-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IeojOWFn0/oM0UQ8fF5mmQGbultQteeOCp9DKOw3dHuSpvaYK+7lB4qAa46mmUem h5sxS80U9fp/ktXgIq2ukQ== 0000950172-97-001075.txt : 19971121 0000950172-97-001075.hdr.sgml : 19971121 ACCESSION NUMBER: 0000950172-97-001075 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971120 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971120 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH FORK BANCORPORATION INC CENTRAL INDEX KEY: 0000352510 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 111353410 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-10458 FILM NUMBER: 97725221 BUSINESS ADDRESS: STREET 1: 275 BROAD HOLLOW RD STREET 2: PO BOX 8914 CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5162985000 MAIL ADDRESS: STREET 1: 275 BROAD HOLLOW RD STREET 2: PO BOX 8914 CITY: MELVILLE STATE: NY ZIP: 11747 8-K 1 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K C U R R E N T R E P O R T Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 November 20, 1997 Date of Report (Date Of Earliest Event Reported) NORTH FORK BANCORPORATION, INC. (Exact Name Of Registrant As Specified In Its Charter) Delaware (State Or Other Jurisdiction Of Incorporation) 0-1280 36-315468 (Commission File Number) (IRS Employer Identification No.) 275 Broad Hollow Road Melville, NY 11747 (Address Of Principal Executive Offices) (Zip Code) (516) 844-1004 (Registrant's Telephone Number, including Area Code) NOT APPLICABLE (Former Name Or Former Address, If Changed Since Last Report) Item 5. Other Events. On October 7, 1997, North Fork Bancorporation, Inc. ("North Fork") entered into an agreement and plan of merger with New York Bancorp Inc. ("New York Bancorp") pursuant to which New York Bancorp will be merged (the "New York Bancorp Merger") with and into North Fork. The New York Bancorp Merger is expected to be consummated in the first quarter of 1998 and to be accounted for under the pooling of interests accounting method. On July 24, 1997, North Fork entered in an agreement and plan of merger with Branford Savings Bank ("Branford") pursuant to which Branford will be merged (the "Branford Merger") with a newly formed wholly-owned subsidiary of North Fork. The Branford Merger is expected to be consummated prior to December 31, 1997 and to be accounted for under the purchase method of accounting. Exhibit 99.1 hereto includes certain historical financial statements of New York Bancorp. Exhibit 99.2 hereto includes certain pro forma condensed combined financial information for North Fork. Item 7. Financial Statements and Exhibits. (a) Financial Statements of the Business Acquired. See Exhibit 99.1. (b) Pro Forma Financial Information. See Exhibit 99.2. (c) Consent of Independent Certified Public Accountants. See Exhibit 99.3. SIGNATURE 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 under signed hereunder duly authorized. Dated: November 20, 1997 NORTH FORK BANCORPORATION, INC. By: /s/ DANIEL M. HEALY Name: Daniel M. Healy Title: Executive Vice President and Chief Financial Officer EX-99 2 EXHIBIT 99.1 EXHIBIT 99.1 New York Bancorp Inc. and Subsidiary consolidated statement of financial condition - ---------------------------------------------- (Unaudited) June 30, 1997 ---------- Assets Cash and due from banks....................................... $ 28,413 Money market investments...................................... -- 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 Available for sale........................................ 135,553 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 Available for sale ...................................... 397,118 Federal Home Loan Bank stock................................. 52,641 Loans receivable, net: First mortgage loans..................................... 1,769,701 Other loans.............................................. 254,425 ----------- 2,024,126 Less allowance for possible loan losses.................. (19,613) Total loans receivable, net.......................... 2,004,513 Accrued interest receivable.................................. 23,784 Premises and equipment, net.................................. 12,485 Other assets................................................. 25,712 ----------- Total assets............................................. $ 3,283,653 =========== Liabilities and Shareholders' Equity Liabilities: Deposits................................................. $ 1,690,993 Borrowed funds........................................... 1,347,230 Mortgagors' escrow payments.............................. 10,302 Accrued expenses and other liabilities................... 68,256 ----------- Total liabilities.................................... 3,116,781 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 Additional paid-in capital............................... 66,502 Retained earnings, substantially restricted.............. 171,847 Treasury stock, at cost, 7,902,178 and 7,296,100 shares at June 30, 1997 and September 30, 1996, respectively..................... (72,480) Unrealized appreciation (depreciation) on securities available for sale, net of tax effect........................................... 708 ----------- Total shareholders' equity........................... 166,872 ----------- Total liabilities and shareholders' equity........... 3,283,653 =========== - ----------------- (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. 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 52,392 176,402 153,1442 --------- --------- --------- --------- Interest Expense: Deposits .............................. 13,808 14,804 41,569 46,048 Borrowed funds ........................ 17,222 11,682 45,788 33,1770 --------- --------- --------- --------- 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. New York Bancorp Inc. and Subsidiary consolidated statement of changes in shareholders' equity - --------------------------------------------------------- (Unaudited)
Nine Months Ended June 30, 1997 ----------------------------------------------------------------------------- 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 Date) 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. 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) --------- --------- 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 sales ............... $ -- $ 65,364 ========= ========= See accompanying notes to consolidated financial statements. New York Bancorp Inc. and Subsidiary notes to consolidated financial statements - ------------------------------------------ (Unaudited) 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. 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. 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. 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. New York Bancorp Inc. and Subsidiary consolidated statements of financial condition - ---------------------------------------------- (Dollars in thousands, except per share data)
September 30, ----------------------------- 1996 1995 ----------- ---------- Assets Cash and due from banks.............................. $ 13,045 $ 31,189 Money market investments (note 3).................... 10,700 13,915 Trading account securities........................... -- 2,003 Investment in debt and equity securities, net: Held to maturity (estimated market value of $641 and $21,107 at September 30, 1996 and 1995, respectively)--(notes 4 and 14)...... 643 21,179 Available for sale (note 5)........................ 136,133 46,273 Mortage-backed securities, net: Held to maturity (estimated market value of $534,602 and $637,503 at September 30, 1996 and 1995, respectively)--(notes 6 and 14)........................................ 550,817 664,726 Available for sale (notes 7, 14 and 21)............ 280,429 206,794 Federal Home Loan Bank stock (note 14)............... 27,938 20,288 Loans receivable, net (notes 8, 9 and 14): First mortgage loans............................... 1,603,769 1,389,776 Other loans........................................ 268,779 296,439 ----------- ----------- 1,872,548 1,686,215 Less allowance for possible loan losses............ (19,386) (21,272) ----------- ----------- Total loans receivable, net.................... 1,853,162 1,664,943 Accrued interest receivable (note 10)................ 21,862 21,723 Premises and equipment, net (note 11)................ 12,927 12,851 Other assets (notes 12 and 16)....................... 33,251 25,708 ----------- ----------- Total assets....................................... $ 2,940,907 $ 2,731,592 =========== =========== Liabilities and Shareholders' Equity Liabilities: Deposits (note 13)................................. $ 1,715,959 $ 1,748,874 Borrowed funds, including securities sold under agreements to repurchase of $453,698 and $344,860 at September 30, 1996 and 1995, respectively (note 14).......... 1,008,786 767,138 Mortgagors' escrow payments........................ 14,987 16,520 Accrued expenses and other liabilities (notes 15 and 18).............................. 49,272 42,674 ----------- ----------- Total liabilities.............................. 2,789,004 2,575,206 ----------- ----------- Commitments, contingencies and contracts (notes 8, 16 and 20) Shareholders' equity (notes 16, 17 and 19): Preferred stock, $.01 par value, 2,000,000 shares authorized; none issued................. -- -- Common stock, $.01 par value, 30,000,000 shares authorized; 14,746,850 shares issued at September 30, 1996 and 1995; 11,098,800 and 12,138,974 shares outstanding at September 30, 1996 and 1995, respectively............................. 147 147 Additional paid-in capital......................... 65,503 63,575 Retained earnings, substantially restricted........ 145,686 125,593 Treasury stock, at cost, 3,648,050 and 2,607,876 shares at September 30, 1996 and 1995, respectively......................... (58,871) (33,740) Unrealized appreciation (depreciation) on securities available for sale, net of tax effect..................................... (562) 811 ----------- ----------- Total shareholders' equity..................... 151,903 156,386 ----------- ----------- Total liabilities and shareholders' equity..... $ 2,940,907 $ 2,731,592 =========== =========== See accompanying notes to consolidated financial statements. New York Bancorp Inc. and Subsidiary consolidated statements of income - ------------------------------------- (In thousands, except per share data)
Year Ended September 30, ----------------------------------------- 1996 1995 1994 ---------- ---------- ---------- Interest income: Interest and fees on loans: First mortgage loans....................................... $ 118,792 $ 104,042 $ 93,373 Other loans................................................ 24,735 25,916 24,094 --------- --------- --------- Total interest and fees on loans........................ 143,527 129,958 117,467 Mortgage-backed securities..................................... 56,921 60,331 52,521 Debt and equity securities - - taxable......................... 6,774 4,877 2,976 Money market investments....................................... 256 1,080 2,113 Trading account securities..................................... 13 726 453 --------- ---------- --------- Total interest income................................... 207,491 196,972 175,530 --------- ---------- --------- Interest expense: Deposits (notes 13 and 21)..................................... 60,470 62,394 56,996 Borrowed funds (notes 14 and 21) .............................. 46,276 39,336 22,952 --------- ---------- --------- Total interest expense.................................. 106,746 101,730 79,948 --------- ---------- --------- Net interest income........................................ 100,745 95,242 95,582 Provision for possible loan losses (note 9).................... (1,200) (1,700) (2,650) --------- ---------- --------- Net interest income after provision for possible loan losses.................................... 99,545 93,542 92,932 --------- ---------- --------- Non-interest income: Loan fees and service charges.................................. 2,770 2,566 3,292 Net gain (loss) on the sales of mortgage loans and securities available for sale (notes 5, 7 and 8) .......... 4,750 (1,088) 214 Other.......................................................... 7,147 5,134 4,494 --------- ---------- --------- Total non-interest income............................... 14,667 6,612 8,000 --------- ---------- --------- Non-interest expenses: General and administrative: Compensation and benefits (notes 18 and 19)................ 22,741 21,809 25,197 Occupancy, net (notes 11 and 20) .......................... 8,397 8,751 8,346 Advertising and promotion.................................. 2,565 2,565 2,370 Federal deposit insurance premiums......................... 3,759 4,464 4,756 Other...................................................... 10,073 11,379 10,176 --------- ---------- --------- Total general and administrative........................ 47,535 48,968 50,845 Merger and restructuring (note 2)............................. -- 19,024 -- Real estate operations, net (note 12).......................... 463 883 880 SAIF recapitalization (note 13)................................ 9,432 -- -- --------- ---------- --------- Total non-interest expense.............................. 57,430 68,875 51,725 --------- ---------- --------- Income before income tax expense and cumulative effect of change in accounting principle................ 56,782 31,279 49,207 --------- ---------- --------- Income tax expense (note 16): Federal expense................................................ 16,676 13,460 14,214 State and local expense........................................ 8,100 6,257 7,526 --------- ---------- --------- Total income tax expense................................ 24,776 19,717 21,740 --------- ---------- --------- Income before cumulative effect of change in accounting principle.................................... 32,006 11,562 27,467 Cumulative effect of change in accounting for income taxes....... -- -- 5,685 --------- ---------- --------- Net income................................................. $ 32,006 $ 11,562 $ 33,152 --------- ---------- --------- Earnings per common share (note 17): Income before cumulative effect of change in accounting principle....................................... $ 2.68 $ .87 $ 2.02 Cumulative effect of change in accounting for income taxes..... $ -- $ -- $ .42 Net income................................................. $ 2.68 $ .87 $ 2.44
New York Bancorp Inc. and Subsidiary consolidated statements of changes in shareholders' equity - ---------------------------------------------------------- (Dollars in thousands, except per share data)
Unrealized Appreciation Common Common (Depreciation) Additional Stock Stock on Securities Common Paid-in Retained Treasury Acquired Acquired Available Stock Capital Earnings Stock by ESOP by RRP for Sale Total ------------------------------------------------------------------------------------------- Balance at September 30, 1993 ...... $144 $53,854 $111,160 $ (7,194) $(2,717) $(1,478) $ -- $153,769 Net income for the year ended September 30, 1994 ............... -- -- 33,152 -- -- -- -- 33,152 Dividends declared on common stock.. -- -- (5,720) -- -- -- -- (5,720) Distribution of 10% stock dividend.. 7 12,133 (12,140) -- -- -- -- -- Cash paid in lieu of 221 fractional shares in the aggregate, resulting from stock dividend .... -- (3) -- -- -- -- -- (3) Compensation amortized to expense... -- 600 -- -- 543 348 -- 1,491 Purchase of 339,280 shares of treasury stock ................... -- -- -- (4,544) -- -- -- (4,544) Purchase and retire 283,030 shares.. (4) (3,772) -- -- -- -- -- (3,776) Exercise of 92,791 shares of stock options .................... -- -- (924) 1,743 -- -- -- 819 Unrealized appreciation on securities available for sale at October 1, 1993, net of taxes of $377..................... -- -- -- -- -- -- 449 449 Change in unrealized depreciation on securities available for sale, net of taxes of $3,428 ..... -- -- -- -- -- -- (4,346) (4,346) ------------------------------------------------------------------------------------------- Balance at September 30, 1994 ...... 147 62,812 125,528 (9,995) (2,174) (1,130) (3,897) 171,291 Net income for the year ended September 30, 1995 ............... -- -- 11,562 -- -- -- -- 11,562 Dividends declared on common stock.. -- -- (9,114) -- -- -- -- (9,114) Exercise of 385,464 shares of stock options .................... 3 -- (603) 1,544 -- -- -- 944 Purchase of 1,453,016 shares of treasury stock ................... -- -- -- (28,784) -- -- -- (28,784) Purchase and retire 196,643 shares.. (2) (3,710) -- -- -- -- -- (3,712) Net proceeds from sale of 298,375 shares of treasury stock (note 2).......................... -- 1,035 -- 3,495 -- -- -- 4,530 ESOP and RRP activity, including tax benefit (note 2) ............. (1) 3,438 -- -- 2,174 1,130 -- 6,741 Hamilton Bancorp's net income for the three months ended December 31, 1994 (note 2) ................ -- -- (1,780) -- -- -- -- (1,780) Change in unrealized appreciation on securities available for sale, net of taxes of $3,690 ..... -- -- -- -- -- -- 4,708 4,708 ------------------------------------------------------------------------------------------- Balance at September 30, 1995 ...... 147 63,575 125,593 (33,740) -- -- 811 156,386 Net income for the year ended September 30, 1996 ............... -- -- 32,006 -- -- -- -- 32,006 Dividends declared on common stock.. -- -- (9,218) -- -- -- -- (9,218) Exercise of 174,038 shares of stock options .................... -- 1,928 (2,695) 3,897 -- -- -- 3,130 Purchase of 1,214,212 shares of treasury stock ................... -- -- -- (29,028) -- -- -- (29,028) Unrealized depreciation on securities transferred from held to maturity to available for sale, net of taxes of $97 (notes 4 and 6) .................. -- -- -- -- -- -- (126) (126) Change in unrealized appreciation (depreciation) on securities available for sale, net of taxes of $968 .................... -- -- -- -- -- -- (1,247) (1,247) Balance at September 30, 1996 ...... $147 $65,503 $145,686 $(58,871) $ -- $ -- $ (562) $151,903 ===========================================================================================
See accompanying notes to consolidated financial statements. New York Bancorp Inc. and Subsidiary consolidated statements of cash flows - -------------------------------------- (In thousands)
Year Ended September 30, ------------------------------------------- 1996 1995 1994 ------------------------------------------- Cash flows from operating activities: Net income before cumulative effect of change in accounting principle............................. $ 32,006 $ 11,562 $ 27,467 Cumulative effect of change in accounting for income taxes..................................... -- -- 5,685 ------------------------------------------- Net income.............................................. 32,006 11,562 33,152 ------------------------------------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization....................... 2,153 2,064 1,817 Amortization and accretion of deferred fees, discounts and premiums........................... 1,823 1,538 8,414 Provision for possible loan losses.................. 1,200 1,700 2,650 Provision for losses on foreclosed real estate...... 346 361 -- Net (gain) loss on sale of foreclosed real estate........................................... 147 82 (190) Net (gain) loss on sale of mortgage loans and securities available for sale.................... (4,750) 1,088 (214) SAIF recapitalization............................... 9,432 -- -- Deferred income taxes............................... (3,520) (1,965) (6,832) Amortization of ESOP and RRP compensation expense.......................................... -- 464 1,491 Termination of ESOP and RRP......................... -- 4,992 -- Net (increase) decrease in trading account.......... 2,003 10,936 (452) Increase in accrued interest receivable............. (139) (2,579) (5,446) Increase in accrued interest payable................ 1,476 838 1,161 Increase (decrease) in accrued expenses and other liabilities................................ (6,290) 3,779 (1,981) (Increase) decrease in other assets................. 1,806 2,812 (491) ------------------------------------------- Total adjustments................................... 5,687 26,110 (73) ------------------------------------------- Net cash provided by operating activities............... 37,693 37,672 33,079 ------------------------------------------- Cash flows from investing activities: Principal payments on loans............................. 296,727 201,852 211,300 Principal payments on mortgage-backed securities........ 102,091 80,169 350,694 Principal payments, maturities and calls on debt and equity securities................................ 56,938 30,987 1,477 Proceeds on sales of loans.............................. 76,349 38,799 109,063 Proceeds on sales of mortgage-backed securities available for sale................................... 83,766 77,279 39,058 Proceeds on sales of debt and equity securities for sale............................................. 17,083 7,737 181 Investment in first mortgage loans...................... (571,989) (432,050) (341,555) Investment in other loans............................... (59,045) (71,057) (49,798) Investment in mortgage-backed securities available for sale............................................. (82,445) (45,789) (80,978) Investment in mortgage-backed securities held to maturity............................................. -- -- (589,083) Investment in debt and equity securities available for sale............................................. (142,048) (52,221) (135) Investment in debt securities held to maturity.......... -- -- (49,985) Investment in interest rate collar and floor agreements........................................... (915) (2,265) -- Proceeds on sales of foreclosed real estate............. 2,856 8,035 3,896 Proceeds from sale of interest rate floor and interest rate swap agreements........................ 1,512 10,835 -- Purchases of Federal Home Loan Bank stock, net.......... (7,650) (2,879) 4,325 Net purchases of premises and equipment................. (2,229) (1,374) (2,466) ------------------------------------------- Net cash used in investing activities................... (228,999) (151,942) (394,006) ------------------------------------------- Cash flows from financing activities: Net increase (decrease) in non-interest bearing demand, savings, money market, and NOW accounts...... $ 14,341 $(187,214) $ (56,591) Net increase (decrease) in time deposits................ (47,256) 152,542 90,003 Net increase (decrease) in borrowings with original maturities of three months or less.......... (93,936) 248,715 160,304 Proceeds from long-term borrowings...................... 691,459 10,000 200,000 Repayment of long-term borrowings....................... (355,875) (66,517) (75,100) Purchase of common stock for treasury or retirement........................................... (29,028) (32,496) (8,320) Payment of common stock dividends....................... (9,427) (8,156) (5,582) Exercise of stock options............................... 1,202 872 819 Proceeds from sale of treasury stock.................... -- 4,530 -- Cash paid in lieu of fractional shares resulting from stock dividend.................................. -- -- (3) Increase (decrease) in mortgagors' escrow accounts...... (1,533) 1,004 (810) ------------------------------------------- Net cash provided by financing activities............... 169,947 123,280 304,720 ------------------------------------------- Net increase (decrease) in cash and cash equivalents.......................................... (21,359) 9,010 (56,207) Hamilton's net cash flows for the three months ended December 31, 1994 (note 2)..................... -- (5,771) -- Cash and cash equivalents at beginning of year.......... 45,104 41,865 98,072 ------------------------------------------- Cash and cash equivalents at end of year................ $ 23,745 $ 45,104 $ 41,865 ------------------------------------------- Supplemental Cash Flow Disclosures: Interest paid........................................... $ 108,096 $ 99,797 $ 78,908 ------------------------------------------- Income taxes paid....................................... $ 26,328 $ 20,599 $ 23,992 ------------------------------------------- Noncash Investing and Financing Activities: Transfer of loans to real estate owned.............. $ 4,462 $ 4,455 $ 5,784 ------------------------------------------- Transfer of mortgage-backed securities available for sale to mortgage-backed securities held to maturity (note 6) ............ $ 15,421 $ -- $ 71,492 ------------------------------------------- Transfer of mortgage-backed securities held to maturity to mortgage-backed securities available for sale (notes 2 and 6).................................. $ 84,109 $ 69,817 $ 78,067 ------------------------------------------- Securitization and transfer of loans to mortgage-backed securities available for sale ........................................ $ 65,364 $ 11,418 $ 18,817 ------------------------------------------- Transfer of debt securities held to maturity to debt and equity securities available for sale (notes 2 and 4)......................... $ 15,000 $ 7,465 $ -- -------------------------------------------
