UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2002
Commission File Number 0-22278
NEW YORK COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1377322
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
615 Merrick Avenue, Westbury, New York 11590
(Address of principal executive offices)
(Registrant's telephone number, including area code) 516: 683-4100
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $0.01 par value
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. |X| Yes |_| No
107,494,110
-------------------------------
Number of shares outstanding at
August 9, 2002
NEW YORK COMMUNITY BANCORP, INC.
FORM 10-Q
Quarter Ended June 30, 2002
INDEX Page No.
- ----- --------
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Condition as of June 30,
2002 (unaudited) and December 31, 2001 1
Consolidated Statements of Income and Comprehensive
Income for the Three and Six Months Ended June 30, 2002
and 2001 (unaudited) 2
Consolidated Statement of Changes in Stockholders'
Equity for the Six Months Ended June 30, 2002
(unaudited) 3
Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 2002 and 2001 (unaudited) 4
Notes to Unaudited Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 29
Part II.OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Changes in Securities 30
Item 3. Defaults Upon Senior Securities 30
Item 4. Submission of Matters to a Vote of Security Holders 30
Item 5. Other Information 31
Item 6. Exhibits and Reports on Form 8-K 31
Signatures 33
Exhibits 34
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CONDITION
(in thousands, except share data)
June 30, December 31,
2002 2001
(unaudited)
------------ ------------
Assets
Cash and due from banks $ 141,826 $ 168,449
Money market investments 1,152 10,166
Securities held to maturity ($166,308 and $114,881 pledged at
June 30, 2002 and December 31, 2001, respectively) 284,037 203,195
Mortgage-backed securities held to maturity ($44,619 and $50,801
pledged at June 30, 2002 and December 31, 2001, respectively) 44,619 50,865
Securities available for sale ($2,469,912 and $1,381,356 pledged at
June 30, 2002 and December 31, 2001, respectively) 3,429,320 2,374,782
Mortgage loans:
Multi-family 4,029,588 3,255,167
1-4 family 562,121 1,318,295
Commercial real estate 519,793 561,944
Construction 146,213 152,367
------------ ------------
Total mortgage loans 5,257,715 5,287,773
Other loans 88,246 116,969
Less: Unearned loan fees (6,457) (3,055)
Allowance for loan losses (40,500) (40,500)
------------ ------------
Loans, net 5,299,004 5,361,187
Premises and equipment, net 67,437 69,010
Goodwill, net 624,406 614,653
Core deposit intangible, net 54,500 57,500
Deferred tax asset, net 14,463 40,396
Other assets 279,119 252,432
------------ ------------
Total assets $ 10,239,883 $ 9,202,635
============ ============
Liabilities and Stockholders' Equity
Deposits:
NOW and money market accounts $ 1,112,290 $ 948,324
Savings accounts 1,673,913 1,639,239
Certificates of deposit 2,016,955 2,407,906
Non-interest-bearing accounts 481,594 455,133
------------ ------------
Total deposits 5,284,752 5,450,602
------------ ------------
Official checks outstanding 26,248 87,647
Borrowings 3,545,729 2,506,828
Mortgagors' escrow 34,659 21,496
Other liabilities 135,505 152,928
------------ ------------
Total liabilities 9,026,893 8,219,501
------------ ------------
Stockholders' equity:
Preferred stock at par $0.01 (5,000,000 shares authorized;
none issued) -- --
Common stock at par $0.01 (150,000,000 shares authorized;
108,224,425 shares issued; 107,950,268 and 101,845,276 shares
outstanding at June 30, 2002 and December 31, 2001, respectively) 1,082 1,082
Paid-in capital in excess of par 1,011,849 898,830
Retained earnings (substantially restricted) 182,661 167,511
Less: Treasury stock (274,157 and 6,379,149 shares, respectively) (5,291) (78,294)
Unallocated common stock held by ESOP (21,081) (6,556)
Common stock held by SERP (3,113) (3,113)
Unearned common stock held by RRPs (41) (41)
Accumulated other comprehensive income, net of tax effect 46,924 3,715
------------ ------------
Total stockholders' equity 1,212,990 983,134
------------ ------------
Total liabilities and stockholders' equity $ 10,239,883 $ 9,202,635
============ ============
See accompanying notes to unaudited consolidated financial statements.
1
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(in thousands, except per share data)
(unaudited)
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2002 2001 2002 2001
-------- -------- -------- --------
Interest Income:
Mortgage and other loans $105,677 $ 63,099 $206,130 $133,607
Securities 9,469 5,229 17,711 14,133
Mortgage-backed securities 37,004 7,302 69,317 10,094
Money market investments 153 2,686 276 4,839
-------- -------- -------- --------
Total interest income 152,303 78,316 293,434 162,673
-------- -------- -------- --------
Interest Expense:
NOW and money market accounts 4,063 3,014 7,591 6,950
Savings accounts 5,865 2,183 11,692 4,321
Certificates of deposit 15,116 24,797 34,728 51,978
Borrowings 31,819 12,111 60,915 28,079
Mortgagors' escrow 5 8 10 12
-------- -------- -------- --------
Total interest expense 56,868 42,113 114,936 91,340
-------- -------- -------- --------
Net interest income 95,435 36,203 178,498 71,333
Provision for loan losses -- -- -- --
-------- -------- -------- --------
Net interest income after
provision for loan losses 95,435 36,203 178,498 71,333
-------- -------- -------- --------
Other Operating Income:
Fee income 10,822 7,789 21,983 15,722
Net securities gains 6,253 369 7,783 8,946
Other 10,906 2,970 18,009 14,941
-------- -------- -------- --------
Total other operating income 27,981 11,128 47,775 39,609
-------- -------- -------- --------
Non-interest Expense:
Operating expense:
Compensation and benefits 19,166 7,828 35,653 17,542
Occupancy and equipment 5,575 3,716 11,668 7,088
General and administrative 7,013 5,347 16,574 11,009
Other 1,570 675 3,091 1,348
-------- -------- -------- --------
Total operating expense 33,324 17,566 66,986 36,987
-------- -------- -------- --------
Amortization of core deposit intangible
and goodwill 1,500 1,482 3,000 2,964
-------- -------- -------- --------
Total non-interest expense 34,824 19,048 69,986 39,951
-------- -------- -------- --------
Income before income taxes 88,592 28,283 156,287 70,991
Income tax expense 30,463 9,588 51,837 24,652
-------- -------- -------- --------
Net income $ 58,129 $ 18,695 $104,450 $ 46,339
======== ======== ======== ========
Comprehensive income, net of tax:
Unrealized gain (loss) on securities 41,642 (2,198) 43,209 3,971
-------- -------- -------- --------
Comprehensive income $ 99,771 $ 16,497 $147,659 $ 50,310
======== ======== ======== ========
Earnings per share(1) $0.57 $0.31 $1.04 $0.77
===== ===== ===== =====
Diluted earnings per share(1) $0.57 $0.31 $1.03 $0.75
===== ===== ===== =====
(1) Per share amounts for the three and six months ended June 30, 2001 have
been adjusted to reflect a 3-for-2 stock split on September 20, 2001.
See accompanying notes to unaudited consolidated financial statements.
2
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Six Months Ended
June 30, 2002
(in thousands, except per share data) (unaudited)
- ------------------------------------------------------------------------------
Common Stock (Par Value: $0.01):
Balance at beginning of year $ 1,082
Shares issued --
------------
Balance at end of period 1,082
------------
Paid-in Capital in Excess of Par:
Balance at beginning of year 898,830
Shares issued in secondary offering and fractional shares 95,569
Tax benefit effect on stock plans 14,727
Allocation of ESOP stock 2,723
------------
Balance at end of period 1,011,849
------------
Retained Earnings:
Balance at beginning of year 167,511
Net income 104,450
Dividends paid on common stock (36,923)
Exercise of stock options (2,069,975 shares) (52,377)
------------
Balance at end of period 182,661
------------
Treasury Stock:
Balance at beginning of year (78,294)
Purchase of common stock (1,829,982 shares) (50,103)
Common stock issued in secondary offering 67,303
Exercise of stock options (2,069,975 shares) 55,803
------------
Balance at end of period (5,291)
------------
Employee Stock Ownership Plan:
Balance at beginning of year (6,556)
Common stock acquired by ESOP (14,790)
Allocation of ESOP stock 265
------------
Balance at end of period (21,081)
------------
SERP Plan:
Balance at beginning of year (3,113)
Common stock acquired by SERP --
------------
Balance at end of period (3,113)
------------
Recognition and Retention Plans:
Balance at beginning of year (41)
Earned portion of RRPs --
------------
Balance at end of period (41)
------------
Accumulated Comprehensive Income, Net of Tax:
Balance at beginning of year 3,715
Net unrealized appreciation in securities, net of tax 43,209
------------
Balance at end of year 46,924
------------
Total stockholders' equity $ 1,212,990
============
See accompanying notes to unaudited consolidated financial statements.
3
NEW YORK COMMUNITY BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
2002 2001
(in thousands) (unaudited)
- ----------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
Net income $ 104,450 $ 46,339
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 3,260 2,363
Amortization of premiums (accretion of discounts), net 3,697 (10,946)
Amortization of net deferred loan origination fees 3,451 2,036
Amortization of core deposit intangible and goodwill 3,000 2,964
Net gain on redemption and sales of securities
and mortgage-backed securities (7,783) (8,946)
Net gain on sale of loans -- (7,473)
Tax benefit effect on stock plans 14,727 5,000
Earned portion of ESOP 2,988 206
Changes in assets and liabilities:
Goodwill recognized in the Peter B. Cannell & Co., Inc.
acquisition and related adjustment (9,753) --
Decrease in deferred income taxes 25,933 18,967
(Increase) decrease in other assets (26,687) 8,320
(Decrease) increase in official checks outstanding (61,399) 23,549
Decrease in other liabilities (17,423) (24,830)
----------- -----------
Total adjustments (65,989) 11,210
----------- -----------
Net cash provided by operating activities 38,461 57,549
----------- -----------
Cash Flows from Investing Activities:
Proceeds from redemption and sales of mortgage-backed securities
held to maturity 6,219 350
Proceeds from redemption and sales of securities held to maturity 39,705 --
Proceeds from redemption and sales of securities available for sale 962,567 463,644
Purchase of securities held to maturity (124,350) --
Purchase of securities available for sale (1,382,449) (619,607)
Net increase in loans (596,893) (206,187)
Proceeds from sale of loans 72,094 528,738
Acquisition or purchase of premises and equipment, net (1,687) (854)
----------- -----------
Net cash (used in) provided by investing activities (1,024,794) 166,084
----------- -----------
Cash Flows from Financing Activities:
Net increase in mortgagors' escrow 13,163 6,527
Net decrease in deposits (165,850) (182,555)
Net increase in borrowings 1,038,901 790
Cash dividends and stock options exercised (89,300) (45,210)
Purchase of Treasury stock, net of stock options exercised 5,700 (29,798)
Proceeds from issuance of common stock in secondary offering 95,569 --
Treasury stock issued in secondary offering 67,303 --
Common stock acquired by ESOP (14,790) --
----------- -----------
Net cash provided by (used in) financing activities 950,696 (250,246)
----------- -----------
Net decrease in cash and cash equivalents (35,637) (26,613)
Cash and cash equivalents at beginning of period 178,615 257,715
----------- -----------
Cash and cash equivalents at end of period $ 142,978 $ 231,102
=========== ===========
Supplemental information:
Cash paid for:
Interest $114,844 $91,285
Income taxes 12,925 3,545
Non-cash investing activities:
Securitization of mortgage loans to mortgage-backed securities 569,554 --
Transfer of securities from available for sale to held to maturity 1,011 --
Reclassification from other loans to securities available for sale 460 --
Transfers to foreclosed real estate from loans -- 186
See accompanying notes to unaudited consolidated financial statements.
4
NEW YORK COMMUNITY BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of New York Community Bancorp, Inc. (the "Company") and its
wholly-owned subsidiary, New York Community Bank (the "Bank").
