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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: March 31, 1997
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Commission File Number 1-11684
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NEW YORK BANCORP INC.
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(Exact name of registrant as specified in its charter)
Delaware 11-2869250
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
241-02 Northern Boulevard, Douglaston, N. Y. 11362
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(Address of principal executive offices) (Zip Code)
(718) 631-8100
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
Number of shares of common stock, par value $.01 per share, outstanding as
of May 1, 1997: 16,213,035.
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NEW YORK BANCORP INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
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Item 1. Financial Statements:
Consolidated Statements of Financial Condition as
of March 31, 1997 and September 30, 1996 4
Consolidated Statements of Income for the Three and
Six Months ended March 31, 1997 and 1996 5
Consolidated Statement of Changes in Shareholders'
Equity for the Six Months ended March 31, 1997 6
Consolidated Statements of Cash Flows for the
Six Months ended March 31, 1997 and 1996 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 - 24
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings 25
Item 2. Changes in Securities 25
Item 3. Defaults Upon Senior Securities 25
Item 4. Submission of Matters to a Vote of Security Holder 25
Item 5. Other Information 25
Item 6. Exhibits and Reports on Form 8-K 25
Signature Page 26
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KPMG Peat Marwick LLP
One Jericho Plaza Telephone 516 822 9100 Telefax 516 822 4575
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 March 31, 1997, and for the three and six
month periods ended March 31, 1997 and 1996 as listed in the accompanying index.
These condensed consolidated financial statements are the responsibility of the
Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of personnel responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated statement of financial condition of New York Bancorp
Inc. and Subsidiary as of September 30, 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
April 18, 1997
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION -----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
March 31, September 30,
1997 1996
------------ --------------
ASSETS
- ------
Cash and due from banks ...................................... $ 12,500 $ 13,045
Money market investments ..................................... -- 10,700
Investment in debt and equity securities, net:
Held to maturity (estimated market value of
$617 and $641 at March 31, 1997
and September 30, 1996, respectively)...................... 619 643
Available for sale ........................................ 145,163 136,133
Mortgage-backed securities, net:
Held to maturity (estimated market value of
$546,954 and $534,602 at March 31, 1997
and September 30, 1996, respectively)...................... 564,061 550,817
Available for sale ........................................ 416,467 280,429
Federal Home Loan Bank stock.................................. 35,646 27,938
Loans receivable, net:
First mortgage loans ....................................... 1,697,383 1,603,769
Other loans ................................................ 260,574 268,779
----------- -----------
1,957,957 1,872,548
Less allowance for possible loan losses..................... (19,767) (19,386)
----------- -----------
Total loans receivable, net................................ 1,938,190 1,853,162
Accrued interest receivable................................... 22,958 21,862
Premises and equipment, net................................... 12,488 12,927
Other assets.................................................. 26,905 33,251
----------- -----------
Total assets .............................................. $ 3,174,997 $ 2,940,907
=========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
LIABILITIES:
Deposits ................................................... $ 1,709,232 $ 1,715,959
Borrowed funds ............................................. 1,235,447 1,008,786
Mortgagors' escrow payments ................................ 19,978 14,987
Accrued expenses and other liabilities ..................... 49,721 49,272
----------- -----------
Total liabilities ......................................... 3,014,378 2,789,004
----------- -----------
Commitments, contingencies and contracts (note 3)
SHAREHOLDERS' EQUITY (notes 2 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; 22,119,894 and 22,120,275 shares
issued at March 31, 1997 and September 30, 1996,
respectively; 16,380,511 and 16,648,200 shares
outstanding at March 31, 1997 and
September 30, 1996, respectively .......................... 221 221
Additional paid-in capital ................................. 66,538 65,429
Retained earnings, substantially restricted................. 161,996 145,686
Treasury stock, at cost, 5,739,383 and 5,472,075 shares
at March 31, 1997 and September 30, 1996, respectively..... (66,991) (58,871)
Unrealized depreciation on securities
available for sale, net of tax benefit .................... (1,145) (562)
----------- ----------
Total shareholders' equity ................................ 160,619 151,903
----------- ----------
Total liabilities and shareholders' equity ................ $ 3,174,997 $2,940,907
=========== ==========
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(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.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF INCOME -----
(UNAUDITED)
Three Months Ended Six Months Ended
March 31, March 31,
---------------------- --------------------
1997 1996 1997 1996
--------- --------- --------- ---------
(In Thousands, except per share amounts)
INTEREST INCOME:
Interest and fees on loans:
First mortgage loans .................... $ 34,276 $ 28,450 $ 67,292 $ 56,862
Other loans ............................. 5,599 6,185 11,344 12,714
-------- -------- -------- --------
Total interest and fees on loans........ 39,875 34,635 78,636 69,576
Mortgage-backed securities ............... 16,107 13,963 29,860 28,166
Debt and equity securities - taxable...... 3,081 1,402 5,974 2,797
Money market investments ................. 3 91 13 198
Trading account securities ............... -- -- -- 13
-------- -------- -------- --------
Total interest income................... 59,066 50,091 114,483 100,750
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits ................................. 13,667 15,363 27,761 31,244
