<PAGE> 1
Filed pursuant to Rule 424 (b) (3)
Registration No. 333-40209
PROSPECTUS SUPPLEMENT
STATEN ISLAND BANCORP, INC.
(PROPOSED HOLDING COMPANY FOR STATEN ISLAND SAVINGS BANK)
37,375,000 SHARES OF COMMON STOCK
(WHICH AMOUNT MAY BE INCREASED TO 42,981,250 SHARES)
$12.00 PER SHARE
On November 6, 1997, RP Financial, L.C. ("RP Financial") updated its
appraisal of the estimated pro forma market value of the common stock, par value
$.01 per share ("Common Stock"), of Staten Island Bancorp, Inc. (the "Company")
which will be sold in connection with the conversion of Staten Island Savings
Bank from a federally-chartered mutual savings bank to a federally-chartered
stock savings bank ("Staten Island Savings" or the "Bank") pursuant to the
Bank's plan of conversion (the "Plan" or "Plan of Conversion"). The simultaneous
conversion of the Bank to stock form, the issuance of the Bank's stock to the
Company and the offer and sale of the Common Stock by the Company are referred
to herein as the "Conversion." Based upon the Bank's results of operations for
the quarter and nine months ended September 30, 1997, increases in the market
prices for publicly traded securities of comparable institutions and market
demand for the Common Stock, as reflected by the level of subscriptions
received, RP Financial concluded that the estimated pro forma market value of
the shares of Common Stock to be sold by the Company in connection with the
Conversion has increased to a range of $331.5 million to $448.5 million (the
"Amended Valuation Range"), as compared to the range of $283.3 million to $383.3
million established by the appraisal of RP Financial dated July 17, 1997, as
updated on September 5, 1997, which constitutes a 17% increase in the range. The
appraisal process was described in the Company's prospectus ("Prospectus") dated
September 12, 1997. See "The Conversion -- Stock Pricing and Number of Shares to
be Issued" in the Prospectus.
As a result of the increase in the pro forma market value of the Common
Stock as reflected in the November 6, 1997 appraisal update, the Company and the
Bank have received permission from the Office of Thrift Supervision ("OTS") to
increase the purchase price from $10.00 per share to $12.00 per share (the
"Amended Purchase Price"). Based on the Amended Valuation Range and the Amended
Purchase Price, the number of shares of Common Stock being offered for sale in
the Conversion ranges from 27,625,000 to 37,375,000 shares (which amount may be
increased to 42,981,250 shares without a further resolicitation of subscribers).
For further information as to the effects of the change in the estimate of the
pro forma market value of the Common Stock, see "Use of Proceeds,"
"Capitalization," "Pro Forma Data" and "Amended Valuation Range" herein.
In view of the November 6, 1997 appraisal update, all persons who
subscribed for shares of Common Stock pursuant to the Subscription Offering are
being offered the opportunity to (i) rescind their subscription order, which
will result in a return of all of their funds submitted, plus interest earned,
or a cancellation of their withdrawal authorizations; (ii) continue their order
for the same dollar amount of Common Stock originally subscribed for, which will
result in fewer shares being received due to the increase in the Amended
Purchase Price and a refund in lieu of fractional shares, if any; (iii) decrease
the total dollar amount of their subscription order, which, after taking into
consideration the number of desired shares at the Amended Purchase Price,
(cover continued on next page)
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY EACH
PROSPECTIVE INVESTOR, SEE "RISK FACTORS" IN THE PROSPECTUS AND "ADDITIONAL RISK
FACTORS" IN THIS PROSPECTUS SUPPLEMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, THE OFFICE OF THRIFT SUPERVISION, OR ANY OTHER FEDERAL
AGENCY OR STATE SECURITIES COMMISSION, NOR HAS SUCH COMMISSION, OFFICE OR OTHER
AGENCY OR COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
KEEFE, BRUYETTE & WOODS, INC.
------------------------
The date of this Prospectus Supplement is November 14, 1997
<PAGE> 2
(continued from previous page)
will result in an adjustment of the withdrawal authorization or a refund of the
overpayment, plus interest earned; or (iv) subject to applicable purchase
limitations, increase the total dollar amount of their subscription, which, due
to the Amended Purchase Price, will require the submission of additional funds
or an increase in the withdrawal authorization. IN ORDER TO CONFIRM YOUR ORDER
FOR SHARES OF COMMON STOCK, YOU MUST COMPLETE AND RETURN THE ENCLOSED
SUPPLEMENTAL ORDER FORM TO THE BANK, ACCOMPANIED, IF APPLICABLE, BY PAYMENT OR A
WITHDRAWAL AUTHORIZATION, SO THAT IT IS RECEIVED NO LATER THAN 3:00 P.M.,
EASTERN TIME, ON DECEMBER 8, 1997. FAILURE TO RETURN A SUPPLEMENTAL ORDER FORM
WILL RESULT IN YOUR ORDER BEING RESCINDED, A RETURN OF ALL OF YOUR FUNDS
SUBMITTED, PLUS INTEREST EARNED, OR A CANCELLATION OF YOUR WITHDRAWAL
AUTHORIZATION.
With the exception of the Company's Employee Stock Ownership Plan ("ESOP"),
the maximum amount that any person may purchase in any particular priority
category in the Offerings is generally limited to one-tenth of one percent
(0.10%) of the shares of Common Stock sold in the Conversion. Assuming the sale
of 42,981,250 shares, which is the maximum, as adjusted, of the Amended
Valuation Range, the maximum amount of Common Stock that any person may
subscribe for generally in any category is 42,981 shares or $515,772. Payments
authorized by withdrawal from deposit accounts at the Bank will continue to earn
interest at the contractual rate until the Conversion is completed or
terminated; these funds will otherwise be unavailable until such time. See
"Limitation on Common Stock Purchases" in this Prospectus Supplement.
<TABLE>
<CAPTION>
==================================================================================================================
ESTIMATED
AMENDED UNDERWRITING ESTIMATED
PURCHASE FEES AND OTHER NET
PRICE(1) EXPENSES(2) PROCEEDS(3)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Minimum Per Share............................................... $12.00 $0.25 $11.75
- ------------------------------------------------------------------------------------------------------------------
Midpoint Per Share.............................................. $12.00 $0.23 $11.77
- ------------------------------------------------------------------------------------------------------------------
Maximum Per Share............................................... $12.00 $0.22 $11.78
- ------------------------------------------------------------------------------------------------------------------
Maximum Per Share, as adjusted(4)............................... $12.00 $0.21 $11.79
- ------------------------------------------------------------------------------------------------------------------
Total Minimum(1)................................................ $331,500,000 $6,932,000 $324,568,000
- ------------------------------------------------------------------------------------------------------------------
Total Midpoint(1)............................................... $390,000,000 $7,551,000 $382,449,000
- ------------------------------------------------------------------------------------------------------------------
Total Maximum(1)................................................ $448,500,000 $8,170,000 $440,330,000
- ------------------------------------------------------------------------------------------------------------------
Total Maximum, as adjusted(4)................................... $515,775,000 $8,882,000 $506,893,000
==================================================================================================================
</TABLE>
(1) Determined in accordance with the Amended Valuation Range established by RP
Financial and the Amended Purchase Price, which have been approved by the
Board of Directors of the Company and the Bank.
(2) Consists of the estimated costs to the Company and the Bank arising from the
Conversion, including estimated fixed expenses of $3,500,000 and fees to be
paid to Keefe, Bruyette & Woods, Inc. ("Keefe, Bruyette") in connection with
the Offerings, which fees are estimated to be $3,432,000, $4,051,000,
$4,670,000 and $5,382,000 at the minimum, midpoint, maximum and maximum, as
adjusted, of the Amended Valuation Range, respectively. Keefe, Bruyette is
not obligated to purchase any shares of Common Stock in the Offerings. Such
fees paid to Keefe, Bruyette may be deemed to be underwriting fees. See "The
Conversion -- Marketing Arrangements" in the Prospectus. The actual fees and
expenses may vary from the estimates. See "Pro Forma Data" herein.
(3) Actual net proceeds may vary substantially from estimated amounts. Includes
the purchase of shares of Common Stock by the ESOP, which initially will be
deducted from the Company's stockholders' equity. For the effects of such
purchase, see "Capitalization" and "Pro Forma Data" herein.
