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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: June 30, 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 July 30, 1997: 21,616,880.
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NEW YORK BANCORP INC.
FORM 10-Q
INDEX
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1. Financial Statements:
Independent Accountants' Review Report 3
Consolidated Statements of Financial Condition as
of June 30, 1997 and September 30, 1996 4
Consolidated Statements of Income for the Three and
Nine Months ended June 30, 1997 and 1996 5
Consolidated Statement of Changes in Shareholders'
Equity for the Nine Months ended June 30, 1997 6
Consolidated Statements of Cash Flows for the
Nine Months ended June 30, 1997 and 1996 7 - 8
Notes to Consolidated Financial Statements 9 - 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13 - 26
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings 27
Item 2. Changes in Securities 27
Item 3. Defaults Upon Senior Securities 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27
Item 6. Exhibits and Reports on Form 8-K 27
Signature Page 28
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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 June 30, 1997, and for the three- and nine-
month periods ended June 30, 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.
KPMG Peat Marwick LLP
July 16, 1997
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION -----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
June 30, September 30,
1997 1996
---------- -------------
ASSETS
- ------
Cash and due from banks..................................... $ 28,413 $ 13,045
Money market investments.................................... -- 10,700
Investment in debt and equity securities, net:
Held to maturity (estimated market value of
$604 and $641 at June 30, 1997
and September 30, 1996, respectively) ................... 606 643
Available for sale ...................................... 135,553 136,133
Mortgage-backed securities, net:
Held to maturity (estimated market value of
$591,620 and $534,602 at June 30, 1997
and September 30, 1996, respectively) .................. 602,828 550,817
Available for sale ...................................... 397,118 280,429
Federal Home Loan Bank stock................................ 52,641 27,938
Loans receivable, net:
First mortgage loans .................................... 1,769,701 1,603,769
Other loans ............................................. 254,425 268,779
---------- ----------
2,024,126 1,872,548
Less allowance for possible loan losses .................. (19,613) (19,386)
---------- ----------
Total loans receivable, net ............................. 2,004,513 1,853,162
Accrued interest receivable ................................ 23,784 21,862
Premises and equipment, net................................. 12,485 12,927
Other assets ............................................... 25,712 33,251
---------- ----------
Total assets ............................................ $3,283,653 $2,940,907
========== ==========
LIABILITIES & SHAREHOLDERS' EQUITY
- ----------------------------------
LIABILITIES:
Deposits ................................................. $1,690,993 $1,715,959
Borrowed funds .......................................... 1,347,230 1,008,786
Mortgagors' escrow payments ............................. 10,302 14,987
Accrued expenses and other liabilities .................. 68,256 49,272
---------- ----------
Total liabilities ....................................... 3,116,781 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; 29,493,425 and 29,493,700 shares
issued at June 30, 1997 and September 30, 1996,
respectively; 21,591,247 and 22,197,600 shares
outstanding at June 30, 1997 and
September 30, 1996, respectively ....................... 295 295
Additional paid-in capital .............................. 66,502 65,355
Retained earnings, substantially restricted............... 171,847 145,686
Treasury stock, at cost, 7,902,178 and 7,296,100 shares
at June 30, 1997 and September 30, 1996, respectively.... (72,480) (58,871)
Unrealized appreciation (depreciation) on securities
available for sale, net of tax effect ................... 708 (562)
---------- ----------
Total shareholders' equity .............................. 166,872 151,903
---------- ----------
Total liabilities and shareholders' equity .............. $3,283,653 $2,940,907
========== ==========
(1) Share information has been restated to fully reflect the 3-for-2 stock split
effective January 23, 1997 and the 4-for-3 stock split effective July 24, 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 Nine Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
--------- -------- -------- ---------
(In Thousands, except per share amounts)
INTEREST INCOME:
Interest and fees on loans:
First mortgage loans .................. $ 35,809 $ 29,952 $ 103,101 $ 86,814
Other loans ........................... 5,543 6,085 16,887 18,799
--------- -------- --------- ---------
Total interest and fees on loans...... 41,352 36,037 119,988 105,613
Mortgage-backed securities ............ 17,164 14,708 47,024 42,874
Debt and equity securities - taxable.... 3,403 1,626 9,377 4,423
Money market investments .............. -- 21 13 219
Trading account securities ............ -- -- -- 13
-------- -------- -------- --------
Total interest income................. 61,919 52,392 176,402 153,142
-------- -------- -------- --------
INTEREST EXPENSE:
Deposits .............................. 13,808 14,804 41,569 46,048
Borrowed funds ........................ 17,222 11,682 45,788 33,170
-------- -------- -------- --------
Total interest expense................ 31,030 26,486 87,357 79,218
-------- -------- -------- --------
Net interest income................... 30,889 25,906 89,045 73,924
Provision for possible loan losses ....... (300) (300) (1,800) (900)
-------- -------- -------- --------
Net interest income after provision
for possible loan losses............. 30,589 25,606 87,245 73,024
-------- -------- -------- --------
NON-INTEREST INCOME:
Loan fees and service charges .......... 738 673 2,254 2,094
Banking service fees .................. 1,677 1,444 4,726 3,862
Fees from sale of investment products... 488 432 1,422 1,069
Net gain on the sale of mortgage
loans and securities available for sale 117 742 747 2,778
Other ................................. 53 132 4,689 368
-------- -------- -------- -------
Total non-interest income............. 3,073 3,423 13,838 10,171
-------- -------- -------- -------
