<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997 0-28886
----------------------
Commission File Number
ROSLYN BANCORP, INC
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(Exact name of registrant as specified in its charter)
Delaware 11-3333218
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1400 Old Northern Boulevard, Roslyn, New York 11576
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(Address of Principal Executive Offices) (Zip Code)
(516) 621-6000
----------------------------------------------------
(Registrant's telephone number, including area code)
None
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Securities registered pursuant to Section 12(b) of the Act
Common Stock, $.01 par value
----------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.
The Registrant had 43,642,459 shares of Common Stock outstanding as of November
13, 1997.
<PAGE>
FORM 10-Q
ROSLYN BANCORP, INC.
INDEX
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION Number
- ------------------------------- ------
<S> <C>
ITEM 1. Financial Statements - Unaudited
Consolidated Statements of Financial Condition at
September 30, 1997 and December 31, 1996 2
Consolidated Statements of Income for the three and nine
months ended September 30, 1997 and 1996 3
Consolidated Statement of Changes in Stockholders' Equity
for the nine months ended September 30, 1997 4
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1997 and 1996 5 - 6
Notes to Unaudited Consolidated Financial Statements 7 - 13
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 14 - 27
PART II - OTHER INFORMATION
- ---------------------------
ITEM 1. Legal Proceedings 28
ITEM 2. Changes in Securities 28
ITEM 3. Defaults Upon Senior Securities 28
ITEM 4. Submission of Matters to a Vote of Security Holders 28
ITEM 5. Other Information 29
ITEM 6. Exhibits and Reports on Form 8-K 29
Signature Page 31
</TABLE>
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Statements contained in this Form 10-Q which are not historical facts are
forward-looking statements, as that term is defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
are subject to risk and uncertainties which could cause actual results to
differ materially from those projected. Such risks and uncertainties
include potential changes in interest rates, competitive factors in the
financial services industry, general economic conditions, the effect of new
legislation and other risks detailed in documents filed by the Company with
the SEC from time to time.
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1
<PAGE>
ROSLYN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- --------------
ASSETS
<S> <C> <C>
Cash and cash equivalents:
Cash and cash items............................. $ 2,199 $ 2,284
Due from banks.................................. 17,970 9,786
Money market investments........................ 20,800 1,114,240
------------ ------------
40,969 1,126,310
Debt and equity securities:
Held-to-maturity, net (estimated fair value of
$2,037 and $2,067, respectively).............. 1,930 1,930
Available-for-sale............................. 524,947 486,896
Mortgage-backed and mortgage related
securities:
Held-to-maturity, net (estimated fair value
of $223,856 and 276,046, respectively)........ 223,203 276,632
Available-for-sale.............................. 1,728,113 1,159,411
------------ ------------
2,478,193 1,924,869
Loans held for sale, net......................... 17,648 14,134
Loans receivable held for investment, net:
Real estate loans, net.......................... 898,477 510,969
Consumer and student............................ 3,947 1,241
------------ ------------
902,424 512,210
Less allowance for possible loan losses......... (23,945) (23,320)
------------ ------------
878,479 488,890
Banking house and equipment, net................. 16,938 17,235
Accrued interest receivable...................... 22,078 18,665
Mortgage servicing rights, net................... 8,909 8,695
Excess of cost cover over fair value of net
assets acquired................................. 2,963 3,375
Real estate owned, net........................... 661 1,698
Deferred tax asset, net.......................... 1,788 5,022
Other assets..................................... 5,524 9,060
------------ ------------
Total assets................................ $ 3,474,150 $ 3,617,953
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Savings accounts................................ 427,383 646,650
Certificates of deposit......................... 1,287,120 1,128,053
Money market accounts........................... 48,331 75,157
Demand deposit accounts......................... 113,156 105,675
------------ ------------
Total deposits............................... 1,875,990 1,955,535
Borrowed funds................................... 918,619 1,829
Accrued dividends and interest on deposits....... 11,976 6,636
Mortgagors' escrow and security deposits......... 23,895 17,725
Accrued taxes payable............................ 15,889 12,185
Non-depository stock subscriptions............... - 1,356,911
Accrued expenses and other liabilities........... 14,968 17,783
------------ ------------
Total liabilities............................ 2,861,337 3,368,604
------------ ------------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000
shares authorized; none issued................. - -
Common stock, $.01 par value, 100,000,000
shares authorized; 43,642,459 shares issued
and outstanding at September 30, 1997.......... 436 -
Additional paid-in-capital...................... 423,212 -
Retained earnings - substantially restricted.... 254,590 235,154
Unallocated common stock held by Employee
Stock Ownership Plan........................... (52,460) -
Unearned common stock held by Recognition and
Retention Plan................................. (39,305) -
Net unrealized gain on securities
available-for-sale, net of tax................. 26,340 14,195
------------ ------------
Total stockholders' equity................... 612,813 249,349
------------ ------------
Total liabilities and stockholders' equity... $ 3,474,150 $ 3,617,953
============ ============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
2
<PAGE>
ROSLYN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the For the
three months ended nine months ended
September 30, September 30,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Federal funds sold and short-term deposits................ $ 395 $ 326 $ 3,704 $ 1,013
Debt and equity securities................................ 8,616 8,161 25,028 22,298
Mortgage-backed and mortgage related securities........... 33,680 15,733 91,426 43,503
Real estate loans......................................... 16,532 9,906 42,175 28,096
Consumer and student loans................................ 110 47 252 291
---------- ---------- ---------- ----------
Total interest income................................. 59,333 34,173 162,585 95,201
Interest expense:
Deposits.................................................. 22,792 17,396 65,547 48,956
Borrowed funds............................................ 11,544 2,139 23,072 3,445
---------- ---------- ---------- ----------
Total interest expense................................ 34,336 19,535 88,619 52,401
---------- ---------- ---------- ----------
Net interest income before provision for possible loan
losses.................................................... 24,997 14,638 73,966 42,800
Provision for possible loan losses........................... 150 300 450 700
---------- ---------- ---------- ----------
Net interest income after provision for possible loan
losses.................................................... 24,847 14,338 73,516 42,100
---------- ---------- ---------- ----------
Non-interest income:
Loan servicing and fee income............................. 1,547 1,210 4,806 3,917
Net gains on sales of loans............................... 592 1,071 1,788 3,039
Net gains on securities................................... 923 42 1,266 97
Other non-interest income................................. 36 19 167 296
---------- ---------- ---------- ----------
Total non-interest income............................. 3,098 2,342 8,027 7,349
---------- ---------- ---------- ----------
Non-interest expense:
General and administrative expenses:
Compensation and employee benefits...................... 7,357 5,035 20,267 14,343
Occupancy and equipment................................. 975 1,197 2,798 2,936
Deposit insurance premiums.............................. 56 1 269 2
Advertising and promotion............................... 585 522 1,784 1,493
Other non-interest expenses............................. 2,188 2,202 7,856 6,401
---------- ---------- ---------- ----------
Total general and administrative expenses............. 11,161 8,957 32,974 25,175
Real estate operations, net............................... 17 233 54 564
Amortization of excess of cost over fair value of net
assets acquired....................................... 117 117 352 352
Charitable contribution to The Roslyn Savings Foundation.. - - 12,711 -
---------- ---------- ---------- ----------
Total non-interest expense............................ 11,295 9,307 46,091 26,091
---------- ---------- ---------- ----------
Income before income taxes................................... 16,650 7,373 35,452 23,358
Provision for income taxes................................... 5,616 2,702 11,487 7,767
---------- ---------- ---------- ----------
Net income................................................... $ 11,034 $ 4,671 $ 23,965 $ 15,591
========== ========== ========== ==========
Primary earnings per common share............................ $ 0.28 $ - $ 0.60 $ -
========== ========== ========== ==========
Fully diluted earnings per common share...................... $ 0.28 $ - $ 0.60 $ -
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
3
<PAGE>
ROSLYN BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
For the
nine months ended
September 30, 1997
------------------
<S> <C>
Common Stock (Par Value)
- ------------------------
Issuance of 42,371,359 shares of $0.01 par value common stock
in initial public offering........................................................................ $ 423
Issuance of 1,271,100 shares of $0.01 par value common stock
to The Roslyn Savings Foundation.................................................................. 13
-------------
Balance at end of period............................................................................. 436
-------------
Additional Paid-in-Capital
- --------------------------
Issuance of 42,371,359 shares of common stock in initial public
offering at $10.00 per share, net of conversion related expenses.................................. 410,227
Issuance of 1,271,100 shares of common stock at $10.00 per share
to The Roslyn Savings Foundation................................................................. 12,699
Excess of ESOP compensation charge measured using fair value.........................................