(4) Gives effect to an increase in the number of shares of Common Stock which
may be sold in the Conversion at the Amended Purchase Price, without
resolicitation of subscribers or any right of cancellation, due to a 15%
increase in the Amended Valuation Range (42,981,250 shares). See "The
Conversion -- Stock Pricing and Number of Shares to be Issued" in the
Prospectus and "Pro Forma Data" herein.
FOR INFORMATION, CALL THE STOCK SALES CENTER AT (718) 815-7171
------------------------
THIS PROSPECTUS SUPPLEMENT SUPPLEMENTS AND AMENDS THE PROSPECTUS OF THE
COMPANY, DATED SEPTEMBER 12, 1997, AND SHOULD BE READ IN CONJUNCTION HEREWITH.
ANY INFORMATION PRESENTED HEREIN SUPERSEDES THAT CONTAINED IN THE PROSPECTUS.
UNLESS OTHERWISE SPECIFICALLY SET FORTH HEREIN, CAPITALIZED TERMS USED, BUT NOT
DEFINED, IN THIS PROSPECTUS SUPPLEMENT SHALL HAVE THE SAME MEANING AS THEY DO IN
THE PROSPECTUS. SEE "EXTENSION OF TIME PERIOD TO COMPLETE THE CONVERSION" FOR
INFORMATION ON HOW A SUBSCRIBER MAY OBTAIN AN ADDITIONAL COPY OF THE PROSPECTUS.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR DEPOSITS
AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
<PAGE> 3
RESULTS OF THE SPECIAL MEETING OF MEMBERS AND
THE SUBSCRIPTION OFFERING
At the Special Meeting of Members of the Bank held on October 28, 1997,
7,526,403 votes, or 50.92% of the 14,779,735 total votes eligible to be cast,
were voted in favor of the Bank's Plan of Conversion, and 7,398,736 votes, or
50.06%, were voted in favor of the establishment of the SISB Community
Foundation (the "Foundation") and the proposed contribution of Common Stock to
the Foundation in conjunction with the consummation of the Conversion.
Accordingly, each of the Plan of Conversion and the creation of, and
contribution to, the Foundation were approved by more than the required majority
of the total votes entitled to be cast at the Special Meeting.
The Bank originally offered 38,333,333 shares of Common Stock in the
Subscription Offering. The Bank received orders to purchase 81,702,824 shares of
Common Stock (including the ESOP), or 213.1% of the shares initially offered,
from eligible depositors of the Bank and directors, officers and employees of
the Bank. Eligible Account Holders subscribed for approximately 74.2 million
shares.
AMENDED VALUATION RANGE
As required by applicable regulations, upon conclusion of the initial
Subscription Offering, RP Financial submitted an updated appraisal of the pro
forma market value of the Common Stock to the Bank and the OTS. The updated
appraisal of RP Financial dated November 6, 1997 set forth an estimated Amended
Valuation Range of the Common Stock to be sold in the Conversion of $331.5
million at the minimum and $448.5 million at the maximum, with a midpoint of
$390.0 million, which constitutes a 17.0% increase from the midpoint valuation
established by the appraisal report dated July 17, 1997, as updated on September
5, 1997, which was set forth in the Prospectus. The increased valuation set
forth in RP Financial's updated appraisal was based on the Bank's results of
operations for the quarter and nine months ended September 30, 1997, increases
in market prices for publicly traded securities of comparable institutions and
market demand for the Common Stock, as reflected by the level of subscriptions
received. In determining the reasonableness and adequacy of RP Financial's
updated appraisal, the Board of Trustees reviewed the methodology and the
appropriateness of the assumptions used by RP Financial. Copies of RP
Financial's appraisal report and updated appraisals are available for inspection
at the main office of the Bank and are otherwise publicly available. See
"Additional Information."
As a result of the increase in the pro forma market value of the Common
Stock as reflected in the updated appraisal, the Company and the Bank have
received permission from the OTS to increase the purchase price from $10.00 per
share to the Amended Purchase Price of $12.00 per share. Based on the Amended
Valuation Range and the Amended Purchase Price, the number of shares being
offered in the Conversion ranges from 27,625,000 shares to 37,375,000 shares. In
the event the Company receives orders for Common Stock in excess of $448.5
million (the maximum of the Amended Valuation Range), the final valuation may be
increased by RP Financial to a maximum of $515.8 million (the maximum of the
Amended Valuation Range, as adjusted by 15%) and the Company may accept orders
for up to 42,981,250 shares of Common Stock without an additional resolicitation
of subscribers or any right of cancellation.
Subscribers should note that the change in the estimated pro forma market
value has a material impact on the pro forma data presented in this Prospectus
Supplement when compared to the values presented in the Prospectus. At the
maximum of the Amended Valuation Range, pro forma per share net income and
stockholders' equity per share at or for the nine months ended September 30,
1997 would be $0.63 and $15.10, respectively, while the price per share to pro
forma net income per share would be 14.29x and the ratio of price per share to
pro forma stockholders' equity per share and pro forma tangible stockholders'
equity per share would be 79.47% and 82.08%, respectively. Assuming 42,981,250
shares of Common Stock are sold in the Conversion, based upon the maximum, as
adjusted, of the Amended Valuation Range, the price per share to pro forma net
income per share would be 15.79x and the ratio of price per share to pro forma
stockholders' equity per share and pro forma tangible stockholders' equity per
share would be 82.99% and 85.47%, respectively. These amounts may be compared to
pro forma per share net income and stockholders' equity at
1
<PAGE> 4
or for the four months ended April 30, 1997 of $0.25 and $12.83, respectively,
at the maximum of the previous Estimated Valuation Range, and the ratio of price
per share to pro forma net income per share of 13.33x and the price per share to
pro forma stockholders' equity per share and pro forma tangible stockholders'
equity per share of 77.94% and 81.04%, respectively, at such previous maximum.
The number of shares ultimately sold in the Conversion within the Amended
Valuation Range will depend upon market demand for the Common Stock as well as
market and financial conditions following the conclusion of the resolicitation
period, and will affect the price to book value ratio, price to earnings ratio,
stockholders' equity per share and net income per share of the Common Stock.
Prospective investors should be aware that the increased valuation reflected in
the Amended Valuation Range may result in less favorable after-market price
performance of the Common Stock than might have occurred if the Estimated
Valuation Range had not been increased. See "Capitalization" and "Pro Forma
Data" herein for the effect on the pro forma stockholders' equity, stockholders'
equity per share, net income, net income per share, price to book value ratios
and price to earnings ratios resulting from the Amended Valuation Range.
In view of the appraisal update, all persons who subscribed for shares of
Common Stock in the Subscription Offering are being offered the opportunity to
(i) rescind their subscription, which will result in a return of all of their
funds submitted, plus interest earned, or a cancellation of their withdrawal
authorizations; (ii) continue their order for the same dollar amount of Common
Stock originally subscribed for, which will result in fewer shares being
received due to the increase in the Amended Purchase Price and a refund in lieu
of fractional shares, if any; (iii) decrease the total dollar amount of their
subscription, which will result in an adjustment of the withdrawal authorization
or a refund of the overpayment, plus interest earned; or (iv) subject to
applicable purchase limitations, increase the total dollar amount of their
subscription, which will require the submission of additional funds or an
increase in the withdrawal authorization. IN ORDER TO CONFIRM YOUR ORDER FOR
SHARES OF COMMON STOCK, YOU MUST COMPLETE AND RETURN THE ENCLOSED SUPPLEMENTAL
ORDER FORM TO THE BANK, ACCOMPANIED, IF APPLICABLE, BY PAYMENT OR A WITHDRAWAL
AUTHORIZATION, SO THAT IT IS RECEIVED NO LATER THAN 3:00 P.M., EASTERN TIME, ON
DECEMBER 8, 1997. FAILURE TO RETURN A SUPPLEMENTAL ORDER FORM WILL RESULT IN
YOUR ORDER BEING RESCINDED, A RETURN OF ALL OF YOUR FUNDS SUBMITTED, PLUS
INTEREST EARNED, OR A CANCELLATION OF YOUR WITHDRAWAL AUTHORIZATION. As a result
of this resolicitation offer, the number of shares of Common Stock set forth
under "Results of the Special Meeting of Members and the Subscription Offering"
which were subscribed for in the Subscription Offering may change.