NON-INTEREST EXPENSE:
General and administrative:
Compensation and benefits .............. 5,917 5,588 19,042 16,538
Occupancy, net ......................... 2,164 2,123 6,474 6,363
Advertising and promotion .............. 600 761 1,676 2,210
Federal deposit insurance premiums...... 484 931 1,725 2,828
Other .................................. 2,498 2,311 8,323 7,316
-------- -------- -------- -------
Total general and administrative....... 11,663 11,714 37,240 35,255
Real estate operations, net ............ 164 253 899 340
-------- -------- -------- -------
Total non-interest expense............. 11,827 11,967 38,139 35,595
-------- -------- -------- -------
Income before income tax expense....... 21,835 17,062 62,944 47,600
-------- -------- -------- -------
INCOME TAX EXPENSE:
Federal expense ........................ 7,132 5,154 19,126 14,385
State and local expense ................ 1,539 2,278 6,477 6,581
-------- -------- -------- -------
Total income tax expense............... 8,671 7,432 25,603 20,966
-------- -------- -------- -------
Net income............................. $ 13,164 $ 9,630 $ 37,341 $ 26,634
======== ======== ======== ========
EARNINGS PER COMMON SHARE (1) (note 2)..... $ .58 $ .41 $ 1.63 $ 1.10
(1) Per share amounts have been restated to fully reflect the 3-for-2 stock
split effective January 23, 1997 and the 4-for-3 stock split effective
July 24, 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 -----
NINE MONTHS ENDED JUNE 30, 1997
(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............. $ 295 $ 65,355 $ 145,686 $ (58,871) $ (562) $ 151,903
Net income for the nine months
ended June 30, 1997...................... -- -- 37,341 -- -- 37,341
Dividends declared on
common stock............................. -- -- (8,190) -- -- (8,190)
Cash paid in lieu of 275 fractional
shares in the aggregate, resulting
from 3-for-2 stock split -- (5) -- -- -- (5)
Purchase of 858,986 shares
of treasury stock........................ -- -- -- (18,101) -- (18,101)
Issuance of 252,907 shares upon
exercise of stock options................ -- 1,152 (2,990) 4,492 -- 2,654
Change in unrealized
appreciation (depreciation)
on securities available for
sale, net of taxes....................... -- -- -- -- 1,270 1,270
----- ---------- --------- -------- --------- ---------
Balance at June 30, 1997.................. $ 295 $ 66,502 $ 171,847 $(72,480) $ 708 $ 166,872
===== ========== ========= ========= ========= =========
See accompanying notes to consolidated financial statements.
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(UNAUDITED)
Nine Months Ended
June 30,
--------------------------
1997 1996
------------- ----------
(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ............................................... $ 37,341 $ 26,634
----------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ........................... 1,727 1,611
Amortization and accretion of deferred fees,
discounts and premiums ................................. 18 1,381
Provision for possible loan losses ...................... 1,800 900
Provision for losses on foreclosed real estate........... 259 488
Net loss on sale of foreclosed real estate .............. 186 89
Net gain on sale of mortgage loans and securities
available for sale ..................................... (747) (2,778)
Payment of SAIF recapitalization ........................ (9,432) --
Deferred income taxes ................................... 3,571 769
Net decrease in trading account ......................... -- 2,003
Increase in accrued interest receivable ................. (1,922) (411)
Increase (decrease) in accrued interest payable.......... 2,892 (452)
Increase in accrued expenses and other liabilities....... 24,799 3,050
(Increase) decrease in other assets ..................... 2,355 (846)
----------- ----------
Total adjustments ....................................... 25,506 5,804
----------- ----------
Net cash provided by operating activities................. 62,847 32,438
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal payments on loans ............................. 251,250 216,640
Principal payments on mortgage-backed securities.......... 92,789 74,770
Principal payments, maturities and calls on debt
and equity securities .................................. 25,037 56,427
Proceeds on sales of loans .............................. 36,057 41,858
Proceeds on sales of mortgage-backed securities
available for sale ..................................... -- 83,767
Proceeds on sales of debt and equity securities
available for sale ..................................... 20,815 2,719
Investment in first mortgage loans ...................... (398,507) (453,763)
Investment in other loans ............................... (42,829) (45,157)
Investment in mortgage-backed securities held to maturity. (89,973) --
Investment in mortgage-backed securities available for sale (171,110) (82,445)
Investment in debt and equity securities available for sale (44,138) (91,708)
Proceeds on sales of foreclosed real estate............. 3,398 2,206
Net purchases of Federal Home Loan Bank stock........... (24,703) (10,656)
Net purchases of premises and equipment .................. (1,285) (1,599)
----------- ----------
Net cash used in investing activities ................... (343,199) (206,941)
----------- ----------
(Continued)
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NEW YORK BANCORP INC. AND SUBSIDIARY
----- CONSOLIDATED STATEMENTS OF CASH FLOWS -----
(CONTINUED)
Nine Months Ended
June 30,
-----------------------
1997 1996
---------- ---------
(In Thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in non-interest bearing demand,
savings, money market, and NOW accounts................. $ 9,612 $ 15,017
Net decrease in time deposits ......................... (34,578) (16,916)
Net increase (decrease) in borrowings with original
maturities of three months or less ..................... 161,882 (155,176)
Proceeds from long-term borrowings ..................... 558,046 532,625
Repayment of long-term borrowings ...................... (381,484) (185,675)
Purchase of common stock for treasury .................. (18,101) (18,090)
Payment of common stock dividends ...................... (7,169) (7,129)
Exercise of stock options .............................. 1,502 991
Cash paid for fractional shares resulting from stock split (5) --
Decrease in mortgagors' escrow accounts ................ (4,685) (7,048)
-------- ---------
Net cash provided by financing activities................ 285,020 158,599
-------- ---------