See accompanying notes to consolidated financial statements. New York Bancorp Inc. and Subsidiary notes to Consolidated Financial Statements - ------------------------------------------ September 30, 1996, 1995 and 1994 (1) Summary of Significant Accounting Policies New York Bancorp Inc. ("New York Bancorp" or the "Holding Company") is a savings and loan holding company under the savings and loan holding company act, as amended ("SLHCA"). The Holding Company, through its savings bank subsidiary, Home Federal Savings Bank (the "Bank") operates as a community savings bank. On January 27, 1995, Hamilton Bancorp, Inc. ("Hamilton"), the parent company of Hamilton Federal Savings F.A. ("Hamilton Savings"), was merged with and into New York Bancorp (see note 2) and Hamilton Savings was merged into the Bank. The merger was accounted for as a pooling of interests and, accordingly, all prior periods include the consolidated accounts of Hamilton. The more significant accounting and reporting policies are summarized below. (A) Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements are prepared on the accrual basis of accounting and include the accounts of New York Bancorp and its wholly owned subsidiary, Home Federal Savings Bank (collectively the "Company"). All material intercompany transactions and balances have been eliminated. The Company reports its financial results on a fiscal year basis ending September 30, whereas Hamilton had reported its financial results on a calendar year basis. The consolidated financial statements for fiscal year 1995 reflect Hamilton's year-end conformed with that of the Company. The consolidated financial statements for fiscal year 1994 reflect the combination of the Company at and for the year ended December 31. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the consolidated statements of condition and income for the years presented. Estimates that are susceptible to change include, among other things, the determination of the allowance for possible loan losses and the valuation of real estate acquired in connection with foreclosures. Certain reclassifications have been made to prior year amounts to conform to the current year presentation. For purposes of reporting cash flows, cash and cash equivalents include cash and due from banks and money market investments. (B) Money Market Investments Money market investments represent short-term instruments (generally ninety days or less), which are generally held to maturity. These investments are carried at cost or, if applicable, at cost adjusted for accretion of discount or amortization of premium using a method which approximates the level-yield method over the period to maturity. Carrying values of these investments approximate current market values. (C) Trading Account Securities Trading account securities are carried at estimated market value. Net realized and unrealized gains (losses) are included in non-interest income. Interest on trading account securities is included in interest income. (D) Debt and Equity and Mortgage-Backed Securities Debt and mortgage-backed securities which the Company has the positive intent and ability to hold until maturity are carried at cost, adjusted for amortization of premiums and accretion of discounts on a level yield method. Debt and mortgage-backed securities to be held for indefinite periods of time and not intended to be held to maturity and marketable equity securities are classified as available for sale securities and are recorded at fair value, with unrealized appreciation and depreciation, net of tax, reported as a separate component of shareholders' equity. Gains and losses on the sale of securities are determined using the specific identification method. (E) Loans Receivable Loans are carried at amortized cost. Interest on loans is recognized on the accrual basis. The accrual of income on loans is discontinued when certain factors, such as contractual delinquency of ninety days or more, indicate reasonable doubt as to the timely collectibility of such income. Interest previously recognized on past due loans is charged to the allowance for loan losses when in the opinion of management such interest is deemed to be uncollectible. Loans on which the accrual of income has been discontinued are designated as nonaccrual loans and income is recognized subsequently only in the period collected. Loan origination fees, less certain direct origination costs, are deferred and recognized as an adjustment of the loan's yield over the life of the loan by the interest method, which results in a constant rate of return. When loans are sold, any remaining unaccreted deferred fees are recognized as income at the time of sale. Discounts (premiums) on mortgage loans purchased are deferred and accreted (amortized) to income over the life of the loans using the level-yield method. On October 1, 1995, the Company adopted Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("SFAS No. 114") and Statement of Financial Accounting Standards No. 118, "Accounting by Creditors for Impairment of a Loan--Income Recognition and Disclosures" ("SFAS No. 118") which amended SFAS No. 114 (collectively the "Statements"). Under the Statements, a loan is considered impaired when it is probable that the Company, based upon current information, will not collect all amounts due, both principal and interest, according to the contractual terms of the loan agreement. Certain loans are exempt from the provisions of the Statements, including large groups of smaller-balance homogenous loans that are collectively evaluated for impairment which, for the Company, include one-to-four family first mortgage loans and consumer and commercial loans whose principal balance is less than $500,000, other than those modified in a troubled debt restructuring (TDR). A loan is considered a TDR by the Company when modifications of a concessionary nature are made to the loan's original contractual terms due to the borrower's financial difficulties. The Statements require that impaired loans that are within the scope of these Statements be measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or the fair value of the collateral if the loan is collateral dependent. Loans reviewed for impairment by the Company are limited to one-to-four family first mortgage loans and consumer and commercial loans in excess of $500,000, loans modified in a TDR, and commercial real estate loans. At September 30, 1996, the measurement value of the Company's impaired loans was based upon the estimated market value of the underlying collateral. The Company's impaired loan identification and measurement processes are conducted in conjunction with the Company's review of classified assets and adequacy of its allowance for possible loan losses. Specific factors utilized in the impaired loan identification process include, but are not limited to, delinquency status, loan-to-value ratio, and debt coverage. Cash receipts on an impaired loan are applied to principal and interest in accordance with the contractual terms of the loan unless full payment of principal is not expected, in which case the full payment is applied as a reduction of the carrying value of the loan. If the estimated market value of the underlying collateral, including guarantees, is less than the principal balance of an impaired loan, a loss is either charged to the allowance for possible loan losses or an impairment reserve is allocated to reduce the book value of the loan to the estimated market value of the underlying collateral. Interest income on impaired loans is recorded on a cash basis, except for a TDR which has performed under its restructured terms for at least six months, at which time the accrual basis is utilized. The adoption of SFAS Nos. 114 and 118 did not have a significant effect on the Company's financial condition or results of operations. Provisions for possible loan losses are charged to operations based on management's periodic review and evaluation of the loan portfolio in relation to the Company's past loan loss experience, known and inherent risks in the portfolio, adverse situations which may affect the borrower's ability to repay, overall portfolio quality, and underlying collateral values and cash flow values. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for possible loan losses. Such agencies could require the Bank to recognize additions to the allowance based on their judgments about information available to them at the time of their examination. Management believes that the allowance for possible loan losses is adequate. (F) Loan Servicing Fees earned for servicing loans owned by investors are reported as income when the related mortgage loan payments are collected. Loan servicing costs are charged to expense as incurred. On October 1, 1995, the Company adopted Statement of Financial Accounting Standards No. 122, "Accounting for Mortgage Servicing Rights" ("SFAS No. 122"). The Statement establishes accounting standards for mortgage servicing rights, which are the contractual right to service loans owned by others, typically for a fee. Prior to this Statement, only purchased mortgage servicing rights were capitalized as an asset. SFAS No. 122 requires originated mortgage servicing rights ("OMSR") to be capitalized as an asset. OMSR represents mortgage servicing rights acquired when an institution originates and subsequently sells or securitizes mortgage loans but retains the servicing rights. The Statement also requires all capitalized mortgage servicing rights ("MSR") to be evaluated for impairment based on their value. In evaluating for impairment, the Company stratifies its MSR by adjustable or fixed rate loans, by interest rate, and by year of origination. The Company uses current market assumptions for prepayment speeds and discounts, and a 4.5% annual inflation factor for servicing costs. The adoption of SFAS No. 122 did not have a significant effect on the Company's operating results or financial position. The Company amortizes its MSR in proportion to, and over the period of, estimated servicing income. (G) Premises and Equipment Land is carried at cost. Buildings and building improvements, leasehold improvements and furniture, fixtures and equipment are carried at cost, less accumulated depreciation and amortization. Buildings, building improvements and furniture, fixtures and equipment are depreciated using the straight-line method over the estimated useful lives of the respective assets. Leasehold improvements are amortized using the straight-line method over the terms of the related leases. (H) Real Estate Owned Real estate owned consists of real estate acquired in satisfaction of loans, and is carried at the lower of cost or estimated fair value less estimated selling costs. When a property is acquired in satisfaction of a loan, the excess of the carrying amount over the fair value, if any, is charged to the allowance for loan losses. Subsequent to acquisition, an allowance for real estate owned is established to maintain these properties at the lower of cost or fair value less estimated costs to sell. Real estate owned is shown net of the allowance. The allowance is established through charges to income which are included in real estate operations, net. Operating results of real estate owned, including rental income, operating expenses, and gains and losses realized from the sales of properties owned, are also recorded in real estate operations, net. (I) Reverse Repurchase Agreements Reverse repurchase agreements are accounted for as financing transactions. Accordingly, the collateral securities continue to be carried as assets and a borrowing liability is established for the transaction proceeds. (J) Income Taxes The Holding Company and its subsidiary file consolidated income tax returns. The subsidiary pays to or receives from the Holding Company, as appropriate, an allocated portion of the consolidated income taxes or benefits based upon the effective current income tax rate. Deferred taxes are provided for temporary differences between the tax basis and financial statement carrying amounts of existing assets and liabilities, which is measured by applying enacted tax laws and rates. A valuation allowance is provided for deferred tax assets which are deemed not likely to be realized. (K) Retirement Plans The Company has a pension plan covering substantially all employees who have attained minimum service requirements. The Company's policy is to contribute annually an amount sufficient to meet Employee Retirement Income Security Act ("ERISA") funding standards. Postretirement and postemployment benefits are recorded on an accrual basis with an annual provision that recognizes the expense over the service life of the employee, determined on an actuarial basis. (L) Off-Balance Sheet Financial Instruments Interest rate swaps, caps, floors, collars, options and financial futures agreements are periodically used to manage the Company's interest rate risk. Generally, the net settlements on such transactions used as hedges of non- trading assets or liabilities are accrued as an adjustment to interest income or interest expense over the lives of the agreements. Further, gains or losses on terminated contracts used as hedges of non-trading assets or liabilities are generally deferred and amortized over the life of the original hedge. Contracts which are not matched against specific assets, liabilities, or the repricing of interest rate floor arrangements or do not meet correlation criteria are accounted for at market value with the resulting gain or loss recognized in operations. (M) Earnings Per Common Share Earnings per common 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 used in the computation of earnings per common share for the years ended September 30, 1996, 1995 and 1994 was 11,944,393, 13,327,915 and 13,609,867, respectively. (2) Business Combination On January 27, 1995, New York Bancorp acquired Hamilton in a transaction accounted for under the pooling of interests method of accounting. Pursuant to the merger agreement, New York Bancorp issued 1.705 shares of common stock for each outstanding share of Hamilton common stock and reserved for issuance 182,824 shares of common stock for Hamilton's stock options outstanding as of the merger consummation date. In addition, 306,392 shares of common stock were issued to holders of Hamilton stock options who received stock for the options calculated in accordance with the formula contained in the merger agreement. As a condition to the merger, Hamilton, immediately prior to the consummation of the merger, reissued in an underwritten offering 175,000 shares of Hamilton treasury stock amounting to net proceeds of $4,530,000 after underwriting commission and offering costs. As a result of the above, 6,224,921 shares of common stock were issued in connection with the merger. The Company reports its financial results on a fiscal year basis ending September 30, whereas Hamilton had reported its financial results on a calendar year basis. Accordingly, the accompanying Consolidated Statements of Income, Changes in Shareholders' Equity and Cash Flows for the year ended September 30, 1994 includes the operations of Hamilton for its year ended December 31, 1994. The consolidated financial statements for 1995 reflect Hamilton's year-end conformed with that of the Company. The effect on the accompanying consolidated financial statements arising from the inclusion of the $1,780,000 of net income of Hamilton for the three months ended December 31, 1994 in the Company's results of operations for both fiscal year 1995 and 1994 is presented in the accompanying Consolidated Statement of Changes in Shareholders' Equity as an adjustment for change in fiscal year of Hamilton. Additionally, the accompanying Consolidated Statements of Income for both fiscal year 1995 and 1994 each include $7,948,000 and $1,780,000 representing net interest income after provision for possible loan losses and net income, respectively, reflecting those results of Hamilton's operations for the three months ended December 31, 1994. The following is a summary of Hamilton Bancorp's cash flows for the three months ended December 31, 1994 (in thousands): Net cash provided by operating activities.............. $ 678 Net cash used by investing activities.................. (4,389) Net cash provided by financing activities.............. 9,482 --------- Net increase in cash and cash equivalents.............. $ 5,771 ========= In connection with the merger, during fiscal year 1995 the Company recorded certain non-recurring merger-related and restructuring expenses of approximately $19.0 million and reclassified $77.3 million of Hamilton's held to maturity securities to available for sale securities. Of these securities, $66.8 million were subsequently sold, resulting in a $1.2 million loss. The non-recurring merger-related and restructuring charges reflected $4.3 million in investment banking, legal and accounting fees, $6.3 million in severance costs, $5.1 million related to the termination of Hamilton's ESOP and the accelerated vesting of shares of the RRP pursuant to the requirements of such plans upon a change in control, and $3.3 million in certain back-office and facilities consolidation costs and signage costs. The following table summarizes the activity with respect to the merger-related and restructuring expenses, on a pre-tax basis: Merger-Related and Restructuring Accrual ================== (In Thousands) Balance at December 31, 1994................... $ -- Provision charged against operations........... 19,024 Cash outlays................................... (12,287) Non-cash items................................. (6,395) ----------- Balance at September 30, 1995.................. 342 Cash outlays................................... (342) ----------- Balance at September 30, 1996.................. $ -- =========== (3) Money Market Investments Money market investments are summarized as follows: September 30, ----------------------- 1996 1995 ======================= (In Thousands) Securities purchased under agreements to resell........... $10,700 $ 8,400 FHLP overnight deposits........... -- 4,997 Federal funds sold................ -- 500 Other............................. -- 18 ----------------------- $10,700 $13,915 ======================= During the years ended September 30, 1996, 1995 and 1994, the Company entered into purchases of securities under agreements to resell. The amounts advanced under these agreements represented short-term loans and are reflected as money market investments in the consolidated statements of financial condition. Securities representing collateral for these transactions were delivered by appropriate entry into the Company's account maintained at a third-party custodian. At September 30, 1996 and 1995, these agreements matured within thirty days. Securities purchased under agreements to resell averaged $.3 million. $1.2 million and $16.2 million for the years ended September 30, 1996, 1995 and 1994, respectively. The maximum amount of such agreements outstanding at any month-end during the years ended September 30, 1996, 1995 and 1994 was $11.4 million, $8.4 million and $30.0 million, respectively. (4) Debt Securities Held to Maturity The amortized cost and estimated market values of debt securities held to maturity are summarized as follows: September 30, 1996 ------------------------------------------------ Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ================================================ (In Thousands) Bonds and notes: corporate notes....... $ 643 $ -- $ (2) $ 641 ================================================ September 30, 1995 ------------------------------------------------ Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ================================================= (In Thousands) Bonds and notes: U.S. Government and Agency Obligations.... $20,000 $ -- $ (75) $19,925 Corporate notes....... 1,179 5 (2) 1,182 ------------------------------------------------ Total................ $21,179 $ 5 $ (77) $21,107 ================================================ The amortized cost and contractual maturity of debt securities at September 30, 1996 and 1995 are shown below. Expected maturities may differ from contractual maturities because borrowers have the right to call or prepay obligations without call or prepayment penalties.