Borrowed funds ........................... 15,122 10,378 28,566 21,488
-------- -------- -------- --------
Total interest expense.................. 28,789 25,741 56,327 52,732
-------- -------- -------- --------
Net interest income..................... 30,277 24,350 58,156 48,018
Provision for possible loan losses.......... (1,200) (300) (1,500) (600)
-------- -------- -------- --------
Net interest income after provision
for possible loan losses............... 29,077 24,050 56,656 47,418
-------- -------- -------- --------
NON-INTEREST INCOME:
Loan fees and service charges ............ 699 790 1,516 1,421
Banking service fees ..................... 1,558 1,175 3,049 2,418
Fees from sale of investment products..... 573 444 934 637
Net gain on the sale of mortgage
loans and securities available for sale.. 513 1,529 630 2,036
Other ................................... 4,574 108 4,636 236
-------- -------- -------- --------
Total non-interest income............... 7,917 4,046 10,765 6,748
-------- -------- -------- --------
NON-INTEREST EXPENSE:
General and administrative:
Compensation and benefits ............... 6,600 5,433 13,125 10,950
Occupancy, net .......................... 2,201 2,200 4,310 4,240
Advertising and promotion ............... 601 594 1,076 1,449
Federal deposit insurance premiums....... 482 932 1,241 1,897
Other ................................... 3,534 2,472 5,825 5,005
-------- -------- -------- --------
Total general and administrative........ 13,418 11,631 25,577 23,541
Real estate operations, net............... 466 (46) 735 87
-------- -------- -------- --------
Total non-interest expense.............. 13,884 11,585 26,312 23,628
-------- -------- -------- --------
Income before income tax expense........ 23,110 16,511 41,109 30,538
-------- -------- -------- --------
INCOME TAX EXPENSE:
Federal expense ......................... 6,451 4,989 11,994 9,231
State and local expense .................. 2,746 2,346 4,938 4,303
-------- -------- -------- --------
Total income tax expense................ 9,197 7,335 16,932 13,534
-------- -------- -------- --------
Net income.............................. $ 13,913 $ 9,176 $ 24,177 $ 17,004
======== ======== ======== ========
EARNINGS PER COMMON SHARE (note 2).......... $ .81 $ .50(1) $ 1.40 $ .93(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.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY -----
SIX MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
Unrealized
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 six months
ended March 31, 1997................ -- -- 24,177 -- -- 24,177
Dividends declared on
common stock........................ -- -- (4,964) -- -- (4,964)
Cash paid in lieu of 381 fractional
shares in the aggregate, resulting
from 3-for-2 stock split............ -- (5) -- -- -- (5)
Purchase of 451,711 shares
of treasury stock................... -- -- -- (12,458) -- (12,458)
Issuance of 184,403 shares upon
exercise of stock options.......... -- 1,114 (2,903) 4,338 -- 2,549
Change in unrealized
depreciation on
securities available for sale,
net of taxes....................... -- -- -- -- (583) (583)
----- -------- --------- --------- -------- ----------
Balance at March 31, 1997........... $ 221 $ 66,538 $ 161,996 $ (66,991) $ (1,145) $ 160,619
===== ======== ========= ========== ========= =========
See accompanying notes to consolidated financial statements.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(UNAUDITED)
Six Months Ended
March 31,
------------------------
1997 1996
---------- ----------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................ $ 24,177 $ 17,004
---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .................... 1,157 1,079
Amortization and accretion of deferred fees,
discounts and premiums .......................... 322 900
Provision for possible loan losses ............... 1,500 600
Provision for losses on foreclosed real estate.... 185 220
Net loss on sale of foreclosed real estate........ 108 68
Net gain on sale of mortgage loans and securities
available for sale .............................. (630) (2,036)
Payment of SAIF recapitalization ................. (9,432) --
Deferred income taxes ............................ 3,230 (468)
Net decrease in trading account .................. -- 2,003
(Increase) decrease in accrued interest receivable (1,096) 684
Increase (decrease) in accrued interest payable... 59 (1,363)
Increase in accrued expenses and other liabilities 10,424 3,699
(Increase) decrease in other assets .............. 2,721 (139)
---------- ----------
Total adjustments ................................ 8,548 5,247
---------- ----------
Net cash provided by operating activities.......... 32,725 22,251
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments on loans ...................... 154,584 132,778
Principal payments on mortgage-backed securities... 59,671 42,466
Principal payments, maturities and calls on debt
and equity securities ........................... 24 56,011
Proceeds on sales of loans ....................... 27,023 35,403
Proceeds on sales of mortgage-backed securities
available for sale .............................. -- 84,281
Proceeds on sales of debt and equity securities
available for sale .............................. 20,659 2,719
Investment in first mortgage loans ................ (239,750) (214,012)
Investment in other loans ........................ (29,262) (29,259)
Investment in mortgage-backed securities held to
maturity......................................... (40,121) --
Investment in mortgage-backed securities available
for sale......................................... (171,110) (82,445)
Investment in debt and equity securities available
for sale......................................... (29,000) (65,330)
Proceeds on sales of foreclosed real estate........ 2,562 1,240
Net purchases of Federal Home Loan Bank stock...... (7,708) (5,212)
Net purchases of premises and equipment............ (718) (1,083)
---------- ----------
Net cash used in investing activities ............. (253,146) (42,443)
---------- ----------
(Continued)
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(CONTINUED)
Six Months Ended
March 31,
------------------------
1997 1996
---------- ----------
(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in non-interest bearing demand,
savings, money market, and NOW accounts....................... $ 7,211 $ (6,746)
Net increase (decrease) in time deposits....................... (13,938) 6,017
Net increase (decrease) in borrowings with original
maturities of three months or less............................ 1,461 (254,163)
Proceeds from long-term borrowings............................. 532,059 458,000