Net increase (decrease) in cash and cash equivalents..... 4,668 (15,904)
Cash and cash equivalents at beginning of period......... 23,745 45,104
-------- ---------
Cash and cash equivalents at end of period............... $ 28,413 $ 29,200
========= =========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid .......................................... $ 89,693 $ 81,619
========= =========
Income taxes paid ....................................... $ 18,612 $ 19,183
========= =========
Noncash investing and financing activities:
Transfer of loans to real estate owned ................. $ 2,590 $ 3,380
========= =========
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 June 30, 1997
and September 30, 1996 and for the three and nine month periods ended
June 30, 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 nine month
periods ended June 30, 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. In addition, a 4-for-3 stock split,
effected in the form of a stock dividend, was distributed on July 24,
1997 to shareholders of record on July 10, 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 splits. 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 shares of
common stock and common stock equivalents outstanding for the
calculation of primary earnings per share for the quarters ended June
30, 1997 and 1996 was 22,647,308 and 23,716,482, respectively, and for
the nine months ended June 30, 1997 and 1996 was 22,976,368 and
24,147,648, respectively.
NOTE 3: COMMITMENTS, CONTINGENCIES AND CONTRACTS
At June 30, 1997, Home Federal had commitments of $85.6 million to
originate first mortgage and cooperative residential loans. Of this
amount, adjustable rate mortgage loans represented $73.5 million and
fixed rate mortgage loans with interest rates ranging from 7.00% to
10.00%, represented $12.1 million. At June 30, 1997, Home Federal also
had commitments to sell $2.9 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 $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 June 30, 1997 three month LIBOR was 5.78%.
At June 30, 1997, the Bank was servicing first mortgage loans of
approximately $586.7 million, which are either partially or
wholly-owned by others.
NOTE 4: STOCK REPURCHASE PLAN
During the quarter ended June 30, 1997, New York Bancorp repurchased
256,704 shares under its present stock repurchase plan, bringing total
purchases during the current fiscal year to 858,986 shares. At June
30, 1997, the total number of Treasury shares amounted to 7,902,178.
Additionally, at June 30, 1997, the Company had authority to
repurchase up to an additional 1,688,741 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.
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.
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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.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130").
The Statement establishes standards for reporting and display of
comprehensive income and its components (revenues, expenses, gains,
and losses) in a full set of general-purpose financial statements.
Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and
circumstances from nonowner sources. SFAS No. 130 requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other
financial statements. SFAS No. 130 also requires than an enterprise
(a) classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional
paid-in-capital in the equity section of a statement of financial
position. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. Reclassification of prior periods will be required.
Management has not completed its review of SFAS No. 130, and has not
determined the impact, if any, that adoption of SFAS No. 130 will have
on the Company.
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In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS No. 131"). The Statement establishes
standards for the way an enterprise reports information about
operating segments in annual financial statements and requires that
enterprises report selected information about operating segments in
interim financial reports issued to shareholders. Operating segments
are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in
assessing performance. The Statement requires a reconciliation of
total segment revenue and expense items and segment assets to the
amounts in the enterprise's financial statements. The Statement also
requires a descriptive report on how the operating segments were
determined, the products and services provided by the operating
segments, and any measurement differences used for segment reporting
and financial statement reporting. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997. In the initial year of
application, comparative information for earlier years is to be
restated. Management has not completed its review of SFAS No. 131, but
does not anticipate that the adoption of SFAS No. 131 will have a
significant effect on 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 those 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 June 30, 1997 amounted to approximately $3.3 billion
reflecting a $342.7 million increase from the amount reported at September 30,
1996. The increase in total assets primarily reflects increases of
$168.7 million in mortgage-backed securities and $151.6 million in total loans.
These increases were primarily funded through a $338.4 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 11.4% at June 30, 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 3.90% in the third quarter of fiscal year 1997,
compared to 3.74% in the third quarter of fiscal year 1996.
At June 30, 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 June 30, 1997, 54.5% 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 June 30, 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 June 30,
1997 three month LIBOR was 5.78%. Further, at June 30, 1997, the amount of
unamortized gain on terminated interest rate floor arrangements amounted to
$2.0 million.
At June 30, 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 October 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.
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's ratio was 4.89% during June 1997 and 5.26% during September 1996.
The Bank has informed the OTS that its liquidity ratio was below the minimum
required for the month of June 1997. Under OTS regulation, the Bank could be
assessed a small monetary penalty for failure to meet the liquidity requirement
during June 1997. The Bank's liquidity ratio exceeded the requirement at June
30, 1997.