September 30, --------------------------------------------- 1996 1995 ============================================= Estimated Estimated Amortized Market Amortized Market Cost Value Cost Value ============================================= (In Thousands) Due in one year or less.......... $ -- $ -- $ 502 $ 507 Due after one year through five years.................... -- -- 20,000 19,925 Due after five years through ten years -- -- -- -- Due after ten years.............. 643 641 677 675 --------------------------------------------- Total............................ $ 643 $ 641 $21,179 $21,107 =============================================
There were no sales of debt securities held to maturity during the years ended September 30, 1996, 1995 and 1994. (See note 2 regarding the transfer of securities in connection with the Hamilton merger.) As permitted under guidance issued by the Financial Accounting Standards Board in November 1995, during the quarter ended December 31, 1995, the Company transferred $15.0 million of its debt securities, previously classified as held to maturity, to the available for sale classification. (5) Debt and Equity Securities Available for Sale The amortized cost and estimated market values of debt and equity securities available for sale are summarized as follows:
September 30, 1996 -------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ====================================== ============ (In Thousands) Equity securities: Common stocks........... $ 5,326 $ -- $ (508) $ 4,818 Stock in FNMA........... 2 40 -- 42 -------------------------------------------------- 5,328 40 (508) 4,860 -------------------------------------------------- Bonds and notes: U.S. Government and Agency obligations.... 131,245 -- (1,007) 130,238 Other.................. 1,028 7 -- 1,035 -------------------------------------------------- 132,273 7 (1,007) 131,273 -------------------------------------------------- $137,601 $ 47 $(1,515) $136,133 ================================================== September 30, 1995 -------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ================================================== (In Thousands) Equity securities: Common stocks........... $ 4,082 $407 $ -- $ 4,489 Stock in FNMA........... 2 29 -- 31 -------------------------------------------------- 4,084 436 -- 4,520 Bonds and notes: U.S. Government and Agency obligations.... 41,740 13 -- 41,753 -------------------------------------------------- $ 45,824 $449 $ -- $ 46,273 ==================================================
Gains and losses were realized on sales of debt and equity securities available for sale as follows: Year ended September 30, ------------------------------------------ 1996 1995 1994 ========================================== (In Thousands) Gross gains........... $3,143 $304 $ -- Gross losses.......... (2) (168) (3) ----------------------------------------- Net gains (losses)..... $3,141 $136 $ (3) ========================================= (6) Mortgage-Backed Securities Held to Maturity The amortized cost and the estimated market values of mortgage-backed securities held to maturity are summarized as follows:
September 30, 1996 ----------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ===================================================== (In Thousands) FHLMC............................... $ 14,710 $ -- $ (59) $ 14,651 FNMA................................ 6,333 -- (129) 6,204 GNMA................................ 1,409 59 -- 1,468 Private-issue pass-through.......... 1,264 25 -- 1,289 REMIC & CMO......................... 527,101 -- (16,111) 510,990 ----------------------------------------------------- Total............................... $550,817 $ 84 $(16,299) $534,602 ===================================================== September 30, 1995 ----------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ===================================================== (In Thousands) FHLMC............................... $ 21,858 $100 $ (137) $ 21,821 FNMA................................ 35,662 20 (618) 35,064 REMIC & CMO......................... 607,206 532 (27,120) 580,618 ----------------------------------------------------- Total............................... $664,726 $652 $(27,875) $637,503 =====================================================
The amortized cost and estimated market values of mortgage-backed securities held to maturity, all of which have pre-payment provisions, are distributed to a maturity category based on the estimated average life as shown below. These principal prepayments are not scheduled over the life of the investment, but are reflected as adjustments to the final maturity distribution. September 30, ------------------------ 1996 ------------------------ Estimated Amortized Market Cost Value ======================== (In Thousands) Due in one year or less.................... $ 24,919 $ 24,735 Due after one year through five years...... 236,722 233,632 Due after five years through ten years..... 248,864 238,583 Due after ten years........................ 40,312 37,652 ------------------------- $550,817 $534,602 ========================= There were no sales of mortgage-backed securities held to maturity during the years ended September 30, 1996, 1995 and 1994. (See note 2 regarding the transfer of securities in connection with the Hamilton merger.) In connection with the adoption of SFAS No. 115, effective October 1, 1993, mortgage-backed securities previously classified as held for sale, and carried at the lower of cost or market, were classified as available for sale. The carrying value of these mortgage-backed securities was adjusted to their market value, which resulted in increasing the carrying value by $826,000, and increasing shareholders' equity by $449,000, which was net of taxes of $377,000. In addition, the Bank reclassified $71.5 million of mortgage-backed securities available for sale to mortgage-backed securities held to maturity, and reclassified $78.1 million of mortgage-backed securities held to maturity to mortgage-backed securities available for sale. At the time of the reclassifications, the carrying value of such mortgage-backed securities approximated market value. As permitted under guidance issued by the Financial Accounting Standards Board in November 1995, during the quarter ended December 31, 1995, the Company transferred $84.1 million of its mortgage-backed securities previously classified as held to maturity to the available for sale classification. Additionally, mortgage-backed securities with a carrying value and market value of approximately $15.4 million, previously classified as available for sale, were transferred to the held to maturity portfolio. At September 30, 1996 and 1995, $10,241,000 and $17,568,000, respectively, of the mortgage-backed securities held to maturity portfolio consists of securities with underlying adjustable rate loans. Such securities had an estimated market value of $10,077,000 and $17,474,000, respectively. The privately-issued REMICs and CMOs and privately-issued pass-through mortgage-backed securities contained in the Bank's held to maturity and available for sale portfolios have generally been underwritten by large investment banking firms with the timely payment of principal and interest on these securities supported (credit enhanced) in varying degrees by either insurance issued by a financial guarantee insurer, letters of credit or subordination techniques. Substantially all such securities are rated AAA by one or more of the nationally recognized securities rating agencies. These securities are subject to certain credit-related risks normally not associated with U.S. Government Agency mortgage-backed securities. Among such risks is the limited loss protection generally provided by the various forms of credit enhancements as losses in excess of certain levels are not protected. Furthermore, the credit enhancement itself is subject to the creditworthiness of the enhancer. Thus, in the event a credit enhancer does not fulfill its obligations, the mortgage-backed securities holder could be subject to risk of loss similar to a purchaser of a whole loan pool. Management believes that the credit enhancements are adequate to protect the Company from losses, thus the Company has not provided an allowance for losses on its privately issued mortgage-backed securities. (7) Mortgage-Backed Securities Available for Sale The amortized cost and the estimated market value of mortgage-backed securities available for sale are summarized as follows:
September 30, 1996 ---------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ==================================================== (In Thousands) FHLMC............................... $ 59,872 $ 491 $ (518) $ 59,845 FNMA................................ 47,596 313 -- 47,909 GNMA................................ 7,336 355 -- 7,691 REMIC & CMO......................... 139,262 261 (626) 138,897 Private-issue pass-through.......... 25,886 201 -- 26,087 ---------------------------------------------------- Total............................... $279,952 $1,621 $(1,144) $280,429 ==================================================== September 30, 1995 ---------------------------------------------------- Gross Gross Estimated Amortized Unrealized Unrealized Market Cost Gains Losses Value ==================================================== (In Thousands) FHLMC............................... $ 72,968 $1,139 $ (695) $ 73,412 FNMA................................ 35,191 901 -- 36,092 GNMA................................ 10,578 486 (7) 11,057 REMIC & CMO......................... 56,676 82 (999) 55,759 Private-issue pass-through.......... 30,383 162 (71) 30,474 ---------------------------------------------------- Total............................... $205,796 $2,770 $(1,772) $206,794 ====================================================
The amortized cost and estimated market values of mortgage-backed securities available for sale, all of which have pre-payment provisions, are distributed to a maturity category based on the estimated average life as shown below. These principal prepayments are not scheduled over the life of the investment, but are reflected as adjustments to the final maturity distribution. September 30, ------------------------ 1996 ------------------------ Estimated Amortized Market Cost Value ======================== (In Thousands) Due in one year or less.................... $ 27,038 $ 26,980 Due after one year through five years...... 168,880 169,088 Due after five years through ten years..... 77,726 77,736 Due after ten years........................ 6,308 6,625 ------------------------ $279,952 $280,429 ======================== Gains and losses were realized on sales of mortgage-backed securities available for sale as follows: Year Ended September 30, --------------------------------------- 1996 1995 1994 ======================================= (In Thousands) Gross gains............... $1,205 $ 60 $608 Gross losses.............. -- (1,044) (3) -------------------------------------- Net gains (losses)........ $1,205 $ (984) $605 ======================================= (8) Loans Receivable Loans receivable are summarized as follows (in thousands):
September 30, ----------------------------- 1996 ----------------------------- 1996 1995 ============================= First mortgage loans: One-to-four family conventional residential, including loans with adjustable rates of $843,860 and $632,036 in 1996 and 1995, respectively........................................ $1,029,636 $ 906,436 Multifamily residential............................... 171,099 101,065 Commercial real estate................................ 383,181 355,507 Partially guaranteed by Veterans Administration or insured by the Federal Housing Administration.... 14,836 18,812 Participation in loans fully guaranteed by the Agency for International Development................ 26 30 Construction loans, net of undisbursed portion of approximately $5,470 and $4,025 in 1996 and 1995, respectively........................................ 4,369 8,902 Reverse annuity loans, net of undisbursed portion of approximately $4,416 and $2,734 in 1996 and 1995, respectively.................................. 2,265 2,251 -------------------------- 1,605,412 1,393,003 Unamortized purchase accounting premiums.............. 1,645 2,426 Unearned purchase accounting discounts................ (1,993) (2,757) Unamortized premiums.................................. 3,677 1,433 Unearned discounts.................................... (27) (42) Deferred loan fees.................................... (4,945) (4,287) --------------------------- 1,603,769 1,389,776 --------------------------- Other loans: Consumer loans........................................ 9,227 8,580 Cooperative residential loans......................... 123,034 141,902 Home improvement loans................................ 1,035 1,526 Guaranteed student loans.............................. 51,151 56,673 Commercial business loans............................. 12,351 11,214 Loans secured by deposit accounts..................... 8,078 7,917 Second mortgage loans................................. 2,211 2,147 Home equity loans, net of unused lines of credit of approximately $9,462 and $12,312 in 1996 and 1995, respectively.............................. 44,277 46,845 Purchased auto leasing................................ 18,702 21,063 -------------------------- 270,066 297,867 Unamortized purchase accounting premiums.............. 52 72 Unearned purchase accounting discounts................ (52) (70) Unamortized premiums.................................. 319 423 Unearned discounts.................................... (1,391) (1,621) Deferred loan fees.................................... (215) (232) -------------------------- 268,779 296,439 -------------------------- Less allowance for possible loan losses.................. (19,386) (21,272) -------------------------- $1,853,162 $1,664,943 ==========================
The yield on the average investment in first mortgage loans was 8.07%, 8.28% and 8.42% for the years ended September 30, 1996, 1995 and 1994, respectively. At September 30, 1996 and 1995, the Bank had commitments of $80,950,000 and $61,369,000, respectively, to originate first mortgage, cooperative residential and home equity loans. Such commitments generally have fixed expiration date and may require payment of a fee. Since many of the commitments may expire without being used, the total commitment amounts do not necessarily represent future cash requirements. Of the $80,950,000 commitments outstanding at September 30, 1996, $16,258,000 represent fixed rate loans with interest rates ranging from 5.25% to 10.25% and $64,692,000 represent adjustable rate loans. At September 30, 1996 and 1995, the Company had commitments of $6,016,000 and $5,414,000, respectively, to sell qualified fixed rate first mortgage loans. The commitment prices approximated the carrying value of the loans. During the years ended September 30, 1996, 1995 and 1994, the Company recognized net gains (losses) of $.4 million, $(.2) million and $(.4) million, respectively, on sales of newly originated first mortgage loans. Substantially all of the Bank's business activity is through originations of loans secured by real estate with customers located in the New York metropolitan area. The risk inherent in this portfolio is dependent not only upon regional and general economic stability which affects property values, but also financial well-being and creditworthiness of the borrowers. In order to minimize the credit risk related to this concentration, the Company utilizes conservative underwriting standards as well as diversifying the type and locations of real estate projects underwritten in the area. (9) Allowance for Possible Loan Losses Activity in the allowance for possible loan losses is summarized as follows:
As of and for the Year Ended September 30, ------------------------------------------ 1996 1995 1994 ========================================== (In Thousands) Allowance for possible loan losses, beginning of year............................. $21,272 $25,705 $26,828 Charge-offs: Commercial real estate......................... (974) (2,889) (879) Residential real estate........................ (730) (1,422) (1,572) Multifamily residential........................ -- (546) (853) Other loans.................................... (1,441) (1,442) (901) ------------------------------------------ Total charge-offs............................ (3,145) (6,299) (4,205) ------------------------------------------ Less recoveries: Commercial real estate....................... -- -- 349 Residential real estate...................... -- 4 47 Other loans.................................. 59 75 36 ------------------------------------------ Total recoveries........................... 59 79 432 ------------------------------------------ Net charge-offs.......................... (3,086) (6,220) (3,773) Hamilton's net activity for the quarter ended December 31, 1994........................ -- 87 -- Addition to allowance, charged to expense........ 1,200 1,700 2,650 ------------------------------------------ Allowance at end of year......................... $19,386 $21,272 $25,705 ==========================================
The following table sets forth the Bank's nonaccrual loans at the date indicated:
September 30, ---------------------------------------- 1996 1995 1994 ======================================== (In Thousands) First mortgage loans: One-to-four family conventional residential.... $12,092 $13,391 $14,642 Multifamily residential........................ 155 131 1,966 Commercial real estate......................... 11,758 14,316 18,208 ---------------------------------------- 24,005 27,838 34,816 Other loans--cooperative residential loans..... 1,547 2,534 1,717 ---------------------------------------- Total nonaccrual loans........................... $25,552 $30,372 $36,533 ========================================