of stock over its related cost................................................................... 286
-------------
Balance at end of period............................................................................. 423,212
-------------
Retained Earnings-Substantially Restricted
- ------------------------------------------
Balance at beginning of period....................................................................... 235,154
Net income........................................................................................... 23,965
Cash dividends declared on common stock.............................................................. (4,423)
Excess of RRP stock cost over compensation charge upon amortization of awards....................... (106)
-------------
Balance at end of period............................................................................. 254,590
-------------
Unallocated Common Stock Held by Employee Stock Ownership Plan ("ESOP")
- -----------------------------------------------------------------------
Open market purchases of Roslyn Bancorp, Inc. common stock
by ESOP trustee.................................................................................. (54,805)
Allocation from shares purchased with 1996 contribution.............................................. 1,000
Allocation from shares purchased with loan from Roslyn Bancorp, Inc.................................. 1,345
-------------
Balance at end of period............................................................................. (52,460)
-------------
Unearned Common Stock Held by Recognition and Retention Plan ("RRP")
- --------------------------------------------------------------------
Open market purchases of Roslyn Bancorp, Inc. common stock........................................... (41,374)
Amortization of RRP stock awards..................................................................... 2,069
-------------
Balance at end of period............................................................................. (39,305)
-------------
Net Unrealized Gain on Securities Available-For-Sale, Net of Tax
- ----------------------------------------------------------------
Balance at beginning of period....................................................................... 14,195
Change in unrealized gain on securities available-for-sale, net of tax............................... 12,145
-------------
Balance at end of period............................................................................. 26,340
-------------
Total stockholders' equity........................................................................... $ 612,813
=============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
4
<PAGE>
ROSLYN BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
(IN THOUSANDS)
<TABLE>
<CAPTION>
For the
Nine Months Ended
September 30,
--------------------------------
1997 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 23,965 $ 15,591
Adjustments to reconcile net income to net cash
provided by operating activities:
Charitable contribution of Roslyn Bancorp, Inc.
common stock to The Roslyn Savings Foundation....................................... 12,711 -
Provision for possible loan losses.................................................... 450 700
Provision for possible losses on real estate owned.................................... - 350
Originated mortgage servicing rights, net of amortization............................. (214) (397)
Amortization of excess of cost over fair value of
net assets acquired................................................................. 352 352
Depreciation.......................................................................... 1,145 1,184
Accretion of discounts, net of amortization of premiums............................... (3,229) (913)
Amortization of premium on callable preferred stock................................... 594 559
Allocation of ESOP stock.............................................................. 1,631 -
Amortization of RRP stock awards...................................................... 1,963 -
Proceeds from sales of loans held for sale,
net of originations and purchases................................................... (1,514) 6,697
Gains on sales of loans............................................................... (1,788) (3,039)
Net gains on securities............................................................... (1,266) (97)
Net gains on sales of real estate owned............................................... (155) (10)
(Increase) decrease in deferred income taxes.......................................... (5,824) 381
Changes in assets and liabilities:
Increase in accrued interest receivable............................................ (3,413) (3,450)
Decrease (increase) in other assets................................................ 3,558 (2,760)
Increase in accrued dividends and interest on deposits............................. 5,340 4,435
Increase in accrued taxes payable.................................................. 3,704 2,441
(Decrease) increase in accrued expense and other liabilities....................... (2,557) 2,464
Net increase in unearned income.................................................... 6,057 234
----------- ----------
Net cash provided by operating activities........................................ 41,510 24,722
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales and repayments of mortgage-backed
and mortgage related securities held-to-maturity........................................ 53,787 57,307
Proceeds from sales and repayments of debt, equity,
mortgage-backed and mortgage related securities
available-for-sale...................................................................... 515,307 202,098
Purchases of debt, equity, mortgage-backed and
mortgage related securities available-for-sale.......................................... (1,097,315) (650,414)
Loan originations and purchases, net of principal repayments............................... (396,515) (85,012)
Purchases of banking house and equipment, net.............................................. (848) (4,038)
Proceeds from sales of real estate owned................................................... 1,181 1,751
----------- ----------
Net cash used in investing activities................................................. (924,403) (478,308)
----------- ----------
</TABLE>
Continued
5
<PAGE>
<TABLE>
<CAPTION>
For the
Nine Months Ended
September 30,
-------------------------------
1997 1996
------------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in demand deposit, money market,
and savings accounts.................................................................... (238,612) (5,967)
Increase in certificates of deposit........................................................ 159,067 262,310
Increase in borrowed funds................................................................. 916,790 213,664
Increase in mortgagors' escrow and security deposits....................................... 6,170 5,432
Net proceeds of common stock issuance...................................................... 410,650 -
Loan to ESOP for open market purchase of common stock...................................... (53,805) -
Open market purchase of common stock for RRP............................................... (41,374) -
Cash dividends paid on common stock........................................................ (4,423) -
Decrease in non-depository stock subscriptions............................................. (1,356,911) -
------------ ---------
Net cash (used) provided by financing activities...................................... (202,448) 475,439
------------ ---------
Net (decrease) increase in cash and cash equivalents....................................... (1,085,341) 21,853
Cash and cash equivalents at beginning of period........................................... 1,126,310 21,271
------------ ---------
Cash and cash equivalents at end of period................................................. $ 40,969 $ 43,124
============ =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposits and borrowed funds................................................. $ 83,279 $ 47,966
============ =========
Income taxes............................................................................ $ 13,080 $ 4,848
============ =========
Non-cash investing activities:
Additions to real estate owned, net..................................................... $ 12 $ 431
============ =========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
6
<PAGE>
ROSLYN BANCORP, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Roslyn Bancorp, Inc. (the "Company"), its direct wholly-owned
subsidiary The Roslyn Savings Bank (the "Bank"), and the subsidiaries of the
Bank.
The unaudited consolidated financial statements included herein reflect all
normal recurring adjustments which are, in the opinion of management, necessary
to present a fair statement of the results for the interim periods presented.
The results of operations for the three and nine months ended September 30, 1997
are not necessarily indicative of the results of operations that may be expected
for the entire year. Certain information and note disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC").
The unaudited consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto included in
the Company's 1996 Annual Report on Form 10-K.
2. EARNINGS PER SHARE
Primary and fully diluted earnings per share ("EPS") are computed by dividing
net income by the weighted average number of shares of common stock and
dilutive common stock equivalents outstanding.
For the primary EPS calculation, the weighted-average number of shares of common
stock and common stock equivalents outstanding includes the average number of
shares of common stock outstanding adjusted for the weighted average number of
unallocated shares held by the Employee Stock Ownership Plan ("ESOP") and the
unawarded shares held by the Recognition and Retention Plan ("RRP") and the
dilutive effect of unexercised stock options using the treasury stock method.
For the fully diluted EPS calculation, the weighted average number of shares of
common stock equivalents includes the same components used in the primary
earnings per share calculation; however, the maximum dilutive effect for
unexercised stock options is computed using the period-end market price of the
Company's common stock if it is higher than the average market price used in
calculating primary earnings per share.
3. CONVERSION TO STOCK FORM OF OWNERSHIP
On May 29, 1996, the Board of Trustees of the Bank adopted a Plan of Conversion,
which was subsequently amended on July 30, 1996 and September 30, 1996, to
convert the Bank from a New York State chartered mutual savings bank to a New
York State chartered stock savings bank with the concurrent formation of a
holding company, Roslyn Bancorp, Inc. (the "Conversion").
The Conversion was completed on January 10, 1997, with the issuance by the
Company of 42,371,359 shares of its common stock, at a price of $10.00 per
share, in an initial public offering to the Bank's eligible depositors. The
Company received gross proceeds from the Conversion of $423.7 million, before
the
7
<PAGE>
reduction from gross proceeds of $13.1 million for estimated Conversion
related expenses. On the date of the Conversion, $145.3 million of deposits and
$278.4 million of non-depository stock subscriptions funds were transferred to
stockholders' equity, and $1.08 billion of non-depository stock subscriptions
funds were subsequently returned to subscribers.
Concurrent with the close of the stock offering, an additional 1,271,100 shares
of authorized but unissued shares of common stock were donated by the Company to
The Roslyn Savings Foundation (the "Foundation"), a private foundation dedicated
to charitable purposes within the Bank's local community.
The Company recognized a one-time charge of $12.7 million, the full amount of
the contribution made to the Foundation, in the first quarter of 1997. The
contribution to the Foundation will be fully tax deductible, subject to an
annual limitation based upon the Company's annual taxable income.
4. EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the Conversion, the Bank established an Employee Stock
Ownership Plan (the "ESOP"). The ESOP is a tax qualified retirement plan
designed to invest primarily in the Company's common stock. All full-time
employees of the Bank who have completed one year of service with the Bank will
be able to participate in the ESOP. Subsequent to the Conversion, the ESOP
purchased, primarily through a $53.8 million loan from the Company and an
initial $1.0 million contribution from the Bank, 8% of the outstanding shares of
common stock, or 3,491,397 shares, on the open market. The loan to the ESOP
will be primarily repaid with contributions from the Bank to the ESOP over a
period not to exceed 30 years. The Company recognizes compensation expense
attributable to its ESOP, other than the initial $1.0 million contribution which
was charged to compensation expense in 1996, ratably over the year based upon
the estimated number of ESOP shares to be allocated each December 31st. The
amount of compensation expense recorded is equal to the estimate of shares to be
allocated by the ESOP multiplied by the average fair value of the underlying
shares during the period. For the nine months ended September 30, 1997,
compensation expense attributable to the ESOP was approximately $1.6 million.
5. RECOGNITION AND RETENTION PLAN
At the annual shareholder meeting on July 22, 1997, the shareholders approved
The Roslyn Bancorp, Inc. 1997 Stock-Based Incentive Plan ("Incentive Plan" or
"Recognition and Retention Plan"). The Incentive Plan authorizes the granting of
options to purchase common stock, option-related awards and awards of common
stock (collectively, "Awards"). Subject to certain adjustments to prevent
dilution of Awards to participants, the maximum number of shares reserved for
Awards denominated in common stock under the Incentive Plan is 6,108,444 shares.
