. In addition, the net interest margin of 3.90% for the current
quarter reflects a 13 basis point increase from the net interest margin of
3.77% for the quarter ended September 30, 1996.
At December 31, 1996, the Bank's interest-earning assets principally
consisted of adjustable rate mortgage and other loans and securities,
multi-tranched fixed rate REMIC securities and an assortment of fixed rate
mortgage and other loans. At December 31, 1996, 54.9% of such
interest-earning assets were adjustable rate assets.
Within the framework of the targeted one year gap, the Bank may choose
to extend the maturity of its funding source and/or reduce the repricing
mismatches by using interest rate swaps and financial futures arrangements.
Additionally, the Bank uses interest rate collar, interest rate floor, and
interest rate cap arrangements to assist in further insulating the Bank from
volatile interest rate changes.
At December 31, 1996, outstanding notional amounts of interest rate
swap arrangements totaled $400.0 million. The Bank pays a fixed weighted
average rate of 4.72%, and receives a variable rate (5.375% at December 31,
1996) which adjusts monthly based on one month LIBOR. These interest rate
swap arrangements mature in June 1997. Additionally, at December 31, 1996,
the Bank maintained $700.0 million of interest rate collar arrangements which
mature in August 1998. These interest rate collars provide for the Bank to
receive payment when three month LIBOR exceeds 7.5%, and requires the Bank to
pay when three month LIBOR is less than 5.00%, thereby reducing the Bank's
exposure to a rising interest rate environment. At December 31, 1996 three
month LIBOR was 5.5625%. Further, at December 31, 1996, the amount of
unamortized gain on terminated interest rate floor and terminated interest
rate swap arrangements amounted to $3.5 million and $1.4 million,
respectively.
At December 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 August 1999. The Bank uses
stock indexed call options for purposes of hedging its remaining MarketSmart
CD's and MarketSmart I.R.A. CD's. The Bank ceased offering MarketSmart CD's
during fiscal year 1995 due to its inability to purchase such small
quantities of stock indexed call options.
13
14
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 Bank actively manages this ratio to maximize its net
interest income. The Bank's ratio was 5.06% during December 1996 and 5.26%
during September 1996.
The Bank's liquidity levels will vary depending upon savings flows,
future loan fundings, operating needs and general prevailing economic
conditions. Because of the multitude of available funding sources, the Bank
does not foresee any problems in generating liquidity to meet its operational
and regulatory requirements.
The Bank's lending and investment activities are predominately funded
by deposits, 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 December 31, 1996, New York Bancorp
repurchased 97,986 shares under its present stock repurchase plan. At
December 31, 1996, the total number of Treasury shares amounted to 5,550,594.
Additionally, at December 31, 1996, the Company had authority to repurchase
up to an additional 1,805,256 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 December 31, 1996, Home Federal is categorized "adequately
capitalized" 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(3) Amount Percentage(3) Amount Percentage(3)
--------- -------------- ------- ------------- ------- -------------
(Dollars in Thousands)
Capital for regulatory
purposes.............. $148,766 4.76% $148,766 4.76% $166,977 11.41%
Minimum regulatory
requirement........... 46,882 1.50 93,765 3.00 117,041 8.00
-------- ----- -------- ----- -------- -----
Excess................. $101,884 3.26% $ 55,001 1.76% $ 49,936 3.41%
======== ===== ======= ===== ======== =====
- ------------------
(1)Under the OTS prompt corrective action regulations, the core capital
requirement was effectively increased to 4.00% since OTS regulations
stipulate that as of that date an institution with less than 4.00% core
capital will be deemed to be classified as "undercapitalized."
(2)The OTS adopted a final regulation which incorporates an interest rate risk
component into its existing risk-based capital standard. The regulation
requires certain institutions with more than a "normal level" of interest
rate risk to maintain capital in addition to the 8.0% risk-based capital
requirement. Although the OTS has delayed implementation of this regulation,
the Bank does not anticipate that its risk-based capital requirement will be
materially affected as a result of the new regulation.
(3)For tangible and core capital, the ratio is to adjusted total assets. For
risk-based capital, the ratio is to total risk-weighted assets.
14
15
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 in debt and equity
securities, 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 table sets forth certain information relating to the
Company's average consolidated statements of financial condition and reflect
the average yield on assets and average cost of liabilities for the periods
indicated. Such yields and costs are derived by dividing annualized income or
expense by the average balance of assets (which include nonaccrual loans) or
liabilities, respectively, for the periods shown.