Additionally, at September 30, 1996, 1995 and 1994 the Bank had $4.4 million, $5.0 million and $4.0 million, respectively, of consumer and other loans which are past due 90 days and still accruing interest at the dates indicated. Of the $4.4 million at September 30, 1996, $3.5 million represents loans guaranteed by the United States Department of Education through the New York Higher Education Services Corporation. 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 $2,654,000, $3,097,000 and $2,972,000 for the years ended September 30, 1996, 1995 and 1994, respectively. The amount of interest income that was recorded on these loans was $924,000, $1,083,000 and $441,000 for the years ended September 30, 1996, 1995 and 1994, respectively. At September 30, 1996, 1995 and 1994 the Bank had $5.8 million, $9.1 million and $9.5 million, respectively, in loans whose terms had been modified in trouble debt restructurings. The amount of interest income that would have been recognized for the years ended September 30, 1996, 1995 and 1994 had these loans remained current in accordance with their original terms was $598,000, $952,000 and $968,000, respectively. The amount of interest income that was recorded on these loans was $473,000, $725,000 and $740,000 for the years ended September 30, 1996, 1995 and 1994, respectively. At September 30, 1996, the Bank's recorded investment in impaired loans was $11.9 million. Due to charge-offs, or the crediting of interest payments to principal, the loans do not have an impairment reserve at September 30, 1996. Interest income recognized on impaired loans, which was not materially different from cash-basis interest income, amounted to approximately $.4 million for the year ended September 30, 1996. The average recorded investment in impaired loans during the current fiscal year was approximately $14.5 million. The allowance for possible loan losses contains additional amounts for impaired loans, as deemed necessary, to maintain reserves at levels considered adequate by management. (10) Accrued Interest Receivable Accrued interest receivable is summarized as follows: September 30, ----------------------- 1996 1995 ======================= (In Thousands) Debt and equity securities................ $ 1,806 $ 821 Mortgage-backed securities................ 5,324 5,978 Loans receivable.......................... 13,554 12,912 Interest rate swap arrangements........... 1,178 2,012 ----------------------- $21,862 $21,723 ======================= (11) Premises and Equipment Premises and equipment are summarized as follows: September 30, ----------------------- 1996 1995 ======================= (In Thousands) At cost: Land...................................... $ 651 $ 651 Office buildings and improvements......... 10,395 9,928 Leasehold improvements.................... 5,898 5,320 Furniture, fixtures and equipment......... 10,970 9,786 ------------------------ 27,914 25,685 Accumulated depreciation and amortization... (14,987) (12,834) ------------------------ $ 12,927 $12,851 ======================== Depreciation and amortization of premises and equipment, included in occupancy expense, was approximately $2,153,000, $2,064,000 and $1,817,000 for the years ended September 30, 1996, 1995 and 1994, respectively. (12) Other assets Other assets are summarized as follows: September 30, ---------------------- 1996 1995 ======================= (In Thousands) Net deferred tax asset.......................... $ 19,393 $ 14,806 Mortgage servicing rights....................... 1,088 137 Real estate owned, net of allowance for losses of $266,000 in 1996 and $220,000 in 1995....................................... 3,197 1,967 Investment in the Bank's subsidiaries........... 679 919 Prepaid expenses................................ 1,270 1,417 Other........................................... 7,624 6,462 ----------------------- $ 33,251 $ 25,708 ======================= At September 30, 1996, 1995 and 1994, the Bank was servicing first mortgage loans of approximately $597,017,000, $523,664,000 and $530,317,000, respectively, which are either partially or wholly owned by others. The Bank's risk at September 30, 1996 with respect to servicing loans for others is minimized due to the fact that loans serviced for others are all without recourse to the originator/servicer. To date, the Bank has not suffered significant losses from its mortgage servicing activities. An analysis of the changes in the Company's mortgage servicing rights is as follows: As of and For the Year Ended September 30, ---------------------------------- 1996 1995 1994 ================================== (In Thousands) Balance at beginning of year..... $137 $248 $647 Additions........................ 1,217 -- -- Amortization..................... (266) (111) (399) ---------------------------------- Balance at end of year........... $1,088 $137 $248 ================================== Activity in the allowance for losses on real estate owned is summarized as follows: As of and For the Year Ended September 30, --------------------------------- 1996 1995 1994 ================================ (In Thousands) Balance at beginning of year...... $220 $390 $750 Provision charged to operations... 346 361 -- Charge-offs....................... (300) (531) (360) --------------------------------- Balance at end of year............ $266 $220 $390 ================================= The Bank has six wholly owned subsidiaries, three of which are inactive. Of the subsidiaries, one subsidiary, Alameda Advantage Corp. ("AAC"), is a limited partner in the partnership which owns the property used for the Bank's executive and administrative offices. At September 30, 1996 and 1995, the Bank's investment in AAC amounted to $524,000 and $455,000, respectively. Two of the subsidiaries, Home Fed Services, Inc. and HF Investors, Inc., were primarily established for the Bank's entry into offering annuities and other insurance products through its branch system. At September 30, 1996 and 1995, the Bank's investment in these subsidiaries amounted to $77,000 and $386,000, respectively. The combined financial condition and results of operations of the Bank's subsidiaries are not significant to the accompanying consolidated financial statements. (13) Deposits Deposits are summarized as follows:
September 30, ---------------------------------------------------------- 1996 1995 -------------------------- ------------------------- Amount Percent Amount Percent ========================== ========================= (Dollars in Thousands) Non-interest bearing demand deposits....... $37,013 2.16% $32,821 1.88% NOW accounts............................... 130,831 7.63 116,726 6.67 Passbook accounts.......................... 716,827 41.77 751,374 42.96 Variable rate money market deposit accounts................................. 133,528 7.78 102,937 5.89 -------------------------- ------------------------ 1,018,199 59.34 1,003,858 57.40 -------------------------- ------------------------ Certificate accounts: 64 Original term of six months.............. 83,943 4.89 98,674 5. Original term of 2 1/2 years............... 34,784 2.03 46,807 2.68 Other certificates (various original terms)................................... 579,033 33.74 599,535 34.28 -------------------------- ------------------------- 697,760 40.66 745,016 42.60 -------------------------- ------------------------ $1,715,959 100.00% $1,748,874 100.00% ========================== =======================
Included in deposits are accounts with denominations of $100,000 or more totaling approximately $164,720,000 and $137,337,000 at September 30, 1996 and 1995, respectively. The Bank does not use brokered certificates of deposit as a funding source. Scheduled remaining maturities of certificate accounts are summarized as follows:
September 30, ----------------------------------------------------------------- 1996 1995 ---------------------------- ----------------------------- Amount Percent Amount Percent ============= ============== ============= =============== (Dollars in Thousands) Within 12 months........... $458,856 65.76% $509,750 68.42% 12 to 24 months............ 134,031 19.21 86,590 11.62 24 to 36 months............ 51,192 7.34 64,480 8.66 36 to 48 months............ 43,271 6.20 41,081 5.52 48 to 60 months............ 9,552 1.37 41,908 5.63 Over 60 months............. 858 .12 1,207 .15 -------------------------------- ---------------------------- $697,760 100.00% $745,016 100.00% ================================ ============================
Weighted average stated interest rates on interest-bearing deposits, including the effect of related interest rate floors, interest rate collars, and interest rate swaps, as of the respective dates were as follows: September 30, ---------------------- 1996 1995 ====================== NOW accounts.................................. 1.33% 1.41% ---------- ----------- Passbook accounts............................. 2.36% 2.29% ---------- ----------- Variable rate money market deposit accounts... 2.98% 2.83% ---------- ----------- Certificate accounts.......................... 4.86% 5.50% ---------------------- Total deposits................................ 3.30% 3.59% ======================= The average cost of deposits, including the effect of related interest rate floors, interest rate collars, and interest rate swaps (net of early withdrawal penalties) approximated 3.47%, 3.55% and 3.18% for the years ended September 30, 1996, 1995 and 1994, respectively. Interest expense on deposits, including the effect of related interest rate floors, interest rate collars, and interest rate swaps, is summarized as follows:
Year ended September 30, ---------------------------------------- 1996 1995 1994 =========== =========== ============== (In Thousands) NOW accounts................................. $ 1,925 $ 2,673 $ 2,610 Passbook accounts............................ 17,509 19,964 23,846 Variable rate money market deposit accounts.. 3,357 4,054 3,926 Certificate accounts......................... 37,679 35,703 26,614 ----------- ----------- -------------- $60,470 $62,394 $56,996 =========== =========== ==============
On September 30, 1996, Congress passed, and the President signed, legislation that recapitalized the Savings Association Insurance Fund (the "SAIF"). Under the major provisions of the legislation, savings institutions, such as the Bank, are being assessed a one-time assessment of 65.7 basis points per $100 of insured SAIF-assessable deposits as of March 31, 1995. Since approximately 80.8% of the Bank's deposits are insured by the SAIF (the remainder are insured by the Bank Insurance Fund ("BIF")), the Company recorded a one-time charge of $9.4 million during the fourth quarter of fiscal year 1996 which is payable in the first quarter of fiscal year 1997. (14) Borrowed Funds Borrowed funds are summarized as follows: September 30, ------------------------------ 1996 1995 ============================== (In Thousands) Notes payable-fixed-rate advances from the Federal Home Loan Bank of New York: 4.13% to 8.45%, due in 1996............ $ -- $ 22,375 8.10%, due in 1997..................... 375 375 -------------- -------------- 375 22,750 -------------- -------------- Notes payable-variable rate advances from the Federal Home Loan Bank of New York: 5.883% to 6.625%, due in 1996.......... -- 363,000 5.369% to 5.986%, due in 1997.......... 542,000 20,000 -------------- -------------- 542,000 383,000 -------------- -------------- Securities sold under agreements to repurchase: Fixed rate agreements: 5.79% to 6.00%, due in 1996............ -- 190,160 5.370% to 6.150%, due in 1997.......... 353,698 -- -------------- -------------- 353,698 190,160 -------------- -------------- Variable rate agreements: 5.7925% to 6.025%, due in 1996......... -- 150,000 5.09%, due in 1998..................... 100,000 -- -------------- -------------- 100,000 150,000 -------------- -------------- Other collateralized borrowings: Fixed rate flexible reverse repurchase agreements: 7.85%, due in 1996..................... -- 4,700 -------------- -------------- Subordinated capital notes, fixed rate--10.84%: Due in 1996............................ -- 3,800 Due in 1997............................ 3,800 3,800 Due in 1998............................ 3,800 3,800 Due in 1999............................ 3,800 3,800 -------------- -------------- 11,400 15,200 -------------- -------------- Treasury, Tax and Loan Notes-- 5.84% callable........................... 1,313 1,328 -------------- -------------- $1,008,786 $767,138 ============== ============== New York Bancorp Inc. and Subsidiary notes to Consolidated Financial Statements September 30, 1996, 1995 and 1994 Under the terms of a collateral agreement, indebtedness to and outstanding commitments from the Federal Home Loan Bank of New York (the "FHLB-NY") are secured by qualifying assets principally in the form of first mortgage loans and mortgage-backed securities having estimated market values at least equal to 125% of the amount of total indebtedness and outstanding commitments. At September 30, 1996, all securities sold under agreements to repurchase were delivered to the primary dealers who arranged the transactions. The securities remained registered in the name of the Bank and are returned upon maturity of the agreement. Securities sold under agreements to repurchase averaged $328,405,000, $307,657,000 and $232,916,000 during the years ended September 30, 1996, 1995 and 1994, respectively. The maximum amounts outstanding at any month-end were $453,698,000, $351,855,000 and $271,978,000 during the years ended September 30, 1996, 1995 and 1994, respectively. At September 30, 1996, the Bank had outstanding $353.7 million of fixed rate reverse repurchase agreements with a weighted average interest rate of 5.61% and remaining maturities of one to twelve months. The Bank may substitute collateral in the form of U.S. Treasury or mortgage-backed certificates. At September 30, 1996, the borrowings were collateralized by FNMA, FHLMC, REMIC and non-agency pass-through certificates having a carrying value of approximately $378.0 million and a market value of approximately $372.8 million. At September 30, 1996, the Bank had outstanding a $100.0 million reverse repurchase agreement with an interest rate of 5.09% and a remaining maturity of 16 months. The rate on this reverse repurchase agreement is subject to repricing by the counterparty in January 1997 to a LIBOR based rate, with monthly adjustments thereafter. The Bank may substitute collateral in the form of U.S. Treasury, GNMA, FNMA, FHLMC, REMIC, CMO or non-agency pass-through certificates rated no less than AA. At September 30, 1996, the borrowings were collateralized by REMIC and non-agency pass-through certificates having a carrying vlaue of approximately $113.7 million and a market value of approximately $111.6 million. On November 18, 1988, the Bank issued $25,000,000 in 10.95% (Series A Notes) and $5,000,000 in 10.52% (Series B Notes) subordinated capital notes (collectively as the "Notes"). Interest on the Notes is payable in semiannual installments, commencing May 30, 1989. The remaining principal on the Series A Notes and Series B Notes is payable in annual installments of $2,800,000 and $1,000,000, respectively. The Notes are fully subordinated to savings deposit accounts and other general liabilities of the Bank. Further, a portion of the Notes qualify as capital for purposes of meeting the regulatory risk based capital requirements. The Notes are redeemable in whole or in part, with a prepayment premium, at the option of the Bank, subject to regulatory approval, at any time. Deferred issuance costs are being amortized over the period to maturity of the notes. On February 3, 1989 the Bank established a Mortgage-Backed Medium-Term Note, Series A (the "Medium-Term Notes") program. The Medium-Term Notes can be issued from time to time in designated principal amounts, up to a total remaining aggregate amount of $180,000,000, with interest rates to be established at the time of issuance, and with maturities to be set ranging from nine months to fifteen years from the date of issuance. No amounts were outstanding under this program at September 30, 1996 and 1995. Weighted average interest rates on borrowed funds at September 30, 1996 and 1995, including the effect of related interest rate collars, interest rate caps, and interest rate swaps, amounted to 5.25% and 6.14%, respectively. The average cost of borrowed funds for the years ended September 30, 1996, 1995 and 1994, including the effect of related interest rate collars, interest rate caps, and interest rate swaps, was 5.62%, 5.88% and 4.85%, respectively. Interest expense on borrowed funds, including the effect of related interest rate collars, interest rate caps, and interest rate swaps, is summarized as follows: New York Bancorp Inc. and Subsidiary notes to Consolidated Financial Statements September 30, 1996, 1995 and 1994
Year ended September 30, ============================================== 1996 1995 1994 (In Thousands) Notes payable...................................... $26,764 $19,920 $10,897 Securities sold under agreements to repurchase..... 18,175 17,619 9,812 Subordinated capital notes......................... 1,304 1,716 2,059 Other.............................................. 33 81 184 -------------- -------------- ---------------- $46,276 $39,336 $22,952 ============== ============== ================
(15) Accrued Expenses and Other Liabilities Accrued expenses and other liabilities are summariezed as follows:
September 30, ------------------------------- 1996 1995 =============== =============== (In Thousands) Federal, state and local income taxes payable.................... $ 411 $ -- Accrued interest payable......................................... 6,633 5,157 Negative goodwill................................................ 1,068 1,262 Deferred gain on interest rate floor and swap agreements......... 5,819 7,395 Accrued SAIF recapitalization assessment......................... 9,432 -- Accrued expenses and other....................................... 25,909 28,860 --------------- --------------- $49,272 $42,674 =============== ===============
(16) Federal, State and Local Taxes Federal Income Taxes The Company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109") effective October 1, 1993. Prior to October 1, 1993, deferred income taxes were provided for timing differences in the recognition of revenues and expenses for tax reporting and financial statement purposes (an income statement approach), pursuant to Accounting Principles Board Opinnion No. 11. SFAS No. 109 adopts a balance sheet approach (or liability method) in place of the income statement approach. The liability method requires that an asset or a liability, as appropriate, be recorded for financial statement purposes for the deferred tax consequences of all temporary differences between the tax basis and financial statement carrying amounts of existing assets and liabilities, which is measured by applying enacted tax laws and rates. Additionally, SFAS No. 109 permits the recognition of net deferred tax assets based upon the likelihood of realization of tax benefits in the future. The cumulative effect at October 1, 1993 of the change in accounting for income taxes which was implemented on a prospective basis amounted to $5.7 million and is included in the consolidated statement of income for the year ended September 30, 1994. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
September 30, ------------------------------ 1996 1995 ============================== (In Thousands) Deferred tax assets: Allowance for possible loan losses............................. $7,976 $8,921 SAIF recapitalization.......................................... 4,020 -- Nonaccrual interest............................................ 2,477 2,987 Excess tax over book basis of loans............................ 1,009 -- Deferred loan fees............................................. 977 1,831 Real estate owned.............................................. 109 742 Premises and equipment......................................... 720 445 Unrealized loss on available for sale securities............... 428 -- Other 2,645 2,972 --------------- --------------- Total gross deferred tax assets.............................. 20,361 17,898 --------------- --------------- Deferred tax liabilities: Excess book over tax basis of loans............................ -- 684 Unrealized gain on available for sale securities............... -- 639 Other.......................................................... 968 1,769 --------------- --------------- Total gross deferred tax liabilities......................... 968 3,092 --------------- --------------- Net deferred tax asset....................................... $19,393 $14,806 =============== ===============