The statements reflect all normal recurring adjustments that, in the opinion of
management, are necessary to present a fair statement of the results for the
periods presented. Certain reclassifications have been made to prior-year
financial statements to conform to the 2002 presentation. There are no other
adjustments reflected in the accompanying consolidated financial statements. The
results of operations for the three and six months ended June 30, 2002 are not
necessarily indicative of the results of operations that may be expected for all
of 2002.
Certain information and note disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America ("GAAP") have been condensed or omitted,
pursuant to the rules and regulations of the Securities and Exchange Commission
(the "SEC").
These unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
the Company's 2001 Annual Report to Shareholders and incorporated by reference
into the Company's 2001 Annual Report on Form 10-K.
Note 2. Impact of Accounting Pronouncements
Business Combinations, Goodwill, and Other Intangible Assets
The Company acquired Haven Bancorp, Inc. ("Haven") in a purchase transaction on
November 30, 2000 and merged with Richmond County Financial Corp. ("Richmond
County") in a purchase transaction on July 31, 2001.
Effective July 1, 2001, the Company adopted the provisions of SFAS No. 141 and
certain provisions of SFAS No. 142 as required for goodwill and intangible
assets resulting from business combinations consummated after June 30, 2001.
These rules require that all business combinations initiated after June 30, 2001
be accounted for under the purchase method. The non-amortization provisions of
the rules affecting goodwill and intangible assets deemed to have indefinite
lives are effective for all purchase business combinations completed after June
30, 2001. Accordingly, no goodwill is being amortized in connection with the
Richmond County transaction.
The Company adopted the remaining provisions of SFAS No. 142 when the rules
became effective for calendar year companies on January 1, 2002. Under these
rules, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized, but are subject to annual impairment tests. Other intangible
assets will continue to be amortized over their useful lives. The Company
applied the new rules on accounting for goodwill and other intangible assets
with regard to the Haven acquisition on January 1, 2002, at which time the
amortization of goodwill stemming from this acquisition, in the amount of $1.5
million per quarter or $5.9 million per year, was discontinued.
Additionally, SFAS No. 142 requires that the Company complete an initial
impairment assessment on all goodwill recognized in its consolidated financial
statements within six months of the statement's adoption to determine if a
transition impairment charge needs to be recognized. The initial impairment
assessment was completed by the second quarter of 2002 as of January 1, 2002 and
management determined that no impairment charge was needed.
The Company did not have indefinite lived intangible assets other than goodwill
as of June 30, 2002.
5
Net income and earnings per share for the three and six months ended June 30,
2002 and 2001, as adjusted to exclude amortization expense (net of taxes)
related to goodwill, are as follows:
For the For the
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
(in thousands, except per share data) 2002 2001 2002 2001
------- ------- -------- -------
Net income
Reported net income $58,129 $18,695 $104,450 $46,339
Add back: goodwill amortization -- 963 -- 1,927
------- ------- -------- -------
Adjusted net income $58,129 $19,658 $104,450 $48,266
======= ======= ======== =======
Basic earnings per share
Reported basic earnings per share $0.57 $0.31 $1.04 $0.77
Add back: goodwill amortization -- 0.02 -- 0.03
------- ------- -------- -------
Adjusted basic earnings per share $0.57 $0.33 $1.04 $0.80
======= ======= ======== =======
Diluted earnings per share
Reported diluted earnings per share $0.57 $0.31 $1.03 $0.75
Add back: goodwill amortization -- 0.02 -- 0.03
------- ------- -------- -------
Adjusted diluted earnings per share $0.57 $0.33 $1.03 $0.78
======= ======= ======== =======
Goodwill
The changes in the carrying amount of goodwill for the six months ended June 30,
2002 are as follows:
(in thousands)
Balance as of January 1, 2002 $614,653
Goodwill acquired in the Peter B.
Cannell & Co., Inc. acquisition 9,753
--------
Balance as of June 30, 2002 $624,406
========
Acquired Intangible Assets
The Company has a core deposit intangible ("CDI") and mortgage servicing rights
stemming from the Richmond County merger. Mortgage servicing rights are included
in "other assets" on the Consolidated Statements of Condition as of June 30,
2002. The Company also has other identifiable intangibles of approximately
$699,000 related to a branch purchase that are included in "other assets" on the
Consolidated Statements of Condition as of June 30, 2002. The following table
summarizes the gross carrying and accumulated amortization amounts of the
Company's intangible assets as of June 30, 2002.
Gross Carrying Accumulated
Amount Amortization
-------------- ------------
(in thousands)
Amortizing intangible assets
Core deposit intangible $60,000 $(5,500)
Mortgage servicing rights 2,640 (181)
Other intangible assets 1,325 (626)
------- -------
Total $63,965 $(6,307)
======= =======
6
As of June 30, 2002, the Company had no indefinite lived intangible assets.
Aggregate amortization expense related to the CDI was $3.0 million for the six
months ended June 30, 2002. Aggregate amortization expense related to the
mortgage servicing rights was $155,277 for the six months ended June 30, 2002.
Aggregate amortization expense for the other identifiable intangibles was
$44,000 for the six months ended June 30, 2002. The CDI, mortgage servicing
rights, and other intangibles are being amortized over periods of ten years,
eight years, and fifteen years, respectively. The Company assessed the
appropriateness of the useful lives of the intangible assets as of January 1,
2002 and determined them to be adequate. No residual value is estimated for
these intangible assets.
Estimated future amortization expense related to the CDI, mortgage servicing
rights, and other identifiable intangibles is as follows:
Core Deposit Mortgage Other
Intangible Servicing Rights Intangibles Total
------------ ---------------- ----------- ------------
(in thousands)
2002 $ 3,000 $ 155 $ 44 $ 3,199
2003 6,000 311 88 6,399
2004 6,000 311 88 6,399
2005 6,000 311 88 6,399
2006 6,000 311 88 6,399
2007 and thereafter 27,500 1,060 303 28,863
------- ------ ------- -------
Total remaining intangible assets $54,500 $2,459 $ 699 $57,658
======= ====== ======= =======
Accounting for the Impairment or Disposal of Long-lived Assets
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-lived Assets." SFAS No. 144 established more stringent criteria
than those then in existence under GAAP for determining when a long-lived asset
is held for sale. While SFAS No. 144 also broadens the definition of
"discontinued operations," it does not allow for the accrual of future operating
losses as was previously permitted. The provisions of the new standard are to be
applied prospectively. The adoption of SFAS No. 144 on January 1, 2002 has not
had a material impact on the Company's consolidated financial statements.
Rescission of FASB Statements Nos. 4, 44, and 64 - Amendment of FASB Statement
No. 13 and Technical Corrections
In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements Nos.
4, 44, and 64 - Amendment of FASB Statement No. 13 and Technical Corrections,"
which was effective as of May 15, 2002. SFAS No. 145 rescinds SFAS No. 4,
"Reporting Gains and Losses from Extinguishment of Debt," and an amendment of
that statement, SFAS No. 64, "Extinguishments of Debt Made to Satisfy
Sinking-Fund Requirements". SFAS No. 145 also amends SFAS No. 13, "Accounting
for Leases," to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. In addition, SFAS No. 145 amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The adoption of SFAS No.
145 will not have a material impact on the Company's consolidated financial
condition or results of operations.
Note 3. Transfers of Financial Assets
During the second quarter of 2002, the Company securitized one-to-four family
mortgage loans totaling $572.5 million. In connection with the securitization,
the Company recognized mortgage servicing rights under SFAS No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities", which replaces SFAS No. 125. According to SFAS No. 140, the
retained interests in a securitization are initially measured at their allocated
carrying amount, based upon relative fair values of the retained interests
received at the date of securitization. Capitalized servicing rights are
reported in other assets and amortized into non-interest income in proportion
to, and over the period of, the estimated future net servicing income of the
underlying financial assets. Servicing assets are evaluated for impairment based
upon
7
the fair value of the rights as compared to amortized cost. Impairment is
determined by stratifying servicing assets by predominant risk characteristics,
such as interest rates and terms. Fair value is determined using prices for
similar assets with similar characteristics, when available, or based upon
discounted cash flows using market-based assumptions. Impairment is recognized
through a valuation allowance for an individual stratum. The amount of
impairment recognized is the amount by which the carrying amount of servicing
assets for a stratum exceeds its fair value. The valuation allowance is adjusted
to reflect changes in the measurement of impairment subsequent to the initial
measurement and charged to earnings.
On May 31, 2002, the Company securitized $572.5 million of loans into
mortgage-backed securities. At the transaction date, this amount represented the
historical carrying amount of the loans, net of any unamortized fees, plus
accrued interest. Of the $572.5 million, $569.6 million was allocated to the
mortgage-backed securities and $2.9 million was allocated to the capitalized
mortgage servicing rights, in proportion to their relative fair values.
As of June 30, 2002, the mortgage servicing portfolio was segregated into
valuation tranches based on predominant risk characteristics of the underlying
mortgages, such as loan type and interest rate. Those tranches were further
segregated between performing loans and non-performing loans. The fair value of
the servicing portfolio was determined by estimating the future cash flows
associated with the servicing rights and discounting the cash flows using market
discount rates. The portfolio was valued using all relevant positive and
negative cash flows including service fees, miscellaneous income and float,
marginal costs of servicing, the cost of carry on advances, and foreclosure
losses. The following table summarizes the key assumptions used at the time of
valuation:
Prepayment Speed 33.63%
Discount Rate 10.08%
Cost of carry 1.75%
As of June 30, 2002, the carrying value of the mortgage servicing rights was
$2,906,894. The mortgage servicing rights are included in "other assets" on the
Consolidated Statements of Condition as of June 30, 2002. No amortization
expense was recorded in the quarter ended June 30, 2002.
Estimated future amortization expense related to the mortgage servicing rights
is as follows:
Mortgage
Servicing Rights
------------------
(in thousands)
2002 $ 516,492
2003 772,605
2004 522,897
2005 348,553
2006 235,533
2007 and thereafter 510,814
------------
Total remaining $ 2,906,894
============
8
NEW YORK COMMUNITY BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
New York Community Bancorp, Inc. (the "Company"), formerly known as Queens
County Bancorp, Inc., is the holding company for New York Community Bank (the
"Bank"), a New York State-chartered financial institution with 109 banking
offices serving customers in New York City, Long Island, Westchester County, and
New Jersey. In addition to operating the largest supermarket banking franchise
in the region, the Bank is the largest producer of multi-family mortgage loans
for portfolio in New York City. The Bank operates its branches through six
community divisions: Queens County Savings Bank, Richmond County Savings Bank,
CFS Bank, First Savings Bank of New Jersey, Ironbound Bank, and South Jersey
Bank.
The Company's second quarter 2002 performance reflects the ongoing benefit of
its November 30, 2000 acquisition of Haven Bancorp, Inc. ("Haven"), the benefit
of its merger-of-equals with Richmond County Financial Corp. ("Richmond County")
on July 31, 2001, a record-setting volume of mortgage loan originations, and the
ongoing restructuring and leveraging of its balance sheet. The following actions
were taken during the quarter, and are reflected on the Company's consolidated
financial statements at or for the three and six months ended June 30, 2002:
o On April 5, 2002, the Company completed the divestiture of seven
in-store branches located in Connecticut that had been acquired in
the Haven transaction.
o On May 17, 2002, the Company sold seven in-store branches (five in
New Jersey and two in Rockland County, New York) that had been
acquired in the Haven transaction to The Trust Company of New
Jersey.
o The Company opened three branches during the quarter and a fourth on
July 14, 2002; three are located on Staten Island and one in Nassau
County, New York. Of the three Staten Island branches, two are
in-store locations, bringing the total number of such locations to
54.
o On April 19, 2002, the Company filed a $400.0 million universal
shelf registration on SEC Form S-3, enabling it to periodically
offer and sell debt securities, trust preferred securities, warrants
to purchase common stock, units, and common stock.
o On April 29, 2002, the Company filed a supplemental prospectus for
the offering of 5,100,000 shares of common stock.
o On May 14, 2002, the Company completed the public offering of
5,865,000 shares of its common stock, including 765,000 shares sold
pursuant to the exercise of the underwriters' over-allotment option,
at a public offering price of $29.00 per share. The shares were
issued from Treasury stock. The offering generated net proceeds of
$147.5 million. As a result of the offering, the Company recorded a
72.0% increase in tangible stockholders' equity to $534.1 million
and a 60.4% increase in tangible book value per share to $5.10.
o The proceeds of the offering were leveraged into a record level of
mortgage loan production and investments in short-term
mortgage-backed securities at favorable rates. Multi-family mortgage
loan originations totaled $733.3 million during the quarter,
boosting the portfolio to $4.0 billion, while securities available
for sale investments rose $1.1 billion to $3.4 billion, at quarter's
end.
o On May 28, 2002, the Company securitized $572.5 million of
one-to-four family mortgage loans. Reflecting the securitization,
the balance of one-to-four family mortgage loans declined to $562.1
million at June 30, 2002; the securitized loans were re-classified
as securities available for sale.