Repayment of long-term borrowings ............................. (306,859) (185,050)
Purchase of common stock for treasury ......................... (12,458) (11,688)
Payment of common stock dividends ............................. (4,721) (4,787)
Exercise of stock options ..................................... 1,435 795
Cash paid for fractional shares resulting from stock split..... (5) --
Increase in mortgagors' escrow accounts........................ 4,991 313
---------- ----------
Net cash provided by financing activities...................... 209,176 2,691
---------- ----------
Net decrease in cash and cash equivalents...................... (11,245) (17,501)
Cash and cash equivalents at beginning of period............... 23,745 45,104
---------- ----------
Cash and cash equivalents at end of period..................... $ 12,500 $ 27,603
========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid ................................................. $ 60,351 $ 55,177
========== ==========
Income taxes paid ............................................. $ 7,037 $ 7,583
========== ==========
Noncash investing and financing activities:
Transfer of loans to real estate owned ....................... $ 1,985 $ 2,208
========== =========
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
========== =========
Securitization and transfer of loans to
mortgage-backed securities available for sale................ $ -- $ 65,364
========== =========
See accompanying notes to consolidated financial statements
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NEW YORK BANCORP INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of New York Bancorp Inc. ("New York Bancorp" or the
"Company") and its wholly-owned subsidiary, Home Federal Savings Bank
("Home Federal" or the "Bank") and Subsidiaries, as of March 31, 1997
and September 30, 1996 and for the three and six month periods ended
March 31, 1997 and 1996.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management all necessary adjustments, consisting only of normal
recurring accruals necessary for a fair presentation, have been
included. The results of operations for the three and six month periods
ended March 31, 1997 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 March 31, 1997 and 1996 was 17,197,101 and 18,195,823,
respectively, and 17,221,576 and 18,264,721 for the six months ended
March 31, 1997 and 1996, respectively.
NOTE 3: COMMITMENTS, CONTINGENCIES AND CONTRACTS
At March 31, 1997, Home Federal had commitments of $88.3 million to
originate first mortgage and cooperative residential loans. Of this
amount, adjustable rate mortgage loans represented $76.8 million and
fixed rate mortgage loans with interest rates ranging from 6.625% to
10.25%, represented $11.5 million. At March 31, 1997, Home Federal also
had commitments to sell $4.0 million of qualified fixed rate first
mortgage loans at prices which approximate the carrying value of the
loans.
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The Bank is a party to interest rate swap arrangements to extend the
repricing or maturity of its liabilities in order to creat a more
consistent and predictable interest rate spread. At March 31, 1997,
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 (5.47% at March 31, 1997) which adjusts
monthly based on one month LIBOR. These interest rate swap arrangements
mature in June 1997.
Further, at March 31, 1997, the Bank maintained $700.0 million of
interest rate collar arrangements which mature in August 1998. These
interest rate collars provide for the Bank to receive payment when
three month LIBOR exceeds 7.50%, and requires the Bank to pay when
three month LIBOR is less than 5.00%, thereby reducing the Bank's
exposure to a rising interest rate environment. At March 31, 1997 three
month LIBOR was 5.77%.
At March 31, 1997, the Bank was servicing first mortgage loans of
approximately $593.5 million, which are either partially or
wholly-owned by others.
NOTE 4: STOCK REPURCHASE PLAN
During the quarter ended March 31, 1997, New York Bancorp repurchased
353,725 shares under its present stock repurchase plan, bringing total
purchases during the current fiscal year to 451,711 shares. At March
31, 1997, the total number of Treasury shares amounted to 5,739,383.
Additionally, at March 31, 1997, the Company had authority to
repurchase up to an additional 1,458,156 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.
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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) 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 the portions of SFAS No. 125 which have been deferred
by SFAS No. 127 will have a material effect on the Company.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("SFAS No. 128"). The Statement
is effective for periods ending after December 15, 1997, and will
require restatement of all prior-period earnings per share ("EPS") data
presented. The Statement establishes standards for computing and
presenting EPS. It replaces the presentation of primary EPS with basic
EPS, and requires dual presentation of basic and diluted EPS on the
face of the income statement. Basic EPS is computed by dividing income
available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. Based
on its review of the Statement, management believes the adoption of
SFAS No. 128 will result in basic earnings per share being modestly
higher than the current primary earnings per share, and at the same
time will have no material effect on diluted earnings per share of
the Company.
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NEW YORK BANCORP INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
A. GENERAL
New York Bancorp Inc. ("New York Bancorp" or the "Company") is a
savings and loan holding company. The Company, through its subsidiary, Home
Federal Savings Bank ("Home Federal" or the "Bank"), operates as a community
savings bank. The Bank's principal business consists of attracting deposits
from the general public and investing these deposits, together with funds
from ongoing operations and borrowings, in the origination and purchase of
residential, multifamily and commercial mortgage loans, cooperative
residential loans and consumer loans. The Bank maintains a portion of its
assets in mortgage-backed securities and debt and equity securities,
including obligations of the U. S. Government and federal agencies, money
market investments, corporate notes and other securities.
B. FINANCIAL POSITION
Total assets at March 31, 1997 amounted to approximately $3.2 billion,
reflecting a $234.1 million increase from the amount reported at September
30, 1996. The increase primarily reflects a $149.3 million increase in
mortgage-backed securities and an $85.0 million increase in loans receivable.