Under SFAS No. 109, the Company has a net deferred tax asset of $19.4 million at September 30, 1996. This represents the anticipated Federal, state and local tax benefits expected to be realized in future years upon the utilization of the underlying tax attributes comprising this balance. The Company has reported taxable income for Federal, state and local income tax purposes in each of the past three years and in management's opinion, in view of the Company's previous, current and projected future earnings trend, such net deferred tax asset will be fully realized. Accordingly, no valuation allowance was deemed necessary for the net deferred tax asset at September 30, 1996. Total income tax expense was allocated as follows:
Year ended September 30, ---------------------------------------------- 1996 1995 1994 ============== ============== ================ (In Thousands) Income from operations............................. $24,776 $19,717 $21,740 Shareholders' equity-- compensation expense for tax purposes in excess of amounts recognized for financial reporting purposes..................... (1,928) (1,488) -- Shareholders' equity-- unrealized appreciation (depreciation) on securities available for sale................. (1,067) 3,690 (3,051) -------------- -------------- ---------------- Total.............................................. $21,781 $21,919 $18,689 ============== ============== ================
The components of income tax expense on operations are as follows:
Year ended September 30, ---------------------------------------------- 1996 1995 1994 ============== ============== ============= (In Thousands) Current: Federal.......................................... $19,599 $13,917 $15,690 State and local.................................. 8,697 7,765 7,197 -------------- -------------- ---------------- 28,296 21,682 22,887 -------------- -------------- ---------------- Deferred: Federal.......................................... (2,923) (457) (1,476) State and local.................................. (597) (1,508) 329 -------------- -------------- ---------------- (3,520) (1,965) (1,147) -------------- -------------- ---------------- Total........................................ $24,776 $19,717 $21,740 ============== ============== ================
The effective income tax rates for the years ended September 30, 1996, 1995 and 1994 were 43.6%, 63.0% and 44.2%, respectively. The reconciliation between the statutory Federal income tax rate and the effective tax rate is as follows:
Year ended September 30, ---------------------------------------------- 1996 1995 1994 ============== ============== ================ Tax on income at statutory rate.................... 35.0% 35.0% 35.0% Tax effects of: State and local income tax, net of Federal income tax benefit............................. 9.3 13.0 9.9 Nondeductible costs associated with Hamilton merger................................ .-- 15.0 .-- Other, net....................................... (.7) .-- (.7) -------------------------------------- Tax at effective rate.............................. 43.6% 63.0% 44.2% ======================================
New York Bancorp files consolidated Federal income tax returns on a calendar-year basis with the Bank and its subsidiaries. Prior to January 1, 1996, if certain definitional tests and other conditions were met, the Bank was allowed a special bad debt deduction based on a percentage of taxable income or on a specified experience formula. The Bank used the specified experience formula for 1993 and 1995 and the percentage of taxable income method in 1994. The statutory percentage of the special bad debt deduction was 8% and was allowable only if the Bank maintained at least 60% of its total assets in qualifying assets, as defined. If qualifying assets fall below 60%, the Bank would be required to recapture essentially all of its bad debt reserve for Federal income tax purposes into taxable income. The Bank's qualifying assets at September 30, 1996 and 1995 exceeded 60%. Under legislation enacted in August 1996, the Bank will no longer be permitted to use the percentage of taxable income method for Federal tax purposes, but will be permitted to deduct bad debts only as they are incurred. The legislation also requires the recapture of the excess of tax bad debt reserves at December 31, 1995 over those established as of December 31, 1987 (the "base year"). The Bank's tax bad debt reserves of $27.9 million as of December 31, 1995 do not exceed those of the base year. Therefore, the Bank will not be required to recapture any of its bad debt reserves. Such reserve reflects the cumulative Federal income tax bad debt deductions to that date. The base year reserves will continue to be subject to recapture, and the Bank could be required to recognize a tax liability, under certain circumstances, including (1) the Bank fails to qualify as a "bank" for Federal income tax purposes; (2) certain distributions are made with respect to the stock of the Bank; (3) the bad debt reserves are used for any purpose other than to absorb bad debt losses; and (4) there is a change in Federal tax law. However, management is currently not aware of the occurrence of any such circumstances. State and Local Taxes New York Bancorp files combined New York State franchise and New York City financial corporation tax returns with the Bank and its subsidiaries on a calendar-year basis. The Company's annual tax liability for each tax was the greater of a tax based on "entire net income," "alternative entire net income," "taxable assets" or a minimum tax. Further, the Company is subject to a temporary surcharge based upon New York State tax liability. The Company's provision for New York State and New York City taxes is based on "entire net income" for the calendar years 1995, 1994 and 1993 and for the nine months ended September 30, 1996. New York State and New York City do not allow for the utilization of net operating loss carrybacks or carryforwards for banks. In response to the aforementioned Federal legislation enacted in August 1996, the New York State tax law has been amended to prevent a recapture of existing tax bad debt reserves and to allow for the continued use of the percentage of taxable income method to determine the bad debt deduction in computing the New York State tax liability. However, no such amendments have been made to date with respect to the New York City tax law; therefore, the Company cannot predict whether such changes will be made or as to the form of any changes. (17) Shareholders' Equity Dividend Restrictions In connection with the Bank's conversion to stock form in February 1988, and Hamilton Savings' conversion to stock form in April 1993, special liquidation accounts were established at the time of conversions, pursuant to regulations of the Federal Home Loan Bank Board (the "FHLBB"), the predecessor to the Office of Thrift Supervision ("OTS"), based on the amount of the Bank's regulatory capital as of September 30, 1987 and Hamilton Savings' regulatory capital as of September 30, 1992. In the unlikely event of a future liquidation, eligible depositors who continue to maintain accounts would be entitled to receive a distribution from the liquidation accounts. The total amount of the liquidation account will be decreased as the balances of eligible deposits are reduced on annual determination dates subsequent to the conversions. The balance of the liquidation accounts aggregated to approximately $16.9 million at September 30, 1996. The ability of New York Bancorp to pay dividends depends upon dividend payments by the Bank to New York Bancorp, which is New York Bancorp's primary source of income. The Bank is not permitted to pay dividends on its capial stock or repurchase shares of its stock if its shareholders' equity would be reduced below the amount required for the liquidation account or applicable regulatory capital requirements. The Bank is currently allowed under regulation to pay cash dividends to New York Bancorp in an amount not to exceed 100% of its net income to date, during a calendar year, plus an amount not to exceed one-half of its surplus capital ratio at the beginning of the calendar year. Additionally, under terms of its subordinated capital note agreements, the Bank is permitted to pay, on a cumulative basis, cash dividends to New York Bancorp in an amount not to exceed 75% of its net income from November 30, 1988 to date, plus $5.0 million. 3-for-2 Stock Split and Stock Dividend The Company declared a 3-for-2 common stock split which was distributed on July 29, 1993 in the form of a stock dividend. Additionally, the Company declared a ten percent stock dividend which became effective on February 14, 1994. Accordingly, information with respect to shares of common stock fully reflects the stock split and the stock dividend. Treasury Stock Transactions During the year ended September 30, 1996, New York Bancorp repurchased 1,214,212 shares. On September 26, 1996 the Board of Directors approved the repurchase of up to an additional 10% of the Company's outstanding common stock, bringing the total then current authority for repurchase to 1,265,604 shares. At September 30, 1996, the Company has 3,648,050 shares of Treasury stock which, among other things, could be held to satisfy obligations under the Company's stock option plans. Treasury stock is being accounted for using the cost method. Regulatory Capital As required by regulation of the OTS, savings institutions are required to maintain regulatory capital, in the form of a "tangible capital requirement," a "core capital requirement" and a "risk-based capital requirement." The Bank must meet specific capital guidelines that involve quantitive measures of the Bank's assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The Bank's capital amounts are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. As of September 30, 1996 the Bank has been categorized as "adequately capitalized" by the OTS under the prompt corrective action regulations and continues to exceed all regulatory capital requirements as detailed in the following table (dollars in thousands):
Tangible Capital Core Capital(1) Risk-Based Capital(2) ------------------------------------------------------------------------- Amount Percentage(3) Amount Percentage(3) Amount Percentage(3) ------------------------------------------------------------------------- Total Bank equity..................... $138,195 4.70% $138,195 4.70% $138,195 9.86% Add: * Allowable portion of subordinated capital notes..... -- -- -- -- 1,634 .11 * Other............................. 278 .01 278 .01 7,806 1.27 -------------------------------------------------------------------------- Capital for regulatory purposes....... 138,473 4.71 138,473 4.71 157,635 11.24 Minimum regulatory requirement........ 44,117 1.50 88,234 3.00 112,180 8.00 -------------------------------------------------------------------------- Excess................................ $ 94,356 3.21% $ 50,239 1.71% $ 45,455 3.24% ==========================================================================
(1) Under the OTS's 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. 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. (18) Benefits Pension Plan All eligible employees of the Bank are included in a defined benefit pension plan (the "Plan"). Benefits contemplated by the Plan are funded through a group annuity insurance contract. The Bank contributes to the Plan an amount sufficient to meet ERISA funding standards. Hamilton had maintained a noncontributary defined benefit plan for all eligible employees. The plan was funded through a deposit administration contract with an insurance company. As of May 1, 1994, the plan was curtailed and all future benefit accruals ceased. The plan curtailment resulted in a net gain of approximately $181,000. Subsequent to the merger, all former Hamilton employees retained by the Bank meeting plan requirements became eligible for participation in the Plan. Effective December 31, 1995, the former Hamilton plan was merged with that of the Bank. The following table sets forth the funded status of the Bank's and Hamilton's plans and amounts recognized in the Company's consolidated financial statements at September 30 (in thousands): 1996 1995 =========================== Acturial present value of benefit obligation Accumulated benefit obligation, including vested benefits of $10,423 in 1996 and $9,781 in 1995............. $10,929 $10,352 =========================== Projected benefit obligations for $10,978 $10,380 service rendered to date............... 10,166 10,284 --------------------------- Projected benefit obligation in excess of plan assets.................. (812) (96) Unrecognized net loss from past experience different from that assumed and effects of changes in assumptions.. 1,972 1,246 Unrecognized prior service cost.......... (971) (1,072) Unrecognized net obligation at transition being recognized over fifteen years.... 261 292 Additional liability..................... (1,213) (334) -------------------------- Prepaid (accrued) pension cost........... $ (763) $ 36 ========================== Net pension cost for the years ended September 30, 1996, 1995 and 1994 included the following components (in thousands): 1996 1995 1994 ============================== Service cost--benefits earned during the period.......................... $ 46 $ 131 $ 467 Interest cost on projected benefit obligation.......................... 838 844 878 Actual return on plan assets (593) (583) (546) Net amortization and deferral............... (371) (439) (233) Additional liability........................ 879 -- -- ----------------------------- Net pension cost (benefit) included $ 799 $ (47) $ 566 in non-interest expenses-- compensation and benefits........... ============================= Assumptions used in 1996, 1995 and 1994 to develop the net periodic pension cost were: 1996 1995 1994 ==================================================================== Weighted average discount rate.......... 8.00% 9.00% 9.00% to 9.25% Rate of increase in future compensation levels.... 4.00% 4.00% 4.00% Expected long-term rate 9.50% 9.50% 9.00% of return on assets.... ==================================================================== In conjunction with its pension plan, the Bank maintains a Supplemental Executives Retirement Plan (the "SERP Plan") to provide retirement benefits which would have been provided under the Plan except for limitations imposed by Section 415 of the Internal Revenue Code. The following sets forth the SERP Plan's status and amounts recognized in the Company's consolidated financial statements at September 30 (in thousands): 1996 1995 ========================== Actuarial present value of benefit obligation: Accumulated benefit obligation, including vested benefits of $485 in 1996 and $821 in 1995.................. $824 $1,120 ========================== Projected benefit obligations for service rendered to date............... $950 $1,122 Plan assets at fair value................ -- -- ------------------------- Projected benefit obligation in excess of plan assets.................. (950) (1,122) Unrecognized net (gain) loss from past experience different from that assumed and effects of changes in assumptions.. 50 (500) Unrecognized prior service cost being recognized over fifteen years.... 322 350 Additional liability..................... (247) -- ------------------------ Accrued SERP Plan cost included in $(825) $(1,272) other liabilities...................... ======================== Net SERP Plan cost for the years ended September 30, 1996, 1995 and 1994 included the following components (in thousands): 1996 1995 1994 ============================== Service cost--benefits earned during the period............................ $ 35 $ 52 $ 271 Interest cost on projected benefit obligation............................ 118 90 113 Actual return on plan assets ........... -- -- -- Net amortization and deferral........... 27 (7) 45 Settlement loss......................... 49 -- -- ------------------------------ Net pension cost included $ 229 $ 135 $ 429 in non-interest expenses-- compensation and benefits............. ============================== Assumptions used in 1996, 1995 and 1994 to develop the net periodic SERP Plan cost were: 1996 1995 1994 ============================================================================ Weighted average discount rate................ 7.50% to 8.00% 7.50% to 8.00% 9.00% Rate of increase in future compensation levels.......... 4.00% 4.00% 4.00% Expected long-term rate N/A N/A N/A of return on assets.......... ============================================================================ Hamilton had also maintained a SERP. On January 27, 1995, as a result of the merger, Hamilton's SERP was terminated in accordance with the plan's change in control provision and distributions in the aggregate amount of $307,000 were made to all eligible participants. Included in compensation and benefit expense is $179,000 for the year ended September 30, 1994. Fiscal year 1995 includes $63,000 in merger and restructuring expenses related to the termination of Hamilton's SERP. 401(k) Plan The Bank maintains a 401(k) Savings Plan (the "401(k) Plan") for all qualified employees. The terms of the 401(k) Plan provide for employee contributions on a pre-tax basis up to a maximum of 10% of total compensation, with matching contributions to be made by the Bank equal to a minimum of 50% of employee contributions. Hamilton also had a qualified 401(k) savings plan for its employees in which Hamilton matched a portion of the employee's contribution. Hamilton's employees immediately became fully vested in Hamilton's contributions at the time they were made. Effective December 31, 1995, the former Hamilton plan was merged with that of the Bank. Retirees' Benefit Plan The Bank, as part of its overall benefits, provides to its eligible retirees health coverage and life insurance coverage. Eligible participants are retired employees of the Bank who retire with a minimum age of 55 and 5 years of service. The Company has elected to defer and amortize to expense over a twenty year period the accumulated postretirement benefit obligation of $3.2 million at the October 1, 1993 date of adoption of SFAS No. 106 "Employers' Accounting for Postretirement Benefits Other Than Pensions." The plan is non-contributory for those retirees who retired prior to July 1992. The plan was amended during fiscal year 1995. The amendment included an increase in the cost for future retirees and placing a cap on the Bank's share of plan costs. Former Hamilton employees became covered under this amended plan effective February 1, 1995. The following table sets forth the plan's status and amounts recognized in the Company's consolidated financial statements at September 30 (in thousands): 1996 1995 ======================= Accumulated postretirement benefit obligation: Retirees including covered dependents and beneficiaries...................... $1,693 $2,169 Eligible active participants............. 