14
15
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 June 30, 1997, New York Bancorp repurchased
256,704 shares under its present stock repurchase plan, bringing total purchases
during the current fiscal year to 858,986 shares. At June 30, 1997, the total
number of Treasury shares amounted to 7,902,178. Additionally, at June 30, 1997,
the Company had authority to repurchase up to an additional 1,688,741 shares.
Repurchases may be made from time to time in open market transactions, subject
to availability of shares at prices deemed appropriate by New York Bancorp.
As of June 30, 1997, Home Federal was categorized "adequately capitalized"
under the OTS "prompt corrective action regulations" and continued to exceed all
regulatory capital requirements as detailed in the following table:
TANGIBLE CAPITAL CORE CAPITAL(1) RISK-BASED CAPITAL(2)
--------------------- ------------------------- -----------------------
Amount Percentage(3) Amount Percentage(3) Amount Percentage(3)
------ ------------ -------- -------------- -------- -------------
(Dollars in Thousands)
Capital for regulatory
purposes................. $155,981 4.75% $155,981 4.75% $174,974 11.18%
Minimum regulatory
requirement.............. 49,295 1.50 98,591 3.00 125,248 8.00
-------- ------- -------- ----- -------- ------
Excess.................... $106,686 3.25% $ 57,390 1.75% $ 49,726 3.18%
======== ======= ======== ===== ======== ======
(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.
15
16
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 borrowed funds. Net
interest income is dependent on the difference between the average balances and
rates earned on interest-earning assets versus the average balances and rates
paid on interest-bearing deposits and borrowed funds. Net income is further
affected by other operating income, other operating expenses and taxes.
The following tables set forth certain information relating to the
Company's average consolidated statements of financial condition and reflect the
average yield on assets and average cost of liabilities for the periods
indicated. Such yields and costs are derived by dividing annualized income or
expense by the average balance of assets (which include nonaccrual loans) or
liabilities, respectively, for the periods shown.
Quarter Ended June 30,
---------------------------------------------------------------------------------------------
1997 1996
---------------------------------------------- --------------------------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-------------- ----------- ---------- ---------------- ------------- ---------
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans.......... $ 1,724,465 $ 35,809 8.31% $ 1,495,526 $ 29,952 8.01%
Other loans................... 257,454 5,543 8.63 277,095 6,085 8.81
----------- --------- ----------- ---------
Total loans................. 1,981,919 41,352 8.35 1,772,621 36,037 8.14
Mortgage-backed securities.... 985,241 17,164 6.97 876,543 14,708 6.71
Debt and equity securities.... 196,808 3,403 6.92 105,966 1,626 6.15
Money market investments...... -- -- -- 1,588 21 5.21
----------- --------- ----------- ---------
Total interest-earning assets... 3,163,968 61,919 7.83 2,756,718 52,392 7.61
--------- ---------
Non-interest-earning assets..... 42,557 49,241
----------- -----------
Total assets.................. $ 3,206,525 $ 2,805,959
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Interest-bearing liabilities:
Deposits...................... $ 1,694,691 13,808 3.27 $ 1,752,352 14,804 3.40
Borrowed funds................ 1,293,071 17,222 5.34 854,455 11,682 5.49
----------- --------- ----------- ---------
Total interest-bearing liabilities 2,987,762 31,030 4.17 2,606,807 26,486 4.08
--------- ---------
Other liabilities............... 56,072 39,675
----------- -----------
Total liabilities............. 3,043,834 2,646,482
Shareholders' equity............ 162,691 159,477
----------- -----------
Total liabilities and
shareholders' equity......... $ 3,206,525 $ 2,805,959
=========== ===========
NET INTEREST INCOME/INTEREST RATE
SPREAD........................... $ 30,889 3.66% $25,906 3.53%
========= ====== ======= ======
NET EARNING ASSETS/NET
INTEREST MARGIN.................. $ 176,206 3.90% $ 149,911 3.74%
=========== ====== =========== ======
PERCENTAGE OF INTEREST-EARNING
ASSETS TO INTEREST-BEARING
LIABILITIES...................... 105.90% 105.75%
====== ======
16
17
Nine Months Ended on June 30,
---------------------------------------------------------------------------------------------
1997 1996
---------------------------------------------- --------------------------------------------
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
-------------- ----------- ---------- ---------------- ------------- ---------
(Dollars in Thousands)
ASSETS:
Interest-earning assets:
First mortgage loans.......... $ 1,671,370 $103,101 8.23% $ 1,428,928 $ 86,814 8.10%
Other loans................... 262,746 16,887 8.58 284,463 18,799 8.82
----------- -------- ----------- --------
Total loans................. 1,934,116 119,988 8.27 1,713,391 105,613 8.22
Mortgage-backed securities.... 916,550 47,024 6.84 857,475 42,874 6.67
Debt and equity securities.... 179,846 9,377 6.96 93,208 4,423 6.33
Money market investments...... 333 13 5.21 5,438 219 5.38
Trading account securities.... -- -- -- 293 13 5.70
----------- -------- ----------- --------
Total interest-earning assets... 3,030,845 176,402 7.76 2,669,805 153,142 7.65
-------- --------
Non-interest-earning assets..... 64,121 49,523
----------- -----------
Total assets.................. $ 3,094,966 $ 2,719,328
=========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Interest-bearing liabilities:
Deposits...................... $ 1,699,760 41,569 3.27 $ 1,748,528 46,048 3.52
Borrowed funds................ 1,162,726 45,788 5.26 771,339 33,170 5.74
----------- -------- ----------- --------
Total interest-bearing liabilities 2,862,486 87,357 4.08 2,519,867 79,218 4.20
-------- --------
Other liabilities............... 71,840 40,598
----------- -----------
Total liabilities............. 2,934,326 2,560,465
Shareholders' equity............ 160,640 158,863
----------- -----------
Total liabilities and
shareholders' equity......... $ 3,094,966 $ 2,719,328
=========== ===========
NET INTEREST INCOME/INTEREST RATE
SPREAD........................... $ 89,045 3.68% $ 73,924 3.45%
======== ====== ========= ======
NET EARNING ASSETS/NET
INTEREST MARGIN.................. $ 168,359 3.91% $ 149,938 3.69%
=========== ====== =========== ======
PERCENTAGE OF INTEREST-EARNING
ASSETS TO INTEREST-BEARING
LIABILITIES...................... 105.88% 105.95%
====== ======
17
18
F. COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 AND 1996
General
- -------
New York Bancorp's net income for the quarter ended June 30, 1997 was
$13.2 million, or $.58 per share, compared to net income of $9.6 million, or
$.41 per share, for the quarter ended June 30, 1996. Comments regarding the
components of net income are detailed in the following paragraphs.