9
o In June 2002, the Company sold $71.4 million of home equity loans,
reducing the balance of other loans to $88.2 million at June 30,
2002.
Reflecting these actions, and the benefit of the Company's recent strategy of
growing through acquisitions, second quarter 2002 earnings rose 210.9%
year-over-year to $58.1 million, providing a 2.34% return on average assets
("ROA") and a 20.67% return on average stockholders' equity ("ROE"). On a
diluted per share basis, the Company's earnings rose to $0.57 from $0.31, the
year-earlier figure, signifying an increase of 83.9%.
Based on the strength of the Company's second quarter performance, and
management's expectations regarding revenue growth, asset quality, cost
controls, and the effective tax rate, the Company increased its earnings
estimates for 2002 and provided initial guidance for 2003. It is currently
management's expectation that the Company's 2002 diluted earnings per share will
range from $2.13 to $2.15, and that its 2003 diluted earnings per share will
range from $2.48 to $2.52.
Forward-looking Statements and Associated Risk Factors
This filing contains certain forward-looking statements with regard to the
Company's prospective performance and strategies within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. The Company intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in the Private Securities Litigation Reform Act of 1995,
and is including this statement for purposes of said safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe
future plans, strategies, and expectations of the Company, are generally
identified by use of the words "believe," "expect," "intend," "anticipate,"
"estimate," "project," or similar expressions. The Company's ability to predict
results or the actual effects of its plans or strategies is inherently
uncertain. Accordingly, actual results may differ materially from anticipated
results. Factors that could have a material adverse effect on the operations of
the Company and its subsidiaries include, but are not limited to, changes in
market interest rates, general economic conditions, legislation, and regulation;
changes in the monetary and fiscal policies of the U.S. Government, including
policies of the U.S. Treasury and the Federal Reserve Board; changes in the
quality or composition of the loan or investment portfolios; changes in deposit
flows, competition, and demand for loan products or financial services in the
Company's local markets; changes in real estate values; changes in accounting
principles and guidelines; war or terrorist activities; and other economic,
competitive, governmental, regulatory, geopolitical, and technological factors
affecting the Company's operations, pricing, and services.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this filing. Except as required
by applicable law or regulation, the Company undertakes no obligation to update
these forward-looking statements to reflect events or circumstances that occur
after the date on which such statements were made.
Financial Condition
The Company recorded total assets of $10.2 billion at June 30, 2002, up $1.0
billion, or 11.3%, from $9.2 billion at December 31, 2001. Asset growth was
primarily fueled by a record level of mortgage loan production, with six-month
originations exceeding $1.4 billion, including $899.1 million in the second
quarter of the year.
Consistent with the Company's focus on multi-family lending, the portfolio of
multi-family mortgage loans rose $774.4 million to $4.0 billion at the second
quarter's end. Multi-family mortgage loans represented $1.1 billion, or 80.2%,
of year-to-date originations, including $733.3 million, or 81.6%, of
originations in the second quarter of the year. The balance of one-to-four
family mortgage loans, meanwhile, declined $756.2 million to $562.1 million,
largely reflecting the securitization of $572.5 million of such loans on May 28,
2002. While the growth in multi-family mortgage loans largely offset the
reduction, total mortgage loans declined $30.1 million to $5.3 billion at June
30, 2002.
10
The Company's record of asset quality was sustained in the second quarter, as
non-performing assets declined $1.0 million from the March 31, 2002 level and
$3.9 million from the level recorded at December 31, 2001. Non-performing assets
totaled $13.8 million at June 30, 2002, representing 0.14% of total assets,
including foreclosed real estate of approximately $145,000 and non-performing
loans of $13.7 million, or 0.26% of loans, net. In the absence of any net
charge-offs or provisions for loan losses, the allowance for loan losses was
maintained at $40.5 million, representing 295.73% of non-performing loans and
0.76% of loans, net.
The Company continued to capitalize on the current steep yield curve, increasing
its investments in short-term mortgage-backed securities. Reflecting the
reclassification of the securitized one-to-four family mortgage loans as
securities available for sale, and year-to-date securities investments of $1.4
billion, the balance of securities available for sale rose $1.1 billion to $3.4
billion at June 30, 2002. Asset growth was also fueled by an $80.8 million
increase in securities held to maturity to $284.0 million, but tempered by a
$6.2 million reduction in mortgage-backed securities held to maturity to $44.6
million.
Primarily reflecting the first quarter 2002 acquisition of the remaining 53%
equity interest in Peter B. Cannell & Co., Inc. ("PBC"), an investment advisory
firm, goodwill, net, rose to $624.4 million at June 30, 2002 from $614.7 million
at December 31, 2001. In accordance with SFAS Nos. 141 and 142, the goodwill
stemming from the Company's acquisition of Haven in 2000 is no longer being
amortized; however, the CDI stemming from the Richmond County merger is being
amortized at a rate of $1.5 million per quarter, or $6.0 million per year.
Additionally, SFAS No. 142 requires that the Company complete an initial
impairment assessment on all goodwill recognized in its consolidated financial
statements within six months of the statement's adoption to determine if a
transition impairment charge needs to be recognized. The initial impairment
assessment was completed by the second quarter of 2002 as of January 1, 2002 and
management determined that no impairment charge was needed.
Core deposits totaled $3.3 billion at June 30, 2002, representing 61.8% of total
deposits, having grown $225.1 million from the balance recorded at December 31,
2001. At the same time, the balance of certificates of deposit ("CDs") dropped
$391.0 million to $2.0 billion, representing 38.2% of total deposits at the
second quarter's end. The decline in CDs was consistent with the Company's
marketing of third-party investment products in lieu of higher cost deposits,
and also reflects the divestiture of 14 in-store branches in the second quarter
of the year.
Additional funding stemmed from a $1.0 billion increase in borrowings to $3.5
billion, including $1.8 billion in Federal Home Loan Bank ("FHLB") advances
against an available line of credit of $4.1 billion.
Stockholders' equity totaled $1.2 billion at June 30, 2002, up $229.9 million
from the balance recorded at December 31, 2001. In addition to six-month cash
earnings of $126.4 million, the increase reflects $147.5 million in net proceeds
from the sale of 5,865,000 shares in the secondary offering completed on May 14,
2002. Tangible stockholders' equity rose 71.7% to $534.1 million, representing
5.22% of total assets and a tangible book value of $5.10 per share. The benefit
of the offering is also reflected in the Company's regulatory capital ratios as
of June 30, 2002. At that date, the Company's leverage capital equaled 7.22% of
adjusted average assets, while its Tier 1 and total risk-based capital equaled
12.95% and 13.76%, respectively, of risk-weighted assets. As of June 30, 2002,
the Company is categorized as well capitalized under the FDIC regulatory
framework for prompt corrective action. To be categorized as well capitalized,
the Company must maintain a minimum leverage capital ratio of 5%, Tier 1 capital
ratio of 6%, and total capital ratio of 10%.
Loans
The Company recorded a record level of mortgage loan production in the first six
months of 2002, with first quarter originations of $511.6 million being exceeded
only by second quarter originations totaling $899.1 million. At $1.4 billion,
the volume of loans produced year-to-date was $895.2 million higher than the
six-month 2001 level and $260.6 million higher than the volume produced for all
of 2001.
Multi-family mortgage loans represented $1.1 billion, or 80.2%, of year-to-date
mortgage originations, including $733.3 million, or 81.6%, of loans originated
in the three months ended June 30, 2002. The volume of loans produced in the
second quarter was funded, in part, by the net proceeds and the increased
capital levels created from the Company's secondary offering in May. Reflecting
the volume of loans produced, the portfolio of multi-family mortgage loans rose
$774.4 million, or 23.8%, to $4.0 billion, representing 76.6% of total mortgage
loans at quarter's end. The average loan in the portfolio had a principal
balance of $1.7 million and a loan-to-value ratio of 58.8%.
11
The increase in multi-family mortgage loans was consistent with the Company's
stated preference for such assets, and occurred in tandem with a reduction in
the portfolio of one-to-four family loans. Reflecting the aforementioned $572.5
million loan securitization, pre-payments, and six-month 2002 originations of
$127.6 million, the balance of one-to-four family mortgage loans outstanding
declined $756.2 million to $562.1 million at June 30, 2002. While the growth in
multi-family mortgage loans offset the bulk of the reduction in one-to-four
family mortgage loans outstanding, total mortgage loans declined $30.1 million
to $5.3 billion at quarter's end.
The decline in total mortgage loans was also partly offset by a $42.2 million
rise in commercial real estate loans to $519.8 million, after six-month
originations of $100.7 million, including $81.9 million in the second quarter of
the year. Construction loans, meanwhile, declined $6.2 million to $146.2
million, after six-month originations of $50.6 million, including second quarter
originations of $24.9 million. Other loans, meanwhile, declined $28.7 million to
$88.2 million, partially reflecting the sale of home equity loans totaling $71.4
million in the second quarter of 2002, offset by an increase in commercial lines
of credit.
Asset Quality
The Company sustained its long-standing record of asset quality in the current
second quarter, with meaningful reductions in the balance of non-performing
assets and the balance of non-performing loans. Non-performing assets totaled
$13.8 million at June 30, 2002, representing 0.14% of total assets, as compared
to $14.9 million, or 0.16% of total assets at March 31, 2002, and $17.7 million,
or 0.19% of total assets, at December 31, 2001.
Non-performing loans totaled $13.7 million, representing 0.26% of loans, net, at
the close of the second quarter, as compared to $14.6 million, or 0.27% of
loans, net, and $17.5 million, or 0.33% of loans, net, respectively, at the
earlier dates. Included in the June 30, 2002 amount were mortgage loans in
foreclosure of $11.2 million and loans 90 days or more delinquent of $2.5
million, as compared to $11.3 million and $3.3 million, the March 31, 2002
levels, and $10.6 million and $6.9 million, the year-end 2001 amounts.
Foreclosed real estate totaled approximately $145,000 at the close of the second
quarter, as compared to $249,000 at each of the earlier dates.
Asset quality was further sustained by the absence of any net charge-offs, in
keeping with the Company's experience over the past eight years.
In the absence of any net charge-offs or provisions for loan losses, the
allowance for loan losses was maintained at $40.5 million, representing 295.73%
of non-performing loans and 0.76% of loans, net, at June 30, 2002, as compared
to 277.38% and 0.74% at March 31, 2002, and to 231.46% and 0.76% at December 31,
2001.
The allowance for loan losses is increased by the provision for loan losses
charged to operations and reduced by reversals or by net charge-offs. Management
establishes the allowance for loan losses through a process that begins with
estimates of probable loss inherent in the portfolio, based on various
statistical analyses. These analyses consider historical and projected default
rates and loss severities; internal risk ratings; geographic, industry, and
other environmental factors; and model imprecision. In establishing the
allowance for loan losses, management also considers the Company's current
business strategy and credit process, including compliance with stringent
guidelines it has established with regard to credit limitations, credit
approvals, loan underwriting criteria, and loan workout procedures.
The policy of the Bank is to segment the allowance to correspond to the various
types of loans in the loan portfolio. These loan categories are assessed with
specific emphasis on the underlying collateral, which corresponds to the
respective levels of quantified and inherent risk. The initial assessment takes
into consideration non-performing loans and the valuation of the collateral
supporting each loan. Non-performing loans are risk-weighted based upon an aging
schedule that typically depicts either (1) delinquency, a situation in which
repayment obligations are at least 90 days in arrears, or (2) serious
delinquency, a situation in which legal foreclosure action has been initiated.