The maximum number of shares reserved for purchase pursuant to the exercise of
options and option-related Awards which may be granted under the Incentive Plan
is 4,364,246 shares and will primarily vest over a five year period and which
must be exercised no more than ten years from the date of grant. The maximum
number of the shares reserved for the award of shares of common stock is
1,744,198 shares, and will primarily vest over a five year period. All officers,
other employees and outside directors of the Company and its affiliates,
including the Bank and its subsidiaries, are eligible to receive Awards under
the Incentive Plan. The Incentive Plan will be administered by a committee of
non-employee directors of the Company (the "Committee"). Authorized, but
unissued shares or shares previously issued and reacquired by the Company, may
be used to satisfy the Awards under the Incentive Plan.
8
<PAGE>
The Bank contributed $41.4 million, during the third quarter of 1997, to the
Recognition and Retention Plan ("RRP") to enable the RRP to purchase the
1,744,198 shares of the Company's common stock to be awarded. This contribution
represents deferred compensation which is initially recorded as a reduction to
stockholders' equity and ratably charged to compensation expense over the
vesting period of the awards. The Committee established September 2, 1997 as the
Incentive Plans effective grant date and substantially all of the shares
reserved as noted above, were awarded. For the nine months ended September 30,
1997, compensation expense attributable to the RRP was approximately $2.0
million. There was no compensation expense attributable to the options as the
Company used the intrinsic value based method of accounting as the $22.50
exercise price equaled the stock price at the grant date.
6. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") SFAS No. 128, "Earnings per
Share." The statement is effective for periods ending after December 15, 1997,
and will require restatement of all prior-period earnings per share ("EPS") data
presented. The statement establishes standards for computing and presenting
EPS. It replaces the presentation of primary EPS with basic EPS, and requires
dual presentation of basic and diluted EPS on the face of the income statement.
Basic EPS is computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
Adoption of this statement is not expected to have a material effect on the
Company's consolidated financial statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income."
This statement establishes standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. All items that are required to be recognized under SFAS
No. 130 as components of comprehensive income must be reported in a financial
statement that is displayed with the same prominence as other financial
statements. This statement does not require a specific format for that financial
statement but requires that an institution display an amount representing total
comprehensive income for the period in that financial statement.
SFAS No. 130 requires that an institution (i) classify items of other
comprehensive income by their nature in a financial statement and (ii) display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position.
This statement is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. Management is still assessing the impact of
the adoption of this statement on the Company's consolidated financial
statements.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." This statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. Additionally, it establishes standards for related
disclosures about products and services, geographic areas, and major customers.
The statement supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise", No. 18, "Financial Reporting for Segments of a Business
Enterprise - Interim Financial Statements", No. 24, "Reporting Segment
Information in Financial Statements That Are Presented in Another Enterprise's
Financial Report" and SFAS No. 30, "Disclosure of Information about Major
Customers." SFAS No. 131 amends SFAS No. 94,
9
<PAGE>
"Consolidation of All Majority-Owned Subsidiaries", to eliminate the requirement
to disclose additional information about subsidiaries that were not consolidated
prior to the effective date of SFAS No. 94. The statement also amends Accounting
Principles Board Opinion No. 28, "Interim Financial Reporting", to require
disclosure of selected information about operating segments in interim reports
to shareholders.
This statement requires that a public business enterprise report financial and
descriptive information about its reportable operating segments. Operating
segments are components of an enterprise about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
SFAS No. 131 requires that a public business enterprise report a measure of
segment profit or loss, certain revenue and expense items, and segment assets.
It requires reconciliations of total segment revenues, total segment profit or
loss, total segment assets, and other amounts disclosed for segments to
corresponding amounts in the enterprise's general purpose financial statements.
It requires that all public business enterprises report information about
revenues derived from enterprise's products or services, about the countries in
which the enterprise earns revenues and holds assets, and about major customers
regardless of whether that information is used in making operating decisions.
The statement requires that a public business enterprise report descriptive
information about the way that the operating segments were determined, the
products and services provided by operating segments, differences between the
measurements used in reporting segment information and those used in the
enterprise's general purpose financial statements, and changes in the
measurement of segment amounts from period to period.
The statement is effective for financial statements for fiscal years beginning
after December 15, 1997. In the initial year of application, comparative
information for the earlier years is to be restated. This statement need not be
applied to interim financial statements in the initial year of its application,
but comparative information for interim periods in the initial year of
application is to be reported in the financial statements for the interim period
in the second year of application. Management is still assessing the impact of
the adoption of this statement on the Company's consolidated financial
statements.
7. RECENT DEVELOPMENTS
On August 19, 1997, the Company announced that its Board of Directors declared a
quarterly dividend of six cents ($0.06) per common share. The dividend was paid
on September 12, 1997 to shareholders of record as of September 2, 1997.
8. DEBT AND EQUITY AND MORTGAGE-BACKED AND MORTGAGE RELATED SECURITIES
The following table sets forth certain information regarding amortized cost, and
estimated fair values of debt and equity and mortgage-backed and mortgage
related securities of the Company at September 30, 1997 and December 31, 1996,
respectively.
10
<PAGE>
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------------- -------------------------
(In thousands)
Estimated Estimated
Amortized fair Amortized fair
cost value cost value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Available-for-sale:
Debt securities:
United States Government - direct and
guaranteed................................................ $ 115,563 $ 118,231 $ 175,440 $ 179,259
United States Government agencies........................... 148,292 147,696 124,709 124,377
Other....................................................... 12,374 12,410 14,207 14,398
----------- ----------- ----------- -----------
Total debt securities..................................... 276,229 278,337 314,356 318,034
----------- ----------- ----------- -----------
Equity securities:
Common and preferred........................................ 221,500 246,111 155,284 168,364
Other....................................................... 488 499 488 498
----------- ----------- ----------- -----------
Total equity securities................................... 221,988 246,610 155,772 168,862
----------- ----------- ----------- -----------
Mortgaged-backed and mortgage related
securities, net:
GNMA pass-through securities............................... 15,253 16,750 18,737 20,504
FNMA pass-through securities............................... 5,448 5,359 6,443 6,263
FHLMC pass-through securities.............................. 231,109 233,618 220,800 220,264
GNMA adjustable rate mortgage pass-
through securities....................................... 419,419 426,914 268,801 272,432
Whole loan private collateralized mortgage
obligations.............................................. 466,112 470,210 276,500 278,033
Agency collateralized mortgage
obligations.............................................. 571,518 575,262 360,115 361,915
----------- ----------- ----------- -----------
Total mortgage-backed and mortgage
related securities, net................................ 1,708,859 1,728,113 1,151,396 1,159,411
----------- ----------- ----------- -----------
Total securities available-for-sale...................... $ 2,207,076 $ 2,253,060 $ 1,621,524 $ 1,646,307
=========== =========== =========== ===========
Held-to-maturity, net:
Debt securities:
State, county and municipal................................. $ 1,930 $ 2,037 $ 1,930 $ 2,067
Mortgaged-backed and mortgage related securities:
Whole loan private collateralized mortgage obligations...... 223,203 223,856 276,632 276,046
----------- ----------- ----------- -----------
Total securities held-to-maturity, net.................... $ 225,133 $ 225,893 $ 278,562 $ 278,113
=========== =========== =========== ===========
</TABLE>
11
<PAGE>
9. LOANS RECEIVABLE, NET
Loans receivable, net at September 30, 1997 and December 31, 1996 consist
of the following:
<TABLE>
<CAPTION>
September 30, 1997 December 31, 1996
------------------- -------------------
(In thousands)
<S> <C> <C>
Real estate loans:
One- to four-family......................... $ 574,015 $ 263,337
Multi-family................................ 37,325 46,576
Commercial real estate...................... 246,660 168,797
Construction and development................ 51,866 37,459
Home equity and second mortgage............. 13,635 9,506
Consumer...................................... 3,947 1,241
Student....................................... 837 1,576
----------------- -------------------
Gross loans.......................... 928,285 528,492
Less:
Unamortized discounts, net.................. 5,975 701
Deferred loan fees.......................... 771 881
Deferred mortgage interest.................. 1,467 566
Allowance for possible loan losses.......... 23,945 23,320
----------------- -------------------
Total loans, net..................... 896,127 503,024
Less:
Loans held for sale, net:
One- to four-family, net............... 16,811 12,558
Student................................ 837 1,576
----------------- -------------------
Loans receivable held for
investment, net..................... $ 878,479 $ 488,890
================= ===================
</TABLE>
10. ASSET QUALITY
The following table sets forth information regarding non-accrual loans, loans
delinquent 90 days or more and still accruing interest at the dates indicated
and real estate owned. It is the Bank's general policy to discontinue accruing
interest on all loans which are past due 90 days or when, in the opinion of
management, such suspension is warranted. When a loan is placed on non-accrual
status, the Bank ceases the accrual of interest owed and previously accrued
interest is charged against interest income. Loans are generally returned to
accrual status when principal and interest payments are current, there is
reasonable assurance that the loan will be fully collectible and a consistent
record of performance has been demonstrated.