Interest Income
- ---------------
Interest income on interest-earning assets for the quarter ended June 30,
1997 increased by $9.5 million, or 18.2%, to $61.9 million compared to the
quarter ended June 30, 1996. The increase in interest income is attributable to
a $407.3 million increase in average interest-earning assets, coupled with a
22 basis point increase in yield.
Interest and fee income on loans for the quarter ended June 30, 1997
increased by $5.3 million, or 14.7%, to $41.4 million compared to the same
quarter in 1996. The increase in loan income reflects a $209.3 million increase
in the average loan balance to $1.982 billion and a 30 basis point increase in
yield on first mortgage loans which, however, were partially offset by an
18 basis point decline in yield on other loans. Interest on mortgage-backed
securities for the quarter ended June 30, 1997 increased by $2.5 million to
$17.2 million as compared to the same quarter in 1996. This increase in income
is primarily due to a $108.7 million increase in the average balance, coupled
with a 26 basis point increase in yield to 6.97%. Interest and dividends on debt
and equity securities increased by $1.8 million to $3.4 million in the current
quarter compared to the comparable prior year quarter. The increase in such
income is attributed to a $90.8 million increase in the average balance, coupled
with a 77 basis point increase in yield.
Interest Expense
- ----------------
Interest expense on interest-bearing liabilities for the quarter ended
June 30, 1997 amounted to $31.0 million, an increase of $4.5 million from the
quarter ended June 30, 1996. The increase in interest expense for the quarter
reflects a $381.0 million growth in interest-bearing liabilities to
$2.988 billion coupled with a 9 basis point increase in the cost on
interest-bearing liabilities. During the quarter ended June 30, 1997, $400
million of outstanding notional amounts of interest rate swaps matured.
Additionally, the amount of gain deferred on $200 million (notional amount) of
terminated interest rate swap arrangements became fully accreted to income
during the current quarter. 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 ($1.5 million of which is attributable to interest rate swaps) and
$.9 million for the quarters ended June 30, 1997 and 1996, respectively. The
Bank had no interest rate swap arrangements outstanding at June 30, 1997.
18
19
Interest expense on deposits of $13.8 million for the quarter ended June
30, 1997 decreased by $1.0 million compared to the quarter ended June 30, 1996.
This decrease reflects a 13 basis point decline in the average cost of deposits
from 3.40% in the 1996 quarter to 3.27% in the 1997 quarter, coupled with a
$57.7 million decline in the average balance of deposits to $1.695 billion
during the quarter ended June 30, 1997. Interest expense on borrowed funds
increased $5.5 million to $17.2 million for the quarter ended June 30, 1997 as
compared to the quarter ended June 30, 1996. This increase reflects a
$438.6 million increase in the average balance of borrowed funds to
$1.293 billion which, however, was partially offset by a 15 basis point decline
in the average cost of borrowed funds from 5.49% during the quarter ended
June 30, 1996 to 5.34% during the quarter ended June 30, 1997. The decrease in
the cost of borrowings is due to the Bank's increased use of interest rate
swaps, which decreased the average cost of borrowed funds 51 basis points in the
current quarter, as compared to 5 basis points in the comparable prior year
quarter.
Provision for Possible Loan Losses
- ----------------------------------
Home Federal provided $.3 million for possible loan losses during each of
the quarters ended June 30, 1997 and 1996. The Bank's ratio of its allowance for
possible loan losses to total nonaccrual loans amounted to 69.1% and 72.9% at
June 30, 1997 and 1996, respectively.
At June 30, 1997, the Company's recorded investment in impaired loans was
$14.7 million, all of which were on nonaccrual status, compared to $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 June 30, 1997.
