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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended: Commission File Number 0-31565
December 31, 2002
NEW YORK COMMUNITY BANCORP, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1377322
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
615 Merrick Avenue, Westbury, New York 11590
(Address of principal executive offices) (Zip code)
(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)
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 that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes |X| No | |
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (Section 229.405 of this chapter) is not considered herein,
and will not be contained to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of the Form 10-K or any amendment to this Form 10-K. |X|
Indicated by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act) Yes |X| No| |
As of June 28, 2002, the aggregate market value of the shares of common stock
outstanding of the registrant was $2.709 billion, excluding 7,971,078 shares
held by all directors and executive officers of the registrant. This figure is
based on the closing price as reported by the Nasdaq National Market for a share
of the registrant's common stock on June 28, 2002, which was $27.10 as reported
in The Wall Street Journal on July 1, 2002.
The number of shares of the registrant's common stock outstanding as of March
26, 2003 was 104,897,760 shares.
Documents Incorporated by Reference
Portions of the definitive Proxy Statement for the Annual Meeting of
Shareholders to be held on May 14, 2003, and the 2002 Annual Report to
Shareholders are incorporated herein by reference - Parts I, II, and III.
CROSS REFERENCE INDEX
PART I
Page
Item 1. Business 1
Description of Business 1
Statistical Data: 19
Mortgage and Other Lending Activities 20
Loan Maturity and Repricing 21
Summary of the Allowance for Loan Losses 22
Composition of the Loan Portfolio 23
Portfolio of Securities, Money Market Investments,
and Mortgage-backed Securities 24
Item 2. Properties 25
Item 3. Legal Proceedings 25
Item 4. Submission of Matters to a Vote of Security Holders 25
PART II
Item 5. Market for Registrant's Common Stock and Related Stockholder
Matters 25
Item 6. Selected Financial Data 25
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 25
Item 8. Financial Statements and Supplementary Data
New York Community Bancorp, Inc. and Subsidiaries: 26
Independent Auditors' Report 26
Consolidated Statements of Condition 26
Consolidated Statements of Income and Comprehensive Income 26
Consolidated Statements of Changes in Stockholders' Equity 26
Consolidated Statements of Cash Flows 26
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 26
PART III
Item 10. Directors and Executive Officers of the Registrant 26
Item 11. Executive Compensation 26
Item 12. Security Ownership of Certain Beneficial Owners and Management 26
Item 13. Certain Relationships and Related Transactions 26
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 26
Signatures 28
PART I
ITEM 1. BUSINESS
Formerly known as Queens County Bancorp, Inc., New York Community
Bancorp, Inc. (the "Company"),was incorporated in the State of Delaware on July
20, 1993, to serve as the holding company for New York Community Bank (the
"Bank"), formerly known as Queens County Savings Bank. Established on April 14,
1859, the Bank was the first savings bank chartered in the State of New York in
the Borough of Queens. The Company acquired all of the stock of the Bank upon
its conversion from a New York State-chartered mutual savings bank to a New York
State-chartered stock form savings bank on November 23, 1993.
On November 21, 2000, the Company changed its name to New York
Community Bancorp, Inc., in anticipation of its acquisition of Haven Bancorp,
Inc. ("Haven"), parent company of CFS Bank. On November 30, 2000, Haven was
merged with and into the Company, and on January 31, 2001, CFS Bank merged with
and into New York Community Bank. On July 31, 2001, the Company completed a
merger-of-equals with Richmond County Financial Corp. ("Richmond County"),
parent company of Richmond County Savings Bank. At the same time, Richmond
County Savings Bank merged with and into the Bank.
The Bank currently serves its customers through a network of 110
banking offices in New York City, Long Island, Westchester County, and New
Jersey, and operates through six divisions with strong local identities: Queens
County Savings Bank, Richmond County Savings Bank, CFS Bank, First Savings Bank
of New Jersey, Ironbound Bank, and South Jersey Bank. In addition to operating
the largest supermarket banking franchise in the metro New York region, with 54
in-store branches, the Bank ranks among its leading producers of multi-family
mortgage loans.
The Company also serves its customers, and its shareholders, through
its website, www.myNYCB.com. Earnings releases, dividend announcements, and
other press releases are typically available at this site within ten minutes of
issuance. In addition, the Company's Securities and Exchange Commission filings
(including its annual report on Form 10-K; its quarterly reports on Form 10-Q;
and its current reports on Form 8-K) are typically available within ten minutes
of being filed with the Securities and Exchange Commission.
General
The Company recorded total assets of $11.3 billion at December 31,
2002, up $2.1 billion, or 22.9%, from the balance recorded at December 31, 2001.
Mortgage loans represented $5.4 billion, or 47.8%, of total assets,
including $4.5 billion of multi-family loans. The latter amount reflects
twelve-month originations totaling $2.1 billion, representing 80.3% of total
mortgage loans produced in 2002. While the multi-family loan portfolio rose $1.2
billion, or 38.1%, during the year, the increase was largely offset by a $1.1
billion decline in one-to-four family loans to $265.7 million. In addition to a
significant level of prepayments, the reduction stemmed from the sale of loans
totaling $215.9 million and the securitization of loans totaling $572.5 million.
The reduction in one-to-four family loans, like the increase in multi-family
lending, was indicative of a strategic balance sheet restructuring program
designed to enhance the quality of the Company's loan portfolio.
The quality of the Company's loans was demonstrated by the performance
of the portfolio in 2002. At December 31, 2002, non-performing assets declined
$1.2 million to $16.5 million, representing 0.15% of total assets, while
non-performing loans declined $1.2 million to $16.3 million, representing 0.30%
of loans, net. In addition, the fourth quarter of 2002 was the Company's 33
consecutive quarter without any net charge-offs being recorded. 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 247.8% of non-performing
loans at December 31, 2002.
While enhancing the mix of mortgage loans was its primary objective,
the Company also focused on growing its assets through a leveraging strategy.
Reflecting the deployment of borrowings into securities investments and the
aforementioned loan securitization, the portfolio of securities available for
sale rose $1.6 billion to $4.0 billion, while the portfolio of securities held
to maturity rose $496.3 million to $699.4 million. Mortgage-backed securities,
with an average maturity of 2.4 years, represented $3.6 billion, or 91.0% of the
available-for-sale portfolio, while capital trust notes, corporate bonds, and
Federal Home Loan Bank ("FHLB") stock comprised the bulk of securities held to
maturity.
1
At December 31, 2002, the Company's borrowings totaled $4.6 billion, up
$2.1 billion from the balance recorded at December 31, 2001. Included in the
2002 amount were Federal Home Loan Bank of New York ("FHLB-NY") advances of $2.3
billion; reverse repurchase agreements of $2.0 billion; and trust preferred
securities of $368.8 million.
Additional funding stemmed from a $264.2 million increase in core
deposits to $3.3 billion, representing 62.9% of total deposits at year-end 2002.
The increase was partly offset by a $458.8 million decline in CDs to $1.9
billion, reflecting management's focus on the sale of third-party investment
products, and the divestiture of 14 in-store branch offices in Connecticut, New
Jersey, and Rockland County (New York) in the second quarter of the year. The
reduction in banking offices was partly offset by the opening of four new
banking offices in Richmond and Nassau Counties during the first three quarters
of 2002.
While core deposits and borrowings were the Company's primary funding
sources, funding also stemmed from a robust level of prepayments in both the
mortgage-backed securities and one-to-four family mortgage loan portfolios in
2002. The funding derived from these sources was further supplemented by funds
derived from loan and securities sales totaling $825.1 million and the maturity
of loans and securities.
In 2002, the Company enhanced its capital position through two
successful public offerings. On May 14th, the Company issued 5,865,000 shares of
common stock in an oversubscribed secondary offering that generated net proceeds
of $147.5 million; and, on November 4, 2002, the Company issued 5.5 million
Bifurcated Option Note Unit Securities (BONUSES(SM) Units) in an oversubscribed
offering that generated net proceeds of $267.3 million. A hybrid investment
instrument, the BONUSES Units combine a warrant to purchase common stock with a
trust preferred security. The net proceeds generated in connection with the
warrant portion of the offering amounted to $89.9 million; the balance of the
net proceeds was recorded in borrowings.
At December 31, 2002, stockholders' equity totaled $1.3 billion, up
$340.4 million, or 34.6%, from the balance recorded at December 31, 2001. The
2002 amount was equivalent to 11.70% of total assets and a book value per share
of $12.97, based on 102,058,843 shares.
Reflecting the record level of mortgage loans produced and the merits
of the leveraging program, the Company recorded 2002 net income of $229.2
million, up $124.8 million, or 119.4%, from the year-earlier amount. The $229.2
million was equivalent to an $0.88, or 65.7% increase in diluted earnings per
share to $2.22, and provided a return on average assets and average
stockholders' equity of 2.29% and 19.95%, respectively.
Earnings growth was supported by a $167.4 million, or 81.4%, rise in
net interest income to $373.3 million and by an $11.2 million, or 12.4%, rise in
other operating income to $101.8 million. Reflected in net interest income is
the interest income produced by the Company's portfolios of loans and securities
investments, which more than offset the interest expense produced by its
portfolios of interest-bearing deposits and borrowings. Other operating income
stemmed from a variety of sources, including the fee income derived from branch
operations; net gains on the sale of securities; and other revenue sources.
Included in the latter category are the income derived from the sale of
third-party investment products, the income derived from the Company's
investment in Bank-owned Life Insurance, and the income derived from the
Company's 100% equity interest in Peter B. Cannell & Co., Inc., an investment
advisory firm.
Reflecting the strength of its earnings and its capital position, the
Company increased its quarterly cash dividend 25% in the second quarter of 2002
and another 25% in the first quarter of 2003. In addition, the Company
maintained an active share repurchase program during 2002, allocating $120.0
million toward the repurchase of 4,337,534 shares. Reflecting shares
repurchases, which were offset by option exercises and the issuance of shares in
the secondary offering, the number of shares outstanding at December 31, 2002
was 105,664,464. Reflecting share repurchases in the first quarter of 2003, the
number of outstanding shares at March 26, 2003 was 104,897,760.
Market Area and Competition
The Company enjoys a significant presence in the metro New York region
and New Jersey, and ranks as the fifth largest thrift depository in the City of
New York. In Queens and Staten Island, where the Company has, respectively, 25
and 23 locations, the Bank ranks as the second largest thrift depository, with a
7% and 22% market share. The remainder of the franchise consists of 31 branches
in Long Island, 19 in New Jersey, 8 more in New York City, and 4 in Westchester
County, New York.
2
The Company's multi-family market niche is centered in the metro New
York region and is primarily comprised of buildings that are rent-controlled or
rent-stabilized.
The Bank faces significant competition both in making loans and in
attracting deposits. Its market area has a high density of financial
institutions, many of which have greater financial resources than the Bank, and
all of which are competitors of the Bank to varying degrees. The Bank vies with
commercial banks, other savings banks, credit unions, and savings and loan
associations for deposits, and with the same institutions, as well as mortgage
banking companies and insurance companies, for loans. Additionally, the Bank
faces competition from non-traditional financial service companies and, on a
nationwide basis, from companies that solicit loans and deposits over the
Internet.
In recent years, competition has increased as a result of recent
regulatory actions and legislative changes, most notably the enactment of the
Gramm-Leach-Bliley Act of 1999. These changes have eased restrictions on
interstate banking and the entrance into the financial services market by
non-traditional and non-depository financial services providers, including
insurance companies and brokerage and underwriting firms.
Reflecting the entry of new banks into the market, the Bank has
recently faced increased competition for the origination of multi-family loans.
While management anticipates that competition for multi-family loans will
continue to rise in the future, the level of loans produced in 2002 and in the
current first quarter would indicate that the Company has the resources to
compete effectively. This said, no assurances can be made that the Bank will be
able to sustain its leadership role in the multi-family lending market, given
that loan production may be influenced by competition as well as by such other
factors as economic conditions and market interest rates.