Quarter Ended December 31,
--------------------------------------------------------------
1996 1995
----------------------------- -----------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
----------- -------- ------ ---------- --------- ------
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans............. $1,623,430 $ 33,016 8.13% $ 1,386,258 $28,412 8.20%
Other loans...................... 267,482 5,745 8.56 291,691 6,529 8.93
Mortgage-backed securities....... 821,857 13,753 6.69 861,566 14,203 6.59
Debt and equity securities....... 165,747 2,893 6.97 83,853 1,395 6.64
Money market investments......... 663 10 6.03 7,903 107 5.39
Trading account securities....... -- -- N/A 874 13 5.70
---------- -------- ----------- ------- ----
Total interest-earning assets...... 2,879,179 55,417 7.69 2,632,145 50,659 7.69
-------- -------
Non-interest-earning assets........ 64,624 47,439
---------- -----------
Total assets..................... $2,943,803 $ 2,679,584
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Deposits......................... $1,707,909 14,094 3.27 $ 1,746,167 15,881 3.62
Borrowed funds................... 1,006,384 13,444 5.30 734,805 11,110 6.02
---------- -------- ----------- -------
Total interest-bearing liabilities. 2,714,293 27,538 4.02 2,480,972 26,991 4.33
-------- -------
Other liabilities.................. 73,371 42,298
---------- -----------
Total liabilities................ 2,787,664 2,523,270
Shareholders' equity............... 156,139 156,314
---------- -----------
Total liabilities and
shareholders' equity............ $2,943,803 $ 2,679,584
========== ===========
NET INTEREST INCOME/INTEREST RATE
SPREAD.............................. $ 27,879 3.67% $23,668 3.36%
======== ====== ======= ======
NET EARNING ASSETS/NET
INTEREST MARGIN..................... $ 164,886 3.90% $ 151,173 3.61%
========== ====== =========== ======
PERCENTAGE OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES..... 106.07% 106.09%
====== ======
15
16
F. COMPARISON OF THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
General
-------
New York Bancorp's net income for the quarters ended December 31, 1996
and 1995 was $10.3 million, or $.60 per share, and $7.8 million, or $.43 per
share, respectively. Comments regarding the components of net income are
detailed in the following paragraphs.
Interest Income
---------------
Interest income on interest-earning assets for the quarter ended
December 31, 1996 increased by $4.8 million, or 9.4%, to $55.4 million
compared to the quarter ended December 31, 1995. The increase in interest
income is attributable to a $247.0 million increase in average
interest-earning assets.
Interest and fee income on loans for the quarter ended December 31,
1996 increased by $3.8 million, or 10.9%, to $38.8 million compared to the
same quarter in 1995. The increase in loan income reflects a $213.0 million
increase in the average loan balance to $1.89 billion which, however, was
partially offset by a 7 basis point decrease in yield on first mortgage loans
and a 37 basis point decrease in yield on other loans. Interest on
mortgage-backed securities for the quarter ended December 31, 1996 decreased
by $.5 million to $13.8 million as compared to the same quarter in 1995. This
decrease in income is primarily due to a $39.7 million decrease in the
average balance which, however, was partially offset by a 10 basis point
increase in yield. Interest and dividends on debt and equity securities
increased by $1.5 million to $2.9 million in the current quarter compared to
the comparable prior year quarter. The increase in income is attributed to an
$81.9 million increase in the average balance, coupled with a 33 basis point
increase in yield. Money market investment income decreased $.1 million as a
64 basis point increase in yield was more than offset by a $7.2 million
decrease in the average balance.
Interest Expense
----------------
Interest expense on interest-bearing liabilities for the quarter ended
December 31, 1996 increased by $.5 million, or 2.0%, to $27.5 million
compared to the quarter ended December 31, 1995. The increase in interest
expense for the quarter primarily reflects a $233.3 million growth in
interest-bearing liabilities to $2.71 billion which, however, was partially
offset by a 31 basis point decline in the cost of funds. The impact of the
Bank's use of interest rate swaps and other off-balance sheet instruments was
to decrease interest expense by $1.5 million for the quarter ended December
31, 1996 and decrease interest expense by $.8 million for the quarter ended
December 31, 1995.