ADDITIONAL RISK FACTORS
Prospective investors should consider carefully the matters presented below
and in the "Risk Factors" section of the Prospectus in addition to the other
information contained herein and in the Prospectus.
POSSIBLE ADVERSE EFFECT ON AFTER-MARKET PRICE PERFORMANCE
Prospective investors should be aware that the increased valuation
reflected in the Amended Valuation Range may result in less favorable
after-market price performance of the Common Stock than might have occurred if
the Estimated Valuation Range of the Common Stock had not been increased.
BASIS OF UPDATED APPRAISAL
The updated appraisal of RP Financial is based upon the Bank's results of
operations for the quarter and nine months ended September 30, 1997, increases
in the market prices for publicly traded securities of comparable institutions,
increased demand for initial public offerings of financial service companies and
strong after market performance for the common stock of such companies, market
demand as reflected by the level of subscriptions received as well as current
conditions in the market for thrift institution common stocks. Among other
factors, acquisition activity both in New York and in other comparable market
areas has generally resulted in higher bank and thrift stock prices as investors
speculate that industry consolidation will continue. No assurance can be given
that such speculative activity will continue.
2
<PAGE> 5
EXTENSION OF TIME PERIOD TO COMPLETE THE CONVERSION
OTS regulations provide that the sale of the Common Stock must be completed
within 45 days following the termination of the subscription period, unless such
period is extended by the OTS. As a result of the need to resolicit all persons
who previously subscribed for shares of Common Stock in the Subscription
Offering, the resolicitation will terminate at 3:00 p.m., Eastern Time on
December 8, 1997 unless extended by the Bank and the Company, with approval of
the OTS, if necessary. Any Community Offering or Syndicated Community Offering
must be completed within 45 days after the close of the resolicitation period,
unless extended by the Bank and the Company with the approval of the OTS, if
necessary. As a result of the increase in the Estimated Valuation Range, all
subscribers have been given the right to continue their order for the dollar
amount of shares subscribed for, or to increase, decrease or rescind their
subscriptions. See "Amended Valuation Range." If the Subscription and Community
Offerings are not completed by January 22, 1998, either all funds received will
be returned with interest and withdrawal authorizations cancelled or, if the OTS
has granted an extension of such period, all subscribers will again be given the
right to continue their order for the dollar amount of shares subscribed for, or
to increase, decrease or rescind their subscriptions at any time prior to 20
days before the end of the extension period. ANY SUBSCRIBER WHO REQUIRES AN
ADDITIONAL COPY OF THE PROSPECTUS PREVIOUSLY PROVIDED BY THE COMPANY MAY OBTAIN
ONE BY CONTACTING THE STOCK SALES CENTER AT (718) 815-7171. THE COMPANY WILL
PROMPTLY PROCESS SUCH A REQUEST. SINCE THE RESOLICITATION PERIOD ENDS ON
DECEMBER 8, 1997, ANY SUBSCRIBER WHO DESIRES TO OBTAIN A COPY OF THE PROSPECTUS
SHOULD REQUEST ONE PROMPTLY.
SUBSCRIPTION BY THE ESOP
The Plan of Conversion provides that the ESOP may subscribe for up to 8% of
the Common Stock to be issued in the Conversion. Based on the Amended Valuation
Range, the ESOP intends to purchase in the Conversion an amount of Common Stock
equal to 8% of the total number of shares of Common Stock issued in the
Conversion, or 2,210,000 shares and 2,990,000 shares of Common Stock at the
minimum and maximum of the Amended Valuation Range, respectively (3,438,500
shares at the maximum, as adjusted).
LIMITATION ON COMMON STOCK PURCHASES
As a result of the Amended Valuation Range, each Eligible Account Holder,
Supplemental Eligible Account Holder and Other Member generally may subscribe
for one-tenth of one percent (0.10%) of total shares of Common Stock sold in the
Conversion (42,981 shares or $515,772 assuming 42,981,250 shares of Common Stock
are sold in the Conversion based on the maximum, as adjusted, of the Amended
Valuation Range), except for certain subscribers whose subscription rights are
based on the amount of the deposits at the Bank. In the event that the number of
shares sold in the Conversion is less than 42,981,250, orders for the maximum
number of shares will be reduced to the number of shares equal to one-tenth of
one percent (0.10%) of the number of shares sold and subject to the allocation
procedures of the Plan in the event of oversubscription. See "The
Conversion -- Limitations on Common Stock Purchases" in the Prospectus. Except
for the ESOP and Eligible Account Holders and Supplemental Eligible Account
Holders whose subscription rights are based upon the amount of their deposits,
the maximum number of shares of Common Stock subscribed for or purchased in all
categories of the Conversion by any person, together with associates of and
groups of persons acting in concert with such persons, shall not exceed 1.0% of
the total number of shares of Common Stock sold in the Conversion. In light of
the level of subscriptions by Eligible Account Holders, no assurance can be
given that shares of Common Stock will be available for allocation to other
subscribers.
The minimum purchase is 25 shares or $300. Any person who previously
subscribed for 25 shares will be required to pay the difference in order to
maintain their order. Alternatively, as an example, any person who subscribed
for $1,200 or 120 shares of Common Stock would now receive 100 shares of Common
Stock for the same $1,200. Subscribers who have paid or pay for additional
shares of Common Stock by cash, check, bank draft or money order will earn
interest at the Bank's stated rate on passbook accounts from the date of receipt
until the Conversion is completed or terminated.
3
<PAGE> 6
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Conversion is completed, it is presently anticipated
that the net proceeds from the sale of the Common Stock will be between $324.6
million and $440.3 million ($506.9 million assuming an increase in the Amended
Valuation Range by 15%). See "Pro Forma Data" herein as to the assumptions used
to arrive at such amounts.
The Company will purchase all of the capital stock of the Bank to be issued
in the Conversion in exchange for 50% of the net Conversion proceeds, and the
Company will retain the remaining 50% of the net proceeds. The Company intends
to use a portion of the net proceeds to make a loan directly to the ESOP to
enable the ESOP to purchase up to 8% of the Common Stock sold in the Conversion.
Based upon the issuance of 27,625,000 shares or 37,375,000 shares at the minimum
and maximum of the Amended Valuation Range, respectively, the loan to the ESOP
would be $26.5 million and $35.9 million, respectively. The remaining net
proceeds retained by the Company initially may be used to invest in investment
securities, mortgage-backed securities, U.S. Government and federal agency
securities of various maturities, deposits in either the Bank or other financial
institutions, or a combination thereof. The portion of the net proceeds retained
by the Company may ultimately be used to support the Bank's lending activities,
to support the future expansion of operations through acquisitions of other
financial institutions or branch offices (although no such transactions are
specifically being considered at this time), and for other business and
investment purposes, including the payment of regular or special cash dividends,
possible repurchases of the Common Stock or returns of capital (the Company and
the Bank have committed that no return of capital will be made on the Common
Stock during the one-year period subsequent to consummation of the Conversion).
Management of the Company may consider expanding or diversifying, should such
opportunities become available. Neither the Bank nor the Company has any
specific plans, arrangements or understandings regarding any acquisitions or
diversification of activities at this time, nor have criteria been established
to identify potential candidates for acquisition.
Following the six-month anniversary of the completion of the Conversion (to
the extent permitted by the OTS), and based upon then existing facts and
circumstances, the Company's Board of Directors may determine to repurchase
shares of Common Stock, subject to any applicable statutory and regulatory
requirements. Such facts and circumstances may include but are not limited to
(i) market and economic factors such as the price at which the stock is trading
in the market, the volume of trading, the attractiveness of other investment
alternatives in terms of the rate of return and risk involved in the investment,
the ability to increase the book value and/or earnings per share of the
remaining outstanding shares and an improvement in the Company's return on
equity; (ii) the avoidance of dilution to stockholders by not having to issue
additional shares to cover the exercise of stock options or to fund employee
stock benefit plans; and (iii) any other circumstances in which repurchases
would be in the best interests of the Company and its stockholders. Any stock
repurchases will be subject to the determination of the Company's Board of
Directors that the Bank will be capitalized in excess of all applicable
regulatory requirements after any such repurchases. The payment of dividends or
repurchase of stock, however, would be prohibited if the Bank's net worth would
be reduced below the amount required for the liquidation account to be
established for the benefit of Eligible Account Holders and Supplemental
Eligible Account Holders. As of September 30, 1997, the initial balance of the
liquidation account would be approximately $195.3 million. See "Dividend
Policy," "The Conversion -- Liquidation Rights" and "The Conversion -- Certain
Restrictions on Purchase or Transfer of Shares After the Conversion" in the
Prospectus.