12
<PAGE>
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- ------------
(In thousands)
<S> <C> <C>
Non-accrual loans:
One- to four-family................................ $ 3,709 $ 2,764
Home equity........................................ 59 -
Multi-family....................................... - -
Commercial real estate............................. 4,263 5,374
Construction and development....................... 602 602
Consumer loans..................................... 19 -
------------ ------------
Total non-accrual loans......................... 8,652 8,740
Loans contractually past due 90
days or more, other than non-accruing............. 4 -
------------ ------------
Total non-performing loans...................... 8,656 8,740
Real estate owned, net (1).......................... 661 1,698
------------ ------------
Total non-performing assets..................... $ 9,317 $ 10,438
============ ============
Allowance for possible loan losses
as a percent of loans (2)......................... 2.65% 4.55%
Allowance for possible loan losses
as a percent of total non-performing loans........ 276.63% 266.82%
Non-performing loans as a percent of loans (2)...... 0.96% 1.71%
Non-performing assets as a percent of total
assets............................................ 0.27% 0.29%
</TABLE>
(1) Real estate owned balances are shown net of related loss allowances.
(2) Loans include loans receivable held for investment, net, excluding the
allowance for possible loan losses.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Roslyn Bancorp, Inc. is a savings and loan holding company regulated by
the Office of Thrift Supervision. The primary operating subsidiary of Roslyn
Bancorp, Inc. is The Roslyn Savings Bank (the "Bank"), a New York State
chartered stock savings bank. While the following discussion of financial
condition and results of operations includes the collective results of Roslyn
Bancorp, Inc. and the Bank (collectively the "Company"), this discussion
reflects principally the Bank's activities as the Company currently does not
engage in any significant business activities other than the management of the
Bank and the investment of net proceeds from the Bank's mutual to stock
conversion which occurred on January 10, 1997.
FINANCIAL CONDITION
Total assets at September 30, 1997 were $3.47 billion, a decrease of $143.8
million, or 3.98%, from $3.62 billion at December 31, 1996. The decrease was
primarily attributable to the January 10, 1997 consummation of the Bank's
conversion from a New York State chartered mutual savings bank to a New York
State chartered stock savings bank and the return of stock subscription proceeds
for unsatisfied subscriptions of Roslyn Bancorp, Inc. common stock. As a
result, $145.3 million of deposits and $278.4 million of non-depository stock
subscriptions funds were transferred to stockholders' equity of the Company, and
$1.08 billion of non-depository stock subscriptions funds, which were held in
short-term money market investments, were returned to subscribers. The effect
of such resulted in a $1.09 billion decrease in short-term money market
investments from $1.11 billion at December 31, 1996 to $20.8 million at
September 30, 1997.
Excluding the effect of the $1.08 billion of non-depository stock
subscriptions funds returned to subscribers, total assets increased by $934.8
million primarily due to a $606.8 million increase in securities available-for-
sale and a $387.5 million increase in real estate loans held for investment,
net. The net conversion proceeds, along with the Company's leveraging strategy,
were utilized to fund the growth in both the securities and mortgage loan
portfolios. Mortgage-backed and mortgage related securities available-for-sale
increased by $568.7 million, or 49.1%, from $1.16 billion at December 31, 1996
to $1.73 billion at September 30, 1997. Debt and equity securities available-
for-sale at September 30, 1997 totaled $524.9 million, an increase of $38.0
million, or 7.8%, compared to $486.9 million at December 31, 1996. Securities
held-to-maturity, net decreased $53.5 million, or 19.2%, to $225.1 million at
September 30, 1997 from $278.6 million at December 31, 1996. These changes in
the securities portfolios reflect the effects of securities purchases,
securities repayments and maturities, and in the case of the available-for-sale
securities portfolio, the effects of securities sales and changes in the
estimated fair values of the securities. At September 30, 1997, the securities
available-for-sale portfolio had net unrealized gains of $46.0 million as
compared to $24.8 million at December 31, 1996.
Real estate loans held for investment, net at September 30, 1997 were
$898.5 million, an increase of $387.5 million, or 75.8% from $511.0 million at
December 31, 1996 primarily due to the origination of $353.2 million in
commercial real estate, construction and development and one- to four-family
residential real estate loans and from the purchase of $262.2 million of one- to
four-family residential real estate loans.
Total liabilities at September 30, 1997 were $2.86 billion, a decrease of
$507.3 million, or 15.06% from $3.37 billion at December 31, 1996. Although
total deposits decreased by $79.5 million, or 4.07%, from $1.96 billion at
December 31, 1996 to $1.88 billion at September 30, 1997, after giving effect to
the $145.3 million of
14
<PAGE>
deposits that were transferred to stockholders' equity as part of the conversion
to a stock form of ownership, deposits have increased by $65.8 million, or 3.6%.
At September 30, 1997 total deposits increased $104.8 million, or 5.9% from the
previous quarter ended June 30, 1997. The overall decrease in total liabilities
was partially offset by a $916.8 million increase in borrowed funds principally
due to management's decision to adopt a leveraging strategy utilizing
borrowings, primarily in the form of reverse repurchase agreements, to fund
asset growth and, to a lesser extent, fund first quarter deposit outflows.
Total stockholders' equity increased $363.5 million to $612.8 million at
September 30, 1997 from $249.3 million at December 31, 1996. The increase is
primarily due to the transfer of $410.7 million of net conversion proceeds of
the initial public offering that was completed on January 10, 1997, earnings for
the nine months ended September 30, 1997 totaling $24.0 million and the increase
in net unrealized gains on securities available-for-sale, net of taxes of $12.1
million. The increase in net unrealized gains on securities available-for-sale
from December 31, 1996 to September 30, 1997 resulted primarily from the
appreciation in equity securities coupled with the larger aggregate principal
balance of the investment portfolio. This increase was partially offset by the
unallocated and unearned shares of common stock held by the Company's ESOP and
RRP of $52.5 million and $39.3 million, respectively, and the $4.4 million of
dividends paid to shareholders. Additionally, concurrent with the close of the
stock offering, the Company donated 1,271,100 shares of common stock to the
Foundation which increased stockholders' equity by $12.7 million.
ANALYSIS OF NET INTEREST INCOME
Net interest income represents the difference between income on interest-
earning assets and expense on interest-bearing liabilities. Net interest income
depends upon the volume of interest-earning assets and interest-bearing
liabilities and the interest rates earned or paid on them.
The following table sets forth certain information regarding the Company's
average statements of financial condition and its statements of income for the
three and nine months ended September 30, 1997 and 1996, and reflects the
average yield on interest-earning assets and average cost of interest-bearing
liabilities for the periods indicated. Such yields and costs are derived by
dividing income or expense, annualized, by the average balance of interest-
earning assets or interest-bearing liabilities, respectively. Average balances
are derived from daily balances. Average balances and yields include non-
accrual loans.