Based upon this analysis, a quantified risk factor is assigned to each type of
non-performing loan. This results in an allocation to the overall allowance for
the corresponding type and severity of each non-performing loan category.
Performing loans are also reviewed by collateral type, with similar risk factors
being assigned. These risk factors take into consideration, among other matters,
the borrower's ability to pay and the Bank's past loan loss experience
12
with each type of loan. The performing loan categories are also assigned
quantified risk factors, which result in allocations to the allowance that
correspond to the individual types of loans in the portfolio.
In order to determine its overall adequacy, the allowance for loan losses is
reviewed quarterly by management, through its Classification of Assets
Committee, and by the Mortgage and Real Estate Committee of the Board of
Directors.
Various factors are considered in determining the appropriate level of the
allowance for loan losses. These factors include, but are not limited to:
1) End-of-period levels and observable trends in non-performing loans;
2) Charge-offs experienced over prior periods, including an analysis of
the underlying factors leading to the delinquencies and subsequent
charge-offs (if any);
3) Analysis of the portfolio in the aggregate as well as on an
individual loan basis, which analysis considers:
i. payment history;
ii. underwriting analysis based upon current financial
information; and
iii. current inspections of the loan collateral by qualified
in-house property appraisers/inspectors.
4) Bi-weekly meetings of executive management with the Mortgage and
Real Estate Committee (which committee includes five outside
directors, each possessing over 30 years of complementary real
estate experience), during which observable trends in the local
economy and their effect on the real estate market are discussed;
5) Discussions with, and periodic review by, various governmental
regulators (e.g., the Federal Deposit Insurance Corporation, the New
York State Banking Department); and
6) Full Board assessment of all of the preceding factors when making a
business judgment regarding the impact of anticipated changes on the
future level of the allowance for loan losses.
While management uses available information to recognize losses on loans, future
additions to the allowance may be necessary, based on changes in economic and
local market conditions beyond management's control. In addition, various
regulatory agencies periodically review the Bank's loan loss allowance as an
integral part of the examination process. Accordingly, the Bank may be required
to take certain charge-offs and/or recognize additions to the allowance based on
the judgment of regulators with regard to information provided to them during
their examinations.
Based upon all relevant and presently available information, management believes
that the current allowance for loan losses is adequate.
For more information regarding asset quality and the coverage provided by the
loan loss allowance, see the asset quality analysis that follows and the
discussion of the provision for loan losses on page 23 of this report.
13
Asset Quality Analysis
At or For the At or For the
Six Months Ended Year Ended
June 30, 2002 December 31, 2001
(dollars in thousands) (unaudited)
- ---------------------------------------------------------------------------------------
Allowance for Loan Losses:
Balance at beginning of period $40,500 $18,064
Acquired allowance -- 22,436
------- -------
Balance at end of period $40,500 $40,500
======= =======
Non-performing Assets at Period-end:
Mortgage loans in foreclosure $11,160 $10,604
Loans 90 days or more delinquent 2,535 6,894
------- -------
Total non-performing loans 13,695 17,498
Foreclosed real estate 145 249
------- -------
Total non-performing assets $13,840 $17,747
======= =======
Ratios:
Non-performing loans to loans, net 0.26% 0.33%
Non-performing assets to total assets 0.14 0.19
Allowance for loan losses to non-performing loans 295.73 231.46
Allowance for loan losses to loans, net 0.76 0.76
======= =======
Securities, Mortgage-backed Securities, and Money Market Investments
Reflecting the second quarter 2002 securitization of one-to-four family mortgage
loans totaling $572.5 million, as well as the leveraging of the proceeds of the
Company's secondary offering, the balance of securities available for sale rose
$1.1 billion from the level recorded at December 31, 2001 to $3.4 billion at
June 30, 2002. Mortgage-backed securities represented $3.1 billion, or 91.1%, of
the balance at June 30, with capital trust notes representing $190.3 million, or
62.5%, of the remaining $304.5 million.
The increase in securities available for sale was partly tempered by
year-to-date securities sales, prepayments, and redemptions of $962.6 million,
including $450.5 million in the second quarter of the year. The sales generated
six-month after-tax net securities gains of $5.1 million, and contributed $0.05
per share to six-month 2002 diluted earnings per share.
The portfolio of securities held to maturity rose more modestly, to $284.0
million, from $203.2 million at December 31, 2001. Federal Home Loan Bank stock
represented $166.3 million of the June 30, 2002 balance, with corporate bonds,
capital trust notes, and preferred stock accounting for the rest. At June 30,
2002 and December 31, 2001, the market values of securities held to maturity
were $286.0 million and $203.6 million, equivalent to 100.7% and 100.2% of
carrying value, respectively.
These increases were partly offset by a $6.2 million reduction in
mortgage-backed securities held to maturity to $44.6 million, reflecting
prepayments and the classification of any new such investments as available for
sale. At June 30, 2002 and December 31, 2001, the market values of the portfolio
were $45.6 million and $51.1 million, equivalent to 102.3% and 100.5% of
carrying value, respectively.
The balance of money market investments, meanwhile, declined to $1.2 million
from $10.2 million, reflecting the Company's preference for investing in such
higher yielding assets as multi-family mortgage loans.
14
Available-for-Sale Securities Portfolio Analysis
Securities available for sale at June 30, 2002 and December 31, 2001 are
summarized as follows:
June 30, 2002
----------------------------------------------------------
Amortized Gross Gross Estimated
(in thousands) Cost Unrealized Gain Unrealized Loss Market Value
--------- --------------- --------------- ------------
Debt and equity securities available for sale:
U.S. Government and agency obligations $ 113 $ 27 $ -- $ 140
Corporate bonds 21,612 456 1 22,067
Capital trust notes 186,986 4,576 1,230 190,332
Preferred stock 79,962 395 297 80,060
Common stock 9,537 2,530 524 11,543
Other 387 -- -- 387
---------- ------- ------ ----------
Total $ 298,597 $ 7,984 $2,052 $ 304,529
---------- ------- ------ ----------
Mortgage-backed securities available for sale:
GNMA certificates $ 97,985 $ 1,912 $ -- $ 99,897
FNMA certificates 43,417 1,020 -- 44,437
FHLMC certificates 620,705 18,899 11 639,593
CMOs and REMICs 2,296,419 45,473 1,028 2,340,864
---------- ------- ------ ----------
Total $3,058,526 $67,304 $1,039 $3,124,791
---------- ------- ------ ----------
Total securities available for sale $3,357,123 $75,288 $3,091 $3,429,320
========== ======= ====== ==========
December 31, 2001
----------------------------------------------------------
Amortized Gross Gross Estimated
(in thousands) Cost Unrealized Gain Unrealized Loss Market Value
--------- --------------- --------------- ------------
Debt and equity securities available for sale:
U.S. Government and agency obligations $ 25,113 $ -- $ 230 $ 24,883
Corporate bonds 13,387 182 2 13,567
Capital trust notes 120,171 4,809 722 124,258
Preferred stock 79,857 392 78 80,171
Common stock 9,137 1,575 256 10,456
---------- ------- ------ ----------
Total $ 247,665 $ 6,958 $1,288 $ 253,335
---------- ------- ------ ----------
Mortgage-backed securities available for sale:
GNMA certificates $ 143,179 $ 667 $ 4 $ 143,842
FNMA certificates 78,258 468 2 78,724
FHLMC certificates 47,528 418 -- 47,946
CMOs and REMICs 1,841,727 10,140 932 1,850,935
---------- ------- ------ ----------
Total $2,110,692 $11,693 $ 938 $2,121,447
---------- ------- ------ ----------
Total securities available for sale $2,358,357 $18,651 $2,226 $2,374,782
========== ======= ====== ==========
Sources of Funds
The Company's primary sources of funding for dividends and payments for periodic
stock purchases have been dividends from the Bank, the issuance of
trust-preferred securities, the issuance of stock (in May 2002), and maturities
and income from investments.
The Bank's primary sources of funds are the deposits it gathers and the line of
credit it maintains with the FHLB. The Bank's line of credit is collateralized
by stock in the FHLB and by certain securities and mortgage loans under a
blanket pledge agreement in an amount equal to 110% of outstanding borrowings.
Additional funding stems from interest and principal payments on loans and the
interest on, and maturity of, mortgage-backed and other investment securities.
The Bank gathers deposits through a network of 109 banking offices, including 54
supermarket branches, that extends throughout New York City, Long Island,
Westchester County, and New Jersey.
In the second quarter of 2002, the Bank continued to realize an increase in the
balance of low-cost core deposits in tandem with a reduction in higher cost CDs.
Notwithstanding the aforementioned divestiture of 14 in-store branches (with
total deposits of $67.6 million), core deposits rose $225.1 million from the
year-end 2001 balance to
15
$3.3 billion at June 30, 2002. The June 30 amount represented 61.8% of total
deposits, up from 55.8%, at December 31, 2001. The increase was driven by growth
in all three types of core deposits: a $164.0 million rise in NOW and money
market accounts to $1.1 billion; a $34.7 million rise in savings accounts to
$1.7 billion; and a $26.5 million rise in non-interest-bearing accounts to
$481.6 million.
CDs totaled $2.0 billion at June 30, 2002, representing 38.2% of total deposits,
as compared to $2.4 billion, representing 44.2%, at December 31, 2001. The net
effect of the core deposit growth and the decline in higher cost deposits was a
$165.9 million reduction in total deposits to $5.3 billion at June 30, 2002.
The restructuring of the Bank's deposit mix coincides with the significant
volume of third-party products sold throughout the branch network during the
first six months of 2002. In addition to providing the Bank with a meaningful
level of other income, the sale of such products supports the establishment of
customer relationships. In the first six months of 2002, gross sales of
third-party investment products totaled $102.3 million, generating net revenues
of $6.1 million.
In connection with the Bank's leveraged growth strategy, the balance of
borrowings rose $1.0 billion from the level recorded at December 31, 2001 to
$3.5 billion at June 30, 2002. Included in the 2002 amount were FHLB advances of
$1.8 billion, reverse repurchase agreements of $1.6 billion, and trust-preferred
securities of $191.9 million.
Asset and Liability Management and the Management of Interest Rate Risk
The Company's primary component of market risk is interest rate volatility.
Accordingly, the Company manages its assets and liabilities to reduce its
exposure to changes in market interest rates. The asset and liability management
process has three primary objectives: to evaluate the interest rate risk
inherent in certain balance sheet accounts; to determine the level of risk that
is appropriate, given the Company's business strategy, operating environment,
capital and liquidity requirements, and performance objectives; and to manage
that risk in a manner consistent with the Board of Directors' approved
guidelines.
In the process of managing its interest rate risk, the Company has pursued the
following strategies: (1) emphasizing the origination and retention of
multi-family mortgage loans with a fixed rate of interest in the first five
years of the loan and a rate that adjusts annually in each of years six through
ten; (2) selling the majority of one-to-four family mortgage loans it originates
to a third party, without recourse; and (3) investing in fixed rate
mortgage-backed and mortgage-related securities with estimated average lives of
three to seven years. These strategies take into consideration the stability of
the Company's core deposit base.
The actual duration of mortgage loans and mortgage-backed securities can be
significantly impacted by changes in prepayment levels and market interest
rates. Mortgage prepayments will vary due to a number of factors, including the
economy in the region where the underlying mortgages were originated; seasonal
factors; demographic variables; and the assumability of the underlying
mortgages. However, the largest determinants of prepayments are prevailing
interest rates and related mortgage refinancing opportunities. Management
monitors interest rate sensitivity so that adjustments in the asset and
liability mix can be made on a timely basis when deemed appropriate. The Company
does not currently participate in hedging programs, interest rate swaps, or
other activities involving the use of off-balance-sheet derivative financial
instruments.