The growth in assets was primarily funded by a $226.7 million increase in
borrowed funds.
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 9.7% at March 31, 1997 as compared to a negative 2.9%
at September 30, 1996.
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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 3.92% in the second
quarter of fiscal year 1997, compared to 3.70% in the second quarter of
fiscal year 1996.
At March 31, 1997, the Bank's interest-earning assets principally
consisted of adjustable rate mortgage and other loans and securities,
multi-tranched fixed rate REMIC securities and an assortment of fixed rate
mortgage and other loans. At March 31, 1997, 56.0% 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 March 31, 1997, 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 (5.47% at March 31, 1997) which
adjusts monthly based on one month LIBOR. These interest rate swap
arrangements mature in June 1997. Additionally, at March 31, 1997, the Bank
maintained $700.0 million of interest rate collar arrangements which mature
in August 1998. These interest rate collars provide for the Bank to receive
payment when three month LIBOR exceeds 7.5%, 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 March 31, 1997 three month
LIBOR was 5.77%. Further, at March 31, 1997, the amount of unamortized gain
on terminated interest rate floor and terminated interest rate swap
arrangements amounted to $2.8 million and $.7 million, respectively.
At March 31, 1997 the Company had approximately $2.6 million in
contracts for purposes of hedging the "Standard & Poor's 500" index. The call
options maturities range from March 1999 through August 1999. The Bank uses
stock indexed call options for purposes of hedging its MarketSmart CD's and
MarketSmart I.R.A. CD's. The Bank ceased offering MarketSmart CD's during
fiscal year 1995 due to its inability to purchase such small quantities of
stock indexed call options.
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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 its level of liquid assets to
maximize net interest income. The Bank's ratio was 5.22% during March 1997
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, advances from and reverse repurchase agreements with the Federal
Home Loan Bank of New York, reverse repurchase agreements with primary
government securities dealers, subordinated capital notes, scheduled
amortization and prepayments, and funds provided by operations.
During the quarter ended March 31, 1997, New York Bancorp repurchased
353,725 shares under its present stock repurchase plan, bringing total
purchases during the current fiscal year to 451,711 shares. At March 31,
1997, the total number of Treasury shares amounted to 5,739,383.
Additionally, at March 31, 1997, the Company had authority to repurchase up
to an additional 1,458,156 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 March 31, 1997, Home Federal was categorized "adequately
capitalized" under the "prompt corrective action regulations" and continued
to exceed all regulatory capital requirements as detailed in the following
table:
TANGIBLE CAPITAL CORE CAPITAL(1) RISK-BASED CAPITAL(2)
----------------------- ----------------------- ------------------------
Amount Percentage(3) Amount Percentage(3) Amount Percentage(3)
-------- -------------- -------- -------------- -------- ---------------
(Dollars in Thousands)
Capital for regulatory
purposes .............. $ 156,628 4.91% $156,628 4.91% $175,776 11.76%
Minimum regulatory
requirement ........... 47,854 1.50 95,707 3.00 119,624 8.00
--------- ------ -------- ------ -------- ------
Excess ................. $ 108,774 3.41% $ 60,921 1.91% $ 56,152 3.76%
========= ====== ======== ====== ======== ======
(1) Under the OTS prompt corrective action regulations, the core capital requirement was
effeectively 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, investments in debt and equity securities
and money market 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 March 31,
----------------------------------------------------------------
1997 1996
------------------------------- -----------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
--------- -------- --------- ---------- --------- -------
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans......... $ 1,666,753 $ 34,276 8.23% $ 1,405,470 $ 28,450 8.10%
Other loans.................. 263,255 5,599 8.57 284,523 6,185 8.72
----------- -------- ----------- --------
Total loans................ 1,930,008 39,875 8.28 1,689,993 34,635 8.20
Mortgage-backed securities... 943,887 16,107 6.83 834,273 13,963 6.70
Debt and equity securities... 177,116 3,081 6.97 89,909 1,402 6.25
Money market investments 222 3 5.35 6,795 91 5.40
----------- -------- ----------- --------
Total interest-earning assets.... 3,051,233 59,066 7.75 2,620,970 50,091 7.65
-------- --------
Non-interest-earning assets.... 85,358 51,906
----------- -----------
Total assets................. $ 3,136,591 $ 2,672,876
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Deposits..................... $ 1,696,558 13,667 3.27 $ 1,747,091 15,363 3.54
Borrowed funds............... 1,190,611 15,122 5.15 725,158 10,378 5.75
----------- -------- ----------- --------
Total interest-bearing
liabilities.................. 2,887,169 28,789 4.05 2,472,249 25,741 4.19
-------- --------
Other liabilities.............. 86,255 39,800
----------- -----------
Total liabilities............ 2,973,424 2,512,049
Shareholders' equity........... 163,167 160,827
----------- -----------
Total liabilities and
shareholders' equity........ $ 3,136,591 $ 2,672,876
=========== ===========
NET INTEREST INCOME/INTEREST
RATE SPREAD..................... $ 30,277 3.70% $ 24,350 3.46%
======== ====== ======== ======
NET EARNING ASSETS/NET
INTEREST MARGIN................. $ 164,064 3.92% $ 148,721 3.70%
=========== ====== =========== ======
PERCENTAGE OF INTEREST-EARNING
ASSETS TO INTEREST-BEARING
LIABILITIES..................... 105.68% 106.02%
====== ======
15
16
Six Months Ended March 31,