15
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
1997 1996
---------------------------------- ---------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------------ -------- ------- ---------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Federal funds sold and
repurchase agreements.............. $ 26,317 $ 395 6.00% $ 24,690 $ 326 5.28%
Debt and equity securities........... 532,830 8,616 6.47 478,104 8,161 6.83
Mortgage-backed and mortgage
related securities................. 1,867,823 33,680 7.21 903,570 15,733 6.96
Real estate loans, net............... 770,837 16,532 8.58 441,897 9,906 8.97
Consumer and student loans........... 4,577 110 9.61 2,109 47 8.91
----------- -------- ----------- --------
Total interest-earning assets. 3,202,384 59,333 7.41 1,850,370 34,173 7.39
-------- --------
Non-interest-earning assets............. 69,778 76,261
----------- -----------
Total assets............................ $ 3,272,162 $ 1,926,631
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts................ $ 50,688 338 2.67% $ 61,233 443 2.89%
Savings accounts..................... 425,988 3,300 3.10 457,121 3,613 3.16
NOW and Super NOW accounts........... 82,994 782 3.77 47,624 382 3.21
Certificates of deposit.............. 1,251,903 18,372 5.87 926,010 12,958 5.60
----------- -------- ----------- --------
Total deposits................ 1,811,573 22,792 5.03 1,491,988 17,396 4.66
Borrowed funds....................... 765,811 11,544 6.03 150,272 2,139 5.69
----------- -------- ----------- --------
Total interest-bearing
liabilities.................. 2,577,384 34,336 5.33 1,642,260 19,535 4.76
-------- --------
Non-interest-bearing liabilities........ 73,374 57,758
----------- -----------
Total liabilities....................... 2,650,758 1,700,018
Stockholders' equity.................... 621,404 226,613
----------- -----------
Total liabilities and stockholders'
equity.............................. $ 3,272,162 $ 1,926,631
=========== ===========
Net interest income/net interest
rate spread......................... $ 24,997 2.08% $ 14,638 2.63%
======== ====== ======== =======
Net interest margin..................... 3.12% 3.16%
====== =======
Ratio of interest-earning assets to
interest-bearing liabilities........ 124.25% 112.67%
====== =======
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
1997 1996
---------------------------------- ---------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------------ -------- ------- ---------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Interest-earning assets:
Federal funds sold and
repurchase agreements.............. $ 89,566 $ 3,704 5.51% $ 25,933 $ 1,013 5.21%
Debt and equity securities........... 506,627 25,028 6.59 432,582 22,298 6.87
Mortgage-backed and mortgage
related securities................. 1,702,189 91,426 7.16 840,562 43,503 6.90
Real estate loans, net............... 650,183 42,175 8.65 408,224 28,096 9.18
Consumer and student loans........... 3,761 252 8.93 3,352 291 11.58
----------- --------- ----------- --------
Total interest-earning assets. 2,952,326 162,585 7.34 1,710,653 95,201 7.42
--------- --------
Non-interest-earning assets............. 87,622 68,777
----------- -----------
Total assets............................ $ 3,039,948 $ 1,779,430
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest-bearing liabilities:
Money market accounts................ $ 54,675 1,101 2.68% $ 62,959 1,357 2.87%
Savings accounts..................... 436,529 9,988 3.05 460,022 10,860 3.15
NOW and Super NOW accounts........... 76,843 2,037 3.53 39,886 839 2.80
Certificates of deposit.............. 1,188,061 51,080 5.73 854,847 35,900 5.60
----------- --------- ----------- --------
Total deposits................ 1,756,108 64,206 4.87 1,417,714 48,956 4.60
Borrowed funds....................... 527,428 23,072 5.83 80,777 3,445 5.69
Non-depository stock subscriptions... 70,537 1,341 2.53 - - -
----------- --------- ----------- --------
Total interest-bearing
liabilities.................. 2,354,073 88,619 5.02 1,498,491 52,401 4.66
--------- --------
Non-interest-bearing liabilities........ 80,429 55,307
----------- -----------
Total liabilities....................... 2,434,502 1,553,798
Stockholders' equity.................... 605,446 225,632
----------- -----------
Total liabilities and stockholders'
equity.............................. $ 3,039,948 $ 1,779,430
=========== ===========
Net interest income/net interest
rate spread......................... $ 73,966 2.32% $ 42,800 2.76%
========= ======= ======== =======
Net interest margin..................... 3.34% 3.34%
======= =======
Ratio of interest-earning assets to
interest-bearing liabilities........ 125.41% 114.16%
======= =======
</TABLE>
17
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
AND 1996
GENERAL
The Company reported net income of $11.0 million for the quarter ended
September 30, 1997, or $0.28 per share as compared to net income of $4.7 million
for the quarter ended September 30, 1996. Due to the Bank's conversion and
acquisition by the Company on January 10, 1997, the Company had no significant
assets or operations prior to such date. Accordingly, the data presented for the
quarter ended September 30, 1996 reflects the operations of the Bank and its
subsidiaries only and the data presented for the quarter ended September 30,
1997 reflects the operations of the Company and the Bank and its subsidiaries.
Per share data for the quarter ended September 30, 1996 is not applicable.
INTEREST INCOME
Interest income amounted to $59.3 million for the three months ended
September 30, 1997, representing an increase of $25.2 million, or 73.6% from the
same period in 1996. The increase was primarily the result of a $1.35 billion
increase in average interest-earning assets. The increase in average interest-
earning assets was principally attributable to growth of $964.3 million in
mortgage-backed and mortgage related securities, $328.9 million in real estate
loans, net and $54.7 million in debt and equity securities. These increases were
principally the result of utilizing the net conversion proceeds and the
Company's leveraging position. Additionally, the growth was attributable to a
$319.6 million increase in average interest-bearing deposits over the comparable
1996 period. Interest income on mortgage-backed and mortgage related securities
increased $18.0 million, from $15.7 million for the three months ended September
30, 1996 to $33.7 million for the same period in 1997. The increase was due to
the increased average balance of these securities and the increase in the
average yield on these securities of 25 basis points from 6.96% for the three
months ended September 30, 1996 to 7.21% for the three months ended September
30, 1997. The yield increase was due to increases in maturity terms for new
purchases and the upward repricing of securities purchased in prior periods.
Interest income on real estate loans increased $6.6 million, or 66.9%,
to $16.5 million for the three months ended September 30, 1997, from $9.9
million for the same period in 1996. The increase was a result of the growth in
the average balance of loans outstanding primarily due to increased originations
of one- to four-family, commercial real estate and construction and development
loans and the purchase of $172.3 million of one- to four-family residential real
estate loans. The increase was partially offset by a 39 basis point decrease in
the average yield on real estate loans from 8.97% for the three months ended
September 30, 1996 to 8.58% for the same period in 1997 principally due to an
increased concentration of one- to four-family real estate loans within the loan
portfolio mix.
INTEREST EXPENSE
Interest expense for the three months ended September 30, 1997, was
$34.3 million, compared to $19.5 million for the three months ended September
30, 1996, an increase of $14.8 million, or 75.8%. The increase in interest
expense is related to an $935.1 million, or 56.9%, increase in the average
balance of interest-bearing liabilities from $1.64 billion for the quarter ended
September 30, 1996 to $2.58 billion for the quarter ended September 30, 1997.
This increase reflects a $319.6 million increase in the average balance of
interest-bearing deposits and a $615.5 million increase in the average balance
of borrowed funds for the quarter ended September 30, 1997, as compared to the
prior year quarter. The increase in total deposits is primarily due to a
increase in the average balance of certificates of deposit due to management's
strategy of funding asset growth by offering competitive rates, and through the
acquisition of $150.0 million of brokered deposits of which $50.0 million were
18
<PAGE>
acquired during the quarter ended September 30, 1997 and $100.0 million during
the third and fourth quarters of 1996. As of September 30, 1997, $149.8 million
of brokered deposits remain outstanding. The effect of the higher certificates
of deposit average balance in addition to a 27 basis point increase in the
average cost resulted in an increase of $5.4 million in interest expense on
certificates of deposit for the quarter ended September 30, 1997 as compared to
the same quarter in 1996.
The average balance of borrowed funds increased $615.5 million from
$150.3 million for the three months ended September 30, 1996 to $765.8 million
for the three months ended September 30, 1997. This increase in addition to a 34
basis point increase in the average cost resulted in a $9.4 million increase in
interest expense on borrowed funds, from $2.1 million for the quarter ended
September 30, 1996 to $11.5 million for the quarter ended September 30, 1997.
The increase in borrowings, principally reverse repurchase agreements, were part
of the Company's wholesale leverage strategy to improve its return on invested
capital subsequent to the conversion.
The proceeds from increased certificates of deposit and borrowings were
reinvested in investment securities, real estate loans and residential whole
loans, and, to a lesser extent, fund share purchases for the RRP.
NET INTEREST INCOME
Net interest income before provision for possible loan losses was $25.0
million for the three months ended September 30 , 1997 as compared to $14.6
million for the three months ended September 30, 1996, an increase of $10.4
million, or 70.8%. The increase in net interest income before provision for
possible loan losses was attributable to a $1.35 billion, or 73.1%, increase in
average interest-earning assets to $3.20 billion for the quarter ended September
30, 1997 from $1.85 billion for the quarter ended September 30, 1996. The growth
in interest-earning assets was principally the result of utilizing the
conversion proceeds and the Company's leveraging position to increase both the
investment and real estate loan portfolios. Interest-bearing liabilities
increased $935.1 million, or 56.9%, to $2.58 billion for the 1997 period from
$1.64 billion for the 1996 period. The net interest margin and spread for the
quarter ended September 30, 1997, decreased to 3.12% and 2.08%, respectively,
from 3.16% and 2.63%, respectively, for the prior year quarter due to the
increase in borrowed funds and certificates of deposit, the proceeds of which
were used to invest in mortgage-backed and mortgage related securities, whole
loan purchases, and, to a lesser extent, fund share purchases for the Bank's
incentive stock program.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses totaled $150,000 for the three
months ended September 30, 1997 as compared to $300,000 for the three months
ended September 30, 1996. The provision for possible loan losses for the three
months ended September 30, 1997 reflects management's qualitative assessment of
the loan portfolio, net charge-offs and collection of delinquent loans. The
decrease resulted from management's assessment of the loan portfolio, the level
of the Company's allowance for possible loan losses and its assessment of the
local economy and market conditions. At September 30, 1997 and December 31,
1996, the allowance for possible loan losses amounted to $23.9 million and $23.3
million, respectively and the ratio of such allowance to non-performing loans
was 276.63% at September 30, 1997 as compared to 266.82% at December 31, 1996.
Management assesses the adequacy of the allowance for possible loan losses based
on evaluating known and inherent risks in the loan portfolio and upon
management's continuing analysis of the factors underlying the quality of the
loan portfolio. While management believes that, based on information currently
available, the allowance for possible loan losses is sufficient to cover losses
inherent in its loan portfolio at this time, no assurance can be given that the
level of allowance for possible loan losses will be sufficient to cover future
possible loan losses incurred by the Company or that future adjustments to the
allowance for possible loan losses will not be necessary if economic and other
conditions differ substantially from the economic and other conditions used by
management to determine the
19
<PAGE>
current level of the allowance for possible loan losses. Management may in the
future increase its level of allowance for possible loan losses as a percentage
of total loans and non-performing loans in the event it increases the level of
commercial real estate, multi-family, construction and development or consumer
lending as a percentage of its total loan portfolio. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the allowance for possible loan losses. Such agencies may
require the Company to provide additions to the allowance based upon judgments
different from management.