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring a bank's interest rate sensitivity "gap." An asset or liability is
said to be interest rate sensitive within a specific time period if it will
mature or reprice within that period of time. The interest rate sensitivity gap
is defined as the difference between the amount of interest-earning assets
maturing or repricing within a specific time frame and the amount of
interest-bearing liabilities maturing or repricing within that same period of
time. In a rising interest rate environment, an institution with a negative gap
would generally be expected, absent the effects of other factors, to experience
a greater increase in the cost of its interest-bearing liabilities than it would
in the yield on its interest-earning assets, thus producing a decline in its net
interest income. Conversely, in a declining rate environment, an institution
with a negative gap would generally be expected to experience a lesser reduction
in the yield on its interest-earning assets than it would in the cost of its
interest-bearing liabilities, thus producing an increase in its net interest
income.
16
At the same time, however, the Company continued to take advantage of the
favorable yield curve, maintaining its strategy of leveraged asset growth. Due
to the attendant increase in short-term borrowings, the Company's one-year
interest rate sensitivity gap at June 30, 2002 was a negative 17.78%, as
compared to a negative 8.69% at December 31, 2001.
The Company also monitors changes in the net present value of the expected
future cash flows of its assets and liabilities, which is referred to as the net
portfolio value, or NPV. The NPV ratio is the NPV divided by the estimated
market value of total assets, and can be viewed as a corollary to the Company's
capital ratios. To monitor its overall sensitivity to changes in interest rates,
the Company models the effect of instantaneous increases and decreases in
interest rates of 200 basis points on its assets and liabilities. As of June 30,
2002, a 200-basis point increase in interest rates would have reduced the NPV by
approximately 10.09% (as compared to 14.36%, the year-end 2001 impact); a
200-basis point reduction would have increased the NPV by 5.10% (as compared to
6.74% at December 31, 2001). There can be no assurances that future changes in
the Company's mix of assets and liabilities will not result in greater changes
to the NPV and NPV ratio.
Liquidity and Capital Position
Liquidity
Liquidity is managed to ensure that cash flows are sufficient to support the
Bank's operations and to compensate for any temporary mismatches with regard to
sources and uses of funds caused by erratic loan and deposit demand.
As previously indicated, the Bank's primary funding sources are deposits and
borrowings. Additional funding stems from interest and principal payments on
loans, securities, and mortgage-backed securities, and the sale of securities,
loans, and foreclosed real estate. While borrowings and scheduled amortization
of loans and securities are predictable funding sources, deposit flows and
mortgage prepayments are subject to such external factors as market interest
rates, competition, and economic conditions and, accordingly, are less
predictable.
The principal investing activities of the Bank are the origination of mortgage
loans (primarily secured by multi-family buildings) and, to a lesser extent, the
purchase of mortgage-backed and other investment securities. In the six months
ended June 30, 2002, the net cash used in investing activities totaled $1.0
billion, primarily reflecting a $596.9 million net increase in loans, the
purchase of securities available for sale totaling $1.4 billion, and proceeds
from the redemption and sales of securities available for sale totaling $962.6
million. The net increase in loans primarily reflects six-month mortgage loan
originations of $1.4 billion, offset by repayments and prepayments totaling
$870.2 million.
The Bank's investing activities were funded by internal cash flows generated by
its operating and financing activities. In the first six months of 2002, the net
cash provided by operating activities totaled $38.5 million, while the net cash
provided by financing activities totaled $950.7 million, primarily reflecting a
$1.0 billion net increase in borrowings and the proceeds from the secondary
stock offering.
The Bank monitors its liquidity on a daily basis to ensure that sufficient funds
are available to meet its financial obligations, including withdrawals from
depository accounts, outstanding loan commitments, contractual long-term debt
payments, and operating leases. The Bank's most liquid assets are cash and due
from banks and money market investments, which collectively totaled $143.0
million at June 30, 2002 as compared to $178.6 million at December 31, 2001.
Additional liquidity stems from the Bank's portfolio of securities available for
sale, which totaled $3.4 billion at the close of the second quarter, and from
the Bank's approved line of credit with the FHLB, which totaled $4.1 billion.
CDs due to mature in one year or less from June 30, 2002 totaled $1.7 billion;
based upon recent retention rates as well as current pricing, management
believes that a significant portion of such deposits will either roll over or be
reinvested in annuities or mutual funds sold through the branch network.
The Bank's off-balance-sheet commitments at June 30, 2002 consisted of
outstanding loan commitments of $481.9 million and commitments to purchase
mortgage-backed securities in the amount of $296.4 million.
17
Capital Position
The Company significantly enhanced its tangible capital position during the
current second quarter through a secondary offering completed on May 14, 2002.
In accordance with a preliminary prospectus filed on April 29, 2002, the Company
sold 5,865,000 shares of stock from its Treasury account at a price of $29.00
per share, and realized net proceeds of $147.5 million after expenses, including
$14.8 million loaned to the Company's Employee Stock Ownership Plan ("ESOP") for
the purchase of 510,000 shares of the Company's common stock that were sold in
the offering.
Supported by the offering, and by second quarter 2002 cash earnings of $126.4
million, stockholders' equity rose to $1.2 billion at June 30, 2002,
representing 11.85% of total assets and a book value of $11.58 per share, based
on 104,753,036 shares. By comparison, the Company recorded stockholders' equity
of $983.1 million at December 31, 2001, representing 10.68% of total assets and
a book value of $10.05 per share, based on 97,774,030 shares. Tangible
stockholders' equity rose to $534.1 million from $311.0 million, the year-end
2001 level, signifying a 60.4% increase in tangible book value per share to
$5.10.
Also reflected in stockholders' equity at June 30, 2002 are the distribution of
cash dividends totaling $36.9 million and the allocation of $50.1 million toward
the repurchase of 1,829,982 shares. Under the Company's current share repurchase
program, there were 1,486,805 shares still available for repurchase at June 30,
2002.
At June 30, 2002, the level of stockholders' equity exceeded the minimum federal
requirements for a bank holding company. The Company's leverage capital totaled
$669.6 million, or 7.22% of adjusted average assets; its Tier 1 and total
risk-based capital amounted to $669.6 million and $711.4 million, representing
12.95% and 13.76% of risk-weighted assets, respectively. At December 31, 2001,
the Company's leverage capital, Tier 1 risk-based capital, and total risk-based
capital amounted to $497.2 million, $497.2 million, and $542.4 million,
representing 5.95% of adjusted average assets, 10.37% of risk-weighted assets,
and 11.31% of risk-weighted assets, respectively. As of June 30, 2002, the
Company is categorized as well capitalized under the FDIC regulatory framework
for prompt corrective action. To be categorized as well capitalized, the Company
must maintain a minimum leverage capital ratio of 5%, Tier 1 capital ratio of
6%, and total capital ratio of 10%.
The following regulatory capital analyses set forth the Company's and the Bank's
leverage, Tier 1 risk-based, and total risk-based capital levels in comparison
with the minimum federal requirements.
Regulatory Capital Analysis (Company)
At June 30, 2002
----------------
Risk-Based Capital
------------------
Leverage Capital Tier 1 Total
---------------- ------ -----
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
-------- -------- -------- -------- -------- --------
Total equity $669,610 7.22% $669,610 12.95% $711,437 13.76%
Regulatory capital requirement 463,496 5.00 310,179 6.00 516,966 10.00
-------- -------- -------- -------- -------- --------
Excess $206,114 2.22% $359,431 6.95% $194,471 3.76%
======== ======== ======== ======== ======== ========
Regulatory Capital Analysis (Bank Only)
At June 30, 2002
----------------
Risk-Based Capital
------------------
Leverage Capital Tier 1 Total
---------------- ------ -----
(dollars in thousands) Amount Ratio Amount Ratio Amount Ratio
-------- -------- -------- -------- -------- --------
Total savings bank equity $568,438 6.14% $568,438 10.83% $610,265 11.62%
Regulatory capital requirement 277,702 3.00 210,012 4.00 420,024 8.00
-------- -------- -------- -------- -------- --------
Excess $290,736 3.14% $358,426 6.83% $190,241 3.62%
======== ======== ======== ======== ======== ========
18
Under the $400.0 million universal shelf registration filed on SEC Form S-3 on
April 22, 2002, and depending on market conditions, the Company has the ability
to raise additional capital, up to approximately $230.0 million, through the
issuance of debt securities, common stock, trust preferred securities, or a
combination of trust preferred securities and warrants to purchase common stock.
Comparison of the Three Months Ended June 30, 2002 and 2001
Earnings Summary
The Company's earnings rose significantly in the current second quarter,
extending its record of earnings growth. In addition to the benefits of its
merger transactions, the Company's second quarter 2002 earnings reflect the
record level of mortgage loans produced over the past four quarters, and the
profitable restructuring and leveraging of the balance sheet.
The Company recorded net income of $58.1 million in the second quarter of 2002,
up 210.9% from $18.7 million in the second quarter of 2001. Included in the 2002
amount were after-tax net securities gains of $4.1 million, which contributed
$0.04 per share to second quarter 2002 diluted earnings per share of $0.57, up
83.9% from $0.31, the year-earlier amount. In addition, the Company's second
quarter 2002 earnings provided a 2.34% ROA and a 20.67% ROE.
Excluding the after-tax net securities gains, the Company's second quarter 2002
earnings would have risen 189.2% to $54.1 million, and generated a 71.0%
increase in diluted earnings per share to $0.53.
The Company's cash earnings also rose, to $61.8 million, from $24.4 million in
the year-earlier three months. On a diluted per share basis, the Company's cash
earnings rose to $0.60 from $0.40, representing a 50.0% increase, while
providing a cash ROA and ROE of 2.49% and 22.00%.
Net interest income rose to $95.4 million in the current second quarter, from
$36.2 million in the year-earlier three months. The year-over-year increase was
driven by a $74.0 million rise in interest income to $152.3 million, which
outweighed a $14.8 million rise in interest expense to $56.9 million. The higher
level of interest income was fueled by a $4.4 billion rise in the average
balance of interest-earning assets to $8.5 billion, which served to offset a
35-basis point drop in the average yield to 7.15%. The higher level of interest
expense stemmed from a $4.0 billion rise in the average balance of
interest-bearing liabilities to $8.0 billion, tempered by a 140-basis point
reduction in the average cost of funds to 2.86%. The growth in net interest
income was paralleled by the expansion of the Company's interest rate spread and
net interest margin, which rose 105 and 101 basis points, respectively, from the
year-earlier measures to 4.29% and 4.48% in the second quarter of 2002.
The Company's earnings were also fueled by a $16.9 million, or 151.4%, increase
in other operating income to $28.0 million. The increase was the combined result
of a $3.0 million rise in fee income to $10.8 million, a $7.9 million rise in
other income to $10.9 million, and a $5.9 million rise in net securities gains
to $6.3 million. Excluding the net securities gains, other operating income rose
$11.0 million year-over-year to $21.7 million, representing 18.6% of total
second quarter 2002 revenues. While the Richmond County merger accounted for
much of the increase in fee income, the higher level of other income reflects a
combination of sources, most notably including revenues from third-party product
sales.
The growth in earnings was partly tempered by a year-over-year increase in
expenses, including a $15.8 million rise in operating expense to $33.3 million
and a $20.9 million rise in income tax expense to $30.5 million. The higher
level of operating expense reflects the net addition of 22 branches through the
Richmond County merger, and the subsequent acquisition of PBC. The growth in
operating expense was sufficiently offset by the growth in net interest income
and other operating income to produce an improvement in the efficiency ratio to
27.00%.
Reflecting the adoption of SFAS Nos. 141 and 142 on January 1, 2002, the Company
discontinued the amortization of goodwill that stemmed from the Haven
acquisition in the first quarter, but continues to amortize the CDI stemming
from the Richmond County merger. In the second quarter of 2002, the amortization
of CDI totaled $1.5 million, comparable to the goodwill amortization recorded in
the year-earlier three months.
19
Income tax expense rose $20.9 million to $30.5 million, the result of a $60.3
million increase in pre-tax income to $88.6 million, which also led to an
increase in the effective tax rate from 33.90% to 34.39%.
The provision for loan losses continued to be suspended, reflecting management's
belief that the coverage provided by the loan loss allowance is currently
sufficient, in view of the ongoing quality of the Company's mortgage loan
portfolio.