16
17
Interest expense on deposits decreased by $1.8 million to $14.1
million for the quarter ended December 31, 1996, compared to the quarter
ended December 31, 1995. This decrease reflects a 35 basis point decrease in
the average cost of deposits from 3.62% in 1995 to 3.27% in 1996, coupled
with a $38.3 million decrease in the average balance of deposits to $1.71
billion during the quarter ended December 31, 1996. The decrease in the cost
of deposits primarily reflects a 51 basis point decline in the average rate
paid on certificates of deposit. Interest expense on borrowed funds increased
$2.3 million to $13.4 million for the quarter ended December 31, 1996 as
compared to the quarter ended December 31, 1995. This increase reflects a
$271.6 million increase in the average balance of borrowed funds to $1.01
billion which, however, was partially offset by a 72 basis point decrease in
the average cost of borrowed funds from 6.02% during the quarter ended
December 31, 1995 to 5.30% during the quarter ended December 31, 1996. The
decrease in the cost of borrowings is due to a 45 basis point decline in the
average rate paid for borrowings, coupled with the Bank's increased use of
interest rate swaps, which decreased the average cost of borrowings 32 basis
points in the current quarter compared to decreasing the average cost of
borrowings 5 basis points in the comparable prior year quarter.
Provision for Possible Loan Losses
----------------------------------
Home Federal provided $.3 million for possible loan losses for the
quarter ended December 31, 1996, the same as for the comparable prior-year
period.
At December 31, 1996, the Company's recorded investment in impaired
loans (as defined in Statement of Accounting Standards No. 114) was $17.2
million, all of which were on nonaccrual status, compared with $11.9 million
at September 30, 1996. Due to charge-offs, or the crediting of interest
payments to principal, the loans do not have an impairment reserve at
December 31, 1996. Interest income of $146,000 was recognized on these loans
during the quarter ended December 31, 1996 (none during the quarter ended
December 31, 1995). This represents actual interest payments received. The
average recorded investment in impaired loans during the quarters ended
December 31, 1996 and 1995 was $12.9 million and $14.6 million, respectively.
The allowance for possible loan losses contains additional amounts for
impaired loans, as deemed necessary, to maintain reserves at levels
considered adequate by management.
As part of the Bank's determination of the adequacy of the allowance
for loan losses, the Bank monitors its loan portfolio through its Asset
Classification Committee. The Committee, which meets no less than quarterly,
consists of employees who are independent of the loan origination process and
members of management. This Committee reviews individual loans with the
lending officers and assesses risks relating to the collectibility of these
loans. The Asset Classification Committee determines the adequacy of the
allowance for possible loan losses through ongoing analysis of historical
loss experience, the composition of the loan portfolios, delinquency levels,
underlying collateral values and cash flow values. Utilizing these
procedures, management believes that the allowance at December 31, 1996 is
sufficient to cover anticipated losses inherent in the loan portfolios.
17
18
Nonaccrual loans at December 31, 1996 amounted to $32.0 million, or
1.67% of total loans, as compared to $25.6 million, or 1.36% of total loans,
at September 30, 1996 and as compared to $28.8 million, or 1.71% of total
loans, at December 31, 1995. The increase in nonaccrual loans during the
current quarter was primarily due to five commercial mortgage loans becoming
nonaccrual in December 1996. These loans, which have collateral with
substantial value and, in the opinion of management, are adequately covered
by the allowance for possible loan losses, will continue to be closely
monitored by management.
The following table sets forth the Bank's nonaccrual loans at the
dates indicated:
December 31, September 30,
1996 1996
------------ -------------
(In Thousands)
Nonaccrual Loans
- ----------------
First mortgage loans:
One to four family conventional residential..... $13,082 $ 12,092
Multifamily residential......................... 362 155
Commercial real estate.......................... 16,856 11,758
------- --------
30,300 24,005
Other loans - cooperative residential loans........ 1,691 1,547
------- --------
Total nonaccrual loans.......................... $31,991 $ 25,552
======= ========
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 $804,000 and $777,000 for the three month periods ended December
31, 1996 and 1995, respectively. The amount of interest income that was
recorded on these loans was $304,000 and $169,000 for the three month periods
ended December 31, 1996 and 1995, respectively.
Additionally, at December 31, 1996, the Bank had $2.6 million in real
estate owned as compared to $3.2 million at September 30, 1996 and $2.8
million at December 31, 1995. Further, at December 31, 1996 the Bank also had
15 restructured commercial real estate loans amounting to approximately $5.6
million, as compared to $5.8 million at September 30, 1996, for which
interest is being recorded in accordance with the loans' restructured terms.
The amount of the interest income lost on these restructured loans is
immaterial.