NON-INTEREST INCOME
Non-interest income increased $756,000, or 32.3%, to $3.1 million for
the quarter ended September 30, 1997 as compared to $2.3 million for the same
period in the prior year. The increase was a result of a $881,000 increase in
net gains on sales of securities and a $337,000 increase in loan servicing and
fee income, which was partially offset by a $479,000 decrease in net gains on
the sales of loans. The increase in net gains on securities is due to
management's investment strategy of periodically recognizing profits from its
available-for-sale securities during favorable market conditions. The increase
in loan servicing and fee income is primarily due to an increase in the loan
servicing portfolio and loan fees. These increases were partially offset by the
decrease in net gains on sales of loans which was primarily attributable to
unfavorable market conditions in the secondary market.
NON-INTEREST EXPENSE
Non-interest expense totaled $11.3 million for the quarter ended
September 30, 1997 as compared to $9.3 million for the quarter ended September
30, 1996, an increase of $2.0 million, or 21.4%. The increase is mainly the
result of increases in compensation and employee benefits, including the
Company's ESOP and RRP and additional personnel and other costs associated with
the establishment in late 1996 of two Long Island branch offices located in
Lawrence and Massapequa, and two mortgage origination offices located in West
Hartford and Fairfield, Connecticut. In 1997, the Company further expanded its
loan origination network by opening four additional mortgage origination offices
in Rochester, Syracuse, Woodhaven, and Staten Island, New York. In contrast to
the increased expense associated with the franchise expansion, the Company's
efficiency ratio improved to 41.08% for the third quarter of 1997 as compared to
52.88% for the comparable 1996 quarter.
INCOME TAXES
Total income tax expense increased $2.9 million, from $2.7 million
recorded during the quarter ended September 30, 1996 to $5.6 million during the
quarter ended September 30, 1997. The effective income tax rates were 33.73% for
the 1997 period as compared to 36.65% for the 1996 period. The reduction in the
Company's tax rate was primarily attributable to certain tax benefits associated
with the establishment, during the second quarter of 1997, of Roslyn Capital
Corp., a subsidiary of the Bank, as a real estate investment trust.
COMPARISON OF OPERATING RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND
1996
GENERAL
The Company reported net income of $24.0 million for the nine month
period ended September 30, 1997, or $0.60 per share, as compared to net income
of $15.6 million for the corresponding period in 1996. Net income for the period
ended September 30, 1997 includes a one-time charge relating to the funding of
the Foundation.
20
<PAGE>
The Foundation was established and funded with a contribution by the Company of
1,271,100 shares of its common stock as part of the January 10, 1997 conversion
of the Bank to a New York State chartered stock savings bank. The contribution
resulted in a $7.4 million charge to earnings, on an after tax basis. The
Company's net income excluding the effect of funding the Foundation was $31.4
million for the nine month period ended September 30, 1997. This represents a
$15.8 million increase in net income from the comparable period in 1996.
INTEREST INCOME
Interest income amounted to $162.6 million for the nine months ended
September 30, 1997, representing an increase of $67.4 million, or 70.8% from the
same period in 1996. The increase was attributable to the growth in average
interest-earning assets to $2.95 billion for the nine months ended September 30,
1997, from $1.71 billion for the nine months ended September 30, 1996. The
growth in interest-earning assets was primarily the result of the deployment of
the January 10, 1997 conversion proceeds, deposit growth and the Company's
leveraging strategy. Although average interest-earning assets increased, the
average yield on interest-earning assets decreased by 8 basis points. The
decrease is due in part to the short-term liquidity position maintained prior to
the Conversion on January 10, 1997. Short-term liquidity was required to be
maintained due to the pending offering of Roslyn Bancorp, Inc. common stock and
the anticipated return of approximately $1.08 billion in non-depository stock
subscriptions funds. Interest income on mortgage-backed and mortgage related
securities increased $47.9 million, from $43.5 million for the nine months ended
September 30, 1996 to $91.4 million for the same period in 1997 due to an
increase of $861.6 million, or 102.5%, in the average balance of these
securities. Additionally contributing to the increase was an increase in the
average yield on these securities of 26 basis points from 6.90% for the nine
months ended September 30, 1996 to 7.16% for the nine months ended September 30,
1997. The yield increases were due to increases in maturity terms for new
purchases and the upward repricing of securities purchased in prior periods.
Interest income on real estate loans increased $14.1 million, or 50.1%,
to $42.2 million for the nine months ended September 30, 1997, from $28.1
million for the same period in 1996. The increase was a result of the growth in
the average balance of loans outstanding primarily due to increased originations
of construction and development, and commercial real estate loans and the
purchase of $262.2 million of one- to four-family residential real estate loans.
Further contributing to the increase in interest income for the nine months
ended September 30, 1997 compared to the same period in 1996 was a 13.6%
decrease in non-performing loans, from $10.0 million at September 30, 1996 to
$8.7 million at September 30, 1997. The increase was partially offset by a 53
basis point decrease in the average yield on real estate loans, net from 9.18%
for the nine months ended September 30, 1996 to 8.65% for the same period in
1997, principally due to an increased concentration of one- to four-family
residential real estate loans within the loan portfolio mix.
INTEREST EXPENSE
Interest expense for the nine months ended September 30, 1997, was $88.6
million, compared to $52.4 million for the nine months ended September 30, 1996,
an increase of $36.2 million, or 69.1%. The increase in interest expense is
related to an $855.6 million, or 57.1%, increase in the average balance of
interest-bearing liabilities from $1.50 billion in 1996 to $2.35 billion in
1997. This increase reflects a $338.4 million increase in the average balance of
interest-bearing deposits for the nine months ended September 30, 1997, as
compared to the comparable period in 1996, a 27 basis point increase in the
average rate paid on total interest-bearing deposits over the comparable period
in 1996 due to a increase in the average balance of certificates of deposit and
a one time $1.3 million expense relating to interest paid on stock subscription
escrow funds received in connection with the offering of Roslyn Bancorp, Inc.
common stock. The average balance of certificates of deposit increased due to
management's strategy of funding asset growth by offering competitive rates, and
through the acquisition of $150.0
21
<PAGE>
million of brokered deposits of which $50.0 million was purchased during the
quarter ended September 30, 1997 and $100.0 million was purchased during the
third and fourth quarters of 1996. As of September 30, 1997, $149.8 million of
brokered deposits remain outstanding. The effect of the higher average deposit
balance primarily resulted in an increase in interest expense on certificates of
deposit of $15.2 million, or 42.3%, from $35.9 million for the 1996 period to
$51.1 million for the 1997 period.
Interest expense on borrowed funds increased $19.7 million, from $3.4
million for the nine months ended September 30, 1996 to $23.1 million for the
nine months ended September 30, 1997 primarily due to an increase of $446.6
million in the average balance of borrowed funds, from $80.8 million for the
1996 period to $527.4 million for the comparable period in 1997. Borrowed funds,
principally reverse repurchase agreements, have been reinvested in investment
securities, real estate loans and residential whole loans as part of a strategy
to leverage the Company's capital position and improve its return on equity.
NET INTEREST INCOME
Net interest income before provision for possible loan losses was $74.0
million for the nine months ended September 30, 1997, an increase of $31.2
million, or 72.8%, from $42.8 million for the nine months ended September 30,
1996. The increase in net interest income before provision for possible loan
losses was attributable to the growth in average-interest earning assets to
$2.95 billion for the nine months ended September 30, 1997 from $1.71 billion
for the nine months ended September 30, 1996. The growth in interest-earning
assets was principally the result of the deployment of the January 10, 1997
conversion proceeds, deposit growth and the Company's leveraging strategy which
was utilized to increase both the investment securities and real estate loan
portfolios. Interest-bearing liabilities increased $855.6 million, or 57.1%, to
$2.35 billion for the 1997 period from $1.50 billion for the 1996 period. The
Company's net interest margin of 3.34% remained consistent with the comparable
1996 period, despite a 44 basis point decline in the net interest spread to
2.32% from 2.76% at September 30, 1996. The decline in the net interest spread
was a result of a 53 basis point decrease in real estate loan yields, a 27
basis point increase in total deposit costs and the Company's increased
leverage position.
PROVISION FOR POSSIBLE LOAN LOSSES
The provision for possible loan losses totaled $450,000 for the nine
months ended September 30, 1997 as compared to $700,000 for the nine months
ended September 30, 1996. The allowance for possible loan losses totaled $23.9
million at September 30, 1997 which represents a ratio of allowance for possible
loan losses as a percent of total non-performing loans and to total loans of
276.63% and 2.65%, respectively. The provision for possible loan losses for the
nine months ended September 30, 1997 reflects management's qualitative
assessment of the loan portfolio, net charge-offs and the collection of
delinquent loans. Management assesses the adequacy of the allowance for possible
loan losses based on evaluating known and inherent risks in the loan portfolio
and upon management's continuing analysis of the factors underlying the quality
of the loan portfolio. While management believes that, based on information
currently available, the Company's allowance for possible loan losses is
sufficient to cover losses inherent in its loan portfolio at this time, no
assurance can be given that the level of allowance for possible loan losses will
be sufficient to cover future possible loan losses incurred or that future
adjustments to the allowance for possible loan losses will not be necessary if
economic and other conditions differ substantially from the economic and other
conditions used by management to determine the current level of the allowance
for possible loan losses. Management may in the future increase its level of
allowance for possible loan losses as a percentage of total loans and non-
performing loans in the event it increases the level of commercial real estate,
multi-family, construction and development or consumer lending as a percentage
of its total loan portfolio. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the allowance
for possible loan losses.