100 536 Other active participants................ 753 401 ---------------------- Total accumulated postretirement benefit obligation................... 2,546 3,106 Plan assets................................. -- -- ---------------------- Accumulated benefit obligation in excess of plan assets........................... (2,546) (3,106) Unrecognized transition obligation....... 2,274 2,408 Unrecognized prior service cost.......... (503) (555) Unrecognized gain........................ (2,062) (1,538) ----------------------- Accrued benefit obligation............... $(2,837) $(2,791) ======================= Net periodic postretirement benefit cost included the following components for the years ended September 30 (in thousands): 1996 1995 1994 ============================ Service cost................................... $ 59 $ 51 $ 247 Interest cost.................................. 190 267 390 Amortization of transition obligation of $3.2 million over 20 years..................... 134 146 162 Amortization of prior service cost............. (52) (39) -- Amortization of gain........................... (131) (87) (293) --------------------------- Total postretirement benefit expense........... $ 200 $ 338 $ 506 =========================== The above plan does not have any assets and the Company presently intends to maintain the plan as unfunded. The assumed long-term health care cost trend used to measure the expected cost of benefits under the plan for 1996 is 5.00%. The discount rate used in determining the accumulated postretirement benefit obligation is 8.00%. The effect of raising the health care trend by 1% will increase the service and interest cost and the accumulated benefit obligation by approximately $34,400 and $300,000, respectively. The amounts included in compensation and benefit expense for the above plans are as follows for the years ended September 30 (in thousands): 1996 1995 1994 ================================ Pension plan............................... $ 799 $ (47) $ 566 Supplemental executives retirement plan.... 229 135 608 401(k) plan................................ 549 408 424 Retirees' benefit plan..................... 200 338 506 --------- ---------- ----------- $ 1,777 $ 834 $ 2,104 ========= ========== =========== Hamilton had also maintained a noncontributory retirement plan for its outside directors. The plan provided benefits for participants upon reaching age 65, and required at least 5 years of service, but not exceeding 10 years of service. On January 27, 1995, the plan was terminated in accordance with the plan's change in control provisions and distributions, in the aggregate amount of $1,039,600 were made to all eligible participants. Included in compensation and benefit expense is $25,000 and $100,000 for the years ended September 30, 1995 and 1994, respectively. Fiscal year 1995 also includes $638,000 in merger and restructuring expense related to the plan. (19) Stock Plans Stock Option Plans The stock option plans permit New York Bankcorp common stock to be issued to key employees and directors of the Holding Company and its subsidiary. The options granted under the plans are intended to be either incentive stock options or non-qualified options. Options have been granted to purchase common stock at the fair market value of the stock at the date of grant. Options generally vest over a three year period from the date of grant and generally expire ten years from the date of grant for employees and five years from the date of grant for directors. Hamilton maintained incentive stock option plans for its officers, directors and other key employees. Generally, these plans granted options to individuals at a price equivalent to the fair market value at the date of grant and were exercisable over a ten year period from the date of grant. In accordance with the plans' change in control provisions, the individuals became fully vested in their stock option grants on the merger date, January 27, 1995. The options were exchanged for options of the Company, and are set forth separately in the table below. Additionally, stock appreciation rights ("SARs") have been granted to key employees of the Holding Company and its subsidiary. SARs entitle the grantee to receive cash equal to the excess of the market value of the shares at the date the right is exercised over the exercise price. An expense is accrued for the earned portion of the amount by which the market value of the stock exceeds the exercise price for each SAR outstanding. The expense related to the SARs for the years ended September 30, 1996, 1995 and 1994 was approximately $1,775,000, $171,000 and $360,000 respectively. The following table summarizes certain information regarding the option plans and has been prepared after giving effect to the 3-for-2 common stock split and the ten percent stock dividend.
Number of shares of ------------------------------------ Non- qualified Weighted Incentive Options Average Stock Non-statutory to Exercise SARs Options Stock Options Directors Plan ============================================================ Balance outstanding at September 30, 1993 153,000 155,585 189,630 90,000 $12.11 Effect of 10% stock dividend............ 15,300 15,559 18,962 9,000 N/A Forfeited............................... -- (2,888) -- -- $ 7.88 Granted................................. -- 52,637 152,568 -- $17.95 Exercised............................... -- (59,891) (32,900) -- $ 8.02 -------------------------------------------- Balance outstanding at September 30, 1994 168,300 161,002 328,260 99,000 $13.27 Hamilton options outstanding at January 27, 1995....................... -- -- 306,392 182,824 $ 2.37 Forfeited............................... (9,900) (34,178) (48,033) -- $16.51 Granted................................. -- 81,031 148,969 -- $19.34 Exercised............................... (19,800) (60,470) (324,994) -- $ 2.08 -------------------------------------------- Balance outstanding at September 30, 1995 138,600 147,385 410,594 281,824 $13.39 Forfeited............................... -- (2,891) -- (24,750) $ 5.88 Granted................................. -- 74,238 79,012 24,750 $22.24 Exercised............................... -- (31,318) -- (142,720) $ 7.32 --------------------------------------------- Balance outstanding at September 30, 1996 138,600 187,414 489,606 139,104 $16.36 =============================================
Recognition and Retention Plan ("RRP") Hamilton maintained a RRP, under which restricted stock awards were made to officers, directors and other key employees, and an Employee Stock Ownership Plan (the "ESOP"). In accordance with the plans' change in control provisions, the participants became fully vested on the merger date, January 27, 1995. Distributions of the shares in the plans have been made to participants. Included in compensation and benefit expense is $464,000 and $1,491,000 for the years ended September 30, 1995 and 1994, respectively. Fiscal year 1995 also includes $4,992,000 in merger and restructuring expense related to these plans. (20) Commitments, Contingencies and Contracts In the normal course of its business, the Company is a defendant in certain claims and legal actions arising in the ordinary course of business. In addition, on July 1, 1994, a purported class action complaint was filed in the Delaware Chancery Court on behalf of the shareholders of Hamilton by Adar Equities, Ltd. as plaintiff, naming, among others, New York Bancorp as a defendant. An identical complaint was filed by the Serious Software Corporation on July 7, 1994 in the Delaware Chancery Court. Plaintiffs allege that certain directors and senior officers of Hamilton breached their fiduciary duties to Hamilton shareholders. New York Bancorp is alleged to have aided and abetted this breach by allegedly providing them the promise of continued employment and monetary incentives in exchange for entering into a merger agreement. Plaintiffs claimed that if the merger was approved by shareholders of New York Bancorp and Hamilton, the consideration that Hamilton shareholders would receive in exchange for their Hamilton common stock would be "grossly inadequate." Plaintiffs seek various remedies, including an injunction to prevent the consummation of the merger and compensatory damages in an unspecified amount. On September 19, 1994, defendants moved to dismiss the complaints on the ground that they fail to state a claim upon which relief could be granted. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters will not have a material adverse effect on the consolidated financial condition of the Company. The Company has obligations under a number of noncancellable leases on property used for banking purposes. These leases contain escalation clauses which provide for increased rental expense based on a percentage of increases in real estate taxes. Rental expense under these leases, included in non-interest expense--occupancy, for the years ended September 30, 1996, 1995 and 1994 approximated $2,096,000, $2,040,000 and $2,025,000, respectively. The projected minimum rentals under existing operating leases are as follows: Year ending September 30, Amount - ------------------------------------------------------------------ (In Thousands) 1997........................................... $ 1,814 1998........................................... 1,802 1999........................................... 1,632 2000........................................... 971 2001........................................... 572 later years.................................... 3,643 ---------- $10,434 ========== (21) Off-Balance Sheet Financial Instruments The Company enters into a variety of financial instruments with off-balance sheet risk in the normal course of business. Interest Rate Swap Arrangements The Company enters into interest rate swap arrangements to manage the repricing characteristics of its interest-bearing liabilities. Such agreements provide for the concurrent exchange of its current and future interest payments on either short-term money market certificates of deposit accounts or variable rate borrowed funds for another party's obligations for interest payments on an equivalent amount of fixed-rate indebtedness. The principal or notional amounts of these arrangements are not reflected in the consolidated statements of financial condition. The incremental revenue or expense associated with interest rate swaps is recognized over the term of the swap arrangement and is presented as a component of the interest expense of the related liability. Gains and losses resulting from the early termination of swap arrangements are amortized over the remaining term of the swap arrangement. The effect of interest rate swap arrangements at September 30, 1996 was to fix the Company's interest cost at a weighted average rate of 4.79% on the agreed-upon amount of funds for approximately six months, the remaining weighted average terms of the arrangements. Outstanding notional amounts of interest rate swap arrangements were $600.0 million and $205.0 million at September 30, 1996 and 1995, respectively. At September 30, 1996, mortgage-backed securities with a market value of $10.2 million were pledged as collateral on these arrangements. The Bank's credit risk with respect to the interest rate swap agreements is in the risk of nonperformance by the other party to the agreements. However, the Bank does not anticipate nonperformance by the counterparty and controls the risk through its usual monitoring procedures. Interest rate swaps outstanding at September 30, 1996 are summarized as follows (in thousands): Fixed Variable Notional Interest Rate Interest Rate amount Paying Receiving Maturity - --------------------------------------------------------------- $100,000 5.260% 5.438% December 1996(1) 100,000 5.265% 5.438% December 1996(1) 50,000 4.785% 5.438% June 1997(2) 50,000 4.780% 5.438% June 1997 50,000 4.770% 5.438% June 1997 50,000 4.774% 5.438% June 1997(2) 50,000 4.748% 5.438% June 1997 50,000 4.743% 5.438% June 1997(2) 50,000 4.700% 5.438% June 1997 50,000 4.700% 5.438% June 1997(2) - -------- $600,000 (1) These $200 million in interest rate swaps have been extended through June 1997 whereby the fixed interest pay rate will be 4.69% beginning in December 1996. (2) In an effort to secure the hedge position provided against interest rate risk, the Bank in July 1996 terminated its position as a party to $200.0 million of interest rate swaps for the six month period December 1996 through June 1997. The gain of $1.5 million from these terminated interest rate swaps is being deferred, and will be amortized as a reduction of interest expense over the period December 1996 through June 1997. At September 30, 1996 the Company's interest rate swaps had an unrealized gain amounting to $2.9 million. Further, at September 30, 1996 there was $1.5 million of net deferred gains relating to terminated interest rate swap contracts. Interest Rate Collar, Interest Rate Floor, and Interest Rate Cap Arrangements The Company uses interest rate collar, interest rate floor, and interest rate cap arrangements to protect the Bank against interest rate risk associated with the repricing of its interest-bearing liabilities. Premiums paid for interest rate collar, interest rate floor, and interest rate cap arrangements are amortized to interest expense of the related liability over the contractual terms of these arrangements using the straight-line method. When a liability is prepaid, any related interest rate collar, interest rate floor, or interest rate cap is re-designated to another interest-bearing liability at the lower of cost or estimated market value and the loss, if any, is included in the gain or loss on early extinguishment of the liability. Interest received or paid under the terms of these arrangements is accrued and recorded as a reduction or increase of interest expense of the related interest-bearing liability. At September 30, 1996, the Bank was a party to $700.0 million of interest rate collar agreements which mature in August 1998. These agreements are intended to reduce the interest rate risk associated with certain short-term borrowings and certificates of deposit. Under the terms of these agreements, the Bank receives interest when the three month LIBOR index is in excess of 7.50%, and pays interest when the three month LIBOR index is less than 5.00%. At September 30, 1996, the three month LIBOR was 5.625%. At September 30, 1996 mortgage-backed securities with a market value of $10.5 million were pledged as collateral on these arrangements. The Bank's credit risk with respect to these interest rate collar arrangements is in the risk of nonperformance by the other party to the agreements. However, the Bank does not anticipate nonperformance by the counterparty and controls the risk through its usual monitoring procedures. At September 30, 1996, the unamortized premium on the Bank's interest rate collars amounted to $.8 million which approximated the current market value. During fiscal year 1995 the Bank was a party to $1.0 billion of interest rate floor agreements which were scheduled to expire on February 22, 1998. During fiscal year 1995, in an effort to secure the hedge position provided against the aforementioned interest rate risk, the Bank terminated its position as a party to the $1.0 billion of interest rate floor agreements. Accordingly, and in conformity with general accepted accounting principles, the Company deferred recognition of the gain on the terminated interest rate floor agreements and is amortizing such gain as an adjustment to the cost of interest-bearing deposit liabilities over the original contractual life of the interest rate floor agreements. At September 30, 1996 the amount of the unamortized gain was $4.3 million. Stock Indexed Call Options The Bank uses stock indexed call options for purposes of hedging its MarketSmart CDs and MarketSmart I.R.A. CDs. The call options hedge the interest rate paid on these 5 year CD deposits which is an annual percentage yield based on the changes in the Standard & Poor's 500 Composite Stock Price Index ("S&P Index") during each of the 5 year terms of the CDs. Premiums paid on the call options are amortized to interest expense over the terms of the underlying CD using the straight line method. Gains and losses, if any, resulting from the early termination of the call option are deferred and amortized to interest expense over the remaining term of the underlying CD. At September 30, 1996 the Company had approximately $2.6 million in contracts for purposes of hedging the S&P Index. The call options maturities range from March 1999 through August 1999. The Company carries stock indexed call options at market value. Further, at September 30, 1996 there were no deferred gains or losses relating to terminated contracts. The Bank ceased offering MarketSmart CDs during fiscal year 1995 due to its inability to purchase stock indexed call options. Financial Futures Transactions The Company from time to time may enter into various financial futures contracts to protect against changes in the market value of various interest-earning assets and interest-bearing liabilities, including the repricing of interest rate floor arrangements. Realized gains and losses on these contracts are deferred and accounted for as premiums or discounts on the related assets, liabilities or interest rate floor resets to the extent such contracts are matched against specific assets, liabilities or interest rate floor resets and meet specific hedge correlation criteria. Contracts which are not matched against specific assets, liabilities, or the repricing of interest rate floor arrangements or do not meet correlation criteria are accounted for at market value with the resulting gain or loss recognized in operations. At September 30, 1996 and 1995 the Company had no outstanding financial future transactions. During the years ended September 30, 1996, 1995 and 1994, the Bank's net interest income increased (decreased) by $3.5 million, $1.2 million and $(1.5) million, respectively, as a net result of off-balance sheet financial instruments. (22) Fair Value of Financial Instruments The fair value of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are determined for on and off-balance sheet financial instruments, without attempting to estimate the value of anticipated future business, and the value of assets and liabilities that are not considered financial instruments. Additionally, tax consequences related to the realization of the unrealized gains and losses can have a potential effect on fair value estimates and have not been considered in many of the estimates. The following table summarizes the carrying values and estimated fair values of the Company's on-balance sheet financial instruments:
September 30, ================================================================ 1996 1995 ============================== ============================= Estimated Estimated Carrying Fair Carrying Fair Value Value Value Value ------------------------------ ----------------------------- (In Thousands) Financial Assets: Cash and cash equivalents........ $ 23,745 $ 23,745 $ 45,104 $ 45,104 Trading account securities....... --- --- 2,003 2,003 Debt and equity securities....... 136,776 136,774 67,452 67,380 Federal Home Loan Bank stock..... 27,938 27,938 20,288 20,288 Mortgage-backed securities....... 831,246 815,031 871,520 844,297 Loans receivable, net............ 1,853,162 1,872,423 1,664,943 1,690,532 Financial Liabilities: Deposits......................... 1,715,959 1,721,433 1,748,874 1,755,704 Borrowed funds................... 1,008,786 1,008,136 767,138 767,735 ============================== =============================
The following methods and assumptions were utilized in estimating the fair values of its on-balance sheet financial instruments at September 30, 1996 and 1995: Cash and Cash Equivalents The estimated fair values are assumed to equal the carrying values as these financial instruments are either due on demand or mature within 90 days. Debt and Equity Securities and Mortgage-Backed Securities Estimated fair values of debt and equity securities and mortgage-backed securities, both available for sale and held to maturity, are generally predicated upon quoted market prices or dealer quotes, or in the absence of such quotes, on quoted market prices for securities with similar credit, maturity and interest rate characteristics. Loans Receivable, net Estimated fair values are calculated for pools of loans with similar characteristics. The loans are first segregated by type, such as one-to-four family residential, other residential, commercial, and consumer, and then further segregated into fixed and adjustable rate categories and seasoned and non-seasoned categories. Estimated fair values are derived by discounting expected future cash flows. Expected future cash flows are based on contractual cash flows, adjusted for prepayments. Prepayment estimates are based on a variety of factors including the Bank's experience with respect to each loan category, the effect of current economic and lending conditions, and regional statistics for each loan category, if available. The discount rates used are based on market rates for new loans of similar type and purpose, adjusted, when necessary, for factors such as servicing cost, credit risk, and term. As mentioned previously, this technique of estimating fair value is extremely sensitive to the assumptions and estimates used. While management has attempted to use assumptions and estimates which are the most reflective of the loan portfolio and the current market, a greater degree of subjectivity is inherent in these values than those determined in formal trading marketplaces. As such, readers are cautioned in using this information for purposes of evaluating the financial condition and/or value of the Company in and of itself or in comparison with any other company. Deposits The fair value of deposit liabilities with no stated maturity (NOW, money market, savings accounts and non-interest bearing accounts, which represent 59.3% of all deposit liabilities) are equal to the carrying amounts payable on demand. The fair value of certificates of deposit represent contractual cash flows discounted using interest rates currently offered on deposits with similar characteristics and remaining maturities. Under generally accepted accounting principles, these estimated fair values do not include the intangible value of core deposit relationships which comprise a significant portion of the Bank's deposit base. However, management believes that the Bank's core deposit relationships provide a relatively stable, low cost funding source which has a substantial intangible value separate from the deposit balances. Borrowed Funds The estimated fair value of borrowed funds is calculated based on the discounted value of contractual cash flows using interest rates currently in effect for borrowings with similar maturities and collateral requirements. Off-Balance Sheet Financial Instruments The fair values of interest rate swap agreements, interest rate collars, interest rate floors, interest rate caps and stock indexed call options are obtained from dealer quotes and represent the cost of terminating the agreements. The estimated fair value of open off-balance sheet financial instruments results in an unrealized gain (loss) of $2.9 million and $(.5) million at September 30, 1996 and 1995, respectively. Further, the estimated fair value of commitments to extend credit is estimated using the fees charged to enter into similar agreements, taking into account the remaining terms of the agreements and the present creditworthiness of the counterparties. Generally, for fixed-rate loan commitments, fair value also considers the difference between current levels of interest rates and the committed interest rates. The fair value of commitments to purchase mortgage-backed securities is based on the estimated cost to terminate them or otherwise settle the obligations with the counterparties. The estimated fair value of these off-balance sheet financial instruments results in no unrealized gain or loss at September 30, 1996 and 1995. (23) Recent Accounting Pronouncements In March 1995, the FASB issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets To Be Disposed Of" ("SFAS No. 121"). The Statement is effective for financial statements issued for fiscal years beginning after December 15, 1995. The Statement establishes accounting standards for, among other things, the impairment of long-lived assets. The Statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company adopted SFAS No. 121 on October 1, 1996. Adoption of SFAS No. 121 did not have a significant effect on the Company's financial condition or results of operations. In October 1995, the FASB issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). The Statement is effective for fiscal years beginning after December 15, 1995. The Statement establishes accounting and reporting standards for stock-based employee compensation awards granted in fiscal years that begin after December 15, 1994. Examples of such plans are stock purchase plans, stock options, restricted stock, and stock appreciation rights. The Statement defines a fair value based method of accounting for employee stock options or similar equity instruments and encourages all entities to adopt that method of accounting. Entities may elect, however, to remain with previous accounting standards which do not require the fair value method of accounting. Those entities electing not to adopt the fair value method of accounting must make pro forma disclosures of net income and earnings per share as if the fair value method of accounting defined in the Statement were adopted. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. The Company has adopted SFAS No. 123 effective October 1, 1996 and has elected to remain with the previous accounting standard which does not require the fair value method of accounting. Pro forma disclosures as if the fair value method were adopted will be presented in future financial statements. Based on this method of adoption, SFAS No. 123 will not have a significant effect on the Company's financial condition or results of operations. In June 1996, 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. The Company plans to adopt SFAS No. 125 on January 1, 1997. Based on its review of the Statement, management does not believe that adoption of SFAS No. 125 will have a material effect on the Company. (24) Parent Company Only Financial Information New York Bancorp operates a wholly owned subsidiary, Home Federal Savings Bank. The earnings of the Bank are recognized by the Holding Company using the equity method of accounting. Accordingly, earnings of the Bank are recorded as increases in the Holding Company's investment and any dividends would reduce the Holding Company's investment in the Bank. The following is the condensed financial statements for New York Bancorp Inc. (parent company only) as of September 30, 1996 and 1995 and for the years ended September 30, 1996, 1995 and 1994:
Condensed Statements of Financial Condition September 30, ------------------------------------------- 1996 1995 =========================================== Assets (In Thousands) Cash and due from banks............................ $ 236 $ 112 Money market investments........................... 10,700 8,418 Debt and equity securities available for sale...... 4,841 4,489 Investment in Bank, at equity...................... 138,195 146,169 Other 195 80 ------------------------------------------- $154,167 $159,268 =========================================== Liabilities and Shareholders' Equity Accrued expenses and other liabilities............. $ 2,264 $ 2,882 Shareholders' equity............................... 151,903 156,386 ------------------------------------------- $154,167 $159,268 ===========================================
Condensed Statements of Income Year ended September 30, ------------------------------------------- 1996 1995 1994 =========================================== (In Thousands) Dividend from Bank................................. $37,352 $ 26,200 $ 11,879 Interest income.................................... 509 720 685 Interest expense................................... --- (48) (182) Non-interest income (loss)......................... 3,141 353 (4) Non-interest expense............................... (410) (649) (697) ------------------------------------------- Income before income taxes and equity in undistributed earnings of Bank................ 40,592 26,576 11,681 Income tax benefit (expense)....................... (1,471) (154) 90 ------------------------------------------- Income before equity in undistributed earnings of Bank................................. 39,121 26,422 11,771 Excess of dividends over current year earnings..... (7,115) (14,860) --- Equity in undistributed earnings of Bank........... --- --- 21,381 ------------------------------------------- Net income......................................... $32,006 $11,562 $33,152 ===========================================
Condensed Statements of Cash Flows Year ended September 30, ------------------------------------------- 1996 1995 1994 =========================================== (In Thousands) Cash flows from operating activities: Net income......................................... $ 32,006 $ 11,562 $ 33,152 Adjustments to reconcile net income to net cash provided by operating activities: Undistributed earnings of the Bank............. 7,115 14,860 (21,381) Gain on sale of debt and equity securities available for sale................ (3,141) (295) --- Amortization of premiums....................... --- 48 150 Amortization of ESOP and RRP................... --- 464 1,491 Termination of ESOP and RRP.................... --- 4,992 --- (Increase) decrease in other assets............ 281 392 (338) Increase (decrease) in other liabilities....... 1,519 (241) (227) ------------------------------------------- Total adjustments........................ 5,774 20,220 (20,305) ------------------------------------------- Net cash provided by operating activities 37,780 31,782 12,847 ------------------------------------------- Cash flows from investing activities: Proceeds from sale of mortgage-backed securities available for sale.................. --- 6,957 --- Proceeds from sale of debt and equity securities available for sale.................. 16,336 1,159 --- Investment in Bank............................... --- (105) (1,000) Investment in mortgage-backed securities available for sale............................. --- --- (2,112) Investment in debt and equity securities available for sale............................. (14,457) (4,812) (480) Principal payments on mortgage-backed securities available for sale.................. --- 2,273 5,512 ------------------------------------------- Net cash provided by investing activities: 1,879 5,472 1,920 ------------------------------------------- Cash flows from financing activities: Purchases of common stock for treasury or retirement.................................. (29,028) (32,496) (8,320) Proceeds from sale of treasury stock............. --- 4,530 --- Repayment of long term debt...................... --- (217) (543) Payment of common stock dividends................ (9,427) (8,156) (5,582) Cash paid in lieu of fractional shares resulting from stock split and dividend........ --- --- (3) Exercise of stock options........................ 1,202 872 819 ------------------------------------------- Net cash used by financing activities.... (37,253) (35,467) (13,629) ------------------------------------------- Net increase in cash and cash equivalents.......... 2,406 1,787 1,138 Cash and cash equivalents at beginning of year..... 8,530 8,187 7,049 Hamilton's net cash flows for the three months ended December 31, 1994................... --- (1,444) --- ------------------------------------------- Cash and cash equivalents at end of year........... $ 10,936 $ 8,530 $ 8,187 Supplemental schedule of non-cash investing activities: Transfer of mortgage-backed securities held to $ --- $ --- $ 11,630 maturity to mortgage-backed securities available for sale............................... ===========================================
(25) Quarterly Financial Data (Unaudited) Selected quarterly financial data for fiscal years ended September 30, 1996 and 1995 is presented below:
Fiscal 1996 Fiscal 1995 ----------------------------------- --------------------------------- Quarter Ended ---------------------------------------------------------------------- September June March December 31, September June March December 31, 30, 1996 30, 1996 31, 1996 1995 30, 1995 30, 1995 31, 1995 1994 ============================================================================================ Quarterly Operating Data: Interest income......... $54,349 $52,392 $50,091 $50,659 $50,843 $49,714 $48,990 $47,425 Interest expense........ 27,528 26,486 25,741 26,991 27,546 26,514 24,860 22,810 -------------------------------------------------------------------------------------------- Net interest income..... 26,821 25,906 24,350 23,668 23,297 23,200 24,130 24,615 Provision for possible loan losses........... (300) (300) (300) (300) (400) (400) (400) (500) -------------------------------------------------------------------------------------------- Net interest income after provision for possible loan losses.. 26,521 25,606 24,050 23,368 22,897 22,800 23,730 24,115 --------------------------------------------------------------------------------------------- Non interest income (loss): Loan fees and service charges............. 676 673 790 631 605 610 588 763 Net gain (loss) on sales of mortgage loans and securities available for sale.............. 1,972 742 1,529 507 303 125 (1,177) (339) Other................. 1,848 2,008 1,727 1,564 1,421 1,316 1,280 1,117 --------------------------------------------------------------------------------------------- Total non-interest income 4,496 3,423 4,046 2,702 2,329 2,051 691 1,541 --------------------------------------------------------------------------------------------- Non-interest expense: General and administrative....... 12,280 11,714 11,631 11,910 10,720 12,533 12,858 12,857 Merger and restructuring --- --- --- --- --- --- 19,024 --- Real estate operations, net 123 253 (46) 133 223 (59) 345 374 SAIF recapitalization. 9,432 --- --- --- --- --- --- --- ----------------------------------------------------------------------------------------- Total non-interest expense 21,835 11,967 11,585 12,043 10,943 12,474 32,227 13,231 -------------------------------------------------------------------------------------------- Income (loss) before income tax expense.... 9,182 17,062 16,511 14,027 14,283 12,377 (7,806) 12,425 Income tax expense...... 3,810 7,432 7,335 6,199 6,303 5,458 1,998 5,958 -------------------------------------------------------------------------------------------- Net income (loss)....... $ 5,372 $ 9,630 $ 9,176 $ 7,828 $ 7,980 $ 6,919 $(9,804) $ 6,467 ============================================================================================ Earnings (loss) per common share $ .47 $ .81 $ .76 $ .64 $ .63 $ .51 $ (.73) $ .48
Summation of the quarterly earnings per common share, due to the average effect of the number of shares and share equivalents throughout the year, does not necessarily equal the annual amount. independent auditors' report - ---------------------------------------------------------------------- To The Board of Directors and Shareholders of New York Bancorp Inc.: We have audited the accompanying consolidated statements of financial condition of New York Bancorp Inc. and Subsidiary as of September 30, 1996 and 1995 and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended September 30, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of New York Bancorp Inc. and Subsidiary as of September 30, 1996 and 1995 and the results of their operations and their cash flows for each of the years in the three-year period ended September 30, 1996, in conformity with generally accepted accounting principles. As discussed in note 16 to the consolidated financial statements, effective October 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 (Accounting for Income Taxes). KPMG Peat Marwick LLP October 29, 1996 Jericho, New York EX-99 3 EXHIBIT 99.2 EXHIBIT 99.2 North Fork Bancorporation, Inc. - New York Bancorp Inc. Combined with Branford Savings Bank Pro Forma Condensed Combined Balance Sheets (Unaudited) September 30, 1997 (Dollars in thousands)
All North Combined Pro Fork/ Trans- Forma Branford New Pro actions North Adjust- Pro York Forma Pro Fork Branford ments Forma Bancorp Adjustments Forma Assets Cash & Due from Banks..... $106,760 $4,237 ($2,710)(1) $108,287 $ 26,305 - $ 134,592 Federal Funds Sold........ 35,000 9,875 - 44,875 - - 44,875 Securities: Available-for-Sale ... 1,633,737 5,132 - 1,638,869 495,910 26,400(4) 2,161,179 Held-to-Maturity...... 1,166,329 42,661 - 1,208,990 644,840 - 1,853,830 Total Securities...... 2,800,066 47,793 0 2,847,859 1,140,750 26,400 4,015,009 ------------------ ----------------------------------------- ------------------ Loans, Net of Unearned Income & Fees........... 3,509,722 120,971 - 3,630,693 2,039,111 - 5,669,804 Allowance for Loan Losses............. 54,611 3,740 - 58,351 18,695 - 77,046 Net noans............. 3,455,111 117,231 0 3,572,342 2,020,416 0 5,592,758 ------------------ ----------------------------------------- ------------------- Premises & Equipment, Net. 63,717 1,893 - 65,610 12,711 - 78,321 Accrued Interest Receivable 45,649 1,272 - 46,921 21,590 - 68,511 Intangibles............... 76,692 - 27,434(123) 104,126 - - 104,126 Other Real Estate......... 5,499 110 - 5,609 1,363 - 6,972 Other Assets.............. 27,126 457 2,052(3) 29,635 21,065 3,149(5) 53,849 Total Assets......... $6,615,620 $182,868 $26,776 $6,825,264 $3,244,200 $29,549 $10,099,013 ------------------ ----------------------------------------- -------------------- Liabilities and Stockholders' Equity Demand Deposits........... $836,020 $10,753 - $846,773 $42,808 - $889,581 Savings N.O.W. & Money Market Deposits.......... 1,895,804 62,749 - 1,958,553 1,000,873 - 2,959,426 Time Deposits 1,726,825 88,162 - 1,814,987 657,067 - 2,472,054 Total Deposits....... 4,458,649 161,664 0 4,620,313 1,700,748 0 6,321,061 ------------------ ----------------------------------------- -------------------- Federal Funds Purchased & Securities Sold under Agreements to Repurchase...1,331,024 - - 1,331,024 840,331 - 2,171,355 Other Borrowings.......... 85,000 2,000 - 87,000 413,600 - 500,600 Accrued Expenses & Other Liabilities.............. 103,020 1,592 5,878(3) 110,490 120,458 37,576(5) 268,524 Total Liabilities...$5,977,693 $165,256 $5,878 $6,148,827 $3,075,137 $37,576 $9,261,540 ------------------ ----------------------------------------- ------------------ Company-Obligated Mandatorily Redeemable Capital Securities of Subsidiary Trust.... 99,646 - - 99,646 - - 99,646 Stockholders' Equity Preferred Stock........... - - - - - - - Common Stock............. 165,111 1,557 1,652(1) 168,320 295 65,508(4) 234,123 Additional Paid in Capital 109,640 31,227 4,074(1) 144,941 66,495 (120,200)(4) 91,236 Retained Earnings......... 263,931 (15,185) 15,185(1) 263,931 181,851 (34,427)(5) 411,355 Unrealized Gain on Securities Available-for- Sale, net of taxes........ 13,476 13 (13)(1) 13,476 1,514 - 14,990 Deferred Compensation..... (13,009) - - (13,009) - - (13,009) Treasury Stock............ (868) - - (868) (81,092) 81,092(4) (868) Total Stockholders' Equity............... 538,281 17,612 20,898 576,791 169,063 (8,027) 737,827 Total Liabilities and Stockholders' Equity..$6,615,620 $182,868 $26,776 $6,825,264 $3,244,200 $29,549 $10,099,013 ------------------------------------------------------------------------------