The Company's ability to compete for deposits has been enhanced by the
growth of its branch network, both through merger transactions and through de
novo development. In addition, the Company places an emphasis on convenience by
featuring 24-hour banking, both on line and through a network of 146 ATMS.
Lending Activities
Loan and Mortgage-backed Securities Portfolio Composition. The
Company's loan portfolio consists primarily of multi-family mortgage loans on
rental and cooperative apartment buildings and, to a lesser extent, of
commercial real estate, one-to-four family, construction, and other loans. At
December 31, 2002, loans outstanding totaled $5.5 billion, of which $4.5
billion, or 81.9%, were multi-family mortgage loans. Reflected in the latter
amount were twelve-month originations totaling $2.1 billion, representing 80.4%
of total mortgage loan originations for the year.
One-to-four family mortgage loans totaled $265.7 million at December
31, 2002, representing 4.8% of outstanding loans. The year-end balance reflects
a robust level of prepayments, the securitization of loans totaling $572.5
million in the second quarter, and the sale of loans from portfolio totaling
$215.9 million over the course of the year. In addition, the Company currently
originates one-to-four family loans on a conduit basis; as a result, no newly
originated loans are retained for portfolio.
The remainder of the mortgage loan portfolio at year-end 2002
consisted of commercial real estate loans totaling $533.3 million and
construction loans totaling $117.0 million. In addition, the Company had other
loans totaling $78.8 million.
At December 31, 2002, 82.0% of outstanding mortgage loans had been made
at adjustable rates of interest and 18.0% had been made at fixed rates.
The types of loans originated by the Bank are subject to federal and
state laws and regulations. Interest rates charged by the Bank on loans are
affected principally by the demand for such loans, the supply of money available
for lending purposes, and the rates offered by its competitors. These factors
are, in turn, affected by general economic conditions, the monetary policy of
the Board of Governors of the Federal Reserve System ("Federal Reserve Board"),
legislative tax policies, and governmental budgetary matters.
The Bank has invested in a variety of mortgage-backed securities, some
of which are directly or indirectly insured or guaranteed by the Federal Home
Loan Mortgage Corporation ("FHLMC"), the Government National Mortgage
Association ("GNMA"), or the Federal National Mortgage Association ("FNMA"). At
December 31, 2002, mortgage-
3
backed securities totaled $3.63 billion, representing 32.1% of total assets, of
which $3.60 billion were classified as available for sale and $36.95 million
were classified as held to maturity. The market value of total mortgage-backed
securities was approximately $3.64 billion at December 31, 2002.
Loan Originations, Purchases, Sales, and Servicing. The Bank originates
both adjustable rate mortgage ("ARM") loans and fixed-rate loans, the amounts of
which are dependent upon customer demand and market rates of interest.
Generally, the Bank does not purchase whole mortgage loans or loan
participations. One-to-four family mortgage loans are originated on a conduit
basis and sold without recourse. For the years ended December 31, 2002 and 2001,
sales of one-to-four family mortgage loans in connection with the conduit
program amounted to $201.6 million and $67.0 million, respectively.
In connection with the Company's balance sheet restructuring program, sales
of one-to-four family mortgage loans totaled $215.9 million and $610.6 million,
respectively, in 2002 and 2001, excluding $201.6 million and $67.0 million of
such loans that were originated and sold through the conduit program in the
corresponding years. As of December 31, 2002 and 2001, the Bank was servicing
$694.9 million and $1.7 billion, respectively, of loans for others. The Bank is
generally paid a fee up to 0.25% for servicing loans sold.
Multi-Family Lending. The Bank originates multi-family loans (defined
as loans on properties with five or more units), which are secured by rental or
cooperative apartment buildings that are primarily located in the metropolitan
New York area. At December 31, 2002, the Bank's portfolio of multi-family
mortgage loans totaled $4.5 billion, representing 81.9% of loans outstanding. Of
this total, $4.3 billion, or 96.1%, were secured by rental apartment buildings
and $173.9 million, or 3.9%, were secured by underlying mortgages on cooperative
apartment buildings.
Multi-family loans are generally originated for terms of 10 years at a
fixed rate of interest in years one through five and a rate that adjusts
annually with the prime rate of interest, as reported in The New York Times, in
each of years six through ten. The minimum rate is equivalent to that of the
initial five-year term. Prepayment penalties range from five points to one over
the first five years of the loan. Properties securing multi-family mortgage
loans are appraised by independent appraisers approved by the Bank.
In originating such loans, the Bank bases its underwriting decisions
primarily on the cash flows generated by the property in relation to the debt
service. The Bank also considers the financial resources of the borrower, the
borrower's experience in owning or managing similar properties, the market value
of the property, and the Bank's lending experience with the borrower. The Bank
generally requires minimum debt service ratios of 120% on multi-family
properties. In addition, the Bank requires a security interest in the personal
property at the premises and an assignment of rents.
The Bank's largest concentration of loans to one borrower at December
31, 2002 consisted of 17 loans secured by 17 multi-family properties located in
the Bank's primary market area. These loans were made to several borrowers who
are deemed to be related for regulatory purposes. As of December 31, 2002, the
outstanding balance of these loans totaled $96.9 million and, as of such date,
all such loans were performing in accordance with their terms. The Bank's
concentration of such loans did not exceed its "loans-to-one-borrower"
limitation.
Payments on loans secured by multi-family buildings are generally
dependent on the income produced by such properties, which, in turn, is
dependent on their successful operation or management. Accordingly, repayment of
such loans may be subject to adverse conditions in the real estate market or the
local economy. The Bank seeks to minimize these risks through its underwriting
policies, which restrict new originations of such loans to the Bank's primary
lending area and require such loans to be qualified on the basis of the
property's cash flow and debt service ratio. Since 1987, one loan on a
multi-family property located outside of the primary lending area was foreclosed
upon and subsequently sold; in the fourth quarter of 2002, the Company
classified a $2.3 million multi-family loan as non-performing, but subsequently
sold the loan in the first quarter of 2003 without any loss of principal or
interest.
One-to-Four Family Mortgage Lending. At December 31, 2002, $265.7
million, or 4.8%, of the Bank's loan portfolio, consisted of one-to-four family
mortgage loans. In addition to a robust level of prepayments, the year-end
amount reflects the securitization of loans totaling $572.5 million and the sale
of loans totaling $215.9 million from the portfolio. On December 1, 2000, the
Bank adopted a policy of originating one-to-four family loans on a conduit
basis, in order to minimize its credit and interest rate risk. Since then,
applications have been taken and processed by a third party and the loans sold
to said party, service-released. Under this program, the Bank sold one-to-four
family mortgage loans totaling $201.6 million and $67.0 million in 2002 and
2001, respectively. In the years ended December 31, 2002 and 2001, the Bank
originated $251.8 million and $137.0 million, respectively, of one-to-four
family loans.
4
In 2003, the balance of one-to-four family mortgage loans is expected
to decline further through principal repayments.
Non-performing one-to-four family loans totaled $14.1 million at
December 31, 2002, representing the majority of the Company's non-performing
loans at that date. In addition, foreclosed real estate, which is included in
"other assets" in the Consolidated Statements of Condition, consisted of four
properties with a total carrying value of approximately $175,000 as of December
31, 2002. In the first quarter of 2003, two of those loans were sold without
any loss.
Commercial Real Estate Lending. The Bank offers commercial real estate
loans that are typically secured by office buildings, retail stores, medical
offices, warehouses, and other non-residential buildings. At December 31, 2002,
the Bank had loans secured by commercial real estate of $533.3 million,
comprising 9.7% of the Bank's total loan portfolio. Commercial real estate loans
may be originated in amounts of up to 65% of the appraised value of the
mortgaged property and feature the same terms and prepayment penalties as the
Bank's multi-family loans. The origination of commercial real estate loans
requires one or more of the following: the personal guarantees of the
principals, a security interest in the personal property, and an assignment of
rents and/or leases. Properties securing the loan are appraised by independent
appraisers approved by the Bank.
Loans secured by commercial real estate properties, like multi-family
loans, are generally larger and involve a greater degree of risk than
one-to-four family residential mortgage loans. Because payments on loans secured
by commercial real estate properties are often dependent on the successful
operation and management of the properties, repayment of such loans may be
subject to adverse conditions in the real estate market or the economy, to a
greater extent than other types of loans. The Bank seeks to minimize these risks
through its lending policies and underwriting standards, which restrict new
originations of such loans to the Bank's primary lending area and qualify such
loans on the basis of the property's income stream and debt service ratio.
Construction Lending. The Bank primarily originates construction loans
to a select group of experienced builders with whom it has had a successful
lending relationship in the past. Building loans are primarily made for the
construction of owner-occupied one-to-four family homes under contract and, to a
far lesser extent, for the acquisition and development of commercial real estate
properties. The Bank will typically lend up to 70% of the estimated market
value, or up to 80%, in the case of home construction loans to individuals.
Personal guarantees and a permanent loan commitment are typically required.
Construction loans are made for terms of up to two years and feature a daily
floating prime-based rate of interest, with a floor of the original rate. Loan
proceeds are disbursed in increments as construction progresses and as
inspections warrant. As of December 31, 2002, the Bank had $117.0 million, or
2.1% of its total loan portfolio, invested in construction loans.
Other Lending. The Company currently originates other loans on a
conduit basis, with applications being taken and processed by a third party and
the loans then being sold to said party, service-released. To further reduce the
portfolio, the Company sold other loans totaling $71.4 million in 2002. Other
loans thus totaled $78.8 million at December 31, 2002, representing 1.4% of the
Bank's total loan portfolio.
Loan Approval Authority and Underwriting. The Board of Directors
establishes lending authority for individual officers for its various loan
products. All loans require the approval of the Mortgage and Real Estate
Committee, and all loans in excess of $5.0 million must be approved by the Board
of Directors as a whole. During the year ended December 31, 2002, the Bank
originated 82 loans in excess of $5.0 million.
Non-performing Loans and Foreclosed Assets. Non-performing loans
totaled $16.3 million at December 31, 2002, including mortgage loans in
foreclosure totaling $11.9 million and loans 90 days or more delinquent totaling
$4.4 million. Based on the current market values of the properties
collateralizing the mortgages, management does not expect any loss to be
incurred by the Bank.
Management reviews non-performing loans on a regular basis and reports
monthly to both the Mortgage and Real Estate Committee and the Board of
Directors regarding delinquent loans. The Bank hires outside counsel experienced
in foreclosure and bankruptcy to institute foreclosure and other proceedings on
the Bank's non-performing loans.
5
The Bank's policies provide that management report monthly to the
Mortgage and Real Estate Committee and the Board of Directors regarding
classified assets. The Bank reviews the problem loans in its portfolio on a
monthly basis to determine whether any loans require classification in
accordance with applicable regulatory guidelines, and believes its
classification policies are consistent with regulatory policies. All classified
assets of the Bank are included in mortgage loans in foreclosure, loans 90 days
or more delinquent, or foreclosed real estate.
When loans are designated as "in foreclosure", the accrual of interest
and amortization of origination fees continues up to net realizable value, less
the transaction cost of disposition. During the years ended December 31, 2002,
2001, and 2000, the amounts of additional interest income that would have been
recorded on mortgage loans in foreclosure, had they been current, totaled
approximately $429,000, $651,000 and $435,000, respectively. These amounts were
not included in the Bank's interest income for the respective periods.
The following table sets forth information regarding all mortgage loans
in foreclosure, loans that are 90 days or more delinquent, and foreclosed real
estate at the dates indicated. At December 31, 2002, the Bank had no
restructured loans within the meaning of Statement of Financial Accounting
Standards ("SFAS") No. 15, "Accounting by Debtors and Creditors for Troubled
Debt Restructurings," as amended by SFAS No. 114.