The Company will be a unitary savings and loan holding company which, under
existing laws, would generally not be restricted as to the types of business
activities in which it may engage, provided that the Bank continues to be a
qualified thrift lender ("QTL"). See "Regulation -- Regulation of Savings and
Loan Holding Companies" in the Prospectus for a description of certain
regulations applicable to the Company.
The portion of the net proceeds used by the Company to purchase the capital
stock of the Bank will be added to the Bank's general funds to be used for
general corporate purposes, including increased lending activities and purchases
of securities. While the amount of net proceeds received by the Bank will
further strengthen the Bank's capital position, which already substantially
exceeds all regulatory requirements, it
4
<PAGE> 7
should be noted that the Bank is not converting primarily to raise capital.
After the Conversion, the Bank's tangible capital ratio will be 13.85% (based
upon the midpoint of the Amended Valuation Range). As a result, the Bank will
continue to be a well-capitalized institution. After the Conversion, the Bank
intends to emphasize growth in assets and earnings and capital strength.
THE NET PROCEEDS MAY VARY BECAUSE TOTAL EXPENSES OF THE CONVERSION MAY BE
MORE OR LESS THAN THOSE ESTIMATED. The net proceeds will also vary if the number
of shares to be issued in the Conversion is adjusted to reflect a change in the
estimated pro forma market value of the Bank. Payments for shares made through
withdrawals from existing deposit accounts at the Bank will not result in the
receipt of new funds for investment by the Bank but will result in a reduction
of the Bank's interest expense and liabilities as funds are transferred from
interest-bearing certificates or other deposit accounts.
MARKET FOR COMMON STOCK
The Company and the Bank have never issued capital stock, and,
consequently, there is no established market for the Common Stock at this time.
The Company has received approval to have its Common Stock listed on the NYSE
under the symbol "SIB." Making a market involves maintaining bid and ask
quotations and being able, as principal, to effect transactions in reasonable
quantities at these quoted prices, subject to various securities laws and other
regulatory requirements. Additionally, the development of a liquid public market
depends on the existence of willing buyers and sellers, the presence of which is
not within the control of the Company, the Bank or any market maker.
Accordingly, the number of active buyers and sellers of the Common Stock at any
particular time may be limited. Under such circumstances, investors in the
Common Stock could have difficulty disposing of their shares and should not view
the Common Stock as a short-term investment. Accordingly, there can be no
assurance that an active and liquid trading market for the Common Stock will
develop or that, if developed, it will continue, nor is there any assurance that
persons purchasing shares of Common Stock will be able to sell them at or above
the Amended Purchase Price. Keefe, Bruyette has indicated its intention to act
as a market maker in the Common Stock following the consummation of the
Conversion, depending on trading volume and subject to compliance with
applicable laws and regulatory requirements.
5
<PAGE> 8
CAPITALIZATION
The following table presents the historical capitalization of the Bank at
September 30, 1997, and the pro forma consolidated capitalization of the Company
after giving effect to the Conversion, based upon the sale of the number of
shares shown below and the other assumptions set forth under "Pro Forma Data."
<TABLE>
<CAPTION>
THE COMPANY -- PRO FORMA
BASED UPON SALE AT $12.00 PER SHARE
------------------------------------------------------------------------
42,981,250
THE BANK -- 27,625,000 32,500,000 37,375,000 SHARES(1)
HISTORICAL SHARES (MINIMUM SHARES (MIDPOINT SHARES (MAXIMUM (15% ABOVE
CAPITALIZATION OF RANGE) OF RANGE) OF RANGE) MAXIMUM OF RANGE)
-------------- --------------- ---------------- --------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits(2)......................... $1,666,492 $ 1,666,492 $1,666,492 $ 1,666,492 $ 1,666,492
Borrowings.......................... 245,841 245,841 245,841 245,841 245,841
---------- ---------- ---------- ---------- ----------
Total deposits and borrowings....... $1,912,333 $ 1,912,333 $1,912,333 $ 1,912,333 $ 1,912,333
========== ========== ========== ========== ==========
Stockholders' equity:
Preferred Stock, $.01 par value,
25,000,000 shares authorized;
none to be issued............... $ -- $ -- $ -- $ -- $ --
Common Stock, $.01 par value,
100,000,000 shares authorized;
shares to be issued as
reflected(3).................... -- 290 341 392 451
Additional paid-in capital........ -- 324,278 382,108 439,938 506,442
Shares issued to Foundation(4).... -- 16,575 19,500 22,425 25,789
Retained earnings(5).............. 183,947 183,947 183,947 183,947 183,947
Net unrealized gain on marketable
securities...................... 11,336 11,336 11,336 11,336 11,336
Less:
Expense of contribution to
Foundation, net(6).............. -- (8,785) (10,335) (11,885) (13,668)
Common Stock to be acquired by the
ESOP(7)......................... -- (26,520) (31,200) (35,880) (41,262)
Common Stock to be acquired by the
Recognition Plan(8)............. -- (13,260) (15,600) (17,940) (20,631)
---------- ---------- ---------- ---------- ----------
Total stockholders' equity.......... $ 195,283 $ 487,861 $ 540,097 $ 592,333 $ 652,404
========== ========== ========== ========== ==========
</TABLE>
- ---------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Amended Valuation Range of up to 15%.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Common Stock in the Offerings. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(3) Reflects the issuance of the shares of Common Stock to be sold in the
Offerings. No effect has been given to the issuance of additional shares of
Common Stock pursuant to the proposed Option Plan. See "Pro Forma Data"
herein and "Management -- Benefits -- Stock Option Plan" in the Prospectus.
Reflects issuance of additional shares of Common Stock to the Foundation.
(4) Reflects shares to be contributed to the Foundation at an assumed value of
$12.00 per share.
(5) The retained earnings of the Bank will be substantially restricted after the
Conversion by virtue of the liquidation account to be established in
connection with the Conversion. See "The Conversion -- Liquidation Rights"
in the Prospectus. In addition, certain distributions from the Bank's
retained earnings may be treated as being from its accumulated bad debt
reserve for tax purposes, which would cause the Bank to have additional
taxable income. See "Taxation" in the Prospectus.
(6) Net of the tax effect of the contribution of Common Stock based upon a 47%
marginal tax rate. The realization of the deferred tax benefit is limited
annually to 10% of the Company's annual taxable income, subject to the
ability of the Company to carry forward any unused portion of the deduction
for five years following the year in which the contribution is made.
(7) Assumes that 8.0% of the Common Stock sold in the Offerings will be
purchased by the ESOP, which is reflected as a reduction of stockholders'
equity. The ESOP shares will be purchased with funds loaned to the ESOP by
the Company. See "Pro Forma Data."
(8) The Company intends to adopt the Recognition Plan and to submit such plan to
stockholders at an annual or special meeting of stockholders held at least
six months following the consummation of the Conversion. If the plan is
approved by stockholders, the Company intends to contribute sufficient funds
to the trust created under the Recognition Plan to enable the trust to
purchase a number of shares of Common Stock equal to 4.0% of the Common
Stock sold in the Offerings. Assumes that stockholder approval has been
obtained and that the shares have been purchased in the open market at the
Amended Purchase Price. However, in the event the Company issues authorized
but unissued shares of Common Stock to the Recognition Plan in the amount of
4.0% of the Common Stock sold in the Offerings, the voting interests of
existing stockholders would be diluted approximately 3.8%. The shares are
reflected as a reduction of stockholders' equity. See "Pro Forma Data"
herein.