-------------------------------------------------------------
1997 1996
----------------------------- ----------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
--------- ---------- ------- ---------- --------- -----
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans.............. $ 1,644,823 $ 67,292 8.18% $ 1,395,811 $ 56,862 8.15%
Other loans....................... 265,392 11,344 8.56 288,127 12,714 8.83
----------- -------- ----------- --------
Total loans..................... 1,910,215 78,636 8.24 1,683,938 69,576 8.26
Mortgage-backed securities........ 882,204 29,860 6.77 847,994 28,166 6.64
Debt and equity securities........ 171,366 5,974 6.97 86,865 2,797 6.44
Money market investments.......... 500 13 5.22 7,352 198 5.39
Trading account securities........ -- -- .-- 439 13 5.70
----------- -------- ----------- --------
Total interest-earning assets....... 2,964,285 114,483 7.73 2,626,588 100,750 7.67
-------- --------
Non-interest-earning assets......... 74,901 49,660
----------- -----------
Total assets...................... $ 3,039,186 $ 2,676,248
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Interest-bearing liabilities:
Deposits.......................... $ 1,702,294 27,761 3.27 $ 1,746,627 31,244 3.58
Borrowed funds.................... 1,097,554 28,566 5.22 730,008 21,488 5.89
----------- -------- ----------- --------
Total interest-bearing liabilities.. 2,799,848 56,327 4.04 2,476,635 52,732 4.26
-------- --------
Other liabilities................... 79,724 41,054
----------- -----------
Total liabilities................. 2,879,572 2,517,689
Shareholders' equity................ 159,614 158,559
----------- -----------
Total liabilities and
shareholders' equity............. $ 3,039,186 $ 2,676,248
=========== ===========
NET INTEREST INCOME/INTEREST
RATE SPREAD.......................... $ 58,156 3.69% $ 48,018 3.41%
======== ====== ======== ======
NET EARNING ASSETS/NET
INTEREST MARGIN...................... $ 164,437 3.91% $ 149,953 3.66%
=========== ====== ========== ======
PERCENTAGE OF INTEREST-EARNING ASSETS
TO INTEREST-BEARING LIABILITIES...... 105.87% 106.05%
====== ======
F. COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 AND 1996
General
-------
New York Bancorp's net income for the quarters ended March 31, 1997
and 1996 was $13.9 million, or $.81 per share, and $9.2 million, or $.50 per
share, respectively. The current quarter includes the receipt of $5.2 million
on a tax settlement with the Internal Revenue Service, inclusive of
$4.5 million in interest. Other comments regarding the components of net
income are detailed in the following paragraphs.
Interest Income
---------------
Interest income on interest-earning assets for the quarter ended March
31, 1997 increased by $9.0 million, or 17.9%, to $59.1 million compared to
the quarter ended March 31, 1996. The increase in interest income is
attributable to a $430.3 million increase in average interest-earning assets,
coupled with a 10 basis point increase in yield.
16
17
Interest and fee income on loans for the quarter ended March 31, 1997
increased by $5.2 million, or 15.1%, to $39.9 million compared to the same
quarter in 1996. The increase in loan income reflects a $240.0 million
increase in the average loan balance to $1.930 billion and a 13 basis point
increase in yield on first mortgage loans which, however, were partially
offset by a 15 basis point decline in yield on other loans. Interest on
mortgage-backed securities for the quarter ended March 31, 1997 increased by
$2.1 million to $16.1 million as compared to the same quarter in 1996. This
increase is due to a $109.6 million increase in the average balance, coupled
with a 13 basis point increase in yield. Interest and dividends on debt and
equity securities increased by $1.7 million to $3.1 million in the current
quarter compared to $1.4 million in the comparable prior year quarter. The
increase in such income is attributed to an $87.2 million increase in the
average balance, coupled with a 72 basis point increase in yield.
Interest Expense
----------------
Interest expense on interest-bearing liabilities for the quarter ended
March 31, 1997 increased by $3.0 million, or 11.8%, to $28.8 million compared
to the quarter ended March 31, 1996. The increase in interest expense for the
quarter primarily reflects a $414.9 million growth in interest-bearing
liabilities to $2.887 billion which, however, was partially offset by a
14 basis point decrease in the cost of interest-bearing liabilities to 4.05%.
The impact of the Bank's use of interest rate swaps and other off-balance
sheet instruments was to decrease interest expense by $2.1 million and
$.6 million for the quarters ended March 31, 1997 and 1996, respectively.
Interest expense on deposits of $13.7 million for the quarter ended
March 31, 1997 decreased $1.7 million from the quarter ended March 31, 1996.
This decrease reflects a 27 basis point decline in the average cost of
deposits from 3.54% in the 1996 quarter to 3.27% in the 1997 quarter, coupled
with a $50.5 million decline in the average balance of deposits to
$1.697 billion during the quarter ended March 31, 1997. The 27 basis point
decrease in the cost of deposits primarily reflects a decline in the average
rate paid on certificates of deposit. Interest expense on borrowed funds
increased $4.7 million to $15.1 million for the quarter ended March 31, 1997
as compared to the quarter ended March 31, 1996. This increase reflects a
$465.5 million increase in the average balance of borrowed funds to
$1.191 billion which, however, was partially offset by a 60 basis point
decline in the average cost of borrowed funds from 5.75% during the quarter
ended March 31, 1996 to 5.15% during the quarter ended March 31, 1997. The
decrease in the cost of borrowings is primarily due to the Bank's increased
use of interest rate swaps, which decreased the average cost of borrowings 50
basis points in the current quarter. Off-balance financial instruments
increased the cost of borrowings 5 basis points during the quarter ended
March 31, 1996.