Interest income of $.1 million was recognized on these loans during each of the
quarters ended June 30, 1997 and 1996, respectively. This represents actual
interest payments received. The average recorded investment in impaired loans
during the quarters ended June 30, 1997 and 1996 was $14.6 million and
$14.8 million, respectively. The allowance for possible loan losses contains
additional amounts for impaired loans, as deemed necessary, to maintain reserves
at levels considered adequate by management.
As part of the Bank's determination of the adequacy of the allowance for
possible loan losses, the Bank monitors its loan portfolio through its Asset
Classification Committee. The Committee, which meets no less than quarterly,
consists of employees who are independent of the loan origination process and
members of management. This Committee reviews individual loans with the lending
officers and assesses risks relating to the collectibility of these loans. The
Asset Classification Committee determines the adequacy of the allowance for
possible loan losses through ongoing analysis of historical loss experience, the
composition of the loan portfolios, delinquency levels, underlying collateral
values and cash flow values. Utilizing these procedures, management believes
that the allowance at June 30, 1997 is sufficient to cover anticipated losses
inherent in the loan portfolios.
Nonaccrual loans at June 30, 1997 amounted to $28.4 million, or 1.40% of
total loans, as compared to $25.6 million, or 1.36% of total loans, at September
30, 1996.
19
20
The following table sets forth the Bank's nonaccrual loans at the dates
indicated:
June 30, September 30,
1997 1996
----------- --------------
(In Thousands)
Nonaccrual Loans
First mortgage loans:
One- to- four family conventional residential..... $12,205 $12,092
Multifamily residential .......................... 929 155
Commercial real estate ........................... 13,766 11,758
------- -------
26,900 24,005
Other loans - cooperative residential loans......... 1,494 1,547
------- -------
Total nonaccrual loans ......................... $28,394 $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 $718,000 and $706,000 for the three month periods ended June 30, 1997 and
1996, respectively. The amount of interest income that was recorded on these
loans was $252,000 and $237,000 for the three month periods ended June 30, 1997
and 1996, respectively.
Additionally, at June 30, 1997, the Bank had $2.1 million in real estate
owned as compared to $3.2 million at September 30, 1996. Further, at June 30,
1997 the Bank also had 14 restructured commercial real estate loans amounting to
approximately $5.4 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 $4.4 million of consumer and other loans which are past
due 90 days and still accruing interest as of June 30, 1997. Of the
$4.4 million, $3.3 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 June 30, 1997 was
$19.6 million, which represented 69.1% 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.
20
21
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 June 30:
1997 1996
-------- --------
(In Thousands)
Allowance for possible loan losses, beginning of quarter..... $ 19,767 $ 20,588
Charge-offs:
Commercial real estate..................................... (61) (134)
Residential real estate.................................... (207) (394)
Other loans................................................ (202) (640)
-------- --------
Total charge-offs........................................ (470) (1,168)
Less recoveries - other loans.............................. 16 15
-------- --------
Net charge-offs............................................ (454) (1,153)
-------- --------
Addition to allowance charged to expense................... 300 300
-------- --------
Allowance for possible loan losses, end of quarter......... $ 19,613 $ 19,735
======== ========
The charge-offs recorded in each of the quarters shown above primarily
relate to delinquent loans for which reserves had been provided in prior
periods. Upon resolution of these delinquent loans, the loss incurred was
charged to the allowance.
Net Interest Income After Provision for Possible Loan Losses
- ------------------------------------------------------------
Net interest income after provision for possible loan losses for the
quarter ended June 30, 1997 amounted to $30.6 million, representing an increase
of $5.0 million from the quarter ended June 30, 1996. This increase reflects a
$407.3 million increase in average interest earning assets, coupled with a
16 basis point increase in the Bank's net interest margin from 3.74% in 1996 to
3.90% in 1997.
Non-Interest Income
- -------------------
Non-interest income amounted to $3.1 million for the quarter ended
June 30, 1997, compared to $3.4 million for the prior year comparable quarter.
The $.3 million decrease in non-interest income reflects a decrease of
$.6 million in net gain on the sale of mortgage loans and securities available
for sale which, however, was partially offset by a $.2 million increase in
banking service fee income.
21
22
Non-Interest Expense
- --------------------
The general and administrative expense component of non-interest expense
totaled $11.7 million or 1.46% of average assets, for the quarter ended June 30,
1997, compared to $11.7 million, or 1.68% of average assets, for the quarter
ended June 30, 1996. A $.3 million increase in compensation and benefits was
offset by a $.4 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 20% increase
in the price of the Company's stock during the current quarter.
Income Tax Expense
- ------------------
Income taxes increased $1.2 million to $8.7 million for an effective tax
rate of 39.7% during the quarter ended June 30, 1997 versus an effective tax
rate of 43.6% during the quarter ended June 30, 1996. The reduction in the
effective tax rate reflects tax planning strategies implemented during the
current quarter.
G. COMPARISON OF NINE MONTHS ENDED JUNE 30, 1997 AND 1996
General
- -------
New York Bancorp's net income for the nine months ended June 30, 1997 was
$37.3 million, or $1.63 per share, compared to net income of $26.6 million, or
$1.10 per share, for the nine months ended June 30, 1996. The current nine 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 nine months ended June
30, 1997 increased by $23.3 million, or 15.2%, to $176.4 million compared to the
nine months ended June 30, 1996. The increase in interest income is attributable
to a $361.0 million increase in average interest-earning assets, coupled with an
11 basis point increase in yield.