At December 31,
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
(dollars in thousands)
Mortgage loans in foreclosure $11,915 $10,604 $6,011 $2,886 $5,530
Loans 90 days or more delinquent
and still accruing interest 4,427 6,894 3,081 222 663
------- ------- ------ ------ ------
Total non-performing loans 16,342 17,498 9,092 3,108 6,193
------- ------- ------ ------ ------
Foreclosed real estate 175 249 12 66 419
Total non-performing assets $16,517 $17,747 $9,104 $3,174 $6,612
======= ======= ====== ====== ======
Total non-performing loans to
loans, net 0.30% 0.33% 0.25% 0.19% 0.42%
Total non-performing assets to
total assets 0.15 0.19 0.19 0.17 0.38
Management monitors non-performing loans and, when deemed appropriate,
writes down such loans to their current appraised values, less transaction
costs. There can be no assurances that further write-downs will not occur with
respect to such loans.
At December 31, 2002, foreclosed real estate consisted of four
residential properties with an aggregate carrying value of approximately
$175,000. The Bank generally conducts appraisals on all properties securing
mortgage loans in foreclosure and foreclosed real estate as deemed appropriate
and, if necessary, charges off any declines in value at such times. Based upon
management's estimates as to the timing of, and expected proceeds from, the
disposition of these loans, no material loss is currently expected to be
incurred. In the first quarter of 2003, two of these properties were sold
without any loss of principal or interest.
It is the Bank's general policy to dispose of properties acquired
through foreclosure or by deed in lieu thereof as quickly and as prudently as
possible, in consideration of market conditions and the condition of such
property. Foreclosed real estate is titled in the name of the Bank's
wholly-owned subsidiary, Main Omni Realty Corp., which manages the property
while it is offered for sale.
Allowance for Loan Losses
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; and geographic,
industry, and other environmental
6
factors. 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 allowance for loan losses is composed of five separate categories
corresponding to the Company's various loan classifications. 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 with each loan type. 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 both management (through its Classification of
Assets Committee), and the Board of Directors' designated committee (the
Mortgage and Real Estate Committee).
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 4 independent 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 the various governmental
regulators (e.g., Federal Deposit Insurance Corporation, the New York
State Banking Department); and
6) Full Board assessment of all of the above 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.
7
The Bank's allowance for loan losses totaled $40.5 million at December
31, 2002 and 2001. The year-end 2002 amount represented 247.8% of non-performing
loans and 245.2% of non-performing assets, respectively. The year-end 2001
amount represented 231.5% of non-performing loans and 228.2% of non-performing
assets, respectively. For the years ended December 31, 2002 and 2001, the Bank
had no net charge-offs against this allowance.
The Bank will continue to monitor and modify the level of its allowance
for loan losses in order to maintain such allowance at a level which management
considers adequate. See Statistical Data- B, C, and D, for components of the
Bank's loan portfolio, maturity, and repricing, and for a summary of the
allowance for loan losses.
Mortgage-backed Securities
The majority of the Bank's mortgage-backed securities are private label
mortgage-backed securities and the remainder are directly or indirectly insured
or guaranteed by the FNMA, FHLMC, or GNMA. At December 31, 2002, mortgage-backed
securities totaled $3.63 billion, representing 32.1% of total assets. Of the
$3.63 billion in total mortgage-backed securities, $36.95 million were
classified by the Bank as held to maturity and $3.60 billion were classified as
available for sale. Because a majority of the Bank's mortgage-backed securities
are fixed-rate private label collateralized mortgage obligations ("CMOs"), the
Bank anticipates that the majority of its mortgage-backed securities will prepay
or reprice within three years. At December 31, 2002, the mortgage-backed
securities portfolio had a weighted average interest yield of 5.10% and a market
value of approximately $3.64 billion.
Investment Activities
General. The investment policy of the Bank is established by the Board
of Directors and implemented by the Mortgage and Real Estate Committee and the
Investment Committee of the Board of Directors, together with certain executive
officers of the Bank. The policy is primarily designed to provide and maintain
liquidity, to generate a favorable return on investments without incurring undue
prepayment, interest rate, and credit risk, and to complement the Bank's lending
activities. The Bank's current securities investment policy permits investments
in various types of liquid assets, including U.S. Treasury securities,
obligations of various federal agencies, and bankers' acceptances of other
Board-approved financial institutions, corporate securities, commercial paper,
certificates of deposit, and federal funds. The Bank does not currently
participate in hedging programs or interest rate swaps and or high-risk mortgage
derivatives.
At December 31, 2002 the Bank's investment securities portfolio totaled
$1.1 billion, representing 9.3% of total assets. Of the $1.1 billion, in total
investment securities, $699.4 million were classified by the Bank as held to
maturity and $355.0 million were classified as available for sale. At December
31, 2002, the investment securities portfolio had a weighted average interest
yield of 7.04% and a market value of $1.1 billion.
Sources of Funds
General. The Company's primary funding sources are deposits and
borrowings. In connection with the Company's leveraged growth strategy, the
Company increased its borrowings during 2002. At December 31, 2002, borrowings
totaled $4.6 billion, including FHLB-NY advances of $2.3 billion, reverse
repurchase agreements of $2.0 billion, and trust preferred securities of $368.8
million. Included in the latter amount was $182.5 million stemming from the
aforementioned issuance of the BONUSES Units in the fourth quarter of the year.
Deposits. The Bank offers a variety of deposit accounts with a range of
interest rates and terms. The Bank's deposits principally consist of
certificates of deposit ("CDs") and savings accounts, together with NOW and
money market accounts and demand deposits. The flow of deposits has been
influenced significantly by the restructuring of the banking industry, changes
in money market and prevailing interest rates, and competition with other
financial institutions. The Bank's deposits are typically obtained from
customers residing or working in the communities in which its offices are
located. The Bank relies primarily on its long-standing relationships with its
customers to retain these deposits. At December 31, 2002, $615.7 million, or
11.7% of the Bank's deposit balance, consisted of CDs with a balance of $100,000
or more.
FHLB-NY Advances. The Bank is a member of the FHLB-NY, and had a $4.5
billion line of credit at December 31, 2002. FHLB-NY advances totaled $2.3
billion at December 31, 2002. A $10.0 million line of credit with a
correspondent financial institution is also available to the Bank, which had not
been drawn upon at December 31, 2002.
8
Reverse Repurchase Agreements. The Company has repurchase agreements of
$2.0 billion and $529.7 million outstanding at December 31, 2002 and 2001,
respectively.
Trust Preferred Securities. Haven Capital Trust I, Haven Capital Trust
II, Queens Capital Trust I, Queens Statutory Trust I, NYCB Capital Trust I, New
York Community Statutory Trust I, New York Community Statutory Trust II and New
York Community Capital Trust V are Delaware business trusts of which all the
common stock is owned by the Company. The Trusts were formed for the purpose of
issuing Company Obligated Mandatorily Redeemable Preferred Securities of
Subsidiary Trusts Holding Solely Junior Subordinated Debentures. Trust preferred
securities issued by New York Community Capital Trust V were issued as part of
the Company's BONUSES(SM) Units offering in November 2002.
For additional information about the Company's trust preferred
securities, see "Note 10 - Borrowings" in the Company's 2002 Annual Report to
Shareholders, which portion is incorporated herein by reference.
Subsidiary Activities
Under its New York State Leeway Authority, the Bank has formed, or
acquired through merger, 11 active subsidiary corporations, seven of which are
direct subsidiaries of the Bank and four of which are subsidiaries of Bank-owned
entities. The direct subsidiaries are: CFS Investments, Inc. (organized in New
York), which sells non-deposit investment products; RCBK Mortgage Corp.
(organized in New York), which holds multi-family mortgage loans; RCSB
Corporation (organized in New York), which owns a branch building; Richmond
Enterprises Inc. (organized in New York), which is the holding company for Peter
B. Cannell & Co., Inc.; CFS Investments New Jersey, Inc. (organized in
Delaware), an investment Company and the holding company for three Real Estate
Investment Trusts (REITs), Columbia Preferred Capital Corp, Ironbound Investment
Company, Inc. and Queens Realty Trust; Pacific Urban Renewal Corp. (organized in
New Jersey), which owns a branch building and Main Omni Realty Corp. (organized
in New York), which manages the Bank's properties aquired through foreclosure
while they are being marketed for sale.
The subsidiaries of Bank-owned entities are: Peter B. Cannell & Co., Inc.
(organized in Delaware), which advises high net worth individuals and
institutions on the management of their assets; Queens Realty Trust, Inc.
(organized in Delaware), a REIT that holds residential and commercial mortgages;
Ironbound Investment Company, Inc. (organized in New Jersey), a REIT that holds
residential and commercial mortgages; Richmond County Capital Corp. (organized
in New York), a REIT that holds residential and commercial mortgages; and
Columbia Preferred Capital Corp. (organized in Delaware), a REIT that holds
residential and commercial mortgages.
In addition, the Bank maintains five inactive corporations: Bayonne
Service Corp, (organized in New Jersey); MFO Holding Corp. (organized in New
York); Queens County Capital Management, Inc. (organized in New York); Columbia
Resources Corp. (organized in New York); and Columbia Funding Corporation,
(organized in New York). The Bank is also affiliated with Columbia Travel
Services, Inc., an inactive corporation organized in New York.
The Company owns eight special business trusts formed for the purpose
of issuing capital and common securities and investing the proceeds thereof in
the junior subordinated debentures issued by the Company. The following
subsidiaries are named in the "Trust Preferred Securities" section above. (See
"Note 10- Borrowings" in the Company's 2002 Annual Report to Shareholders, which
portion is incorporated herein by reference).
Personnel
At December 31, 2002, the number of full-time equivalent employees was
1,465. The Bank's employees are not represented by a collective bargaining unit,
and the Bank considers its relationship with its employees to be good.
9
FEDERAL, STATE, AND LOCAL TAXATION
Federal Taxation
General. The Company, the Bank and their subsidiaries (excluding
certain subsidiaries which are qualified as Real Estate Investment Trusts, which
file separately) report their income on a consolidated basis using a calendar
year on the accrual method of accounting, and are subject to Federal income
taxation in the same manner as other corporations with some exceptions,
including, particularly, the Bank's reserve for bad debts, as discussed below.
The following discussion of tax matters is intended only as a summary and does
not purport to be a comprehensive description of the tax rules applicable to the
Bank or the Company.
Bad Debt Reserves. Prior to the enactment of the Small Business Job
Protection Act of 1996 (the "1996 Act"), the Bank was permitted to establish tax
reserves for bad debts and to make annual additions thereto, which additions,
within specified formula limits, were deducted in arriving at the Bank's taxable
income. The Bank's deduction with respect to "qualifying loans," which are
generally loans secured by certain interests in real property, could be computed
using an amount based on a six-year moving average of the Bank's actual loss
experience (the "Experience Method"), or a percentage equal to 8% of the Bank's
taxable income (the "PTI Method"), computed without regard to this deduction and
with additional modifications, and reduced by the amount of any permitted
addition to the non-qualifying reserve. Under the 1996 Act, the Bank is no
longer permitted to make additions to its tax bad debts reserves and was
required to recapture (i.e., take into income) over a six-year period
approximately $7.4 million, representing the excess of the balance of its tax
bad debt reserves as of December 31, 1995 over the balance of such reserves as
of December 31, 1987.
Distributions. To the extent that the Bank makes "non-dividend
distributions" to shareholders that are considered to result in distributions
from the excess bad debt reserve, i.e., that portion, if any, of the balance of
the reserve for qualifying real property loans attributable to certain
deductions under the percentage of taxable income method, or the supplemental
reserve for losses on loans ("Excess Distribution"), then an amount based on the
distribution will be included in the Bank's taxable income.
Non-dividend distributions include distributions in excess of the
Bank's current and accumulated earnings and profits, distributions in redemption
of stock, and distributions in partial or complete liquidation. However,
dividends paid out of the Bank's current or accumulated earnings and profits, as
calculated for Federal income tax purposes, will not be considered to result in
a distribution from the Bank's bad debt reserves. Thus, any dividends to the
Company that would reduce amounts appropriated to the Bank's bad debt reserves
and previously deducted for Federal income tax purposes would create a tax
liability for the Bank.