Provision for Possible Loan Losses
----------------------------------
Home Federal provided $1.2 million and $.3 million for possible loan
losses during the quarters ended March 31, 1997 and 1996, respectively. The
increase in the provision for the current quarter primarily reflects
management's assessment of recent events related to one nonaccrual loan. The
Bank's ratio of its allowance for possible loan losses to total nonaccrual
loans amounted to 70.1% and 67.3% at March 31, 1997 and 1996, respectively.
17
18
At March 31, 1997, the Company's recorded investment in impaired loans
was $14.2 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 March 31, 1997. Interest income of $58,000 and $.2 million was recognized
on these loans during the quarters ended March 31, 1997 and 1996,
respectively. This represents actual interest payments received. The average
recorded investment in impaired loans during the quarters ended March 31,
1997 and 1996 was $16.1 million and $14.2 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 March 31, 1997 is
sufficient to cover anticipated losses inherent in the loan portfolios.
Nonaccrual loans at March 31, 1997 amounted to $28.2 million, or 1.4%
of total loans, as compared to $25.6 million, or 1.4% of total loans, at
September 30, 1996.
The following table sets forth the Bank's nonaccrual loans at the
dates indicated:
March 31, September 30,
1997 1996
---------- -------------
(In Thousands)
Nonaccrual Loans
- ----------------
First mortgage loans:
One to four family conventional residential... $ 12,479 $ 12,092
Multifamily residential....................... 640 155
Commercial real estate........................ 13,572 11,758
--------- --------
26,691 24,005
Other loans - cooperative residential loans..... 1,492 1,547
--------- --------
Total nonaccrual loans...................... $ 28,183 $ 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 $715,000 and $803,000 for the three month periods ended March 31,
1997 and 1996, respectively. The amount of interest income that was recorded
on these loans was $194,000 and $338,000 for the three month periods ended
March 31, 1997 and 1996, respectively.
18
19
Additionally, at March 31, 1997, the Bank had $2.3 million in real
estate owned as compared to $3.2 million at September 30, 1996. Further, at
March 31, 1997 the Bank also had 15 restructured commercial real estate loans
amounting to approximately $5.5 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 $4.8 million of consumer and other loans which are
past due 90 days and still accruing interest as of March 31, 1997. Of the
$4.8 million, $3.8 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 March 31, 1997 was
$19.8 million, which represented 70.1% 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.
Summary of Loan Loss Experience
-------------------------------
The following is a summary of the activity in the Bank's allowance for
possible loan losses for the quarters ended March 31:
1997 1996
-------- --------
(In Thousands)
Allowance for possible loan losses, beginning of quarter.... $ 18,958 $ 20,723
Charge-offs:
Commercial real estate ................................... -- (44)
Residential real estate .................................. (283) (178)
Other loans .............................................. (223) (224)
-------- --------
Total charge-offs ........................................ (506) (446)
Less recoveries:
Commercial real estate ................................... 26 --
Residential real estate .................................. 74 --
Other loans .............................................. 15 11
-------- --------
Total recoveries......................................... 115 11
-------- --------
Net charge-offs .......................................... (391) (435)
-------- --------
Addition to allowance charged to expense .................. 1,200 300
-------- --------
Allowance for possible loan losses, end of quarter......... $ 19,767 $ 20,588
======== ========
Net Interest Income After Provision for Possible Loan Losses
------------------------------------------------------------
Net interest income after provision for possible loan losses for the
quarter ended March 31, 1997 amounted to $29.1 million, representing an
increase of $5.0 million from the quarter ended March 31, 1996. This increase
primarily reflects a $430.3 million increase in average interest earning
assets, coupled with a 22 basis point increase in the Bank's net interest
margin from 3.70% in the 1996 quarter to 3.92% in the 1997 quarter.
19
20
Non-Interest Income
-------------------
Non-interest income amounted to $7.9 million for the quarter ended
March 31, 1997, compared to $4.0 million for the prior year comparable
quarter. The $3.9 million increase in non-interest income reflects
$.4 million more in banking service fee income and $4.5 million more in other
income which, however, were partially offset by a decrease of $1.0 million in
net gain on the sales of mortgage loans and securities available for sale.
The $4.5 million increase in other income represents interest received on a
tax settlement with the Internal Revenue Service.
Non-Interest Expense
--------------------
The general and administrative expense component of non-interest
expense totaled $13.4 million, or 1.73% of average assets, for the quarter
ended March 31, 1997, compared to $11.6 million, or 1.75% of average assets,
for the quarter ended March 31, 1996. The $1.8 million increase in general
and administrative expense reflects a $1.2 million increase in compensation
and benefits and a $1.1 million increase in other expense, which, however,
were partially offset by a $.5 million decrease in federal deposit insurance
premiums. The increase in compensation and benefit expense was primarily
attributable to the cost associated with stock appreciation rights as a
result of the 12% increase in the price of the Company's stock during the
current quarter. The increase in other expenses was primarily attributed to
professional fees related to special projects.