Based on the strength of the Company's second quarter results, and its prospects
going forward, management increased its 2002 earnings guidance and provided
initial earnings guidance for 2003. As stated in the overview on page 9 of this
filing, it is management's current expectation that the Company's 2002 diluted
earnings per share will range from $2.13 to $2.15, including the $0.05 in net
securities gains already recorded, and that its 2003 diluted earnings per share
will range from $2.48 to $2.52.
For a discussion of factors that could adversely impact the Company's ability to
fulfill these expectations, please see the discussion of forward-looking
statements and associated risk factors on page 10 of this filing.
Cash Earnings Analysis
For the Three Months Ended
June 30,
--------------------------
(in thousands, except per share data) 2002 2001
---------- ----------
Net income $ 58,129 $ 18,695
Additional contributions to tangible stockholders' equity:
Amortization and appreciation of stock-related benefit plans 1,559 2,603
Tax benefit effect on stock plans -- 571
Dividends on unallocated ESOP shares 661 1,043
---------- ----------
Total additional contributions to tangible stockholders' equity 2,220 4,217
Amortization of core deposit intangible and goodwill, respectively 1,500 1,482
---------- ----------
Cash earnings $ 61,849 $ 24,394
========== ==========
Cash earnings per share(1) $ 0.61 $ 0.41
Diluted cash earnings per share(1) $ 0.60 $ 0.40
========== ==========
(1) Per share amounts for the year 2001 have been adjusted to reflect a
3-for-2 stock split on September 20, 2001.
Cash earnings are calculated by adding back to net income certain operating and
income tax expenses stemming from the amortization and appreciation of shares
held in the Company's stock-related benefit plans, as well as the CDI and
goodwill stemming from its merger-of-equals with Richmond County on July 31,
2001 and the acquisition of Haven on November 30, 2000, respectively. Although
cash earnings are not a measure of performance calculated in accordance with
GAAP, the Company believes that cash earnings are useful to an investor in
evaluating its operating performance and in comparing it with other companies in
the banking industry who report similar measures. Cash earnings should not be
considered in isolation or as a substitute for operating income, cash flows from
operating activities, or other income or cash flow statements data prepared in
accordance with GAAP. Moreover, the way in which the Company calculates cash
earnings may differ from that of companies reporting similarly-named measures.
Interest Income
The level of interest income in any given period depends upon the average
balance and mix of the Company's interest-earning assets, the yield on said
assets, and the current level of market interest rates.
In the second quarter of 2002, the average balance of interest-earning assets
was significantly boosted by assets acquired in the Richmond County merger, by
the record level of mortgage loan originations, and by the leveraged growth of
the Company's portfolio of mortgage-backed securities. While the yield on the
Company's assets
20
declined, as market interest rates moved lower, the higher average balance was
more than sufficient to generate an increase in interest income year-over-year.
The Company recorded interest income of $152.3 million in the current second
quarter, up from $78.3 million in the second quarter of 2001. The 94.5% increase
was driven by a $4.4 billion rise in the average balance of interest-earning
assets to $8.5 billion, which more than offset a 35-basis point drop in the
average yield to 7.15%.
Mortgage and other loans generated interest income of $105.7 million, up $42.6
million, or 67.5%, from the year-earlier amount. The increase was fueled by a
$2.3 billion, or 71.2%, rise in the average balance of loans to $5.5 billion,
which served to offset a 14-basis point reduction in the average yield to 7.66%.
Loans represented 64.8% of interest-earning assets in the current second
quarter, and produced 69.4% of total interest income during the period. In the
second quarter of 2001, loans represented 77.4% of average interest-earning
assets and generated 80.6% of interest income. Management anticipates that the
concentration of loans within the mix of interest-earning assets will return to
previous levels as more loans are originated, and as management reduces the
portfolio of mortgage-backed securities available for sale.
In the meantime, mortgage-backed securities generated interest income of $37.0
million, up $29.7 million from the year-earlier amount. The increase stemmed
from a $2.0 billion rise in the average balance to $2.4 billion, which was
tempered by a 22-basis point drop in the average yield to 6.10%. Mortgage-backed
securities represented 28.5% of average interest-earning assets in the current
second quarter, and generated 24.3% of total interest income during the period.
In the year-earlier three months, mortgage-backed securities accounted for 11.1%
and 9.3% of average interest-earning assets and total interest income,
respectively. The increased concentration of mortgage-backed securities stemmed
from the Richmond County merger, as well as from subsequent investments.
Securities generated interest income of $9.5 million in the current second
quarter, up $4.2 million from the year-earlier amount. The increase was fueled
by a $310.1 million rise in the average balance to $550.2 million, and tempered
by a 181-basis point decline in the average yield to 6.90%.
The higher levels of interest income derived from loans, mortgage-backed
securities, and securities in the current second quarter were only slightly
offset by a reduction in the interest income produced by money market
investments during the same period. Money market investments produced interest
income of $153,000, down $2.5 million, the result of a $211.2 million decline in
the average balance to $29.0 million and a 238-basis point decline in the
average yield to 2.12%.
Interest Expense
The level of interest expense is a function of the average balance and
composition of the Company's interest-bearing liabilities and the respective
costs of the funding sources found within this mix. These factors are
influenced, in turn, by competition for deposits and by the level of market
interest rates.
In the second quarter of 2002, the level of interest expense was substantially
augmented, despite the year-over-year reduction in market interest rates. The
average balance of interest-bearing liabilities grew dramatically, as deposits
rose pursuant to the Richmond County merger, and borrowings rose in connection
with the Company's leveraged growth strategy. At the same time, the cost of
funds was reduced by a combination of factors, including the downward repricing
of CDs, a significant rise in the average balance of low-cost core deposits, and
the rising popularity of the third-party investment products sold through the
Company's branches at a time when CDs are being offered at substantially lower
rates.
The Company recorded interest expense of $56.9 million in the current second
quarter, up $14.8 million, or 35.0%, from the level recorded in the second
quarter of 2001. The increase was the net effect of a $4.0 billion rise in the
average balance of interest-bearing liabilities to $8.0 billion and a 140-basis
point reduction in the average cost of funds to 2.86%.
Borrowings generated $31.8 million of second quarter 2002 interest expense, up
$19.7 million, the net effect of a $2.1 billion increase in the average balance
to $3.2 billion, and a 65-basis point reduction in the average cost to
21
4.05%. Borrowings represented 39.5% of average interest-bearing liabilities in
the current second quarter, and generated 56.0% of total interest expense. In
the second quarter of 2001, by comparison, borrowings represented 25.8% of
average interest-bearing liabilities and accounted for 28.8% of total interest
expense.
At the same time, the interest expense generated by other sources of funds
(deposits and mortgagors' escrow) declined $5.0 million to $25.0 million. The
decrease was the net effect of a $2.1 billion rise in the combined average
balance to $5.3 billion and a 191-basis point decline in the average cost to
1.89%. Included in the higher average balance of deposits in the current second
quarter was a $295.5 million rise in average non-interest-bearing deposits to
$480.7 million.
CDs generated second quarter 2002 interest expense of $15.1 million, down $9.7
million from the year-earlier amount. The reduction was the net effect of a
$271.2 million rise in the average balance to $2.0 billion and a 270-basis point
decline in the average cost to 3.02%. CDs represented 25.2% of interest-bearing
liabilities in the current second quarter, as compared to 43.4% in the
year-earlier three months. Similarly, CDs generated 26.6% of total interest
expense in the current second quarter, down from 58.9% in the year-earlier
period.
NOW and money market accounts generated interest expense of $4.1 million in the
current second quarter, up $1.0 million from the level recorded in the second
quarter of 2001. The increase was the net effect of a $384.9 million rise in the
average balance to $1.1 billion and a 24-basis point drop in the average cost to
1.52%.
The interest expense generated by savings accounts rose $3.7 million from the
second quarter 2001 level to $5.9 million in the second quarter of 2002. The
increase was fueled by a $1.2 billion rise in the average balance to $1.7
billion, tempered by a 31-basis point drop in the average cost to 1.40%.
The interest expense produced by mortgagors' escrow declined $3,000 to $5,000,
the net effect of a $23.0 million rise in the average balance to $61.2 million
and a five-basis point drop in the average cost to 0.03%.
Net Interest Income
Net interest income is the Company's primary source of income. Its level is a
function of the average balance of interest-earning assets, the average balance
of interest-bearing liabilities, and the spread between the yield on said assets
and the cost of said liabilities. These factors are influenced by the pricing
and mix of the Company's interest-earning assets and interest-bearing
liabilities which, in turn, may be impacted by such external factors as economic
conditions, competition for loans and deposits, and the monetary policy of the
Federal Open Market Committee of the Federal Reserve Board of Governors (the
"FOMC"). The FOMC reduces, maintains, or increases the federal funds rate (the
rate at which banks borrow funds from one another), as it deems necessary. The
federal funds rate held steady at 1.75% in the current second quarter; in the
year-earlier quarter, the rate ranged from a high of 4.50% in April to a low of
3.75% in June.
The Company recorded net interest income of $95.4 million in the second quarter
of 2002, up $12.4 million, or 14.9%, on a linked-quarter basis, and up $59.2
million, or 163.6%, year-over-year. In addition to the benefit of the Richmond
County merger, the increase reflects the leveraged growth of the Company's
assets, and the ongoing restructuring of the balance sheet.
The increase in the level of net interest income was paralleled by expansion of
the Company's interest rate spread and net interest margin. At 4.29%, the
Company's spread was 29 basis points wider than the linked-quarter measure, and
105 basis points wider than the spread recorded in the second quarter of 2001.
Similarly, the Company's net interest margin, at 4.48%, was 32 and 101 basis
points wider than the measures recorded in the respective earlier periods.
22
Net Interest Income Analysis
Three Months Ended June 30,
-------------------------------------------------------------------------------
2002 2001
-------------------------------------- -------------------------------------
Average Average
Average Yield/ Average Yield/
(dollars in thousands) Balance Interest Cost Balance Interest Cost
---------- ---------- ---------- ---------- ---------- ----------
Assets:
Interest-earning assets:
Mortgage and other loans, net $5,535,656 $105,677 7.66% $3,234,365 $63,099 7.80%
Securities 550,168 9,469 6.90 240,118 5,229 8.71
Mortgage-backed securities 2,433,053 37,004 6.10 461,991 7,302 6.32
Money market investments 28,992 153 2.12 240,237 2,686 4.50
---------- ---------- ---------- ---------- ---------- ----------
Total interest-earning assets 8,547,869 152,303 7.15 4,176,711 78,316 7.50
Non-interest-earning assets 1,401,646 332,589
---------- ----------
Total assets $9,949,515 $4,509,300
========== ==========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
NOW and money market accounts $1,071,799 $ 4,063 1.52% $686,870 $ 3,014 1.76%
Savings accounts 1,682,433 5,865 1.40 513,419 2,183 1.71
Certificates of deposit 2,010,147 15,116 3.02 1,738,972 24,797 5.72
Borrowings 3,150,866 31,819 4.05 1,032,845 12,111 4.70
Mortgagors' escrow 61,223 5 0.03 38,233 8 0.08
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities 7,976,468 56,868 2.86 4,010,340 42,113 4.26
Non-interest-bearing deposits 480,720 185,240
Other liabilities 367,666 30,951
---------- ----------
Total liabilities 8,824,854 4,266,531
Stockholders' equity 1,124,661 282,769
---------- ----------
Total liabilities and stockholders' equity $9,949,515 $4,509,300
========== ==========
Net interest income/interest rate spread $ 95,435 4.29% $36,203 3.24%
========== ========== ========== ==========
Net interest-earning assets/net interest
margin $571,401 4.48% $166,372 3.47%
========== ========== ========== ==========
Ratio of interest-earning assets to
interest-bearing liabilities 1.07x 1.04x
========== ==========
Provision for Loan Losses
The provision for loan losses is based on management's periodic assessment of
the adequacy of the loan loss allowance which, in turn, is based on such
interrelated factors as the composition of the loan portfolio and its inherent
risk characteristics; the level of non-performing loans and charge-offs, both
current and historic; local economic conditions; the direction of real estate
values; and current trends in regulatory supervision.
Notwithstanding the magnitude of the Company's loan production over the past
four quarters, the performance of the portfolio continued to be strong. The
Company recorded no net charge-offs in the current second quarter, and a
meaningful reduction in the balances of non-performing assets and loans.