6
<PAGE> 9
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Conversion is completed. However, net proceeds are
currently estimated to be between $324.6 million and $440.3 million (or $506.9
million in the event the Amended Valuation Range is increased by 15%) based upon
the following assumptions: (i) all shares of Common Stock will be sold in the
Subscription Offering; (ii) no fees will be paid to Keefe, Bruyette on shares
purchased by (x) the ESOP and any other employee benefit plan of the Company or
the Bank, (y) officers, directors, employees and members of their immediate
families or (z) the Foundation; (iii) Keefe, Bruyette will receive a fee equal
to 1.15% of the aggregate Amended Purchase Price for sales in the Subscription
Offering (excluding the sale of shares to the ESOP, employee benefit plans,
officers, directors and their immediate families and the Foundation); (iv) the
Company will contribute to the Foundation an amount of Common Stock equal to 5%
of the Common Stock sold in the Conversion from authorized but unissued shares;
and (v) total expenses, including the marketing fees paid to Keefe, Bruyette,
will be between $6.9 million and $8.2 million (or $8.9 million in the event the
Amended Valuation Range is increased by 15%). Actual expenses may vary from
those estimated.
Pro forma consolidated net income and stockholders' equity of the Company
have been calculated for the nine months ended September 30, 1997 and the year
ended December 31, 1996 as if the Common Stock to be issued in the Offerings had
been sold at the beginning of the period and the net proceeds had been invested
at 5.44% and 5.49%, respectively, which represents the yield on one-year U.S.
Government securities at September 30, 1997 and December 31, 1996 (which, in
light of changes in interest rates in recent periods, are deemed by the Company
and the Bank to more accurately reflect pro forma reinvestment rates than the
arithmetic average method). The effect of withdrawals from deposit accounts for
the purchase of Common Stock has not been reflected. A marginal tax rate of 47%
has been assumed for the period, resulting in an after-tax yield of 2.88%
(annualized) and 2.91%, respectively, for the nine months ended September 30,
1997 and the year ended December 31, 1996. Historical and pro forma per share
amounts have been calculated by dividing historical and pro forma amounts by the
indicated number of shares of Common Stock, as adjusted to give effect to the
shares purchased by the ESOP and the effect of the issuance of shares to the
Foundation. See Note 3 to the tables below. No effect has been given in the pro
forma stockholders' equity calculations for the assumed earnings on the net
proceeds. As discussed under "Use of Proceeds," the Company intends to make a
loan to fund the purchase of 8.0% of the Common Stock by the ESOP and retain 50%
of the net proceeds from the Offerings.
No effect has been given in the tables to the issuance of additional shares
of Common Stock pursuant to the proposed Option Plan. See
"Management -- Benefits -- Stock Option Plan" in the Prospectus. The table below
gives effect to the Recognition Plan, which is expected to be adopted by the
Company following the Conversion and presented (together with the Stock Option
Plan) to stockholders for approval at an annual or special meeting of
stockholders to be held at least six months following the consummation of the
Conversion. If the Recognition Plan is approved by stockholders, the Recognition
Plan intends to acquire an amount of Common Stock equal to 4.0% of the shares of
Common Stock sold in the Offerings, either through open market purchases or from
authorized but unissued shares of Common Stock. The table below assumes that
stockholder approval has been obtained, as to which there can be no assurance,
and that the shares acquired by the Recognition Plan are purchased in the open
market at the Purchase Price. No effect has been given to (i) the Company's
results of operations after the Conversion, (ii) the market price of the Common
Stock after the Conversion, or (iii) a less than 4.0% purchase by the
Recognition Plan.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma stockholders' equity represents the difference
between the stated amount of assets and liabilities of the Company computed in
accordance with GAAP.
THE FOLLOWING TABLE GIVES EFFECT TO THE ISSUANCE OF AUTHORIZED BUT UNISSUED
SHARES OF THE COMPANY'S COMMON STOCK TO THE FOUNDATION CONCURRENTLY WITH THE
COMPLETION OF THE CONVERSION. THE PRO FORMA STOCKHOLDERS' EQUITY IS NOT INTENDED
TO REPRESENT THE FAIR MARKET VALUE OF THE COMMON STOCK AND MAY BE DIFFERENT THAN
AMOUNTS THAT WOULD BE AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS IN THE EVENT OF
LIQUIDATION.
7
<PAGE> 10
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
-------------------------------------------------------------
42,981,250
27,625,000 32,500,000 37,375,000 SHARES SOLD
SHARES SOLD SHARES SOLD SHARES SOLD AT $12.00
AT $12.00 AT $12.00 AT $12.00 PER SHARE
PER SHARE PER SHARE PER SHARE (15%
(MINIMUM (MIDPOINT (MAXIMUM ABOVE MAXIMUM
OF RANGE) OF RANGE) OF RANGE) OF RANGE)(8)
----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds.................................. $ 331,500 $ 390,000 $ 448,500 $ 515,775
Plus: Shares acquired by Foundation (equal to 5%
of the shares issued in the Conversion)....... 16,575 19,500 22,425 25,789
-------- -------- -------- --------
Pro forma market capitalization............... $ 348,075 $ 409,500 $ 470,925 $ 541,564
======== ======== ======== ========
Gross proceeds.................................. $ 331,500 $ 390,000 $ 448,500 $ 515,775
Less offering expenses and commissions.......... 6,932 7,551 8,170 8,882
-------- -------- -------- --------
Estimated net proceeds........................ 324,568 382,449 440,330 506,893
Less: Shares purchased by the ESOP.............. (26,520) (31,200) (35,880) (41,262)
Shares purchased by the Recognition Plan.... (13,260) (15,600) (17,940) (20,631)
-------- -------- -------- --------
Total estimated net proceeds, as adjusted(1).... $ 284,788 $ 335,649 $ 386,510 $ 445,000
======== ======== ======== ========
Net income(2):
Historical.................................... $ 16,997 $ 16,997 $ 16,997 $ 16,997
Pro forma income on net proceeds, as
adjusted.................................... 6,158 7,258 8,358 9,623
Pro forma ESOP adjustment(3).................. (703) (827) (951) (1,093)
Pro forma Recognition Plan adjustment(4)...... (1,054) (1,240) (1,426) (1,640)
-------- -------- -------- --------
Pro forma net income.......................... $ 21,398 $ 22,188 $ 22,978 $ 23,887
======== ======== ======== ========
Net income per share(2)(5):
Historical.................................... $ 0.63 $ 0.54 $ 0.47 $ 0.41
Pro forma income on net proceeds, as
adjusted.................................... 0.23 0.23 0.23 0.23
Pro forma ESOP adjustment(3).................. (0.03) (0.03) (0.03) (0.03)
Pro forma Recognition Plan adjustment(4)...... (0.04) (0.04) (0.04) (0.04)
-------- -------- -------- --------
Pro forma net income per share(4)(6).......... $ 0.79 $ 0.70 $ 0.63 $ 0.57
======== ======== ======== ========
Offering price to pro forma net income per
share(5)...................................... 11.39x 12.86x 14.29x 15.79x
======== ======== ======== ========
Stockholders' equity:
Historical.................................... $ 195,283 $ 195,283 $ 195,283 $ 195,283
Estimated net proceeds........................ 324,568 382,449 440,330 506,893
Plus: Shares issued to Foundation............. 16,575 19,500 22,425 25,789
Less: Contribution to Foundation.............. (16,575) (19,500) (22,425) (25,789)
Plus: Tax benefit of the contribution to
Foundation.................................. 7,790 9,165 10,540 12,121
Less: Common Stock acquired by the ESOP(3).... (26,520) (31,200) (35,880) (41,262)
Common Stock to be acquired by the
Recognition Plan(4)....................... (13,260) (15,600) (17,940) (20,631)
-------- -------- -------- --------
Pro forma stockholders' equity(4)(6)(7)....... $ 487,861 $ 540,097 $ 592,333 $ 652,404
======== ======== ======== ========
Stockholders' equity per share(5):
Historical.................................... $ 6.73 $ 5.72 $ 4.98 $ 4.33
Estimated net proceeds........................ 11.19 11.21 11.22 11.23
Plus: Shares issued to Foundation............. 0.57 0.57 0.57 0.57
Less: Contribution to Foundation.............. (0.57) (0.57) (0.57) (0.57)
Plus: Tax benefit of contribution to
Foundation.................................. 0.27 0.27 0.27 0.27
Less: Common Stock acquired by the ESOP(3).... (0.91) (0.91) (0.91) (0.91)
Common Stock to be acquired by the
Recognition Plan(4)....................... (0.46) (0.46) (0.46) (0.46)
-------- -------- -------- --------
Pro forma stockholders' equity per
share(4)(6)(7).............................. $ 16.82 $ 15.83 $ 15.10 $ 14.46
======== ======== ======== ========
Offering price as a percentage of pro forma
stockholders' equity per share(5)............. 71.34% 75.81% 79.47% 82.99%
======== ======== ======== ========
Offering price as a percentage of pro forma
tangible stockholders' equity per share(5).... 74.21% 78.53% 82.08% 85.47%
======== ======== ======== ========
</TABLE>
(Footnotes on next page.)