22
<PAGE>
Such agencies may require the Company to provide additions to the allowance
based upon judgments different from management.
NON-INTEREST INCOME
Non-interest income, increased $678,000 or 9.2%, to $8.0 million for the
nine month period ended September 30, 1997 as compared to $7.3 million for the
nine month period ended September 30, 1996. The increase reflects in part, a
$889,000 increase in loan servicing and fee income and a $1.2 million increase
in net gains on securities. The increase in loan servicing and fee income is
primarily attributable to $467,000 in fee income earned on temporary bank
balances relating to the post conversion return of $1.08 billion of non-
depository stock subscriptions as well as due to an increase in the loan
servicing portfolio and loan fees. The increase in net gains on securities is
primarily due to managements investment strategy of periodically recognizing
profits from available-for-sale securities during favorable market conditions.
These increases in non-interest income were partially offset by a $1.3 million
decrease in net gains on sales of loans and a $129,000 decrease in other non-
interest income. The decrease in net gains on sales of loans is primarily
attributable to unfavorable market conditions in the secondary market, and, to a
lesser extent the Company retaining a larger percentage of one- to four-family
loan originations. The decrease in other non-interest income is primarily due to
real estate tax certiorari refunds received during the first quarter of 1996.
NON-INTEREST EXPENSE
Non-interest expense totaled $46.1 million for the nine months ended
September 30, 1997 as compared to $26.1 million for the nine months ended
September 30, 1996, an increase of $20.0 million, or 76.7%. The increase is
primarily the result of the one-time $12.7 million expense associated with
funding the Foundation. Excluding the effect of funding the Foundation, non-
interest expense increased $7.3 million, or 27.9%, to $33.4 million for the nine
months ended September 30, 1997 as compared to $26.1 million for the same period
in 1996. The increase in non-interest expense was primarily attributable to
increases in compensation and employee benefits, including the Company's ESOP
and RRP, and additional personnel and other costs associated with the
establishment of additional branch and mortgage origination offices. Also
contributing to the increase in non-interest expense were additional costs
incurred in connection with professional fees, advertising and promotional
expenses and deposit insurance premiums.
INCOME TAXES
Total income tax expense increased $3.7 million, or 47.9%, from $7.8
million recorded during the nine months ended September 30, 1996 to $11.5
million recorded during the nine months ended September 30, 1997. The increase
in the first nine months of 1997 as compared with the same period in 1996 is
primarily due to the $12.1 million, or 51.8% increase in income before income
taxes partially offset by the decrease in the effective tax rate from 33.25% in
1996 to 32.40% in the 1997 period.
INTEREST SENSITIVITY GAP ANALYSIS
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest rate sensitive" and by
monitoring a bank's interest rate sensitivity "gap." An asset or liability is
said to be interest rate sensitive within a specific time period if it will
mature or reprice within that time period. The interest rate sensitivity gap is
defined as the difference between the amount of interest-earning assets maturing
or repricing within a specific time period and the amount of interest-bearing
liabilities maturing or repricing within that same time period. At September 30,
1997, the Bank's one-year gap position, the difference between the
23
<PAGE>
amount of interest-earning assets maturing or repricing within one year and
interest-bearing liabilities maturing or repricing within one year, was negative
13.56%. A gap is considered positive when the amount of interest rate sensitive
assets exceeds the amount of interest rate sensitive liabilities. A gap is
considered negative when the amount of interest rate sensitive liabilities
exceeds the amount of interest rate sensitive assets. Accordingly, during a
period of rising interest rates, an institution with a negative gap position
would be in a worse position to invest in higher yielding assets which,
consequently, may result in the cost of its interest-bearing liabilities
increasing at a rate faster than its yield on interest-earning assets than if it
had a positive gap. During a period of falling interest rates, an institution
with a negative gap would tend to have its interest-bearing liabilities
repricing downward at a faster rate than its interest-earning assets as compared
to an institution with a positive gap which, consequently, may tend to
positively affect the growth of its net interest income. Given the Bank's
existing liquidity position and its ability to sell securities from its
available-for-sale portfolio, management of the Bank believes that its negative
gap position will have no material adverse effect on its liquidity position. If
interest rates decrease, there will be a corresponding effect on the Bank's
interest rate margin and operating results.
The following table sets forth the amount of interest-earning assets and
interest-bearing liabilities outstanding at September 30, 1997, which are
anticipated by the Company, based upon certain assumptions, to price or mature
in each of the future time periods shown (the "GAP Table"). Except as stated
below, the amount of assets and liabilities shown which reprice or mature during
a particular period were determined in accordance with the earlier of term to
repricing or the contractual maturity of the asset or liability. The table sets
forth an approximation of the projected repricing of assets and liabilities at
September 30, 1997, on the basis of contractual maturities, anticipated
prepayments, and scheduled rate adjustments within a one year period and
subsequent selected time intervals. For loans on residential properties,
adjustable-rate loans, and fixed-rate loans, prepayment rates were assumed to
range from 7.20% to 34.44% annually. Mortgage-backed securities were assumed to
prepay at rates between 5.58% and 35.52% annually. Savings accounts were assumed
to decay at 21.40%, 9.95%, 9.95%, 9.95%, and 48.75%, NOW accounts and money
market savings accounts were assumed to decay at 20.00%, 10.00%, 10.00%, 10.00%
and 50.00%, for the periods of one year or less, one to three years, three to
five years, five to ten years and more than ten years, respectively. Prepayment
and deposit decay rates can have a significant impact on the Bank's estimated
gap. While the Company believes such assumptions to be reasonable, there can be
no assurance that assumed prepayment rates and decay rates will approximate
actual future loan prepayment and deposit withdrawal activity.
24
<PAGE>
<TABLE>
<CAPTION>
At September 30, 1997
---------------------
More Than More Than More Than
One Year Three Years Five Years
One Year to to to More Than
or Less Three Years Five Years Ten Years Ten Years Total
----------- ----------- ----------- ---------- --------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS (1):
Federal funds sold........................... $ 20,800 $ - $ - $ - $ - $ 20,800
Debt and equity securities (2)............... 91,228 43,380 145,615 42,414 204,240 526,877
Mortgage-backed and mortgage
related securities (2)...................... 786,506 530,382 267,840 280,376 86,212 1,951,316
Real estate loans, net (3)(4)................ 215,082 122,877 270,427 226,742 72,047 907,175
Consumer and student loans (4)............... 3,232 268 193 110 442 4,245
----------- ----------- ---------- --------- --------- -----------
Total interest-earning assets............... 1,116,848 696,907 684,075 549,642 362,941 3,410,413
----------- ----------- ---------- --------- --------- -----------
INTEREST-BEARING LIABILITIES:
Money market accounts........................ 9,666 4,833 4,833 4,833 24,166 48,331
Savings accounts............................. 91,477 42,520 42,520 42,520 208,346 427,383
NOW and Super NOW accounts................... 16,740 8,369 8,369 8,369 41,847 83,694
Certificates of deposit...................... 823,544 320,053 121,586 21,937 - 1,287,120
Borrowed funds............................... 646,480 242,139 30,000 - - 918,619
----------- ----------- ---------- --------- --------- -----------
Total interest-bearing liabilities.......... 1,587,907 617,914 207,308 77,659 274,359 2,765,147
----------- ----------- ---------- --------- --------- -----------
Interest sensitivity gap (5)................. $ (471,059) $ 78,993 $ 476,767 $ 471,983 $ 88,582 $ 645,266
=========== =========== ========== ========= ========= ===========
Cumulative interest sensitivity gap.......... $ (471,059) $ (392,066) $ 84,701 $ 556,684 $ 645,266
=========== =========== ========== ========= =========
Cumulative interest sensitivity gap as
a percentage of total assets................ (13.56)% (11.29)% 2.44 % 16.02 % 18.57 %
Cumulative net interest-earning assets as
a percentage of cumulative interest-
bearing liabilities........................ 70.33 % 82.23 % 103.51 % 122.35 % 123.34 %
</TABLE>
(1) Interest-earning assets are included in the period in which the balances
are expected to be redeployed and/or repriced as a result of anticipated
prepayments, scheduled rate adjustments, and contractual maturities.
(2) Debt and equity and mortgage-backed and mortgage related securities are
shown at their respective values. Equity securities primarily consist of
callable preferred stock, the maturities of which have been assumed to be
the date on which they are initially callable.
(3) For the purposes of the gap analysis, the allowance for possible loan
losses and non-accrual loans have been excluded.
(4) Loans held for sale are included in the "One Year or Less" category.
(5) Interest sensitivity gap represents the difference between net interest-
earning assets and interest-bearing liabilities.
25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are deposits, proceeds from the
principal and interest payments on loans, mortgage-backed and mortgage related
and debt and equity securities, and to a lesser extent, proceeds from the sale
of residential mortgage loans in the secondary market. While maturities and
scheduled amortization of loans and securities are predictable sources of funds,
deposit outflows, mortgage prepayments and mortgage loan sales are greatly
influenced by general interest rates, economic conditions and competition.