Non-performing assets totaled $13.8 million at June 30, 2002, down $1.0 million
from the level recorded at March 31, 2002 and down $3.9 million from the level
recorded at December 31, 2001. Included in the June 30, 2002 amount were
non-performing loans totaling $13.7 million, down $906,000 and $3.8 million,
respectively from the levels recorded at the earlier dates. Non-performing
assets thus represented 0.14% of total assets at the close of the current second
quarter, while non-performing loans represented 0.26% of loans, net.
Based on management's assessment of the loan portfolio, and, in particular, the
quality of the Company's loans, the provision for loan losses was suspended in
the current second quarter, as it has been since the third quarter of 1995. In
the absence of any net charge-offs or provisions for loan losses, the allowance
for loan losses was maintained at $40.5 million, consistent with the allowance
at December 31, 2001. The loan loss allowance represented 295.73%
23
of non-performing loans at June 30, 2002, as compared to 231.46% at the end of
December, and 0.76% of loans, net, at both June 30, 2002 and December 31, 2001.
For additional information about the allowance for loan losses, please see the
discussion of asset quality beginning on page 12 of this report.
Other Operating Income
The Company has traditionally supplemented its net interest income with other
operating income derived from service fees and fees charged on loans and
depository accounts. Since the Haven acquisition, these income sources have been
augmented by income from the Company's increased investment in BOLI and from the
sale of banking and investment services in a vastly expanded branch network.
More recently, the level of other operating income has been bolstered by
revenues generated by PBC and from the sale of securities.
In the second quarter of 2002, the Company recorded other operating income of
$28.0 million, up from $11.1 million in the year-earlier three months. The $16.9
million increase was the result of a $3.0 million rise in fee income to $10.8
million, a $7.9 million rise in other income to $10.9 million, and a $5.9
million rise in net securities gains to $6.3 million. Excluding the net
securities gains, other operating income rose $11.0 million year-over-year to
$21.7 million, representing 18.6% of total revenues recorded in the three months
ended June 30, 2002.
While the growth in fee income largely reflects the year-over-year expansion of
the branch network, the growth in other income stems primarily from the sale of
third-party products, from the Company's BOLI investment, and from PBC.
Third-party product sales generated other income of $3.4 million in the quarter
(up $1.8 million from the year-earlier level), with BOLI and PBC contributing
income of $2.1 million and $1.5 million, respectively.
Non-interest Expense
Non-interest expense has two primary components: operating expense, consisting
of compensation and benefits, occupancy and equipment, general and
administrative ("G&A"), and other expenses; and the amortization of the CDI
stemming from the Company's merger-of-equals with Richmond County. In connection
with the Company's adoption of SFAS Nos. 141 and 142, the amortization of the
Richmond County-related CDI will continue through the second quarter of 2011;
the amortization of the goodwill stemming from the Haven acquisition was
discontinued on January 1, 2002.
Non-interest expense totaled $34.8 million in the current second quarter, up
from $19.0 million in the year-earlier three months. Operating expense accounted
for $33.3 million and $17.6 million, respectively, of the 2002 and 2001 totals,
with the amortization of CDI and goodwill accounting for the remaining $1.5
million in 2002 and 2001, respectively, as explained above.
The increase in operating expense stemmed from the net addition of 22 branches
to the franchise, and the first quarter 2002 acquisition of the remaining 53%
equity interest in PBC. Compensation and benefits expense rose $11.3 million to
$19.2 million in the current second quarter, while occupancy and equipment
expense rose $1.9 million to $5.6 million. Partly reflecting promotional costs,
and the costs of supporting an expanded branch network, G&A expense rose $1.7
million to $7.0 million, while other expense rose approximately $900,000 to $1.6
million.
Also reflected in compensation and benefits expense are expenses associated with
the amortization and appreciation of shares held in the Company's stock-related
benefit plans ("plan-related expenses"), which were added back to stockholders'
equity at the end of the quarter, and also added back to net income as part of
the cash earnings calculation for the three-month period. In the second quarter
of 2002, such plan-related expenses totaled $1.6 million, as compared to $2.6
million in the year-earlier three months.
The increase in operating expense was sufficiently offset by the growth in net
interest income and other operating income to produce an improvement in the
efficiency ratio to 27.00% in the current second quarter from 37.11% in
24
the second quarter of 2001. At the same time, the ratio of operating expense to
average assets improved to 1.34% from 1.56%. On a cash earnings basis, the
Company's efficiency ratio improved to 25.74% from 34.69%, the year-earlier
measure, while the ratio of operating expense to average assets improved to
1.28% from 1.46%.
The number of full-time equivalent employees at June 30, 2002 was 1,467.
Income Tax Expense
The Company recorded second quarter 2002 income tax expense of $30.5 million, up
$20.9 million from the level recorded in the second quarter of 2001. The
increase was due to a $60.3 million rise in pre-tax income to $88.6 million,
which also contributed to an increase in the effective tax rate from 33.90% to
34.39%.
While the increase in pre-tax income contributed to a higher effective tax rate,
the increase was partly offset by the benefit of certain tax planning strategies
implemented in the fourth quarter of 2001.
Comparison of the Six Months Ended June 30, 2002 and 2001
Earnings Summary
The Company's six-month 2002 earnings reflect the benefit of the Richmond County
merger, the dramatic level of mortgage loan production, and the ongoing
restructuring and leveraging of the balance sheet. Net income totaled $104.5
million in the current six-month period, up 125.4% from $46.3 million in the
first six months of 2001. The 2002 amount was equivalent to $1.03 on a diluted
per-share basis, representing a 37.3% increase from $0.75 in the year-earlier
six months. While the 2002 amounts include after-tax net securities gains of
$5.1 million, or $0.05 per share, the 2001 amounts include an after-tax gain of
$10.3 million, or $0.17 per share, on the sale of loans and securities in the
first quarter of the year. The Company's six-month 2002 earnings provided a
2.18% ROA and a 19.83% ROE.
Excluding the respective after-tax gains, the Company's six-month 2002 earnings
would have risen 175.4% to $99.4 million, and generated a 66.1% increase in
diluted earnings per share to $0.98.
In addition, the Company's six-month 2002 cash earnings rose $69.0 million, or
120.2%, to $126.4 million, equivalent to a 34.4% increase in diluted cash
earnings per share to $1.25.
The increase in six-month 2002 earnings was primarily driven by a $107.2 million
rise in net interest income and an $8.2 million rise in other operating income,
tempered by increases of $30.0 million and $27.2 million, respectively, in
non-interest expense and income tax expense.
Net interest income rose year-over-year to $178.5 million, the net effect of a
$130.8 million increase in interest income to $293.4 million, and a $23.6
million increase in interest expense to $114.9 million. The growth in interest
income was fueled by a $4.0 billion rise in the average balance of
interest-earning assets to $8.3 billion, which served to offset a 44-basis point
decline in the average yield to 7.12%. The growth in interest expense was fueled
by a $3.7 billion rise in the average balance of interest-bearing liabilities to
$7.8 billion, and tempered by a 154-basis point decline in the average cost of
funds to 2.97%.
Other operating income rose year-over-year to $47.8 million, boosted by a $6.3
million increase in fee income to $22.0 million and a $3.1 million increase in
other income to $18.0 million. These increases were tempered by a $1.2 million
reduction in net securities gains to $7.8 million.
Non-interest expense totaled $70.0 million in the current six-month period,
reflecting a $30.0 million increase in operating expense to $67.0 million and
CDI amortization in the amount of $3.0 million. The higher level of operating
expense stemmed from all four expense categories and primarily reflects the
Richmond County merger in the third quarter of 2001.
25
Reflecting an $85.3 million increase in pre-tax income to $156.3 million, the
Company recorded income tax expense of $51.8 million, with an effective tax rate
of 33.17%.
The provision for loan losses had no impact on the Company's six-month 2002 or
2001 earnings, having been suspended since the third quarter of 1995.
Cash Earnings Analysis
For the Six Months Ended
June 30,
-----------------------
(in thousands, except per share data) 2002 2001
-------- -------
Net income $104,450 $46,339
Additional contributions to tangible stockholders' equity:
Amortization and appreciation of stock-related benefit plans 2,988 2,040
Tax benefit effect on stock plans 14,727 5,000
Dividends on unallocated ESOP shares 1,191 1,046
-------- -------
Total additional contributions to tangible stockholders' equity 18,906 8,086
Amortization of core deposit intangible and goodwill, respectively 3,000 2,964
-------- -------
Cash earnings $126,356 $57,389
======== =======
Cash earnings per share(1) $1.26 $0.95
Diluted cash earnings per share(1) $1.25 $0.93
======== =======
(1) Per share amounts for the year 2001 have been adjusted to reflect a
3-for-2 stock split on September 20, 2001.
Interest Income
The Company recorded interest income of $293.4 million in the current six-month
period, up $130.8 million from the level recorded in the year-earlier six
months. The 80.4% increase was fueled by a $4.0 billion rise in the average
balance of interest-earning assets to $8.3 billion, which more than offset a
44-basis point decline in the average yield to 7.12%. The growth in
interest-earning assets was driven by the Richmond County merger, the record
level of mortgage loan production, and the Company's investments in
mortgage-backed securities. The lower cost reflects the reduction in market
interest rates during this period. In the first six months of 2002, the federal
funds rate was maintained by the FOMC at 1.75%, the current level; in the
year-earlier period, the federal funds rate ranged from a high of 6.00% in
January to a low of 3.75% in June.
Mortgage and other loans generated interest income of $206.1 million in the
first six months of 2002, up $72.5 million, or 54.3%, from the year-earlier
amount. The increase stemmed from a $2.0 billion, or 56.6%, rise in the average
balance of loans to $5.5 billion, and was tempered by a five-basis point drop in
the average yield to 7.60%. Loans represented 65.8% of average interest-earning
assets in the current six-month period and generated 70.2% of total interest
income.
Mortgage-backed securities generated interest income of $69.3 million in the
current six-month period, up $59.2 million from the level recorded in the first
six months of 2001. The increase was fueled by a $2.0 billion rise in the
average balance to $2.3 billion, and tempered by a 37-basis point drop in the
average yield to 6.07%. Mortgage-backed securities represented 27.7% of average
interest-earning assets in the current six-month period and generated 23.6% of
total interest income.
The interest income provided by securities rose $3.6 million year-over-year to
$17.7 million, the net effect of a $217.0 million increase in the average
balance to $511.7 million and a 261-basis point reduction in the average yield
to 6.98%.
The higher levels of interest income provided by loans, mortgage-backed
securities, and other securities more than offset a decline in the interest
income provided by money market investments to $276,000 in the current six-month
26
period from $4.8 million in the first six months of 2001. The reduction was the
combined result of a $173.3 million decrease in the average balance to $29.1
million and a 291-basis point decrease in the average yield to 1.92%.
Interest Expense
The Company recorded interest expense of $114.9 million in the first six months
of 2002, as compared to $91.3 million in the first six months of 2001. The 25.8%
increase was the net effect of a $3.7 billion rise in the average balance of
interest-bearing liabilities to $7.8 billion and a 154-basis point reduction in
the average cost of funds to 2.97%. The higher average balance reflects deposits
acquired in the Richmond County merger and the impact of the Company's
subsequent implementation of a leveraged growth strategy. The lower cost
reflects the greater concentration of core deposits within the mix of funding
sources, the downward repricing of deposits in general, and the Company's
emphasis on the sale of investment products in lieu of higher cost CDs.
Borrowings produced six-month 2002 interest expense of $60.9 million, up $32.8
million from the year-earlier amount. The increase was the net effect of a $1.9
billion rise in the average balance to $2.9 billion and a 124-basis point
decline in the average cost to 4.24%. Reflecting the Company's leveraging
strategy, borrowings represented 37.1% of average interest-bearing liabilities
in the current six-month period, and generated 53.0% of total interest expense.
The higher level of interest expense produced by borrowings was tempered by a
reduction in the interest expense produced by deposits and mortgagors' escrow
combined. The interest expense produced by these sources of funds fell $9.2
million to $54.0 million, as a $2.1 billion rise in the average balance to $5.4
billion was offset by a 190-basis point decline in the average cost to 2.03%.