The amount of additional taxable income resulting from an Excess
Distribution is an amount that, when reduced by the tax attributable to the
income, is equal to the amount of the distribution. Thus, the additional taxable
income would be an amount equal to approximately one and one-half times the
amount of the Excess Distribution, assuming a 35% corporate income tax rate
(exclusive of state taxes). See "Regulations and Supervision" for limits on the
payment of dividends by the Bank. The Bank does not intend to pay dividends that
would result in a recapture of any portion of its bad debt reserves.
Corporate Alternative Minimum Tax. The Code imposes an alternative
minimum tax ("AMT") at a rate of 20% on a base of regular taxable income plus
certain tax preferences ("alternative minimum taxable income" or "AMTI"). The
AMT is payable to the extent such AMTI is in excess of an exemption amount.
Certain payments of alternative minimum tax may be used as credits against
regular tax liabilities in future years. The Company has not been and does not
in the foreseeable future expect to be subject to the alternative minimum tax
and has no such amounts available as credits for carryover.
Dividends Received Deduction and Other Matters. The Company may exclude
from its income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. The corporate dividends received deduction is
generally 70% in the case of dividends received from unaffiliated corporations
with which the Company and the Bank will not file a consolidated tax return,
unless the Company and the Bank own more than 20% of the stock of the
corporation distributing a dividend, in which case 80% of any dividends received
may be deducted.
10
State and Local Taxation
The Company, the Bank and certain of their subsidiaries are subject to
the New York State Franchise Tax on Banking Corporations in the annual amount
equal to the greater of (i) 8% (falling to 7 1/2% in 2003) of "entire net
income" allocable to New York State during the taxable year, or (ii) the
applicable alternative minimum tax. The alternative minimum tax is generally the
greatest of (a) 0.01% of the value of taxable assets allocable to New York State
with certain modifications, (b) 3% of "alternative entire net income" allocable
to New York State, or (c) $250. Entire net income is similar to taxable income,
subject to certain modifications and alternative entire net income is equal to
entire net income without certain deductions. The Bank is also subject to a
similarly calculated New York City tax of 9% on income allocated to New York
City and similar alternative taxes.
A temporary Metropolitan Transportation Business Tax Surcharge on
banking corporations doing business in the metropolitan district has been
applied since 1982. The Bank does most of its business within this District
(except for the branch offices in New Jersey), and is subject to this surcharge
rate of 17% of the New York State tax liability computed as though the franchise
tax rate was still 9%.
As a Delaware business corporation, the Company is required to file
annual returns and pay annual fees and an annual franchise tax to the State of
Delaware. Additionally, the Bank and other subsidiaries of the Company doing
business in New Jersey are required to file and pay taxes in that state. Taxes
paid to states other than New York are not material.
REGULATION AND SUPERVISION
General
The Bank is a New York State-chartered stock form savings bank and its
deposit accounts are insured under the Bank Insurance Fund ("BIF"), and through
its acquisition of CFS Bank, some deposits are insured by the Savings
Association Insurance Fund ("SAIF"). The Bank is subject to extensive regulation
and supervision by the New York State Banking Department ("Banking Department"),
as its chartering agency, and by the FDIC, as its deposit insurer. The Bank must
file reports with the Banking Department and the FDIC concerning its activities
and financial condition, in addition to obtaining regulatory approvals prior to
entering into certain transactions such as mergers with, or acquisitions of,
other depository institutions. There are periodic examinations by the Banking
Department and the FDIC to assess the Bank's compliance with various regulatory
requirements. This regulation and supervision establishes a comprehensive
framework of activities in which a savings bank can engage and is intended
primarily for the protection of the insurance fund and depositors. The
regulatory structure also gives the regulatory authorities extensive discretion
in connection with their supervisory and enforcement activities and examination
policies, including policies with respect to the classification of assets and
the establishment of adequate loan loss allowances for regulatory purposes. Any
change in such regulation, whether by the Banking Department, the FDIC, or
through legislation, could have a material adverse impact on the Company and the
Bank and their operations, and the Company's shareholders. The Company is
required to file certain reports, and otherwise comply with the rules and
regulations of the Federal Reserve Board and the Banking Department and of the
Securities and Exchange Commission ("SEC") under federal securities laws.
Certain of the regulatory requirements applicable to the Bank and to the Company
are referred to below or elsewhere herein.
New York Law
The Bank derives its lending, investment, and other authority primarily
from the applicable provisions of Banking Law and the regulations of the Banking
Department, as limited by FDIC regulations. See "Restrictions on Certain
Activities." Under these laws and regulations, savings banks, including the
Bank, may invest in real estate mortgages, consumer and commercial loans,
certain types of debt securities (including certain corporate debt securities
and obligations of federal, state, and local governments and agencies), certain
types of corporate equity securities and certain other assets. Under the
statutory authority for investing in equity securities, a savings bank may
directly invest up to 7.5% of its assets in certain corporate stock, and may
also invest up to 7.5% of its assets in certain mutual fund securities.
Investment in the stock of a single corporation is limited to the lesser of 2%
of the issued and outstanding stock of such corporation or 1% of the savings
bank's assets, except as set forth below. Such equity securities must meet
certain earnings ratios and other
11
tests of financial performance. A savings bank's lending powers are not subject
to percentage of asset limitations, although there are limits applicable to
single borrowers. A savings bank may also, pursuant to the "leeway" power, make
investments not otherwise permitted under the New York State Banking Law. This
power permits investments in otherwise impermissible investments of up to 1% of
assets in any single investment, subject to certain restrictions and to an
aggregate limit for all such investments of up to 5% of assets. Additionally,
savings banks are authorized to elect to invest under a "prudent person"
standard in a wide range of debt and equity securities in lieu of investing in
such securities in accordance with and reliance upon the specific investment
authority set forth in the New York State Banking Law. Although the "prudent
person" standard may expand a savings bank's authority, in the event a savings
bank elects to utilize the "prudent person" standard, it will be unable to avail
itself of the other provisions of the New York State Banking Law and regulations
which set forth specific investment authority. A savings bank may also exercise
trust powers upon approval of the Banking Department.
New York savings banks may also invest in subsidiaries under a service
corporation power. A savings bank may use this power to invest in corporations
that engage in various activities authorized for savings banks, plus any
additional activities, which may be authorized by the Banking Department.
Investment by a savings bank in the stock, capital notes, and debentures of its
service corporation is limited to 3% of the savings bank's assets, and such
investments, together with the savings bank's loans to its service corporations,
may not exceed 10% of the savings bank's assets.
The exercise by an FDIC-insured savings bank of the lending and
investment powers of a savings bank under the New York State Banking Law is
limited by FDIC regulations and other federal laws and regulations. In
particular, the applicable provision of New York State Banking Law and
regulations governing the investment authority and activities of an FDIC-insured
state-chartered savings bank have been effectively limited by the Federal
Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA") and the FDIC
regulations issued pursuant thereto.
With certain limited exceptions, a New York State chartered savings
bank may not make loans or extend credit for commercial, corporate, or business
purposes (including lease financing) to a single borrower, the aggregate amount
of which would be in excess of 15% of the bank's net worth. The Bank currently
complies with all applicable loans-to-one borrower limitations.
Under New York State Banking Law, a New York State chartered stock form
savings bank may declare and pay dividends out of its net profits, unless there
is an impairment of capital, but approval of the Superintendent is required if
the total of all dividends declared in a calendar year would exceed the total of
its net profits for that year combined with its retained net profits of the
preceding two years, subject to certain adjustments.
Under New York State Banking Law, the Superintendent of Banks may issue
an order to a New York State chartered banking institution to appear and explain
an apparent violation of law, to discontinue unauthorized or unsafe practices,
and to keep prescribed books and accounts. Upon a finding by the Banking
Department that any director, trustee, or officer of any banking organization
has violated any law, or has continued unauthorized or unsafe practices in
conducting the business of the banking organization after having been notified
by the Superintendent to discontinue such practices, such director, trustee, or
officer may be removed from office after notice and an opportunity to be heard.
FDIC Regulations
Capital Requirements. The FDIC has adopted risk-based capital
guidelines to which the Bank is subject. The guidelines establish a systematic
analytical framework that makes regulatory capital requirements more sensitive
to differences in risk profiles among banking organizations. The Bank is
required to maintain certain levels of regulatory capital in relation to
regulatory risk-weighted assets. The ratio of such regulatory capital to
regulatory risk-weighted assets is referred to as the Bank's "risk-based capital
ratio." Risk-based capital ratios are determined by allocating assets and
specified off-balance-sheet items to four risk-weighted categories ranging from
0% to 100%, with higher levels of capital being required for the categories
perceived as representing greater risk.
These guidelines divide a savings bank's capital into two tiers. The
first tier ("Tier I") includes common equity, retained earnings, certain
non-cumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid
12
capital instruments, term subordinated debt and the allowance for loan and lease
losses, subject to certain limitations, less required deductions. Savings banks
are required to maintain a total risk-based capital ratio of 8%, of which at
least 4% must be Tier I capital.
In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage capital ratio (Tier I capital to adjusted average assets as
specified in the regulations). These regulations provide for a minimum Tier I
leverage capital ratio of 3% for banks that meet certain specified criteria,
including that they have the highest examination rating and are not experiencing
or anticipating significant growth. All other banks are required to maintain a
Tier I leverage capital ratio of at least 4%. The FDIC may, however, set higher
leverage and risk-based capital requirements on individual institutions when
particular circumstances warrant. Savings banks experiencing or anticipating
significant growth are expected to maintain capital ratios, including tangible
capital positions, well above the minimum levels.
As of December 31, 2002, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must
maintain a minimum Tier I Leverage Capital ratio of 5%, Total Capital ratio of
10%, and Tier I Capital ratio of 6%.
The following is a summary of the Bank's regulatory capital at December
31, 2002:
Tier I Leverage Capital to Average Assets 8.18%
Total Capital to Risk-Weighted Assets 17.01%
Tier I Capital to Risk-Weighted Assets 16.20%
In August 1995, the FDIC, along with the other federal banking
agencies, adopted a regulation providing that the agencies will take account of
the exposure of a bank's capital and economic value to changes in interest rate
risk in assessing a bank's capital adequacy. According to the agencies,
applicable considerations include the quality of the bank's interest rate risk
management process, the overall financial condition of the bank and the level of
other risks at the bank for which capital is needed. Institutions with
significant interest rate risk may be required to hold additional capital. The
agencies subsequently have issued a joint policy statement providing guidance on
interest rate risk management, including a discussion of the critical factors
affecting the agencies' evaluation of interest rate risk in connection with
capital adequacy. Banks that engage in specified amounts of trading activity may
be subject to adjustments in the calculation of the risk-based capital
requirement to assure sufficient additional capital to support market risk.
Standards for Safety and Soundness. Federal law requires each federal
banking agency to prescribe for depository institutions under its jurisdiction,
standards relating to, among other things, internal controls; information
systems and audit systems; loan documentation; credit underwriting; interest
risk exposure; asset growth; compensation; fees and benefits; and such other
operational and managerial standards as the agency deems appropriate. The
federal banking agencies adopted final regulations and Interagency Guidelines
Establishing Standards for Safety and Soundness (the "Guidelines") to implement
these safety and soundness standards. The Guidelines set forth the safety and
soundness standards that the federal banking agencies use to identify and
address problems at insured depository institutions before capital becomes
impaired. If the appropriate federal banking agency determines that an
institution fails to meet any standard prescribed by the Guidelines, the agency
may require the institution to submit to the agency an acceptable plan to
achieve compliance with the standard, as required by the Federal Deposit
Insurance Act, as amended, ("FDI Act"). The final regulation establishes
deadlines for the submission and review of such safety and soundness compliance
plans.