The primary investing activities of the Bank are the origination of both
one- to four-family and commercial real estate loans and the purchase of
mortgage-backed, mortgage related, and debt and equity securities. During the
nine months ended September 30, 1997 and September 30, 1996, the Bank originated
and purchased mortgage loans in the amount of $622.8 million and $331.8 million,
respectively. Purchases of mortgage-backed and mortgage related and debt and
equity securities totaled $1.10 billion and $650.4 million during the nine
months ended September 30, 1997 and 1996, respectively. These activities were
funded primarily by principal repayments on loans and mortgage-backed and
mortgage related securities and by the Company's increased borrowed funds
position during the nine months ended September 30, 1997. Loan sales provided
additional liquidity to the Company, totaling $141.4 million and $173.6 million
for the nine months ended September 30, 1997 and 1996, respectively.
The Company closely monitors its liquidity position on a daily basis.
Excess, short-term liquidity is invested in overnight federal funds sold. In the
event that the Company should require funds beyond its ability to generate them
internally, additional sources of funds are available through the use of reverse
repurchase agreements. At September 30, 1997, the Company had $917.9 million in
reverse repurchase agreements outstanding, whereas, at December 31, 1996 there
were no reverse repurchase agreements outstanding. The aforementioned is
primarily attributable to management's decision to utilize borrowings, primarily
in the form of reverse repurchase agreements, to fund a significant portion of
its asset growth.
Loan commitments totaled $207.3 million at September 30, 1997, comprised
of $67.5 million in one- to four-family loan commitments, $14.3 million in
commercial real estate loan commitments, $105.0 million in construction and
development loan commitments, $13.0 million in multi-family loan commitments and
$7.5 million in home equity loan commitments. Management of the Company
anticipates that it will have sufficient funds available to meet its current
loan commitments. Certificates of deposits that are scheduled to mature in one
year or less from September 30, 1997 totaled $823.5 million. Based upon prior
experience and the Bank's current pricing strategy, management believes that a
significant portion of such deposits will remain with the Bank.
The Bank's most liquid assets are cash and cash equivalents, short-term
securities, securities available-for-sale and securities held-to-maturity due
within one year. The levels of these assets are dependent on the Company's
operating, financing, lending, and investment activities during any given
period. At September 30, 1997, the Company had $41.0 million in cash and cash
equivalents and no short-term repurchase agreements outstanding whereas, at
December 31, 1996 the Bank had $624.6 million in cash and cash equivalents and
$501.7 million in short-term repurchase agreements outstanding. The decrease in
cash and cash equivalents and short-term repurchase agreements was primarily due
to the Company's temporarily high liquidity position at December 31, 1996 due to
the receipt of stock subscriptions held in escrow relating to the Conversion.
26
<PAGE>
REGULATORY CAPITAL POSITION
The Bank is subject to minimum regulatory requirements imposed by the
Federal Deposit Insurance Corporation ("FDIC") which vary according to the
institution's capital level and the composition of its assets. An insured
institution is required to maintain core capital of not less than 3% of total
assets plus an additional 100 to 200 basis points ("leverage capital ratio"). An
insured institution must also maintain a ratio of total capital to risk-based
assets of 8%. Although the minimum leverage capital ratio is 3%, the Federal
Deposit Insurance Corporation Improvement Act ("FDICIA") stipulates that an
institution with less than 4% leverage capital ratio is deemed to be an
"undercapitalized" institution and results in the imposition of regulatory
restrictions. The Bank's capital ratios qualify it to be deemed "well
capitalized" under FDICIA.
In accordance with the requirements of FDIC and the New York State
Banking Department, the Bank must meet certain measures of capital adequacy with
respect to leverage and risk-based capital. As of September 30, 1997 the Bank
exceeded those requirements. The Bank's leverage capital ratio, Tier-1 risk-
based capital ratio and total-risk based capital ratio were 12.52%, 27.27% and
28.53%, respectively.
27
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
Not applicable
ITEM 2. CHANGES IN SECURITIES
- -----------------------------
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ---------------------------------------
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
On July 22, 1997 the Company held its annual meeting of stockholders for
the purpose of the election of Directors to three year terms, the approval of
the Roslyn Bancorp, Inc. 1997 Stock-Based Incentive Plan and the ratification of
KPMG Peat Marwick LLP as the Company's independent auditors. The number of votes
cast at the meeting as to each matter acted upon was as follows:
<TABLE>
<CAPTION>
NO. OF VOTES FOR NO. OF VOTES WITHHELD
---------------- ---------------------
<S> <C> <C>
1. Election of Directors
Thomas J. Calabrese, Jr...... 36,937,110 379,624
Dr. Edwin W. Martin, Jr...... 36,946,332 370,402
Richard C. Webel............. 36,959,136 357,598
</TABLE>
The Directors whose terms continued and the years their terms expire are
as follows: Joseph L. Mancino (1998); James Swiggett (1998); Robert G.
Freese (1998); Floyd N. York (1999); Victor C. McCuaig (1999); and John
P. Nicholson (1999).
<TABLE>
<CAPTION>
NO. OF VOTES NO. OF VOTES NO. OF VOTES
FOR AGAINST ABSTAINING
------------ ------------ -------------
<S> <C> <C> <C>
1. Approval of The Roslyn Bancorp, Inc.
1997 Stock-Based Incentive Plan......... 23,284,044 2,361,429 501,782
NO. OF VOTES NO. OF VOTES NO. OF VOTES
FOR AGAINST ABSTAINING
------------ ------------ -------------
3. Ratification of KPMG Peat
Marwick LLP as the Company's
independent auditors.................... 36,800,217 324,412 192,105
</TABLE>
28
<PAGE>
ITEM 5. OTHER INFORMATION
- -------------------------
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- ----------------------------------------
(a) Exhibits
--------
3.1 Certificate of incorporation of Roslyn Bancorp, Inc.*
3.2 Bylaws of Roslyn Bancorp, Inc.*
11.0 Statement re: Computation of Per Share Earnings
27.0 Financial Data Schedule**
(b) Reports on Form 8-K
-------------------
Not applicable
* Incorporated by reference from the Form S-1, as amended, filed on
August 20, 1996.
** Submitted only with electronic filing.
29
<PAGE>
Exhibit Index
-------------
Page
----
11.0 Statement re: Computation of Per Share Earnings 32
27.0 Financial Data Schedule (submitted only with electronic filing) -
30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROSLYN BANCORP, INC.
(Registrant)
Date : November 14, 1997 By: /s/ Joseph L. Mancino
---------------------------------------
Joseph L. Mancino
Chairman of the Board, President and
Chief Executive Officer
Date : November 14, 1997 By: /s/ Michael P. Puorro
---------------------------------------
Michael P. Puorro
Treasurer and Chief Financial Officer
31
<PAGE>
EXHIBIT 11
ROSLYN BANCORP, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
-------------------- -------------------
<S> <C> <C>
Net income.................................................................. $ 11,034 $ 23,965
---------------- ----------------
Weighted average common shares outstanding.................................. 39,832,697 40,241,086
Common stock equivalents due to dilutive effect of stock options............ - -
---------------- ----------------
Total weighted average common shares and equivalents outstanding............ 39,832,697 40,241,086
================ ================
Primary earnings per common and common share equivalents.................... $ 0.28 $ 0.60
================ ================
Total weighted average common shares and equivalents outstanding............ 39,832,697 40,241,086
Additional dilutive shares using ending period market value versus
average market value for the period when utilizing the treasury
stock method regarding stock options...................................... - -
---------------- ----------------
Total shares for fully diluted earnings per share.......................... 39,832,697 40,241,086
================ ================
Fully diluted earnings per common and common share equivalents.............. $ 0.28 $ 0.60
================ ================
</TABLE>
32
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 20,169
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 20,800
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,253,060
<INVESTMENTS-CARRYING> 225,133
<INVESTMENTS-MARKET> 225,893
<LOANS> 920,072
<ALLOWANCE> 23,945
<TOTAL-ASSETS> 3,474,150
<DEPOSITS> 1,875,990
<SHORT-TERM> 646,480
<LIABILITIES-OTHER> 66,728
<LONG-TERM> 272,139
0
0
<COMMON> 436
<OTHER-SE> 612,377
<TOTAL-LIABILITIES-AND-EQUITY> 3,474,150
<INTEREST-LOAN> 42,427
<INTEREST-INVEST> 116,454
<INTEREST-OTHER> 3,704
<INTEREST-TOTAL> 162,585
<INTEREST-DEPOSIT> 65,547
<INTEREST-EXPENSE> 88,619
<INTEREST-INCOME-NET> 73,966
<LOAN-LOSSES> 450
<SECURITIES-GAINS> 1,266
<EXPENSE-OTHER> 46,091
<INCOME-PRETAX> 35,452
<INCOME-PRE-EXTRAORDINARY> 35,452
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,965
<EPS-PRIMARY> 0.60
<EPS-DILUTED> 0.60
<YIELD-ACTUAL> 7.34
<LOANS-NON> 8,652
<LOANS-PAST> 4
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2,472
<ALLOWANCE-OPEN> 23,320
<CHARGE-OFFS> 24
<RECOVERIES> 200
<ALLOWANCE-CLOSE> 23,945
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 23,945
</TABLE>