Income Tax Expense
------------------
Income tax expense increased $1.9 million to $9.2 million for an
effective tax rate of 39.8% during the quarter ended March 31, 1997. Income
tax expense was reduced by $.7 million during the current quarter as a result
of a tax settlement with the Internal Revenue Service. Excluding the
settlement amount, the effective tax rate was 42.8% for the current quarter
versus an effective tax rate of 44.4% during the quarter ended March 31,
1996.
G. COMPARISON OF SIX MONTHS ENDED MARCH 31, 1997 AND 1996
General
-------
New York Bancorp's net income for the six months ended March 31, 1997
and 1996 was $24.2 million, or $1.40 per share, and $17.0 million or $.93 per
share, respectively. The current six month period includes the receipt of
$5.2 million on a tax settlement with the Internal Revenue Service, inclusive
of $4.5 million in interest. Other comments regarding the components of net
income are detailed in the following paragraphs.
Interest Income
---------------
Interest income on interest-earning assets for the six months ended
March 31, 1997 increased by $13.7 million, or 13.6%, to $114.5 million
compared to the six months ended March 31, 1996. The increase in interest
income is attributable to a $337.7 million increase in average
interest-earning assets, coupled with a 6 basis point increase in yield.
20
21
Interest and fee income on loans for the six months ended March 31,
1997 increased by $9.1 million, or 13.0%, to $78.6 million compared to the
same period in 1996. The increase in loan income reflects a $226.3 million
increase in the average loan balance to $1.910 billion and a 3 basis point
increase in yield on mortgage loans which, however, were partially offset by
a 27 basis point decline in yield on other loans. Interest on mortgage-backed
securities for the six months ended March 31, 1997 increased by $1.7 million
to $29.9 million as compared to the same period in 1996. This increase in
income is due to a $34.2 million increase in the average balance coupled with
a 13 basis point increase in yield. Interest and dividends on debt and equity
securities increased by $3.2 million to $6.0 million in the current six month
period compared to $2.8 million in the comparable prior year period. The
increase in such income is attributed to an $84.5 million increase in the
average balance coupled with a 53 basis point increase in yield.
Interest Expense
----------------
Interest expense on interest-bearing liabilities for the six months
ended March 31, 1997 increased by $3.6 million, or 6.8%, to $56.3 million
compared to the six months ended March 31, 1996. The increase in interest
expense for the six months reflects a $323.2 million growth in average
interest-bearing liabilities to $2.800 billion which, however, was partially
offset by a 22 basis point decrease in cost on interest-bearing liabilities
to 4.04%. The impact of the Bank's use of interest rate swaps and other
off-balance sheet instruments was to decrease interest expense by
$3.6 million and $1.3 million for the six months ended March 31, 1997 and
1996, respectively.
Interest expense on deposits decreased by $3.5 million to
$27.8 million for the six months ended March 31, 1997, compared to the six
months ended March 31, 1996. This 11.1% decrease reflects a 31 basis point
decrease in the average cost of deposits to 3.27% in 1997 from 3.58% in 1996,
coupled with a $44.3 million decrease in the average balance of deposits to
$1.702 billion in the 1997 period. The decrease in the cost of deposits
primarily reflects a 42 basis point decline in the average rate paid on
certificates of deposit. Interest expense on borrowed funds increased
$7.1 million to $28.6 million for the six months ended March 31, 1997 as
compared to the six months ended March 31, 1996. This increase reflects a
$367.5 million increase in the average balance of borrowed funds to
$1.098 billion, which, however, was partially offset by a 67 basis point
decrease in the average cost of borrowed funds to 5.22% in the 1997 period
from 5.89% in the 1996 period. The decrease in the cost of borrowings is
primarily due to the Bank's increased use of interest rate swaps, which
decreased the average cost of borrowings 42 basis points in the current six
month period. Off-balance financial instruments decreased the cost of
borrowings one basis point during the six months ended March 31, 1996.
21
22
Provision for Possible Loan Losses
----------------------------------
Home Federal provided $1.5 million and $.6 million for possible loan
losses during the six months ended March 31, 1997 and 1996, respectively. The
increase in the provision for the current six month period reflects
management's assessment of recent events related to one nonaccrual loan.
At March 31, 1997, the Company's recorded investment in impaired loans
was $14.2 million, all of which were on nonaccrual status. Due to
charge-offs, or the crediting of interest payments to principal, the loans do
not have an impairment reserve at March 31, 1997. Interest income of
$.2 million was recognized on these loans during each of the six month
periods ended March 31, 1997 and 1996. This represents actual interest
payments received. The average recorded investment in impaired loans during
the six months ended March 31, 1997 and 1996 was $14.1 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.
Net Interest Income After Provision for Possible Loan Losses
------------------------------------------------------------
Net interest income after provision for possible loan losses for the
six months ended March 31, 1997 amounted to $56.7 million, representing an
increase of $9.2 million from the six months ended March 31, 1996. This
increase reflects a 25 basis point increase in the Bank's net interest margin
from 3.66% in the 1996 period to 3.91% in the 1997 period, coupled with a
$337.7 million increase in average interest-earning assets.
Non-Interest Income
-------------------
Non-interest income amounted to $10.8 million for the six months ended
March 31, 1997, compared to $6.7 million for the prior year period. The
$4.1 million increase in non-interest income reflects $.6 million more in
banking service fee income, $.3 million more in fees from the sale of
investment products, and $4.4 million more in other income, which however,
were partially offset by a decrease of $1.4 million in net gains on the sale
of mortgage loans and securities available for sale. The increase in other
income reflects the $4.5 million in interest received on a tax settlement
with the Internal Revenue Service.