Real Estate Lending Standards. The FDIC and the other federal banking
agencies have adopted regulations that prescribe standards for extensions of
credit that (i) are secured by real estate or (ii) are made for the purpose of
financing the construction or improvements on real estate. The FDIC regulations
require each savings bank to establish and maintain written internal real estate
lending standards that are consistent with safe and sound banking practices and
appropriate to the size of the bank and the nature and scope of its real estate
lending activities. The standards also must be consistent with accompanying FDIC
Guidelines, which include loan-to-value limitations for the different types of
real estate loans. Savings banks are also permitted to make a limited amount of
loans that do not conform to the proposed loan-to-value limitations so long as
such exceptions are reviewed and justified appropriately. The Guidelines also
list a number of lending situations in which exceptions to the loan-to-value
standard are justified.
Dividend Limitations. The FDIC has authority to use its enforcement
powers to prohibit a savings bank from paying dividends if, in its opinion, the
payment of dividends would constitute an unsafe or unsound practice. Federal law
13
prohibits the payment of dividends by a bank that will result in the bank
failing to meet applicable capital requirements on a pro forma basis. The Bank
is also subject to dividend declaration restrictions imposed by New York law.
Investment Activities
Since the enactment of FDICIA, all state-chartered financial
institutions, including savings banks and their subsidiaries, have generally
been limited to activities as principal and equity investments of the type and
in the amount authorized for national banks, notwithstanding state law, FDICIA
and the FDIC regulations permit certain exceptions to these limitations. For
example, certain state chartered banks, such as the Bank, may, with FDIC
approval, continue to exercise state authority to invest in common or preferred
stocks listed on a national securities exchange or the National Market System of
Nasdaq and in the shares of an investment company registered under the
Investment Company Act of 1940, as amended. Such banks may also continue to sell
Savings Bank Life Insurance. In addition, the FDIC is authorized to permit such
institutions to engage in state authorized activities or investments not
permitted for national banks (other than non-subsidiary equity investments) for
institutions that meet all applicable capital requirements if it is determined
that such activities or investments do not pose a significant risk to the BIF.
The Gramm-Leach-Bliley Act of 1999 and FDIC regulation impose certain
quantitative and qualitative restrictions on such activities and a bank's
dealings with a subsidiary that engages in specified activities. All
non-subsidiary equity investments, unless otherwise authorized or approved by
the FDIC, must have been divested by December 19, 1996, pursuant to an
FDIC-approved divestiture plan unless such investments were grandfathered by the
FDIC.
The Bank received grandfathering authority from the FDIC in February
1993 to invest in listed stock and/or registered shares subject to the maximum
permissible investments of 100% of Tier I capital, as specified by the FDIC's
regulations, or the maximum amount permitted by New York State Banking Law,
whichever is less. Such grandfathering authority is subject to termination upon
the FDIC's determination that such investments pose a safety and soundness risk
to the Bank or in the event the Bank converts its charter or undergoes a change
in control. As of December 31, 2002, the Bank had $239.2 million of such
investments.
Prompt Corrective Regulatory Action
Federal law requires, among other things, that federal bank regulatory
authorities take "prompt corrective action" with respect to banks that do not
meet minimum capital requirements. For these purposes, the law establishes five
capital tiers: well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized.
The FDIC has adopted regulations to implement the prompt corrective
action legislation. Among other things, the regulations define the relevant
capital measure for the five capital categories. An institution is deemed to be
"well capitalized" if it has a total risk-based capital ratio of 10% or greater,
a Tier I risk-based capital ratio of 6% or greater, and a leverage ratio of 5%
or greater, and is not subject to a regulatory order, agreement, or directive to
meet and maintain a specific capital level for any capital measure. An
institution is deemed to be "adequately capitalized" if it has a total
risk-based capital ratio of 8% or greater, a Tier I risk-based capital ratio of
4% or greater, and generally a leverage ratio of 4% or greater. An institution
is deemed to be "undercapitalized" if it has a total risk-based capital ratio of
less than 8%, a Tier I risk-based capital ratio of less than 4%, or generally a
leverage capital ratio of less than 4%. An institution is deemed to be
"significantly undercapitalized" if it has a total risk-based capital ratio of
less than 6%, a Tier I risk-based capital ratio of less than 3%, or a leverage
ratio of less than 3%. An institution is deemed to be "critically
undercapitalized" if it has a ratio of tangible equity (as defined in the
regulations) to total assets that is equal to or less than 2%.
"Undercapitalized" banks are subject to growth, capital distribution
(including dividend) and other limitations and are required to submit a capital
restoration plan. A bank's compliance with such plan is required to be
guaranteed by any company that controls the undercapitalized institution in an
amount equal to the lesser of 5.0% of the bank's total assets when deemed
undercapitalized or the amount necessary to achieve the status of adequately
capitalized. If an "undercapitalized" bank fails to submit an acceptable plan,
it is treated as if it is "significantly undercapitalized." "Significantly
undercapitalized" banks are subject to one or more of a number of additional
restrictions, including but not limited to an order by the FDIC to sell
sufficient voting stock to become adequately capitalized, requirements to reduce
total assets and cease receipt of deposits from correspondent banks or dismiss
directors or officers, and restrictions on interest rates paid on deposits,
compensation of executive officers, and capital distributions by the parent
holding company.
14
"Critically undercapitalized" institutions also may not, beginning 60 days after
becoming "critically undercapitalized," make any payment of principal or
interest on certain subordinated debt or extend credit for a highly leveraged
transaction or enter into any material transaction outside the ordinary course
of business. In addition, "critically undercapitalized" institutions are subject
to appointment of a receiver or conservator. Generally, subject to a narrow
exception, the appointment of a receiver is required for a "critically
undercapitalized" institution within 270 days after it obtains such status.
As of December 31, 2002, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must
maintain a minimum Tier I Leverage Capital ratio of 5%, Total Capital ratio of
10%, and Tier I Capital ratio of 6%.
Transactions with Affiliates
Under current federal law, transactions between depository institutions
and their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
subsidiary. Generally, a bank's subsidiaries are not treated as affiliates
unless they are engaged in activities as principal that are not permissible for
national banks. In a holding company context, at a minimum, the parent holding
company of a savings bank and any companies, which are controlled, by such
parent holding company are affiliates of the savings bank. Generally, Section
23A limits the extent to which the savings bank or its subsidiaries may engage
in "covered transactions" with any one affiliate to an amount equal to 10% of
such savings bank's capital stock and surplus, and contains an aggregate limit
on all such transactions with all affiliates to an amount equal to 20% of such
capital stock and surplus. The term "covered transaction" includes the making of
loans or other extensions of credit to an affiliate; the purchase of assets from
an affiliate, the purchase of, or an investment in, the securities of an
affiliate; the acceptance of securities of an affiliate as collateral for a loan
or extension of credit to any person; or issuance of a guarantee, acceptance, or
letter of credit on behalf of an affiliate. Section 23A also establishes
specific collateral requirements for loans or extensions of credit to, or
guarantees, acceptances on letters of credit issued on behalf of an affiliate.
Section 23B requires that covered transactions and a broad list of other
specified transactions be on terms substantially the same, or no less favorable,
to the savings bank or its subsidiary as similar transactions with
non-affiliates.
The Sarbanes-Oxley Act of 2002 generally prohibits loans by the Company
to its executive officers and directors. However, the Sarbanes-Oxley Act
contains a specific exemption for loans by the Bank to its executive officers
and directors in compliance with federal banking laws. Section 22(h) of the
Federal Reserve Act governs a savings bank's loans to directors, executive
officers, and principal shareholders. Under Section 22(h), loans to directors,
executive officers, and shareholders who control, directly or indirectly, 10% or
more of voting securities of a savings bank, and certain related interests of
any of the foregoing, may not exceed, together with all other outstanding loans
to such persons and affiliated entities, the savings bank's total capital and
surplus. Section 22(h) also prohibits loans above amounts prescribed by the
appropriate Federal-banking agency to directors, executive officers, and
shareholders who control 10% or more of voting securities of a stock savings
bank, and their respective related interests, unless such loan is approved in
advance by a majority of the board of directors of the savings bank. Any
"interested" director may not participate in the voting. The loan amount (which
includes all other outstanding loans to such person) as to which such prior
board of director approval is required, is the greater of $25,000 or 5% of
capital and surplus or any loans over $500,000. Further, pursuant to Section
22(h), loans to directors, executive officers, and principal shareholders must
be made on terms substantially the same as offered in comparable transactions to
other persons. There is an exception for loans made pursuant to a benefit or
compensation program that is widely available to all employees of the
institution and does not give preference to executive officers over other
employees. Section 22(g) of the Federal Reserve Act places additional
limitations on loans to executive officers.
Enforcement
The FDIC has extensive enforcement authority over insured savings
banks, including the Bank. This enforcement authority includes, among other
things, the ability to assess civil money penalties, to issue cease and desist
orders, and to remove directors and officers. In general, these enforcement
actions may be initiated in response to violations of laws and regulations and
unsafe or unsound practices.
15
The FDIC has authority under federal law to appoint a conservator or
receiver for an insured savings bank under certain circumstances. The FDIC is
required, with certain exceptions, to appoint a receiver or conservator for an
insured state savings bank if that savings bank was "critically
undercapitalized" on average during the calendar quarter beginning 270 days
after the date on which the savings bank became "critically undercapitalized."
For this purpose, "critically undercapitalized" means having a ratio of tangible
equity to total assets of less than 2%. See "Prompt Corrective Regulatory
Action." The FDIC may also appoint a conservator or receiver for a state savings
bank on the basis of the institution's financial condition or upon the
occurrence of certain events, including; (i) insolvency (whereby the assets of
the savings bank are less than its liabilities to depositors and others); (ii)
substantial dissipation of assets or earnings through violations of law or
unsafe or unsound practices; (iii) existence of an unsafe or unsound condition
to transact business; (iv) likelihood that the savings bank will be unable to
meet the demands of its depositors or to pay its obligations in the normal
course of business; and (v) insufficient capital, or the incurring or likely
incurring of losses that will deplete substantially all of the institution's
capital with no reasonable prospect of replenishment of capital without federal
assistance.
Insurance of Deposit Accounts
The Bank is a member of the Bank Insurance Fund ("BIF") and, through
its acquisition of CFS Bank, also holds some deposits that are considered to be
insured by the Savings Association Insurance Fund ("SAIF").
The FDIC has adopted a risk-based insurance assessment system. The FDIC
assigns an institution to one of three capital categories based on the
institution's financial information, as of the reporting period ending seven
months before the assessment period, consisting of (1) well capitalized, (2)
adequately capitalized, or (3) undercapitalized, and one of three supervisory
subcategories within each capital group. The supervisory subgroup to which an
institution is assigned is based on the supervisory evaluation provided to the
FDIC by the institution's primary federal regulator, and information which the
FDIC determines to be relevant to the institution's financial condition and the
risk posed to the deposit insurance funds. An institution's assessment rate
depends on the capital category and supervisory category to which it is
assigned. Assessment rates for both BIF and SAIF deposits are determined
semiannually by the FDIC and currently range from 0 basis points to 27 basis
points.
The FDIC is authorized to raise the assessment rates in certain
circumstances, including maintaining or achieving the designated reserve ratio
of 1.25%, which requirement the BIF and SAIF currently meet.
On September 30, 1996, the Deposit Insurance Funds Act of 1996 (the
"Funds Act") was signed into law. Among other things, the law spreads the
obligations for payment of the financing Corporation ("FICO") bonds across all
SAIF and BIF members. Prior to January 1, 2000, BIF members were assessed for
FICO payments at approximately 20% of SAIF members. Full pro rata sharing the
FICO payments between BIF and SAIF members began on January 1, 2000.
Under the FDI Act, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound practices,
is in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC. The
management of the Bank does not know of any practice, condition, or violation
that might lead to the termination of deposit insurance.
Community Reinvestment Act
Federal Regulation. Under the Community Reinvestment Act ("CRA"), as
implemented by FDIC regulations, a savings bank has continuing and affirmative
obligation consistent with its safe and sound operation to help meet the credit
needs of its entire community, including low and moderate income neighborhoods.