Interest and fee income on loans for the nine months ended June 30, 1997
increased by $14.4 million, or 13.6%, to $120.0 million compared to $105.6
million for the same period in 1996. The increase in loan income reflects a
$220.7 million increase in the average loan balance to $1.934 billion and a
13 basis point increase in yield on first mortgage loans which, however, were
partially offset by a 24 basis point decline in yield on other loans. Interest
on mortgage-backed securities for the nine months ended June 30, 1997 increased
by $4.2 million to $47.0 million as compared to the same period in 1996. This
increase in income is due to a $59.1 million increase in the average balance,
coupled with a 17 basis point increase in yield. Interest and dividends on debt
and equity securities increased by $5.0 million to $9.4 million in the current
nine month period compared to $4.4 million in the comparable prior year period.
The increase in such income is attributed to an $86.6 million increase in the
average balance coupled with a 63 basis point increase in yield.
22
23
Interest Expense
- ----------------
Interest expense on interest-bearing liabilities for the nine months ended
June 30, 1997 increased by $8.1 million, or 10.3%, to $87.4 million compared to
the nine months ended June 30, 1996. The increase in interest expense for the
nine months primarily reflects a $342.6 million growth in average
interest-bearing liabilities to $2.862 billion which, however, was partially
offset by a 12 basis point decrease in cost on interest-bearing liabilities to
4.08%. The impact of the Bank's use of interest rate swaps and other off-balance
sheet instruments was to decrease interest expense by $5.7 million and
$2.2 million for the nine months ended June 30, 1997 and 1996, respectively.
Interest expense on deposits decreased by $4.5 million to $41.6 million
for the nine months ended June 30, 1997, compared to the nine months ended
June 30,1996. This decrease is attributed to a $48.8 million decrease in the
average balance of deposits to $1.700 billion, coupled with a 25 basis point
decrease in the average cost of deposits to 3.27% in the current nine month
period compared to the prior year period. Interest expense on borrowed funds
increased $12.6 million to $45.8 million for the nine months ended June 30, 1997
as compared to the nine months ended June 30, 1996. This increase reflects a
$391.4 million increase in the average balance of borrowed funds to
$1.163 billion which, however, was partially offset by a 48 basis point decrease
in the average cost of borrowed funds from 5.74% in 1996 to 5.26% in 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 43 basis
points in the current nine month period. Off-balance financial instruments
decreased the cost of borrowings two basis points during the nine months ended
June 30, 1996.
Provision for Possible Loan Losses
- ----------------------------------
Home Federal provided $1.8 million and $.9 million for possible loan
losses during the nine months ended June 30, 1997 and 1996, respectively. The
increase in the provision for the current nine month period reflects
management's assessment of events during the second fiscal quarter related to
one nonaccrual loan.
At June 30, 1997, the Company's recorded investment in impaired loans was
$14.7 million, all of which were on nonaccrual status. Due to charge-offs, or
the crediting of interest payments to principal, the loans do not have an
impairment reserve at June 30, 1997. Interest income of $.3 million and
$.4 million was recognized on these loans during the nine month periods ended
June 30, 1997 and 1996, respectively. This represents actual interest payments
received. The average recorded investment in impaired loans during the nine
months ended June 30, 1997 and 1996 was $14.3 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.
23
24
Net Interest Income After Provision for Possible Loan Losses
- ------------------------------------------------------------
Net interest income after provision for possible loan losses for the nine
months ended June 30, 1997 amounted to $87.2 million, representing an increase
of $14.2 million from the $73.0 million amount during the nine months ended June
30, 1996. This increase primarily reflects a $361.0 million increase in average
interest-earning assets, coupled with a 22 basis point increase in the Bank's
net interest margin from 3.69% in 1996 to 3.91% in 1997.
Non-Interest Income
- -------------------
Non-interest income amounted to $13.8 million for the nine months ended
June 30, 1997, representing an increase of $3.7 million from the comparable
prior year period. The $3.7 million increase in non-interest income reflects
$.9 million more in banking service fee income, $.4 million more in fees from
the sale of investment products, and $4.3 million more in other income which,
however, were partially offset by a decrease of $2.0 million in net gains on the
sale of mortgage loans and securities available for sale. The increase in other
income reflects $4.5 million in interest received on a tax settlement with the
Internal Revenue Service during the second fiscal quarter.
Non-Interest Expense
- --------------------
The general and administrative expense component of non-interest expense
totaled $37.2 million, or 1.61% of average assets, for the nine months ended
June 30, 1997, compared to $35.3 million, or 1.73% of average assets, for the
nine months ended June 30, 1996. The $1.9 million increase in general and
administrative expense reflects a $2.5 million increase in compensation and
benefits and a $1.0 million increase in other expense which, however, were
partially offset by a $.5 million decrease in advertising expense and a
$1.1 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 65% increase in the
price of the Company's stock during the current nine month period. The increase
in other expense was primarily attributed to professional fees related to
special projects. The $1.1 million decrease in federal deposit insurance
premiums reflects the recapitalization of the Savings Association Insurance Fund
(the "SAIF") of the FDIC during the prior fiscal year.