8
<PAGE> 11
- ---------------
(1) Estimated net proceeds, as adjusted, consist of the estimated net proceeds
from the Offerings minus (i) the proceeds attributable to the purchase by
the ESOP and (ii) the value of the shares to be purchased by the Recognition
Plan, subject to stockholder approval, after the Conversion at an assumed
purchase price of $12.00 per share.
(2) Does not give effect to the non-recurring expense that will be recognized in
1997 as a result of the establishment of the Foundation. The Company will
recognize an after-tax expense for the amount of the contribution to the
Foundation which is expected to be $8.9 million, $10.3 million, $11.9
million and $13.7 million at the minimum, midpoint, maximum and maximum, as
adjusted, of the Amended Valuation Range, respectively. Assuming the
contribution to the Foundation was expensed during the nine months ended
September 30, 1997, pro forma net earnings per share would be $0.47, $0.37,
$0.30 and $0.24, at the minimum, midpoint, maximum and maximum as adjusted,
respectively. Per share net income data is based on 29,906,750, 31,655,000,
36,403,250 and 41,863,738 shares outstanding which represents shares sold in
the Offerings, shares contributed to the Foundation and shares to be
allocated or distributed under the ESOP and Recognition Plan for the period
presented.
(3) It is assumed that 8.0% of the shares of Common Stock sold in the Offerings
will be purchased by the ESOP with funds loaned by the Company. The Company
and the Bank intend to make annual contributions to the ESOP in an amount at
least equal to the principal and interest requirement of the debt. The pro
forma net earnings assumes (i) that the loan to the ESOP is payable over 15
years, with the ESOP shares having an average fair value of $12.00 per share
in accordance with SOP 93-6, entitled "Employers' Accounting for Employee
Stock Ownership Plans," of the AICPA, and (ii) the effective tax rate was
47% for the period. See "Management -- Benefits -- Employee Stock Ownership
Plan" in the Prospectus.
(4) It is assumed that the Recognition Plan will purchase, following stockholder
approval of such plan, a number of shares of Common Stock (equal to 4.0% of
the shares of Common Stock sold in the Offering) for issuance to directors,
officers and employees. Funds used by the Recognition Plan to purchase the
shares initially will be contributed to the Recognition Plan by the Company.
It is further assumed that the shares were acquired by the Recognition Plan
at the beginning of the period presented in open market purchases at the
Amended Purchase Price and that 15.0% of the amount contributed, net of
taxes, was an amortized expense during the nine months ended September 30,
1997. The issuance of authorized but unissued shares of Common Stock
pursuant to the Recognition Plan in the amount of 4.0% of the Common Stock
sold in the Offerings would dilute the voting interests of existing
stockholders by approximately 3.8% and under such circumstances pro forma
net earnings per share for the nine months ended September 30, 1997 would be
$0.77, $0.68, $0.62 and $0.56, at the minimum, midpoint, maximum and 15%
above the maximum of the Amended Valuation Range, respectively, and pro
forma stockholders' equity per share at September 30, 1997 would be $16.64,
$15.69, $14.98 and $14.37 at the minimum, midpoint, maximum and 15% above
the maximum of such range, respectively. There can be no assurance that the
actual purchase price of shares purchased by or issued to the Recognition
Plan will be equal to the Amended Purchase Price. See
"Management -- Benefits -- Recognition Plan" in the Prospectus.
(5) The per share calculations are determined by adding the number of shares
assumed to be issued in the Conversion as well as contributed to the
Foundation and for purposes of calculating earnings per share, in accordance
with SOP 93-6, subtracting 2,099,500 shares, 2,470,000 shares, 2,840,500
shares, and 3,266,575 shares, respectively, representing the ESOP shares
which have not been committed for release during the nine months ended
September 30, 1997. Thus, it is assumed at September 30, 1997 that
26,906,750, 31,655,000, 36,403,250 and 41,863,738 shares of Common Stock are
outstanding at the minimum, midpoint, maximum and 15% above the maximum of
the Amended Valuation Range, respectively. Assuming the uncommitted ESOP
shares were not subtracted from the number of shares of Common Stock
outstanding at September 30, 1997, the offering price as a multiple of pro
forma net earnings per share would be 12.20x, 13.84x, 15.37x and 17.00x at
the minimum, midpoint, maximum and 15% above the maximum of the Amended
Valuation Range, respectively. For purposes of calculating pro
(Footnotes continued on next page)
9
<PAGE> 12
forma stockholders' equity per share, it is assumed that shares outstanding
total 29,006,250, 34,125,000, 39,243,750 and 45,130,313 shares at the
minimum, midpoint, maximum and 15% above the maximum of the Amended
Valuation Range.
(6) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Option Plan, which will be adopted by the Company
following the Conversion and presented for approval by stockholders at an
annual or special meeting of stockholders of the Company held at least six
months following the consummation of the Conversion. If the Option Plan is
approved by stockholders, an amount equal to 10% of the Common Stock sold in
the Offerings, or 2,762,500, 3,250,000, 3,737,500 and 4,298,125 shares at
the minimum, midpoint, maximum and 15% above the maximum of the Amended
Valuation Range, respectively, will be reserved for future issuance upon the
exercise of options to be granted under the Option Plan. The issuance of
Common Stock pursuant to the exercise of options under the Option Plan will
result in the dilution of existing stockholders' interests. Assuming
stockholder approval of the Option Plan, that all these options were
exercised at the beginning of the period at an exercise price of $12.00 per
share and that the shares to fund the Recognition Plan are acquired through
open market purchases at the Amended Purchase Price, pro forma net earnings
per share for the nine months ended September 30, 1997 would be $0.75,
$0.66, $0.60 and $0.54 at the minimum, midpoint, maximum and 15% above the
maximum of the Amended Valuation Range, respectively, and pro forma
stockholders' equity per share at September 30, 1997 would be $16.40,
$15.49, $14.82 and $14.24 at the minimum, midpoint, maximum and 15% above
the maximum of such range, respectively. See
"Management -- Benefits -- Stock Option Plan" in the Prospectus.
(7) The retained earnings of the Bank will be substantially restricted after the
Conversion by virtue of the liquidation account to be established in
connection with the Conversion. See "Dividend Policy" and "The
Conversion -- Liquidation Rights" in the Prospectus. In addition, certain
distributions from the Bank's retained earnings may be treated as being from
its accumulated bad debt reserve for tax purposes, which would cause the
Bank to have additional taxable income. See "Taxation -- Federal Taxation"
in the Prospectus. Pro forma stockholders' equity and pro forma
stockholders' equity per share do not give effect to the liquidation account
or the bad debt reserves established by the Bank for federal income tax
purposes in the event of a liquidation of the Bank.
(8) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Amended Valuation Range of up to 15%.