CRA does not establish specific lending requirements or programs for financial
institutions nor does it limit an institution's discretion to develop the types
of products and services that it believes are best suited to its particular
community, consistent with CRA. CRA requires the FDIC, in connection with its
examination of a savings bank; to assess the institution's record of meeting the
credit needs of its community and to take such record into account in its
evaluation of certain applications by such institution. CRA requires public
disclosure of an institution's CRA rating and further requires the FDIC to
provide a written evaluation of an institution's CRA performance utilizing a
four-tiered descriptive rating system. The Bank's latest CRA rating, received
from the FDIC in February 2003, was "satisfactory."
16
New York Regulation. The Bank is also subject to provisions of the New
York Banking Law which impose continuing and affirmative obligations upon
banking institutions organized in New York to serve the credit needs of its
local community ("NYCRA"), which are substantially similar to those imposed by
the CRA. Pursuant to the NYCRA, a bank must file an annual NYCRA report and
copies of all Federal CRA reports with the Banking Department. The NYCRA
requires the Banking Department to make an annual written assessment of a bank's
compliance with the NYCRA, utilizing a four-tiered rating system, and make such
assessment available to the public. The NYCRA also requires the Superintendent
to consider a bank's NYCRA rating when reviewing a bank's application to engage
in certain transactions, including mergers, asset purchases, and the
establishment of branch offices or ATMs, and provides that such assessment may
serve as a basis for the denial of any such application. The Bank's latest NYCRA
rating, received from the Banking Department in July 2002, was "outstanding".
Federal Reserve System
Under Federal Reserve Board ("FRB") regulations, the Bank is required
to maintain non-interest-earning reserves against its transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve Board
regulations generally require that reserves be maintained against aggregate
transaction accounts as follows: for that portion of transaction accounts
aggregating $42.1 million or less (subject to adjustment by the Federal Reserve
Board), the reserve requirement is 3%; for amounts greater than $42.1 million,
the reserve requirement is 10% (subject to adjustment by the Federal Reserve
Board between 8% and 14%). The first $6.0 million of otherwise reservable
balances (subject to adjustments by the Federal Reserve Board) are exempted from
the reserve requirements. The Bank is in compliance with the foregoing
requirements. Because required reserves must be maintained in the form of either
vault cash, a non-interest-bearing account at a Federal Reserve Bank, or a
pass-through account as defined by the Federal Reserve Board, the effect of this
reserve requirement is to reduce the Bank's interest-earning assets. FHLB System
members are also authorized to borrow from the Federal Reserve "discount
window," but Federal Reserve Board regulations require institutions to exhaust
all FHLB sources before borrowing from a Federal Reserve Bank.
Federal Home Loan Bank System
The Bank is a member of the FHLB System, which consists of 12 regional
FHLBs. The FHLB provides a central credit facility primarily for member
institutions. The Bank, as a member of the FHLB-NY, is required to acquire and
hold shares of capital stock in that FHLB in an amount at least equal to 1% of
the aggregate principal amount of its unpaid residential mortgage loans and
similar obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB-NY, whichever is greater. The Bank was in compliance
with this requirement, with an investment in FHLB-NY stock of $186.9 million at
December 31, 2002. FHLB advances must be secured by specified types of
collateral and may be obtained primarily for the purpose of providing funds for
residential housing finance.
The FHLBs are required to provide funds to cover certain obligations on
bonds issued to fund the resolution of insolvent thrifts and to contribute funds
for affordable housing programs. These requirements could reduce the amount of
dividends that the FHLBs pay to their members and could also result in the FHLBs
imposing a higher rate of interest on advances to their members. For the fiscal
years ended December 31, 2002, and 2001, dividends from the FHLB-NY to the Bank,
amounted to $7.4 million and $4.6 million, respectively. If dividends were
reduced, or interest on future FHLB advances increased, the Bank's net interest
income might also be reduced.
Interstate Branching
Federal law allows the FDIC, and New York banking law allows the New
York superintendent of banks, to approve an application by a state bank to
acquire interstate branches by merger, unless, in the case of the FDIC, the
state of the target institution has opted out of interstate branching. New York
State banking law authorizes savings banks to open and occupy de novo branches
outside the state of New York, and the FDIC is authorized to approve a state
bank's establishment of a de novo interstate branch if the intended host state
has opted into interstate de novo branching. In addition to its branches in New
York, the Bank currently maintains branches in New Jersey.
Holding Company Regulations
Federal Regulation. The Company is currently subject to examination,
regulation, and periodic reporting under the Bank Holding Company Act of 1956,
as amended ("BHCA"), as administered by the FRB.
17
The Company is required to obtain the prior approval of the FRB to
acquire all, or substantially all, of the assets of any bank or bank holding
company. Prior FRB approval would be required for the Company to acquire direct
or indirect ownership or control of any voting securities of any bank or bank
holding company if, after giving effect to such acquisition, it would, directly
or indirectly, own or control more than 5% of any class of voting shares of such
bank or bank holding company. In addition to the approval of the FRB, before any
bank acquisition can be completed, prior approval thereof may also be required
to be obtained from other agencies having supervisory jurisdiction over the bank
to be acquired, including the Banking Department.
A bank holding company is generally prohibited from engaging in, or
acquiring direct or indirect control of more than 5% of the voting securities of
any company engaged in non-banking activities. One of the principal exceptions
to this prohibition is for activities found by the FRB to be so closely related
to banking or managing or controlling banks as to be a proper incident thereto.
Some of the principal activities that the FRB has determined by regulation to be
so closely related to banking are: (i) making or servicing loans; (ii)
performing certain data processing services; (iii) providing discount brokerage
services; (iv) acting as fiduciary, investment or financial advisor; (v) leasing
personal or real property; (vi) making investments in corporations or projects
designed primarily to promote community welfare; and (vii) acquiring a savings
and loan association.
The Gramm-Leach-Bliley Act of 1999 authorizes a bank holding company
that meets specified conditions, including being "well capitalized" and "well
managed," to opt to become a "financial holding company" and thereby engage in a
broader array of financial activities than previously permitted. Such activities
can include insurance underwriting and investment banking.
The FRB has adopted capital adequacy guidelines for bank holding
companies (on a consolidated basis) substantially similar to those of the FDIC
for the Bank. See "Capital Maintenance." At December 31, 2002, the Company's
consolidated total and Tier I capital exceeded these requirements.
Bank holding companies are generally required to give the FRB prior
written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of the Company's
consolidated net worth. The FRB may disapprove such a purchase or redemption if
it determines that the proposal would constitute an unsafe and unsound practice,
or would violate any law, regulation, FRB order or directive, or any condition
imposed by, or written agreement with, the FRB. The FRB has adopted an exception
to this approval requirement for well-capitalized bank holding companies that
meet certain other conditions.
The FRB has issued a policy statement regarding the payment of
dividends by bank holding companies. In general, the FRB's policies provide that
dividends should be paid only out of current earnings and only if the
prospective rate of earnings retention by the bank holding company appears
consistent with the organization's capital needs, asset quality, and overall
financial condition. The FRB's policies also require that a bank holding company
serve as a source of financial strength to its subsidiary banks by standing
ready to use available resources to provide adequate capital funds to those
banks during periods of financial stress or adversity and by maintaining the
financial flexibility and capital-raising capacity to obtain additional
resources for assisting its subsidiary banks where necessary. These regulatory
policies could affect the ability of the Company to pay dividends or otherwise
engage in capital distributions.
The status of the Company as a registered bank holding company under
the BHCA does not exempt it from certain federal and state laws and regulations
applicable to corporations generally, including, without limitation, certain
provisions of the federal securities laws.
Under the FDI Act, depository institutions are liable to the FDIC for
losses suffered or anticipated by the FDIC in connection with the default of a
commonly controlled depository institution or any assistance provided by the
FDIC to such an institution in danger of default. This law would have potential
applicability if the Company ever held as a separate subsidiary a depository
institution in addition to the Bank.
The Company and the Bank will be affected by the monetary and fiscal
policies of various agencies of the United States Government, including the
Federal Reserve System. In view of changing conditions in the national economy
and in the money markets, it is impossible for management to accurately predict
future changes in monetary policy or the effect of such changes on the business
or financial condition of the Company or the Bank.
18
Acquisition of the Holding Company
Federal Restrictions. Under the Federal Change in Bank Control Act
("CIBCA"), a notice must be submitted to the FRB if any person (including a
company), or group acting in concert, seeks to acquire 10% or more of the
Company's shares of Common Stock outstanding, unless the FRB has found that the
acquisition will not result in a change in control of the Company. Under the
CIBCA, the FRB has 60 days within which to act on such notices, taking into
consideration certain factors, including the financial and managerial resources
of the acquirer, the convenience and needs of the communities served by the
Company and the Bank, and the anti-trust effects of the acquisition. Under the
BHCA, any company would be required to obtain prior approval from the FRB before
it may obtain "control" of the Company within the meaning of the BHCA. Control
generally is defined to mean the ownership or power to vote 25% or more of any
class of voting securities of the Company or the ability to control in any
manner the election of a majority of the Company's directors. An existing bank
holding company would be required to obtain the FRB's prior approval under the
BHCA before acquiring more than 5% of the Company's voting stock. See "Holding
Company Regulation."
New York Change in Control Restrictions. In addition to the CIBCA and
the BHCA, the New York State Banking Law generally requires prior approval of
the New York Banking Board before any action is taken that causes any company to
acquire direct or indirect control of a banking institution which is organized
in New York.
Federal Securities Law
The Company's common stock is registered with the SEC under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company is
subject to the information and proxy solicitation requirements, insider trading
restrictions, and other requirements under the Exchange Act.
Registration of the shares of the common Stock that were issued in the
Bank's conversion from mutual to stock form under the Securities Act of 1933, as
amended (the "Securities Act"), does not cover the resale of such shares. Shares
of the common stock purchased by persons who are not affiliates of the Company
may be resold without registration. Shares purchased by an affiliate of the
Company will be subject to the resale restrictions of Rule 144 under the
Securities Act. If the Company meets the current public information requirements
of Rule 144 under the Securities Act, each affiliate of the Company who complies
with the other conditions of Rule 144 (including those that require the
affiliate's sale to be aggregated with those of certain other persons) would be
able to sell in the public market, without registration, a number of shares not
to exceed in any three-month period the greater of (i) 1% of the outstanding
shares of the Company or (ii) the average weekly volume of trading in such
shares during the preceding four calendar weeks. Provision may be made in the
future by the Company to permit affiliates to have their shares registered for
sale under the Securities Act under certain circumstances.
STATISTICAL DATA
The detailed statistical data that follows is being presented in
accordance with Guide 3, prescribed by the Securities and Exchange Commission.
This data should be read in conjunction with the consolidated financial
statements and related notes, and the discussion included in the Management's
Discussion and Analysis of Financial Condition and Results of Operations, that
are indexed on the Form 10-K Cross Reference Index.