The Bank also has $4.6 million of consumer and other loans which are
past due 90 days and still accruing interest as of December 31, 1996. Of the
$4.6 million, $3.7 million represent loans guaranteed by the United States
Department of Education through the New York State Higher Education Services
Corporation.
The Bank's allowance for possible loan losses at December 31, 1996 was
$19.0 million, which represented 59.3% of nonaccrual loans or 1.0% of total
loans, compared to $19.4 million at September 30, 1996, which represented
75.9% of nonaccrual loans or 1.0% of total loans.
18
19
The following is a summary of the activity in the Bank's allowance for
possible loan losses for the quarters ended December 31:
Summary of Loan Loss Experience
-------------------------------
As of and for the
Quarter Ended
December 31,
--------------------------
1996 1995
----------- -----------
(In Thousands)
Allowance for possible loan losses, beginning of quarter..... $ 19,386 $ 21,272
Charge-offs:
Commercial real estate...................................... (19) (395)
Residential real estate..................................... (678) (132)
Other loans................................................. (52) (343)
--------- ---------
Total charge-offs.......................................... (749) (870)
Less recoveries - other loans............................... 21 21
--------- ---------
Net charge-offs............................................. (728) (849)
--------- ---------
Addition to allowance charged to expense.................... 300 300
--------- ---------
Allowance for possible loan losses, at end of quarter....... $ 18,958 $ 20,723
========= =========
Net Interest Income After Provision for Possible Loan Losses
- ------------------------------------------------------------
Net interest income after provision for possible loan losses for the
quarter ended December 31, 1996 amounted to $27.6 million, representing an
increase of $4.2 million from the $23.4 million amount during the quarter ended
December 31, 1995. This increase resulted from a $247.0 million increase in
average interest-earning assets, coupled with a 29 basis point increase in the
Bank's net interest margin to 3.90% for the quarter ended December 31, 1996. The
increase in net interest margin is attributable to a 31 basis point decline in
the Bank's overall cost of funds.
Non-Interest Income
- -------------------
Non-interest income amounted to $2.8 million for the quarter ended December
31, 1996, compared to $2.7 million for the prior year comparable quarter.
Increases in banking related fee income of $.3 million and loan fees and service
charges of $.2 million were almost entirely offset by a decrease in net gain on
the sales of mortgage loans and securities available for sale of $.4 million.
19
20
Non-Interest Expense
--------------------
The general and administrative expense component of non-interest
expense totaled $12.2 million, or 1.64% of average assets, for the
quarter ended December 31, 1996, compared to $11.9 million, or 1.77% of
average assets, for the quarter ended December 31, 1995. The $.3 million
increase in general and administrative expense reflects a $1.0 million
increase in compensation and benefits which, however, was partially
offset by a $.4 million decrease in advertising expense, a $.2 million
decrease in federal deposit insurance premiums, and a $.2 million
decrease in other expense. The increase in compensation and benefit
expense was primarily attributable to the cost associated with stock
appreciation rights (as a result of the 20% increase in the price of the
Company's stock during the current quarter), coupled with staffing and
other costs associated with the Bank's investment in its multifamily
lending department (which began operations in fiscal year 1996), and the
Bank's continued efforts to expand into supermarket banking.
Income Tax Expense
------------------
Income taxes increased $1.5 million to $7.7 million for an effective
tax rate of 43.0% during the quarter ended December 31, 1996 versus an
effective tax rate of 44.2% during the quarter ended December 31, 1995.
G. PROPOSED LEGISLATIVE MATTERS
Two bills have been introduced in Congress that would eliminate the
federal savings association charter. These bills would require all
federal savings associations convert to national banks or state-chartered
institutions by either January 1, 1998 or June 30, 1998, depending upon
which bill was enacted. Federal associations that fail to convert would
automatically become national banks. Additionally, the OTS would be
eliminated. Both bills provide for the merger of the Bank Insurance Fund
and the Savings Association Insurance Fund provided that each fund is
fully capitalized. Both bills would also require federal savings
associations to divest activities or investments that do not conform to
powers authorized under their new charter over a specified period.
Further, savings and loan holding companies would become subject to the
same regulation as holding companies that control banks, subject to a
narrow grandfathering for unitary savings and loan holding companies.
No assurance can be given as to whether legislation as discussed
above will be enacted or, if enacted, what the terms of such legislation
would be.
20
21
H. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data.