Reflected in the higher average balance of these funding sources was a $265.4
million rise in average non-interest-bearing deposits to $463.8 million.
CDs produced six-month 2002 interest expense of $34.7 million, down $17.3
million from the year-earlier amount. The decrease was the net effect of a
$359.4 million rise in the average balance to $2.2 billion and a 260-basis point
reduction in the average cost to 3.25%. CDs represented 27.6% of
interest-bearing liabilities in the current six-month period, and generated
30.2% of total interest expense.
NOW and money market accounts produced interest expense of $7.6 million, up from
$7.0 million in the first six months of 2001. The increase was the net effect of
a $314.2 million rise in the average balance to $1.0 billion and a 47-basis
point reduction in the average cost to 1.48%.
The interest expense produced by savings accounts, meanwhile, rose $7.4 million
to $11.7 million, the net effect of a $1.2 billion increase in the average
balance to $1.7 billion and a 32-basis point decline in the average cost to
1.41%.
Mortgagors' escrow generated interest expense of $10,000, down from $12,000 in
the year-earlier six months. The decrease was the net effect of an $18.2 million
rise in the average balance to $49.2 million and a four-basis point drop in the
average cost to 0.04%.
Net Interest Income
The Company recorded net interest income of $178.5 million in the first six
months of 2002, signifying a 150.2% increase from $71.3 million, the
year-earlier amount. The growth in net interest income was paralleled by the
expansion of the Company's spread and margin, which rose 110 and 102 basis
points, respectively, to 4.15% and 4.33%.
The growth in net interest income and the related measures was boosted by the
aforementioned increase in the Company's average interest-earning assets, and
supported by the aforementioned decline in its cost of funds. For additional
information regarding the factors contributing to the growth of the Company's
net interest income, spread, and margin, see the discussion of net interest
income for the three months ended June 30, 2002 beginning on page 22 of this
report.
27
Net Interest Income Analysis
Six Months Ended June 30,
------------------------------------------------------------------------------
2002 2001
------------------------------------- -------------------------------------
Average Average
Average Yield/ Average Yield/
(dollars in thousands) Balance Interest Cost Balance Interest Cost
---------- ---------- ---------- ---------- ---------- ----------
Assets:
Interest-earning assets:
Mortgage and other loans, net $5,471,297 $206,130 7.60% $3,493,505 $133,607 7.65%
Securities 511,720 17,711 6.98 294,714 14,133 9.59
Mortgage-backed securities 2,304,244 69,317 6.07 313,680 10,094 6.44
Money market investments 29,062 276 1.92 202,380 4,839 4.83
---------- ---------- ---------- ---------- ---------- ----------
Total interest-earning assets 8,316,323 293,434 7.12 4,304,280 162,673 7.56
Non-interest-earning assets 1,285,908 314,125
---------- ----------
Total assets $9,602,231 $4,618,405
========== ==========
Liabilities and Stockholders' Equity:
Interest-bearing liabilities:
NOW and money market accounts $1,033,429 $7,591 1.48% $ 719,227 $ 6,950 1.95%
Savings accounts 1,671,789 11,692 1.41 504,366 4,321 1.73
Certificates of deposit 2,152,471 34,728 3.25 1,793,069 51,978 5.85
Borrowings 2,900,325 60,915 4.24 1,033,945 28,079 5.48
Mortgagors' escrow 49,234 10 0.04 31,023 12 0.08
---------- ---------- ---------- ---------- ---------- ----------
Total interest-bearing liabilities 7,807,248 114,936 2.97 4,081,630 91,340 4.51
Non-interest-bearing deposits 463,810 198,387
Other liabilities 277,741 51,920
---------- ---------
Total liabilities 8,548,799 4,331,937
Stockholders' equity 1,053,432 286,468
---------- ----------
Total liabilities and stockholders' equity $9,602,231 $4,618,405
========== ==========
Net interest income/interest rate spread $178,498 4.15% $ 71,333 3.05%
========== ========== ========== ==========
Net interest-earning assets/net interest
margin $509,075 4.33% $222,649 3.31%
========== ========== ========== ==========
Ratio of interest-earning assets to
interest-bearing liabilities 1.07x 1.05x
========== ==========
Provision for Loan Losses
As noted in the discussion of the provision for loan losses for the second
quarter, the Company has recorded no loan loss provisions since the third
quarter of 1995. For additional information about the provision for loan losses,
please see the discussion that appears on page 23 of this filing, and the
discussion of asset quality beginning on page 12.
Other Operating Income
The Company recorded other operating income of $47.8 million in the first six
months of 2002, as compared to $39.6 million in the first six months of 2001.
Fee income accounted for $6.3 million of the $8.2 million increase, having risen
39.8% to $22.0 million in the current six-month period. Other income accounted
for the remaining $3.1 million of the increase, having grown 20.5% to $18.0
million. The higher levels of fee and other income were partly tempered by a
$1.2 million reduction in net securities gains to $7.8 million, absent which the
Company would have recorded other operating income of $40.0 million.
While the benefit of the Richmond County merger is reflected in the higher
levels of fee and other income, the latter increase also reflects revenues from
third-party product sales, BOLI, and PBC. Third-party product sales generated
revenues of $6.1 million in the current six-month period, while BOLI and PBC
generated revenues of $4.0 million and $3.0 million, respectively. In the six
months ended June 30, 2001, the sale of third-party products generated other
income of $3.1 million, while BOLI generated $1.9 million.
28
Non-interest Expense
The Company recorded non-interest expense of $70.0 million in the first six
months of 2002, up $30.0 million from the level recorded in the first six months
of 2001. The 2002 amount reflects a $30.0 million increase in operating expense
to $67.0 million, and CDI amortization stemming from the Richmond County merger
in the amount of $3.0 million. The latter amount was comparable to the amount of
goodwill amortization stemming from the Haven acquisition recorded in the six
months ended June 30, 2001.
The year-over-year increase in operating expense stemmed from all expense
categories: an $18.1 million increase in compensation and benefits expense to
$35.7 million; a $4.6 million increase in occupancy and equipment expense to
$11.7 million; a $5.6 million increase in G&A expense to $16.6 million; and a
$1.7 million increase in other operating expense to $3.1 million. The higher
costs were primarily due to the Richmond County merger and the PBC acquisition,
which generated additions in staff and office space.
The growth in operating expense was sufficiently offset by the higher levels of
net interest income and other operating income to produce a 374-basis point
improvement in the efficiency ratio to 29.60%. In addition, the ratio of
operating expense to average assets improved to 1.40% in the current six-month
period from 1.60% in the first six months of 2001.
Income Tax Expense
The Company recorded income tax expense of $51.8 million in the first six months
of 2002, as compared to $24.7 million in the first six months of 2001. The
increase was the net effect of an $85.3 million rise in pre-tax income to $156.3
million and a decline in the effective tax rate from 34.73% to 33.17%. The lower
effective tax rate reflects the benefit of certain tax planning strategies that
were implemented in the fourth quarter of 2001.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about the Company's market risk were
presented in the discussion and analysis of Market Risk and Interest Rate
Sensitivity that appear on pages 20 - 23 of the Company's 2001 Annual Report to
Shareholders, filed on April 1, 2002. Subsequent changes in the Company's market
risk profile and interest rate sensitivity are detailed in the discussion
entitled "Asset and Liability Management and the Management of Interest Rate
Risk," beginning on page 16 of this quarterly report.
29
NEW YORK COMMUNITY BANCORP, INC.
PART 2 - OTHER INFORMATION
Item 1. Legal Proceedings
The Bank is involved in various legal actions arising in the ordinary course of
its business. All such actions, in the aggregate, involve amounts that are
believed by management to be immaterial to the financial condition and results
of operations of the Bank.
Item 2. Changes in Securities
(a) On May 14, 2002, the Company completed the public offering of 5,865,000
shares of its common stock (including 765,000 shares of stock sold
pursuant to the exercise of the underwriters' over-allotment option), at a
public offering price of $29.00 per share.
(b) The principal underwriters of the transaction were Lehman Brothers;
Salomon Smith Barney; and Sandler O'Neill & Partners, L.P. The firms
Advest, Inc.; Janney Montgomery Scott LLC; and Keefe, Bruyette & Woods,
Inc. also participated in the underwriting of the transaction.
(c) The aggregate offering price of the common stock was approximately $170.0
million. Aggregate underwriting discounts or commissions totaled
approximately $6.8 million. Expenses for the transaction, excluding
underwriting discounts and commissions, were approximately $600,000. Net
proceeds to the Company after expenses, underwriting discounts, and
commissions were approximately $162.7 million.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Shareholders on May 15, 2002.
Proxies were solicited with respect to such meeting under Regulation 14A
of the Securities Exchange Act of 1934, as amended, pursuant to proxy
materials dated April 15, 2002. Of the 102,245,457 shares eligible to vote
at the annual meeting, 92,319,524 were represented in person or by proxy.
(b) There was no solicitation in opposition to the Board's nominees for
director, and all of such nominees were elected, as follows:
No. of Votes No. of Votes Broker
For Withheld Non-Votes
------------ ------------ ---------
Max L. Kupferberg 90,962,963 1,356,561 -0-
Dominick Ciampa 91,021,240 1,298,284 -0-
William C. Frederick, M.D. 91,108,021 1,211,503 -0-
30
The following directors are serving terms of office that continue through
2003 and 2004, as noted:
Director Year Term Expires
-------- -----------------
Joseph R. Ficalora 2003
Michael F. Manzulli 2003
Robert S. Farrell 2003
Donald M. Blake 2004
Howard C. Miller 2004
Anthony E. Burke 2004
(c) Two additional proposals were submitted for a vote, with the following
results:
No. of Votes No. of Votes No. of Votes Broker
For Against Abstaining Non-Votes
--- ------- ---------- ---------
1. Amendment of the New York Community
Bancorp, Inc. 1997 Stock Option Plan. 69,424,128 22,408,485 486,911 Not Applicable
2. Ratification of the appointment of KPMG
LLP as independent auditors for the fiscal
year ending December 31, 2002. 90,222,113 2,260,023 71,388 Not Applicable
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 3.2: Bylaws*
Exhibit 10.1 Amended and Restated Employment Agreement of Joseph R.
Ficalora
Exhibit 11: Statement re: Computation of Per Share Earnings
Exhibit 99.1: Certification of the Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 99.2: Certification of the Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
* Incorporated by reference to the Exhibits filed with the Company's Form
10-K for the year ended December 31, 2001, File No. 0-22278.
(b) Reports on Form 8-K
On May 21, 2002, the Company filed a Current Report on Form 8-K regarding
its May 8 announcement of the public offering of 5.1 million shares of its
common stock at a price to the public of $29.00 per share; its May 9
announcement that the underwriters of its public offering of 5.1 million
shares of its common stock had exercised their overallotment option to
purchase an additional 765,000 shares at a price of $29.00 per share; and
its May 14 announcement that it completed the public offering of 5,865,000
shares of its common stock. The underwriting agreement was included by
exhibit.
On July 18, 2002, the Company filed a Current Report on Form 8-K reporting
its earnings for the three- and six- month periods ended June 30, 2002,
and providing its diluted GAAP EPS estimates for the full year 2002 and
2003.
31
On July 22, 2002, the Company filed a Current Report on Form 8-K regarding
its intention to make available and distribute to current and prospective
investors a written presentation that would also be posted on its web
site. The presentation discusses the Company's current and historic
performance, strategies, and diluted GAAP EPS projections for 2002 and
2003.
On July 23, 2002, the Company filed a Current Report on Form 8-K reporting
that the Board of Directors had declared a quarterly cash dividend of
$0.20 per share, payable on August 15, 2002 to shareholders of record as
of August 5, 2002.
32
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
New York Community Bancorp, Inc.
--------------------------------
(Registrant)
DATE: August 9, 2002 BY: /s/ Joseph R. Ficalora
----------------------
Joseph R. Ficalora
President and
Chief Executive Officer
(Duly Authorized Officer)
DATE: August 9, 2002 BY: /s/ Robert Wann
---------------
Robert Wann
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
33