10
<PAGE> 13
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------
27,625,000 32,500,000 37,375,000 42,981,250
SHARES SOLD SHARES SOLD SHARES SOLD SHARES SOLD
AT $12.00 AT $12.00 AT $12.00 AT $12.00
PER SHARE PER SHARE PER SHARE PER SHARE (15%
(MINIMUM OF (MIDPOINT (MAXIMUM OF ABOVE MAXIMUM
RANGE) OF RANGE) RANGE) OF RANGE)(8)
----------- ----------- ----------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Gross proceeds............................... $ 331,500 $ 390,000 $ 448,500 $515,775
Plus: Shares acquired by Foundation (equal to
5% of the shares issued in the
Conversion)................................ 16,575 19,500 22,425 25,789
-------- -------- -------- --------
Pro forma market capitalization............ $ 348,075 $ 409,500 $ 470,925 $541,564
======== ======== ======== ========
Gross proceeds............................... $ 331,500 $ 390,000 $ 448,500 $515,775
Less offering expenses and commissions....... 6,932 7,551 8,170 8,882
-------- -------- -------- --------
Estimated net proceeds..................... 324,568 382,449 440,330 506,893
Less: Shares purchased by the ESOP........... (26,520) (31,200) (35,880) (41,262)
Shares purchased by the Recognition
Plan................................... (13,260) (15,600) (17,940) (20,631)
-------- -------- -------- --------
Total estimated net proceeds, as
adjusted(1)................................ $ 284,788 $ 335,649 $ 386,510 $445,000
======== ======== ======== ========
Net income(2):
Historical................................. $ 21,775 $ 21,775 $ 21,775 $ 21,775
Pro forma income on net proceeds, as
adjusted................................. 8,286 9,766 11,246 12,948
Pro forma ESOP adjustment(3)............... (937) (1,102) (1,268) (1,458)
Pro forma Recognition Plan adjustment(4)... (1,406) (1,654) (1,902) (2,187)
-------- -------- -------- --------
Pro forma net income....................... $ 27,718 $ 28,785 $ 29,851 $ 31,078
======== ======== ======== ========
Net income per share(2)(5):
Historical................................. $ 0.81 $ 0.69 $ 0.60 $ 0.52
Pro forma income on net proceeds, as
adjusted................................. 0.31 0.31 0.31 0.31
Pro forma ESOP adjustment(3)............... (0.03) (0.03) (0.03) (0.03)
Pro forma Recognition Plan adjustment(4)... (0.05) (0.05) (0.05) (0.05)
-------- -------- -------- --------
Pro forma net income per share(4)(6)....... $ 1.04 $ 0.92 $ 0.83 $ 0.75
======== ======== ======== ========
Offering price to pro forma net income per
share(5)................................... 11.54x 13.04x 14.46x 16.00x
======== ======== ======== ========
Stockholders' equity:
Historical................................. $ 171,080 $ 171,080 $ 171,080 $171,080
Estimated net proceeds..................... 324,568 382,449 440,330 506,893
Plus: Shares issued to Foundation.......... 16,575 19,500 22,425 25,789
Less: Contribution to Foundation........... (16,575) (19,500) (22,425) (25,789)
Plus: Tax benefit of the contribution to
Foundation............................... 7,790 9,165 10,540 12,121
Less: Common Stock acquired by the
ESOP(3).................................. (26,520) (31,200) (35,880) (41,262)
Common Stock to be acquired by the
Recognition Plan(4).................... (13,260) (15,600) (17,940) (20,631)
-------- -------- -------- --------
Pro forma stockholders' equity(4)(6)(7).... $ 463,658 $ 515,894 $ 568,130 $628,201
======== ======== ======== ========
Stockholders' equity per share(5):
Historical................................. $ 5.90 $ 5.01 $ 4.36 $ 3.79
Estimated net proceeds..................... 11.19 11.21 11.22 11.23
Plus: Shares issued to Foundation.......... 0.57 0.57 0.57 0.57
Less: Contribution to Foundation........... (0.57) (0.57) (0.57) (0.57)
Plus: Tax benefit of contribution to
Foundation............................... 0.27 0.27 0.27 0.27
Less: Common Stock acquired by the
ESOP(3).................................. (0.91) (0.91) (0.91) (0.91)
Common Stock to be acquired by the
Recognition Plan(4).................... (0.46) (0.46) (0.46) (0.46)
-------- -------- -------- --------
Pro forma stockholders' equity per
share(4)(6)(7)........................... $ 15.99 $ 15.12 $ 14.48 $ 13.92
======== ======== ======== ========
Offering price as a percentage of pro forma
stockholders' equity per share(5).......... 75.05% 79.37% 82.87% 86.21%
======== ======== ======== ========
Offering price as a percentage of pro forma
tangible stockholders' equity per
share(5)................................... 78.53% 82.64% 85.96% 89.09%
======== ======== ======== ========
</TABLE>
(Footnotes on next page.)
11
<PAGE> 14
- ---------------
(1) Estimated net proceeds, as adjusted, consist of the estimated net proceeds
from the Offerings minus (i) the proceeds attributable to the purchase by
the ESOP and (ii) the value of the shares to be purchased by the Recognition
Plan, subject to stockholder approval, after the Conversion at an assumed
purchase price of $12.00 per share.
(2) Does not give effect to the non-recurring expense that will be recognized in
1997 as a result of the establishment of the Foundation. The Company will
recognize an after-tax expense for the amount of the contribution to the
Foundation which is expected to be $8.9 million, $10.3 million, $11.9
million and $13.7 million at the minimum, midpoint, maximum and maximum as
adjusted, of the Amended Valuation Range, respectively. Assuming the
contribution to the Foundation was expensed during the year ended December
31, 1996, pro forma net earnings per share would be $0.71, $0.59, $0.50 and
$0.42, at the minimum, midpoint, maximum and maximum as adjusted,
respectively. Per share net income data is based on 26,943,583, 31,698,333,
36,453,083 and 41,921,046 shares outstanding which represents shares sold in
the Offerings, shares contributed to the Foundation and shares to be
allocated or distributed under the ESOP and Recognition Plan for the period
presented.
(3) It is assumed that 8.0% of the shares of Common Stock sold in the Offerings
will be purchased by the ESOP with funds loaned by the Company. The Company
and the Bank intend to make annual contributions to the ESOP in an amount at
least equal to the principal and interest requirement of the debt. The pro
forma net earnings assumes (i) that the loan to the ESOP is payable over 15
years, with the ESOP shares having an average fair value of $12.00 per share
in accordance with SOP 93-6 and (ii) the effective tax rate was 47% for the
period. See "Management -- Benefits -- Employee Stock Ownership Plan" in the
Prospectus.
(4) It is assumed that the Recognition Plan will purchase, following stockholder
approval of such plan, a number of shares of Common Stock (equal to 4.0% of
the shares of Common Stock sold in the Offering) for issuance to directors,
officers and employees. Funds used by the Recognition Plan to purchase the
shares initially will be contributed to the Recognition Plan by the Company.
It is further assumed that the shares were acquired by the Recognition Plan
at the beginning of the period presented in open market purchases at the
Amended Purchase Price and that 20.0% of the amount contributed, net of
taxes, was an amortized expense during the year ended December 31, 1996. The
issuance of authorized but unissued shares of Common Stock pursuant to the
Recognition Plan in the amount of 4.0% of the Common Stock sold in the
Offerings would dilute the voting interests of existing stockholders by
approximately 3.8% and under such circumstances pro forma net earnings per
share for the year ended December 31, 1996 would be $1.00, $0.89, $0.80 and
$0.73, at the minimum, midpoint, maximum and 15% above the maximum of the
Amended Valuation Range, respectively, and pro forma stockholders' equity
per share at December 31, 1996 would be $15.84, $15.00, $14.39 and $13.85 at
the minimum, midpoint, maximum and 15% above the maximum of such range,
respectively. There can be no assurance that the actual purchase price of
shares purchased by or issued to the Recognition Plan will be equal to the
Amended Purchase Price. See "Management -- Benefits -- Recognition Plan" in
the Prospectus.
(5) The per share calculations are determined by adding the number of shares
assumed to be issued in the Conversion as well as contributed to the
Foundation and for purposes of calculating earnings per share, in accordance
with SOP 93-6, subtracting 93.3% the ESOP shares which have not been
committed for release during the year ended December 31, 1996. Thus, it is
assumed at December 31, 1996 that 26,943,583, 31,698,333, 36,453,083 and
41,921,046 shares of Common Stock are outstanding at the minimum, midpoint,
maximum and 15% above the maximum of the Amended Valuation Range,
respectively. Assuming the uncommitted ESOP shares were not subtracted from
the number of shares of Common Stock outstanding at December 31, 1996, the
offering price as a multiple of pro forma net earnings per share would be
12.56x, 14.23x, 15.78x and 17.43x at the minimum, midpoint, maximum and 15%
above the maximum of the Amended Valuation Range, respectively.