Three Months Ended
December 31,
--------------------------
1996 1995
----------- ------------
(Dollars in Thousands,
except per share amounts)
FINANCIAL RATIOS (1)
- --------------------
Average Yield:
First mortgage loans................................. 8.13% 8.20%
Other loans.......................................... 8.56 8.93
Mortgage-backed securities........................... 6.69 6.59
Debt and equity securities........................... 6.97 6.64
Money market investments............................. 6.03 5.39
Trading account securities........................... N/A 5.70
All interest-earning assets......................... 7.69 7.69
Average cost:
Deposits............................................. 3.27 3.62
Borrowed funds....................................... 5.30 6.02
All interest-bearing liabilities.................... 4.02 4.33
Net interest rate spread.............................. 3.67 3.36
Net interest margin................................... 3.90 3.61
Average interest-earning assets to
average interest-bearing liabilities................. 106.07 106.09
Return on average assets.............................. 1.38 1.16
Return on average common equity....................... 26.08 19.92
Efficiency ratio...................................... 39.72 46.05
General and administrative expense to average assets.. 1.64 1.77
Equity to asset ratio at December 31.................. 5.09 5.83
Cumulative one year gap as a percentage of total
interest-earning assets at end of period............ -4.2 -13.8
SHARE INFORMATION(2):
- -------------------
Earnings per common share............................ $ .60 $ .43
Weighted average number of common shares and
equivalents outstanding............................. 17,239,250 18,329,355
Number of shares outstanding at December 31.......... 16,569,681 17,818,461
Book value per share at December 31.................. $9.60 $8.82
NET INTEREST POSITION:
- ---------------------
Excess of average interest-earning assets
over average interest-bearing liabilities........... $ 164,886 $ 151,173
LOAN HIGHLIGHTS:
- ---------------
Loan originations.................................... $ 133,552 $ 70,620
Loan purchases....................................... $ 11,209 $ 8,511
Loan sales........................................... $ 16,981 $ 16,296
Loans serviced for others at December 31............. $ 597,408 $ 525,331
Loan servicing fees.................................. $ 445 $ 403
ADJUSTABLE RATE ASSETS AT DECEMBER 31:
- -------------------------------------
First mortgage loans and mortgage-backed securities.. $1,459,851 $1,144,049
Other loans, money market investments, and
debt and equity securities.......................... $ 223,516 $ 230,522
Total adjustable rate assets as a percent of total
interest-earning assets........................... 54.94% 52.37%
- -----------------
(1) Selected financial ratios were computed using daily average balances and
annualized, where applicable.
(2) Share and per share information have been restated to fully reflect the 3-
for-2 stock split effective January 23, 1997.
21
22
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- --------------------------
Not Applicable
Item 2. Changes in Securities
- ------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
(a) The Company's Annual Meeting of Shareholders was held January 28, 1997.
(b) See Item 4-C below
(c) At such meeting, the shareholders approved the following matters:
1. The election of the following individuals as Directors for a term
of 3 years each:
Broker
Votes For Votes Withheld Non-Votes
------------ -------------- ----------
Geraldine A. Ferraro 10,278,218 31,646 --
Peter D. Goodson 10,291,499 18,365 --
Robert A. Simms 10,292,299 17,565 --
Additionally, the following individuals represent the names of the
other Directors whose term of office as a Director continued after
the meeting:
Josiah T. Austin
Stan I. Cohen
John E. D. Grunow, Jr.
Patrick E. Malloy, III
Michael A. McManus, Jr.
Walter R. Ruddy
Gene A. Washington
2. The ratification of KPMG Peat Marwick LLP as independent
accountants of the Company for the fiscal year ending September 30,
1997, as reflected by 10,269,158 votes for, 20,828 votes against,
19,878 abstentions and no broker non-votes.
(d) Not applicable
22
23
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
1996 Form 10-K
(2) Incorporated by reference to Exhibits filed with New York
Bancorp Inc.'s 1994 Form 10-K
(b) Reports on Form 8-K
-------------------
A Form 8-K was filed with the Securities and Exchange Commission on
January 2, 1997 concerning the 12 1/2% increase in the quarterly
dividend and the 3-for-2 stock split, effected in the form of a stock
dividend, both of which were payable on January 23, 1997 to stockholders
of record as of the close of business on January 9, 1997.
23
24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW YORK BANCORP INC.
(Registrant)
Date: February 7, 1997 By: /s/ Michael A. McManus, Jr.
--------------------------------
Michael A. McManus, Jr.
President and
Chief Executive Officer
Date: February 7, 1997 By: /s/ Stan I. Cohen
--------------------------------
Stan I. Cohen
Senior Vice President,
Controller and Secretary