19
A. Mortgage and Other Lending Activities
The following table sets forth the Bank's loan originations, including
acquisitions, sales, and principal repayments, for the periods indicated:
For the
Years Ended December 31,
------------------------
(dollars in thousands) 2002 2001 2000
---------- ---------- ----------
Mortgage loans (gross):
At beginning of period $5,287,773 $3,596,273 $1,601,798
Mortgage loans originated:
Multi-family 2,059,282 791,250 541,734
One-to-four family 255,988 137,002 6,205
Commercial real estate 159,267 130,677 58,899
Construction 89,208 91,155 9,133
---------- ---------- ----------
Total mortgage loans originated 2,563,745 1,150,084 615,971
Mortgage loans acquired in the Richmond County and Haven
transactions, respectively -- 1,917,575 1,749,180
Principal repayments 1,451,171 765,578 185,539
Mortgage loans sold 417,485 610,581 185,137
Mortgage loans securitized to mortgage-backed securities 572,466 -- --
---------- ---------- ----------
At end of period 5,410,396 5,287,773 3,596,273
Other loans (gross):
At beginning of period 116,878 39,748 8,742
Other loans originated and/or acquired in the Richmond
County and Haven transaction.
respectively 102,062 254,278 36,655
Principal repayments 68,263 177,148 5,649
Other loans sold 71,430 -- --
Reclassification from other loans to securities available for sale 460 -- --
---------- ---------- ----------
At end of period 78,787 116,878 39,748
---------- ---------- ----------
Total loans $5,489,183 $5,404,651 $3,636,021
========== ========== ==========
20
B. Loan Maturity and Repricing
The following table shows the maturity or period to repricing of the
Bank's loan portfolio at December 31, 2002. Loans that have adjustable rates are
shown as being due in the period during which the interest rates are next
subject to change. The table does not include prepayments or scheduled principal
amortization. Prepayments and scheduled principal amortization on mortgage loans
totaled $1.5 billion for the twelve months ended December 31, 2002.
Mortgage and Other Loans
at December 31, 2002
------------------------
Multi- 1-4 Commercial Total
(dollars in thousands) Family Family Real Estate Construction Other Loans
------ ------ ----------- ------------ ----- -----
Amount due:
Within one year $ 259,707 $ 32,244 $ 44,363 $117,013 $36,250 $ 489,577
After one year:
One to five years 3,283,022 54,683 302,967 -- 21,926 3,662,598
Over five years 951,603 178,797 185,997 -- 20,611 1,337,008
----------- -------- -------- -------- ------- ------------
Total due or repricing after
one year 4,234,625 233,480 488,964 -- 42,537 4,999,606
----------- -------- -------- -------- ------- ------------
Total amounts due or
repricing, gross $ 4,494,332 $265,724 $533,327 $117,013 $78,787 $ 5,489,183
=========== ======== ======== ======== ======= ============
The following table sets forth, at December 31, 2002, the dollar amount
of all loans due after December 31, 2002, and indicates whether such loans have
fixed or adjustable rates of interest.
Due after December 31, 2003
---------------------------
(dollars in thousands) Fixed Adjustable Total
----- ---------- -----
Mortgage loans:
Multi-family $635,281 $3,599,344 $ 4,234,625
One-to-four family 143,643 89,837 233,480
Commercial real estate 123,085 365,879 488,964
Construction -- -- --
-------- ---------- -----------
Total mortgage loans $902,009 $4,055,060 $ 4,957,069
Other loans 9,674 32,863 42,537
-------- ---------- -----------
Total loans $911,683 $4,087,923 $ 4,999,606
======== ========== ===========
21
C. Summary of the Allowance for Loan Losses
The allowance for loan losses was allocated as follows at December 31,
2002 2001 2000 1999 1998
----------------- ------------------- ---------------- ------------------ -----------------
Percent Percent Percent Percent Percent
of of of of of
Loans in Loans in Loans in Loans in Loans
Category Category Category Category Category
to Total to Total to Total to Total to Total
(dollars in thousands) Amount Loans Amount Loans Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ ----- ------ ----- ------ --------
Mortgage loans:
Multi-family $25,433 62.80% $21,361 52.74% $ 7,783 43.08% $4,927 70.08% $6,686 70.89%
One-to-four family 2,763 6.82 6,084 15.02 2,923 16.18 663 9.42 1,341 14.22
Construction 2,104 5.20 3,489 8.62 892 4.94 64 0.91 28 0.30
Commercial real estate 7,016 17.32 8,150 20.12 5,671 31.40 1,202 17.10 1,181 12.52
Other loans 3,184 7.86 1,416 3.50 795 4.40 175 2.49 195 2.07
------- ------ ------- ------ ------- ------ ------ ------ ------ ------
Total loans $40,500 100.00% $40,500 100.00% $18,064 100.00% $7,031 100.00% $9,431 100.00%
======= ====== ======= ====== ======= ====== ====== ====== ====== ======
The preceding allocation is based upon an estimate at a given point in
time, based on various factors including, but not limited to, local economic
conditions. A different allocation methodology may be deemed to be more
appropriate in the future.
22
D. Composition of the Loan Portfolio
The following table sets forth the composition of the Bank's portfolio of
mortgage and other loans in dollar amounts and in percentages at December 31,
2002 2001 2000 1999 1998
-------------------- ------------------- -------------------- --------------------- ------------------
Percent Percent Percent Percent Percent
of of of of of
(dollars in thousands) Amount Total Amount Total Amount Total Amount Total Amount Total
------------ ------ ----------- ------ ----------- ----- ---------- ------ ---------- --------
Mortgage loans:
Multi-family $ 4,494,332 81.88% $ 3,255,167 60.23% $ 1,945,656 53.51% $1,348,351 83.72% $1,239,094 82.77%
One-to-four family 265,724 4.84 1,318,295 24.40 1,267,080 34.85 152,644 9.48 178,770 11.94
Commercial real
estate 533,327 9.72 561,944 10.40 324,068 8.91 96,008 5.96 67,494 4.51
Construction 117,013 2.13 152,367 2.82 59,469 1.64 4,793 0.30 1,898 0.13
------------ ------ ----------- ------ ----------- ------ ---------- ------ ---------- ------
Total mortgage loans 5,410,396 98.57 5,287,773 97.85 3,596,273 98.91 1,601,796 99.46 1,487,256 99.35
Total other loans 78,787 1.43 116,878 2.15 39,748 1.09 8,742 0.54 9,750 0.65
------------ ------ ----------- ------ ----------- ------ ---------- ------ ---------- ------
Total loans 5,489,183 100.00% 5,404,651 100.00% 3,636,021 100.00% 1,610,538 100.00% 1,497,006 100.00%
------------ ====== ----------- ====== ----------- ====== ---------- ====== ---------- ======
Unearned premiums
(discounts) 19 91 (18) (24) (22)
Less: Net deferred loan
origination fees 5,130 3,055 1,553 2,404 1,034
Allowance for loan
losses 40,500 40,500 18,064 7,031 9,431
------------ ----------- ---------- ---------- ----------
Loans, net $ 5,443,572 $ 5,361,187 $3,616,386 $1,601,079 $1,486,519
============ =========== ========== ========== ==========
23
ITEM 2. PROPERTIES
The executive and administrative offices of the Company and its
subsidiaries are located at 615 Merrick Avenue, Westbury, New York. Haven
Bancorp had purchased the office building and land in December 1997 under a
lease agreement and Payment-in-Lieu-of-Tax ("PILOT") agreement with the Town of
Hempstead Industrial Development Agency ("IDA"), which has been assumed by the
Company. Under the IDA and PILOT agreements, the Company assigned the building
and land to the IDA, is subleasing it for $1.00 per year for a 10-year period,
and will repurchase the building for $1.00 upon expiration of the lease term in
exchange for IDA financial assistance.
At December 31, 2002, the Company's bank subsidiary owned 30 of its
branch offices and leased 80 of its branch offices and other bank business
facilities under various lease and license agreements expiring at various times
through 2025 (See "Note 12 - Commitments and Contingencies, Lease and License
Commitments" in the Company's 2002 Annual Report to Shareholders, which portion
is incorporated herein by reference). The Company and the Bank believe their
facilities are adequate to meet their present and immediately foreseeable needs.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of the Company's business, there are various
outstanding legal proceedings. In the opinion of management, based on
consultation with legal counsel, the financial position of the Company will not
be affected materially as a result of the outcome of such legal proceedings.
In February 1983, a burglary of the contents of safe deposit boxes
occurred at a branch office of CFS Bank. At December 31, 2002, the Bank had a
lawsuit pending, whereby the plaintiffs are seeking recovery of approximately
$12.4 million in actual damages. This amount does not include any statutory
pre-judgment interest that could be awarded. The ultimate liability, if any,
that might arise from the disposition of these claims cannot presently be
determined. Management believes it has meritorious defenses against this action
and continues to defend its position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Company's common stock is traded on The New York Stock Exchange,
under the symbol, "NYB".
Information regarding the Company's common stock and its price during
fiscal year 2002 appears on page 33 of the 2002 Annual Report to Shareholders
under the caption, "Market Price of Common Stock and Dividends Paid per Common
Share," and is incorporated herein by this reference.
As of March 26, 2003 the Company had approximately 8,600 shareholders
of record, excluding the number of persons or entities holding stock in nominee
or street name through various brokers and banks.
Use of Proceeds from BONUSES(SM) Units and Common Stock Offering On
November 4, 2002, the Company and its subsidiary, New York Community Capital
Trust V (the "Trust"), issued 5.5 million BONUSES(SM) Units (the "Units"),
consisting of a preferred security issued by the Trust and a warrant to purchase
1.4036 shares of the Company's common stock.
The Units were issued pursuant to a registration statement on Form S-3
(Registration No. 333-86682) initially filed with the Securities and Exchange
Commission on April 22, 2002, as amended, and effective on May 8, 2002, and
pursuant to a registration statement on Form S-3 (Registration No. 333-100767)
filed with the Securities and Exchange Commission
24
on October 25, 2002 and effective on the same date. The managing underwriters
for the offering were Salomon Smith Barney Inc. (sole book-running manager) and
Lehman Brothers Inc. (joint-lead manager).
Units representing $275.0 million were registered and sold in the
offering. Total expenses for the Units offering were approximately $7.7 million,
including underwriters' discounts and commissions for the offering of
$6,875,000. The net proceeds from the Units offering thus totaled approximately
$267.3 million.
The Units were issued pursuant to a "shelf" registration process
pursuant to which the Company also generated approximately $170.0 million
through the issuance of 5.9 million shares of its common stock on May 14, 2002
(as previously reported in the Company Form 10-Q for the quarterly period ended
June 30, 2002). As previously reported, the net proceeds of the common stock
offering totaled approximately $147.5 million.
The net proceeds of the Units offering and the May 14, 2002 common
stock offering, combined, totaled approximately $414.8 million, and were used
for the following purposes:
(1) A capital contribution to the Company's primary subsidiary, the Bank
of $100.0 million;
(2) Repurchase of Company common stock in the amount of $56.5 million;
(3) Payment of dividends on Company common stock in the amount of $41.4
million;
(4) Payment of dividends on trust preferred securities in the amount of
$10.5 million; and
(5) Investment in interest-earning assets and other corporate purposes
in the amount of $206.4 million
ITEM 6. SELECTED FINANCIAL DATA
Information regarding selected financial data appears on page 10 of the
2002 Annual Report to Shareholders under the caption, "Financial Summary," and
is incorporated therein by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Information regarding management's discussion and analysis of financial
condition and results of operations appears on pages 13 through 33 of the 2002
Annual Report to Shareholders under the caption, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and is incorporated
herein by this reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding quantitative and qualitative disclosures about
market risk appears on pages 20 through 22 of the 2002 Annual Report to
Shareholders under the caption, "Asset and Liability Management and the
Management of Interest Rate Risk," and is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information regarding the consolidated financial statements and the
Independent Auditors' Report appears on pages 34 through 63 of the 2002 Annual
Report to Shareholders, and is incorporated herein by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the directors and executive officers of the
Registrant appears on pages 4 through 7 of the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held on May 14, 2003, under the caption,
"Information with Respect to Nominees, Continuing Directors, and Executive
Officers," and is incorporated herein by this reference.
25
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation appears on pages 9 through
16 of the Company's Proxy Statement for the Annual Meeting of Shareholders to be
held on May 14, 2003, and is incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Equity Compensation Plan Information as of December 31, 2002
Plan category Number of securities to be Weighted-average exercise Number of securities
issued upon exercise of price of outstanding remaining available for
outstanding options, options, warrants and future issuance under
warrants and rights rights equity compensation plans
(excluding securities
reflected in column (a)
(a) (b) (c)
Equity compensation
plans approved by security
holders 10,922,801 $22.78 1,726,194
Equity compensation plans
not approved by security
holders -- -- --
Total 10,922,801 $22.78 1,726,194
Information regarding security ownership of certain beneficial owners
appears on page 3 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 14, 2003, under the caption, "Security Ownership
of Certain Beneficial Owners," and is incorporated herein by this reference.