Non-Interest Expense
--------------------
The general and administrative expense component of non-interest
expense totaled $25.6 million, or 1.69% of average assets, for the six months
ended March 31, 1997, compared to $23.5 million, or 1.76% of average assets,
for the six months ended March 31, 1996. The $2.1 million increase in general
and administrative expense reflects a $2.2 million increase in compensation
and benefits and a $.8 million increase in other expense, which, however,
were partially offset by a $.4 million decrease in advertising expense, and a
$.7 million decrease in federal deposit insurance premiums. The increase in
compensation and benefit expense was primarily attributable to the cost
associated with stock appreciation rights as a result of the 38% increase in
the price of the Company's stock during the current six month period. The
increase in other expense was primarily attributed to professional fees
related to special projects.
22
23
Income Tax Expense
------------------
Income tax expense increased $3.4 million to $16.9 million for an
effective tax rate of 41.2% during the six months ended March 31, 1997.
Excluding the $.7 million received in the tax settlement with the Internal
Revenue Service, the effective tax rate would have been 42.9% for the current
six month period versus an effective tax rate of 44.3% for the comparable
prior year period.
H. 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.
23
24
I. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data.
Three Months Ended Six Months Ended
March 31, March 31,
------------------------- -----------------------
1997 1996 1997 1996
----------- ---------- ---------- -----------
(Dollars in Thousands, except per share amounts)
FINANCIAL RATIOS (1)
- --------------------
Average Yield:
First mortgage loans.......................... 8.23% 8.10% 8.18% 8.15%
Other loans................................... 8.57 8.72 8.56 8.83
Mortgage-backed securities.................... 6.83 6.70 6.77 6.64
Debt and equity securities - taxable.......... 6.97 6.25 6.97 6.44
Money market investments...................... 5.35 5.40 5.22 5.39
Trading account securities.................... N/A N/A N/A 5.70
All interest-earning assets................ 7.75 7.65 7.73 7.67
Average cost:
Deposits...................................... 3.27 3.54 3.27 3.58
Borrowed funds................................ 5.15 5.75 5.22 5.89
All interest-bearing liabilities........... 4.05 4.19 4.04 4.26
Net interest rate spread......................... 3.70 3.46 3.69 3.41
Net interest margin.............................. 3.92 3.70 3.91 3.66
Average interest-earning assets to
average interest-bearing liabilities........... 105.68 106.02 105.87 106.05
Return on average assets......................... 1.80 1.37 1.60 1.27
Return on average common equity.................. 34.58 22.95 30.38 21.45
Efficiency ratio................................. 40.46 43.29 40.10 44.64
General and administrative expense to
average assets................................. 1.73 1.75 1.69 1.76
Equity to asset ratio at March 31................ 5.06 5.78 5.06 5.78
Cumulative one year gap as a percent of total
interest-earning assets at March 31 ........... -9.7 +9.7 -9.7 +9.7
SHARE INFORMATION(2):
- --------------------
Earnings per common share..................... $ .81 $ .50 $1.40 $ .93
Weighted average number of common shares
and equivalents outstanding................. 17,197,101 18,195,823 17,221,576 18,264,721
Number of shares outstanding at March 31...... 16,380,511 17,586,970 16,380,511 17,586,970
Book value per share at March 31.............. $9.81 $9.05 $9.81 $9.05
NET INTEREST POSITION:
- ---------------------
Excess of average interest-earning assets
over average interest-bearing liabilities... $ 164,064 $ 148,721 $ 164,437 $ 149,953
LOAN HIGHLIGHTS:
- ---------------
Loan originations............................. $ 123,623 $ 80,660 $ 257,175 $ 151,280
Loan purchases................................ $ 2,896 $ 82,804 $ 14,105 $ 91,315
Loan sales.................................... $ 10,149 $ 18,880 $ 27,130 $ 35,176
Loans serviced for others at March 31......... $ 593,469 $ 592,919 $ 593,469 $ 592,919
Loan servicing fees........................... $ 429 $ 438 $ 874 $ 841
ADJUSTABLE RATE ASSETS AT MARCH 31:
- ----------------------------------
First mortgage loans and mortgage-backed
securities.................................. $ 1,529,117 $ 1,225,262 $ 1,529,117 $ 1,225,262
Other loans, money market investments, and
debt and equity securities.................. $ 217,616 $ 244,803 $ 217,617 $ 244,803
Total adjustable rate assets as a percent
of total interest-earning assets............ 55.99% 54.61% 55.99% 54.61%
(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.
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PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- --------------------------
During the quarter ended March 31, 1997, purported class action
complaints filed by Adar Equities, Ltd. and Serious Software Corp. on behalf
of the shareholders of the former Hamilton Bancorp, Inc. were dismissed
without prejudice. No compensation in any form has passed directly or
indirectly to the plaintiffs or their attorneys and no promise to give any
such compensation has been made.
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
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
-------------------
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEW YORK BANCORP INC.
(Registrant)
Date: May 13, 1997 By: /s/ Michael A. McManus, Jr.
--------------------------------
Michael A. McManus, Jr.
President and
Chief Executive Officer
Date: May 13, 1997 By: /s/ Stan I. Cohen
--------------------------------
Stan I. Cohen
Senior Vice President,
Controller and Secretary
26