Selected Capital Ratios: All Combined New York Transactions North Fork Bancorp Pro Forma Tier 1 Capital Ratio 14.34% 10.76% 13.01% Risk Adjusted Capital Ratio 15.59% 11.94% 14.24% Leverage Ratio 8.38% 5.18% 7.23% See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)." North Fork Bancorporation, Inc. - New York Bancorp Inc. Combined with Branford Savings Bank Pro Forma Condensed Combined Statements of Income (Unaudited) For the Nine Months Ended September 30, 1997 (in thousands, except per share amounts)
All Combined North Pro Forma North Fork New York Transactions Fork Branford Adjustments Pro Forma Bancorp Pro Forma Interest Income........................ $359,458 $10,496 $369,954 $183,432 $553,386 Interest Expense....................... 151,977 4,621 156,598 93,095 249,693 ----------------------------------------------------------------------- Net Interest Income.................... 207,481 5,875 -- 213,356 90,337 303,693 Provision for Loan Losses.............. 4,500 200 4,700 1,800 6,500 ----------------------------------------------------------------------- Net Interest Income after Provision for Loan Losses............ 202,981 5,675 -- 208,656 88,537 297,193 Non-Interest Income.................... 26,032 418 26,450 13,646 40,096 Net Securities Gains................... 2,273 -- 2,273 2,259 4,532 Other Real Estate Expense.............. 163 98 261 655 916 Non-Interest Expense................... 91,174 4,446 1,372(2) 96,992 37,890 134,882 ----------------------------------- ----------- ----------------------- Income before Income Taxes............. 139,949 1,549 (1,372) 140,126 65,897 206,023 Provision for Income Taxes............. 54,670 45 - 54,715 24,950 79,665 ----------------------------------------------------------------------- Net Income............................. $85,279 $1,504 ($1,372) $85,411 $40,947 $126,358 ----------------------------------- ----------- ----------------------- Weighted Average Shares Outstanding(6). 66,215 7,005 - 67,499 22,795 94,625 Earnings Per Share..................... $1.29 $ 0.21 - $1.27 $1.80 $1.34
See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)." North Fork Bancorporation, Inc. - New York Bancorp Inc. Combined with Branford Savings Bank Pro Forma Condensed Combined Statements of Income (Unaudited) For the Year Ended December 31, 1996 for North Fork and Branford and September 30, 1996 for New York Bancorp (in thousands, except per share amounts)
All Combined North Pro Forma North Fork New York Transactions Fork Branford Adjustments Pro Forma Bancorp Pro Forma Interest Income........................ $405,307 $13,697 $419,004 $207,491 $626,495 Interest Expense....................... 174,361 6,149 180,510 106,746 287,256 ----------------------------------------------------------------------- Net Interest Income.................... 230,946 7,548 -- 238,494 100,745 339,239 Provision for Loan Losses.............. 6,800 625 7,425 1,200 8,625 ----------------------------------- ----------- ----------- ----------- Net Interest Income after Provision for Loan Losses.............. 224,146 6,923 -- 231,069 99,545 330,614 Non-Interest Income.................... 29,245 587 29,832 10,321 40,153 Net Securities Gains................... 1,878 -- 1,878 4,346 6,224 Other Real Estate Expense.............. 753 232 985 463 1,448 SAIF Recapitalization Charge........... 8,350 -- 8,350 9,432 17,782 Merger Related Restructure Charge...... 21,613 -- 21,613 - 21,613 Non-Interest Expense................... 112,281 5,418 1,829(2) 119,528 47,535 167,063 ----------------------------------- ----------- ----------- ----------- Income before Income Taxes............. 112,272 1,860 (1,829) 112,303 56,782 169,085 Provision for Income Taxes............. 49,830 19 - 49,849 24,776 74,625 ----------------------------------------------------------------------- Net Income............................. $62,442 $1,841 ($1,829) $62,454 $32,006 $94,460 ----------------------------------- ----------- ----------- ----------- Weighted Average Shares Outstanding(6). 64,278 6,898 - 65,562 23,889 93,990 Earnings Per Share..................... $ 0.97 $ 0.27 - $ 0.95 $1.34 $1.01
See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)." North Fork Bancorporation, Inc. - New York Bancorp Inc. Pro Forma Condensed Combined Statements of Income (Unaudited) For the Year Ended December 31, 1995 for North Fork and September 30, 1995 for New York Bancorp (in thousands, except per share amounts)
New York North Fork North Fork Bancorp Pro Forma Interest Income......................................... $332,492 $196,972 $529,464 Interest Expense........................................ 140,399 101,730 242,129 ----------------------------------------- Net Interest Income..................................... 192,093 95,242 287,335 Provision for Loan Losses............................... 11,825 1,700 13,525 ----------------------------------------- Net Interest Income after Provision for Loan Losses..... 180,268 93,542 273,810 Non-Interest Income..................................... 23,010 7,460 30,470 Net Securities Gains/(Losses)........................... 6,734 (848) 5,886 Other Real Estate Expense............................... 1,255 883 2,138 Merger Related Restructure Charge....................... -- 19,024 19,024 Non-Interest Expense.................................... 91,565 48,968 140,533 ----------------------------------------- Income before Income Taxes.............................. 117,192 31,279 148,471 Provision for Income Taxes.............................. 49,850 19,717 69,567 ----------------------------------------- Net Income ............................................. $67,342 $11,562 $78,904 ----------------------------------------- Pro Forma Weighted Average Shares Outstanding(6) ....... 64,432 26,656 96,153 Earnings Per Share...................................... $1.05 $ 0.43 $ 0.82 See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
North Fork Bancorporation, Inc. - New York Bancorp Inc. Pro Forma Condensed Combined Statements of Income (Unaudited) For the Year Ended December 31, 1994 for North Fork and September 30, 1994 for New York Bancorp (in thousands, except per share amounts)
New York North Fork North Fork Bancorp Pro Forma Interest Income......................................... $295,062 $175,530 $470,592 Interest Expense........................................ 112,576 79,948 192,524 ----------------------------------------- Net Interest Income..................................... 182,486 95,582 278,068 Provision for Loan Losses............................... 6,825 2,650 9,475 ----------------------------------------- Net Interest Income after Provision for Loan Losses..... 175,661 92,932 268,593 Non-Interest Income..................................... 21,674 7,398 29,072 Net Security (Losses)/Gains............................. (9,189) 602 (8,587) Other Real Estate Expense............................... 4,929 880 5,809 Merger Related Restructure Charge....................... 14,338 -- 14,338 Non-Interest Expense.................................... 99,338 50,845 150,183 ----------------------------------------- Income before Income Taxes.............................. 69,541 49,207 118,748 Provision for Income Taxes.............................. 26,502 21,740 48,242 ----------------------------------------- Income before Cumulative Effect of Accounting Changes..................................... $43,039 $27,467 $70,506 ----------------------------------------- Pro Forma Weighted Average Shares Outstanding (6)....... 62,312 27,220 94,704 Earnings Per Share before Cumulative Effect of Accounting Changes.................................... $ 0.69 $1.01 $ 0.74 See "NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)."
NORTH FORK BANCORPORATION, INC. AND NEW YORK BANCORP INC. NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) (1) Reflects the issuance of 1,283,674 shares of North Fork's Common Stock utilizing an assumed Exchange Ratio of 0.1957 shares of North Fork Common Stock for each share of Branford Voting Common Stock and Branford Non-Voting Common Stock outstanding at September 30, 1997 (5,179,863 shares and 1,379,533 shares, respectively), and a cash payment to the holder of all outstanding Branford Warrants (who has exercised a cash election right) of $2,709,700 representing the excess of the market price as of October 22, 1997 of shares of North Fork Common Stock that such holder would receive in the Branford Merger if Branford Warrants were exercised immediately prior to the consummation, over the total exercise price of the Branford Warrants. (2) Reflects the excess of the Branford Merger consideration over the fair value of the net assets acquired, as follows: North Fork Common Stock (1,283,674 shares at $30.00 per share) $38,510 Cash payments for the Branford Warrants 2,710 Transaction Costs, net of taxes 3,826 -------- Total consideration $45,046 Branford stockholders' equity at September 30, 1997 (17,612) -------- Intangible asset $27,434 ======== The intangible assets will be amortized utilizing the straight line method over a fifteen year period. Included in non-interest expense for the nine month period ended September 30, 1997 and for the year ended December 31, 1996 is $1,372,000 and $1,829,000, respectively, of intangible amoritization expense. (3) Transaction Costs of approximately $3.8 million, net of taxes, will be incurred upon consummation of the Branford Merger and will be accounted for as part of the purchase price for financial reporting purposes. A summary of the estimated transaction costs are as follow: Type of Cost Expected Costs (in thousands) Professional Fees $1,747 Merger Related Compensation and Severance Costs 1,792 Facility and System Costs 859 Other Merger Related Costs 1,480 ---------- Total Pre-Tax Transaction Costs 5,878 Less: Related Tax Benefit (2,052) ---------- Total Transaction Costs, net of taxes $3,826 =========== Refinements to the foregoing estimates may occur subsequent to the completion of the Branford Merger. (4) Pro forma adjustments to common stock and additional paid-in capital, at September 30, 1997, reflect the Merger accounted for as a pooling-of-interests through: (a) the reissuance of 800,000 shares of New York Bancorp common stock from New York Bancorp's treasury, with an average cost basis of $9.92, at $33.00 per share (which approximated the market price of the New York Bancorp common stock on or about October 22, 1997), with transaction proceeds of $26.4 million assumed to be reinvested in securities available-for-sale; (b) the retirement of the remaining 7,374,522 shares of New York Bancorp common stock held in treasury, with an average cost basis of $9.92, as of September 30, 1997 and (c) the exchange of 26,321,186 shares of North Fork common stock at September 30, 1997 (using the Exchange Ratio of 1.19) for the 22,118,644 adjusted outstanding shares of New York Bancorp common stock. Pro forma adjustments do not include any shares of North Fork Common Stock to be received upon consummation of the Merger by holders of New York Bancorp Options. (5) The pro forma condensed combined balance sheet reflects a non-recurring merger and restructuring charge of approximately $34.4 million, net of taxes, which will be recognized upon consummation of the Merger. Such charge will reduce earnings per share for the period in which such charge is recognized by approximately $.36 (based on pro forma weighted average shares outstanding of 94,624,522 on September 30, 1997). A summary of the estimated merger and restructuring charges are as follows: Type of Cost Expected Costs (in thousands) Merger Expense $9,700 Restructuring Charge: Merger Related Compensation And Severance Costs 15,172 Facility and System Costs 11,814 Other Merger Related Costs 890 ------ Total Pre-Tax Merger and Restructuring Charge 37,576 Add: State and Local Tax Bad Debt Recapture, Net of Federal Benefit 9,000 Less: Related Tax Benefit (12,149) ------ Total After-Tax Merger and Restructuring Charge $34,427 ------- Merger expenses consist primarily of investment banking, legal and other professional fees, and expenses associated with shareholder notification. Restructure related compensation and severance costs consist primarily of employee severance, compensation arrangements, transitional staffing and the related employee benefits expenses. Facility and system costs consist primarily of lease termination charges and equipment write-offs resulting from the consolidation of overlapping branch locations and duplicate headquarters and operational facilities. Also reflected are the costs associated with the cancellation of certain data and item processing contracts and the deconversion of existing New York Bancorp computer systems. The effect of the proposed charge has been reflected in the pro forma condensed combined balance sheet as of September 30, 1997; however, since this charge is non-recurring, it has not been reflected in the pro forma combined statements of income. Although no assurance can be given, North Fork expects that cost savings will be achieved at an annual rate of approximately $25 million on a pre-tax basis by the end of 1998 as a result of steps to be taken to integrate operations and to achieve efficiencies in certain combined lines of business. These anticipated merger cost savings were determined based upon preliminary estimates provided by the management of North Fork. The pro forma financial information does not give effect to these expected cost savings, nor does it include any estimates of revenue enhancements that could be realized with the Merger. (6) The pro forma weighted average shares outstanding for the nine month period ended September 30, 1997 and for the year ended 1996 reflect the assumed issuance of 0.1957 shares of North Fork Common Stock for each voting and non-voting average equivalent share of Branford common stock outstanding during such periods (all Branford warrants having been retired under the cash election), and the pro forma weighted average shares outstanding for all periods presented reflect the assumed issuance of 1.19 shares of North Fork Common Stock for each average equivalent share of New York Bancorp Common Stock outstanding during such periods. (7) North Fork is currently reviewing the investment securities portfolios of New York Bancorp to determine the classification of such securities as either available-for-sale or held-to-maturity in connection with North Fork's existing interest-rate risk position. As a result of this review, certain reclassifications of New York Bancorp's investment securities may result. No adjustments have been made to either the available-for-sale or the held-to-maturity portfolios in the accompanying pro forma condensed combined balance sheet to reflect any such reclassification as a final determination has not been made with respect to such matters. Any such reclassification will be accounted for in accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," which requires that securities transferred from held-to-maturity to available-for-sale to be transferred at fair value with any unrealized gain or loss, net of taxes, at the date of transfer recognized as a separate component of stockholders' equity. (8) The pro forma financial information presented has been prepared in conformity with generally accepted accounting principles and prevailing practices within the financial services industry. Under generally accepted accounting principles, the assets and liabilities of New York Bancorp will be combined with those of North Fork at book value. In addition, the statements of income for New York Bancorp will be combined with North Fork as of the earliest period presented. Certain reclassifications have been included in the pro forma financial statements to conform to North Fork's presentation. North Fork utilizes a fiscal year which ends on December 31 for reporting purposes, whereas New York Bancorp uses a fiscal year which ends on September 30 for such purposes. The unaudited condensed combined statements of income for 1996, 1995, 1994 combine North Fork and New York Bancorp at their respective year-end periods. The unaudited condensed combined statements of income for the nine month periods ended September 30, 1997 and 1996 include New York Bancorp for the nine months then ended to conform with the reporting periods of North Fork. Summary unaudited operating results for the three-months ended December 31, 1996 and 1995 have not been included in the unaudited pro forma condensed combined financial statements and are presented in the following table: Three Months Ended December 31, (Unaudited) (in thousands, except per share amounts) 1996 1995 ---- ---- Interest Income $55,417 $50,659 Interest expense 27,538 26,991 Net interest income 27,879 23,668 Net income 10,264 7,828 Earnings per share $0.45 $0.32 EX-99 4 EXHIBIT 99.3 - CONSENT EXHIBIT 99.3 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS --------------------------------------------------- The Board of Directors of New York Bancorp Inc.: We consent to the inclusion of our report dated October 29, 1996, with respect to the consolidated statements of financial condition of New York Bancorp Inc. as of September 30, 1996 and 1995, and the related consolidated statements of income, changes in shareholders' equity and cash flows for each of the years in the three-year period ended September 30, 1996, which report appears in the Form 8-K of North Fork Bancorporation, Inc. dated November 20, 1997. Our report refers to a change in accounting principles. /s/ KPMG Peat Marwick LLP ------------------------- KPMG Peat Marwick LLP Jericho, New York November 20, 1997 -----END PRIVACY-ENHANCED MESSAGE-----