Information regarding security ownership of management appears on pages
4 through 7 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 14, 2003, under the caption, "Information with
Respect to the Nominees, Continuing Directors, and Executive Officers," and is
incorporated herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions
appears on page 17 of the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held on May 14, 2003 under the caption, "Transactions with
Certain Related Persons," and is incorporated herein by this reference.
ITEM 14. CONTROLS AND PROCEDURES
(a) Evaluation of disclosure controls and procedures The Corporation
maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the
Corporation files or submits under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the
Securities and Exchange Commission. Based upon their evaluation
of those controls and procedures performed within 90 days of the
filing date of this report, the chief executive officer and the
chief financial officer of the Corporation concluded that the
Corporation's disclosure controls and procedures were adequate.
(b) Changes in internal controls The Corporation made no significant
changes in its internal controls or in other factors that could
significantly affect these controls subsequent to the date of
the evaluation of those controls by the chief executive officer
and chief financial officer.
26
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following consolidated financial statements are included in the
Company's Annual Report to Shareholders for the year ended December 31, 2002 and
are incorporated herein by this reference:
- Consolidated Statements of Condition at December 31, 2002 and 2001;
- Consolidated Statements of Income and Comprehensive Income for each
of the years in the three-year period ended December 31, 2002;
- Consolidated Statements of Changes in Stockholders' Equity for each
of the years in the three-year period ended December 31, 2002;
- Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 2002;
- Notes to the Consolidated Financial Statements;
- Glossary;
- Cash Earnings;
- Management's Responsibility for Financial Reporting;
- Independent Auditors' Report
The remaining information appearing in the 2002 Annual Report to
Shareholders is not deemed to be filed as a part of this report, except as
expressly provided herein.
2. Financial Statement Schedules
Financial Statement Schedules have been omitted because they are not
applicable or because the required information is shown in the Consolidated
Financial Statements or Notes thereto.
(b) Reports on Form 8-K filed during the last quarter of 2002
- On November 4, 2002, the Company filed a Form 8-K to file its
underwriting agreement, form of amended and restated declaration of
trust and form of indenture, among other things, as incorporated by
reference to its registration statement on Form S-3.
(c) Exhibits Required by Securities and Exchange Commission Regulation S-K
Exhibit
Number
-------
3.1 Amended and Restated Certificate of Incorporation (1)
3.2 Bylaws (2)
4.1 Specimen Stock Certificate (3)
4.2 Shareholder Rights Agreement, dated as of January 16, 1996
and amended on March 27, 2001 and August 1, 2001 between
New York Community Bancorp, Inc. and Registrar and Transfer
Company, as Rights Agent (4)
4.3 Amended and Restated Declaration of Trust of New York
Community Capital Trust V, dated as of November 4, 2002 (5)
4.4 Indenture relating to the Junior Subordinated
Debentures between New York Community Bancorp, Inc. and
Wilmington Trust Company, as Trustee, dated November 4,
2002 (5)
4.5 First Supplemental Indenture between New York Community
Bancorp, Inc. and Wilmington Trust Company, as Trustee,
dated as of November 4, 2002 (5)
4.6 Form of Preferred Security (included in Exhibit 4.3)
4.7 Form of Warrant (included in Exhibit 4.11)
4.8 Form of Unit Certificate (included in Exhibit 4.10)
4.9 Guarantee Agreement, issued in connection with the
BONUSES(SM) Units, dated as of November 4, 2002 (5)
4.10 Unit Agreement among New York Community Bancorp, Inc.,
New York Community Capital Trust V and Wilmington Trust
Company, as Warrant Agent, Property Trustee and Agent,
dated as of November 4, 2002 (5)
4.11 Warrant Agreement between New York Community Bancorp,
Inc. and Wilmington Trust Company, as Agent, dated as of
November 4, 2002 (5)
27
4.12 Registrant will furnish, upon request, copies of all
instruments defining the rights of holders of long-term
debt instruments of registrant and its consolidated
subsidiaries.
10.1 Form of Employment Agreement between New York
Community Bancorp, Inc. (formerly known as "Queens County
Bancorp, Inc.") and Joseph R. Ficalora, Robert Wann and
James O'Donovan
10.2 Form of Employment Agreement between New York
Community Bank and Joseph R. Ficalora, Robert Wann and
James O'Donovan
10.3 Agreement by and among New York Community Bancorp,
Inc., Richmond County Financial Corp., Richmond County
Savings Bank and Michael F. Manzulli (6)
10.4 Agreement by and among New York Community Bancorp,
Inc., Richmond County Financial Corp., Richmond County
Savings Bank and Anthony E. Burke (6)
10.5 Agreement by and among New York Community Bancorp,
Inc., Richmond County Financial Corp., Richmond County
Savings Bank and Thomas R. Cangemi (6)
10.6 Form of Change in Control Agreements among the
Company, the Bank, and Certain Officers (7)
10.7 Noncompetition Agreement, dated March 27, 2001, by and
among New York Community Bancorp, Inc., Richmond County
Financial Corp., Richmond County Savings Bank and Thomas R.
Cangemi (6)
10.8 Noncompetition Agreement, dated March 27, 2001, by and
among New York Community Bancorp, Inc., Richmond County
Financial Corp., Richmond County Savings Bank and Michael
F. Manzulli (6)
10.9 Noncompetition Agreement, dated March 27, 2001, by and
among New York Community Bancorp, Inc., Richmond County
Financial Corp., Richmond County Savings Bank and Anthony
E. Burke (6)
10.10 Form of Queens County Savings Bank Recognition and
Retention Plan for Outside Directors (7)
10.11 Form of Queens County Savings Bank Recognition and
Retention Plan for Officers (7)
10.12 Form of Queens County Bancorp, Inc. 1993 Incentive
Stock Option Plan (8)
10.13 Form of Queens County Bancorp, Inc. 1993 Incentive
Stock Option Plan for Outside Directors (8)
10.14 Form of Queens County Savings Bank Employee Severance
Compensation Plan (7)
10.15 Form of Queens County Savings Bank Outside Directors'
Consultation and Retirement Plan (7)
10.16 Form of Queens County Bancorp, Inc. Employee Stock
Ownership Plan and Trust (7)
10.17 ESOP Loan Documents (7)
10.18 Incentive Savings Plan of Queens County Savings Bank (9)
10.19 Retirement Plan of Queens County Savings Bank (7)
10.20 Supplemental Benefit Plan of Queens County Savings
Bank (10)
10.21 Excess Retirement Benefits Plan of Queens County
Savings Bank (7)
10.22 Queens County Savings Bank Directors' Deferred Fee
Stock Unit Plan (7)
10.23 Queens County Bancorp, Inc. 1997 Stock Option Plan
(11)
10.24 Richmond County Financial Corp. 1998 Stock Option Plan
(12)
10.25 Richmond County Savings Bank Retirement Plan (12)
11.0 Statement Re: Computation of Per Share Earnings
(attached hereto)
13.0 2002 Annual Report to Shareholders
21.0 Subsidiaries information incorporated herein by
reference to Part I, "Subsidiaries"
23.0 Consent of KPMG LLP, dated March 31, 2003 (attached
hereto)
99.1 Certification of President and Chief Executive Officer
pursuant to Section 906 of Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer pursuant to
Section 906 of Sarbanes-Oxley Act of 2002
(1) Incorporated by reference to Exhibits filed with the Company's Form
10-Q for the quarterly period ended March 31, 2001 (File No. 0-22278)
(2) Incorporated by reference to Exhibits filed with the Company's Form
10-K for the year ended December 31, 2001 (File No. 0-22278)
(3) Incorporated by reference to Exhibits filed with the Company's
Registration Statement on Form S-1 (Registration No. 33-66852)
(4) Incorporated by reference to Exhibits filed with the Company's Form
8-A filed with the Securities and Exchange Commission on January 24, 1996,
amended as reflected in Exhibit 4.2 to the Company's Registration
Statement on Form S-4 filed with the Securities and Exchange Commission on
April 25, 2001 (Registration No. 333-59486) and as reflected in Exhibit
4.3 to the Company's Form 8-A filed with the Securities and Exchange
Commission on December 12, 2002 (File No. 1-31565)
(5) Incorporated by reference to the Company's Form 10-Q for the quarterly
period ended September 30, 2002 (File No. 0-22278)
28
(6) Incorporated by reference to Exhibits filed with the Company's
Registration Statement on Form S-4 filed with the Securities and Exchange
Commission on April 25, 2001 (Registration No. 333-59486)
(7) Incorporated by reference to Exhibits filed with the Registration
Statement on Form S-1, Registration No. 33-66852
(8) Incorporated herein by reference into this document from the Exhibits
to Form S-8, Registration Statement filed on October 27, 1994,
Registration No. 33-85684
(9) Incorporated herein by reference into this document from the Exhibits to
Form S-8, Registration Statement filed on October 27, 1994, Registration
No. 33-85682
(10) Incorporated by reference to Exhibits filed with the 1995 Proxy Statement
for the Annual Meeting of Shareholders held on April 19, 1995
(11) Incorporated by reference to Exhibit filed with the 1997 Proxy Statement
for the Annual Meeting of Shareholders held on April 16, 1997, as amended
as reflected in the Company's Proxy Statement the Annual Meeting of
Shareholders held on May 15, 2002
(12) Incorporated herein by reference into this document from the Exhibits to
Form S-8, Registration Statement filed on July 31, 2001, Registration No.
333-66366
29
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
New York Community Bancorp, Inc.
--------------------------------
(Registrant)
3/25/03
------------------------
Joseph R. Ficalora
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
/s/ Michael F. Manzulli 3/25/03 /s/ Joseph R. Ficalora 3/25/03
- ---------------------------- -----------------------------
Michael F. Manzulli Joseph R. Ficalora
Chairman President and Chief Executive
Officer
(Principal Executive Officer)
/s/ Robert Wann 3/25/03 /s/ Donald M. Blake 3/25/03
- ---------------------------- -----------------------------
Robert Wann Donald M. Blake
Executive Vice President Director
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Anthony E. Burke 3/25/03 /s/ Dominick Ciampa 3/25/03
- ---------------------------- -----------------------------
Anthony E. Burke Dominick Ciampa
Director Director
/s/ Robert S. Farrell 3/25/03 /s/ Dr. William C. Frederick 3/25/03
- ---------------------------- -----------------------------
Robert S. Farrell William C. Frederick, M.D.
Director Director
/s/ Max L. Kupferberg 3/25/03 /s/ Howard C. Miller 3/25/03
- ---------------------------- -----------------------------
Max L. Kupferberg Howard C. Miller
Director Director
/s/ John A. Pileski 3/25/03
- ----------------------------
John A. Pileski
Director
30
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: March 25, 2003 BY: /s/ Joseph R. Ficalora
----------------------------
Joseph R. Ficalora
President and
Chief Executive Officer
(Duly Authorized Officer)
DATE: March 25, 2003 BY: /s/ Robert Wann
----------------------------
Robert Wann
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
31
NEW YORK COMMUNITY BANCORP, INC.
CERTIFICATIONS
I, Joseph R. Ficalora, certify that:
1. I have reviewed this annual report on Form 10-K of New York Community
Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the consolidated financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 25, 2003 BY: /s/ Joseph R. Ficalora
----------------------------
Joseph R. Ficalora
President and
Chief Executive Officer
(Duly Authorized Officer)
32
NEW YORK COMMUNITY BANCORP, INC.
CERTIFICATIONS
I, Robert Wann, certify that:
1. I have reviewed this annual report on Form 10-K of New York Community
Bancorp, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the consolidated financial statements, and other
financial information included in this annual report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: March 25, 2003 BY: /s/ Robert Wann
----------------------------
Robert Wann
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
33