Income Tax Expense
- ------------------
Income taxes increased $4.6 million to $25.6 million for an effective tax
rate of 40.7% during the nine months ended June 30, 1997. Excluding the
$.7 million received on the tax settlement with the Internal Revenue Service,
the effective tax rate would have been 41.8% for the current nine month period
versus an effective tax rate of 44.0% for the comparable prior year period. The
reduction in the effective tax rate reflects tax planning strategies implemented
during the current quarter.
24
25
H. PROPOSED LEGISLATIVE MATTERS
Legislation has been introduced in Congress that would eliminate the
federal savings association charter. The legislation would require all federal
savings associations convert to national banks or state-chartered institutions
two years after enactment. Federal associations that fail to convert would
automatically become national banks. Additionally, the OTS would be eliminated.
The legislation provides for the merger of the Bank Insurance Fund and the SAIF
as of January 1, 2000, or a date two years after enactment. A federal thrift
could continue to engage in any activity in which it was lawfully engaged prior
to converting to a national bank charter. A savings and loan holding company in
existence on the date of enactment would become a bank holding company.
Activities permitted for a savings and loan holding company would be
grandfathered, but would be lost if a bank subsidiary is acquired or there is a
change in control.
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.
25
26
I. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial data.
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- -------
(Dollars in Thousands, except per share amounts)
FINANCIAL RATIOS (1)
- --------------------
Average Yield:
First mortgage loans...................... 8.31% 8.01% 8.23% 8.10%
Other loans............................... 8.63 8.81 8.58 8.82
Mortgage-backed securities................ 6.97 6.71 6.84 6.67
Debt and equity securities - taxable...... 6.92 6.15 6.96 6.33
Money market investments.................. N/A 5.21 5.21 5.38
Trading account securities................ N/A N/A N/A 5.70
All interest-earning assets............ 7.83 7.61 7.76 7.65
Average cost:
Deposits.................................. 3.27 3.40 3.27 3.52
Borrowed funds............................ 5.34 5.49 5.26 5.74
All interest-bearing liabilities....... 4.17 4.08 4.08 4.20
Net interest rate spread..................... 3.66 3.53 3.68 3.45
Net interest margin.......................... 3.90 3.74 3.91 3.69
Average interest-earning assets to
average interest-bearing liabilities....... 105.90 105.75 105.88 105.95
Return on average assets..................... 1.65 1.38 1.61 1.31
Return on average common equity.............. 32.46 24.29 31.08 22.39
Efficiency ratio............................. 34.46 40.98 38.15 43.36
General and administrative expense
to average assets.......................... 1.46 1.68 1.61 1.73
Equity to asset ratio at June 30............. 5.08 5.43 5.08 5.43
Cumulative one year gap as a percent of
total interest-earning assets at June 30... -11.4% -14.0% -11.4% -14.0%
SHARE INFORMATION (2):
- ---------------------
Earnings per common share................. $ .58 $ .41 $1.63 $1.10
Weighted average number of common
shares and equivalents outstanding...... 22,647,308 23,716,482 22,976,368 24,147,648
Number of shares outstanding at June 30... 21,591,247 22,983,716 21,591,247 22,983,716
Book value per share at June 30........... $7.73 $6.89 $7.73 $6.89
NET INTEREST POSITION:
- ---------------------
Excess of average interest-earning assets
over average interest-bearing liabilities $ 176,206 $ 149,911 $ 168,359 $ 149,938
LOAN HIGHLIGHTS:
- ---------------
Loan originations......................... $ 168,117 $ 162,433 $ 425,292 $ 313,713
Loan purchases............................ $ 4,809 $ 93,202 $ 18,914 $ 184,517
Loan sales................................ $ 9,091 $ 7,020 $ 36,221 $ 42,196
Loans serviced for others at June 30...... $ 586,654 $ 577,605 $ 586,654 $ 577,605
Loan servicing fees....................... $ 415 $ 446 $ 1,289 $ 1,287
ADJUSTABLE RATE ASSETS AT JUNE 30:
- ---------------------------------
First mortgage loans and mortgage-backed
securities.............................. $ 1,528,081 $ 1,365,384 $ 1,528,081 $ 1,365,384
Other loans, money market investments
and debt and equity securities.......... $ 223,555 $ 246,816 $ 223,555 $ 246,816
Total adjustable rate assets as a percent
of total interest-earning assets........ 54.52% 56.64% 54.52% 56.64%
- --------------------
(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 and the 4-for-3 stock split
effective July 24, 1997.
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PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
- --------------------------
Not Applicable
Item 2. Changes in Securities
- ------------------------------
Not applicable
Item 3. Defaults Upon Senior Securities
- ----------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
Not applicable
Item 5. Other Information
- --------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibits
--------
Exhibit
Number Description
------ -----------
3.1 Certificate of Incorporation of New York Bancorp Inc., as
amended(1)
3.2 Bylaws of New York Bancorp Inc., as amended(2)
11 Statements re: computation of per share earnings
27 Financial Data Schedule
(1) Incorporated by reference to Exhibits filed with New York Bancorp Inc.'s
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: August 5, 1997 By: /s/ Michael A. McManus, Jr.
--------------------------------
Michael A. McManus, Jr.
President and
Chief Executive Officer
Date: August 5, 1997 By: /s/ Stan I. Cohen
--------------------------------
Stan I. Cohen
Senior Vice President,
Controller and Secretary
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