(6) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Option Plan, which will be adopted by the Company
following the Conversion and presented for approval by
(Footnotes continued on next page)
12
<PAGE> 15
stockholders at an annual or special meeting of stockholders of the Company
held at least six months following the consummation of the Conversion. If
the Option Plan is approved by stockholders, an amount equal to 10% of the
Common Stock sold in the Offerings, or 2,762,500, 3,250,000, 3,737,500 and
4,298,125 shares at the minimum, midpoint, maximum and 15% above the maximum
of the Amended Valuation Range, respectively, will be reserved for future
issuance upon the exercise of options to be granted under the Option Plan.
The issuance of Common Stock pursuant to the exercise of options under the
Option Plan will result in the dilution of existing stockholders' interests.
Assuming stockholder approval of the Option Plan, that all these options
were exercised at the beginning of the period at an exercise price of $12.00
per share and that the shares to fund the Recognition Plan are acquired
through open market purchases at the Amended Purchase Price, pro forma net
earnings per share for the year ended December 31, 1996 would be $0.97,
$0.86, $0.78 and $0.70 at the minimum, midpoint, maximum and 15% above the
maximum of the Amended Valuation Range, respectively, and pro forma
stockholders' equity per share at December 31, 1996 would be $15.64, $14.85,
$14.26 and $13.75 at the minimum, midpoint, maximum and 15% above the
maximum of such range, respectively. See "Management -- Benefits -- Stock
Option Plan" in the Prospectus.
(7) The retained earnings of the Bank will be substantially restricted after the
Conversion by virtue of the liquidation account to be established in
connection with the Conversion. See "Dividend Policy" and "The
Conversion -- Liquidation Rights" in the Prospectus. In addition, certain
distributions from the Bank's retained earnings may be treated as being from
its accumulated bad debt reserve for tax purposes, which would cause the
Bank to have additional taxable income. See "Taxation -- Federal Taxation"
in the Prospectus. Pro forma stockholders' equity and pro forma
stockholders' equity per share do not give effect to the liquidation account
or the bad debt reserves established by the Bank for federal income tax
purposes in the event of a liquidation of the Bank.
(8) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Amended Valuation Range of up to 15%.
13
<PAGE> 16
REGULATORY CAPITAL
At September 30, 1997, the Bank exceeded all of the regulatory capital
requirements applicable to it. The table below sets forth the Bank's historical
regulatory capital at September 30, 1997 and the pro forma regulatory capital of
the Bank after giving effect to the Conversion, based upon the sale of the
number of shares shown in the table. The pro forma regulatory capital amounts
reflect the receipt by the Bank of 50% of the net Conversion proceeds, minus the
amounts to be loaned to the ESOP and contributed to the RRP. The pro forma
risk-based capital amounts assume the investment of the net proceeds received by
the Bank in assets which have a risk-weight of 50% under applicable regulations,
as if such net proceeds had been received and so applied at September 30, 1997.
<TABLE>
<CAPTION>
PRO FORMA AT SEPTEMBER 30, 1997 BASED ON
--------------------------------------------------------------------------------------
27,625,000 32,500,000 37,375,000 42,981,250
HISTORICAL AT SHARES SOLD AT SHARES SOLD AT SHARES SOLD AT SHARES SOLD AT
SEPTEMBER 30, 1997 $12.00 PER SHARE $12.00 PER SHARE $12.00 PER SHARE $12.00 PER SHARE
-------------------- -------------------- -------------------- -------------------- --------------------
PERCENT OF PERCENT OF PERCENT OF PERCENT OF PERCENT OF
AMOUNT ASSETS(1) AMOUNT ASSETS(1) AMOUNT ASSETS(1) AMOUNT ASSETS(1) AMOUNT ASSETS(1)
-------- ---------- -------- ---------- -------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tangible capital(2):
Actual............ $164,631 7.79% $294,925 12.99% $318,221 13.85% $341,516 14.68% $368,305 15.62%
Requirement....... 31,694 1.50 34,046 1.50 34,466 1.50 34,885 1.50 35,368 1.50
-------- ----- -------- ----- -------- -----
Excess............ $132,937 6.29% $260,879 11.49% $283,755 12.35% $306,630 13.18% $332,937 14.12%
======== ===== ======== ===== ======== =====
Core capital(2)(3):
Actual............ $169,200 8.01% $299,494 13.20% $322,790 14.05% $346,085 14.88% $372,874 15.81%
Requirement....... 63,524 3.00 68,228 3.00 69,068 3.00 69,907 3.00 70,872 3.00
-------- ----- -------- ----- -------- -----
Excess............ $105,676 5.01% $231,266 10.20% $253,722 11.05% $276,178 11.88% $302,002 12.81%
======== ===== ======== ===== ======== =====
Risk-based
capital(2)(3):
Actual............ $181,234 18.87% $311,528 29.99% $334,824 31.81% $358,119 33.57% $384,908 35.55%
Requirement....... 76,820 8.00 83,093 8.00 84,212 8.00 85,331 8.00 86,617 8.00
-------- ----- -------- ----- -------- -----
Excess............ $104,414 10.87% $228,436 21.99% $250,612 23.81% $272,788 25.57% $298,291 27.55%
======== ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) Adjusted total or adjusted risk-weighted assets, as appropriate.
(2) Based on the OTS regulatory capital requirements which became applicable to
the Bank upon its conversion to a federal savings bank in August 1997.
(3) Does not reflect the interest rate risk component to be added to the
risk-based capital requirements or, in the case of the core capital
requirement, the 4.0% requirement to be met in order for an institution to
be "adequately capitalized" under applicable laws and regulations. See
"Regulation -- Regulation of Federal Savings Banks -- Regulatory Capital
Requirements" in the Prospectus.
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH NO FOUNDATION
As previously indicated, the Bank's members have approved the establishment
of, and contribution of shares of Common Stock to, the Foundation. The Company
and the Bank anticipate that, as described herein, the Foundation will be
established and shares of Common Stock will be contributed to the Foundation
upon consummation of the Conversion. While the Company and the Bank know of no
reason why the Foundation will not be organized, in the unlikely event that the
Foundation is not established, the Company and the Bank will consummate the
Conversion and the Offering as provided for in the Plan of Conversion. For
comparison purposes and consistent with the presentation utilized in the
Prospectus, information is presented below reflecting certain pro forma
information for the Company assuming the Foundation is not established
contrasted to such information with the Foundation.
In the event that the Foundation was not being established as part of the
Conversion, RP Financial has estimated that the pro forma aggregate market
capitalization of the Company would be approximately $427.5 million at the
midpoint of the Amended Valuation Range, which is approximately $18 million
greater than the
14
<PAGE> 17
pro forma aggregate market capitalization of the Company if the Foundation is
included, and would result in an approximately $37.5 million increase in the
amount of Common Stock offered for sale in the Conversion. At the midpoint, the
pro forma price to book ratio would be approximately the same under both the
current appraisal and the estimate of the value of the Company without the
Foundation and the pro forma price to earnings ratio would be slightly lower
under the current appraisal and the estimate of the value of the Company without
the Foundation. Further, assuming the midpoint of the Amended Valuation Range,
pro forma stockholders' equity per share and pro forma earnings per share would
be substantially the same at $15.83 and $15.82, respectively, and $0.70 and
$0.69, respectively, with the Foundation or without the Foundation. There is no
assurance that in the event the Foundation was not formed that the appraisal
prepared at the time would have concluded that the pro forma market value of the
Company would be the same as that estimated herein. Any appraisals prepared at
that time would be based on the facts and circumstances existing at that time,
including, among other things, market and economic conditions.
For comparative purposes only, set forth below are certain pricing ratios
and financial data and ratios, at the minimum, midpoint, maximum and maximum, as
adjusted, of the Amended Valuation Range, assuming the Conversion was completed
at September 30, 1997.
<TABLE>
<CAPTION>
AT THE MAXIMUM,
AT THE MINIMUM AT THE MIDPOINT AT THE MAXIMUM AS ADJUSTED
---------------------- ---------------------- ---------------------- ----------------------
WITH NO WITH NO WITH NO WITH NO
FOUNDATION FOUNDATION FOUNDATION FOUNDATION FOUNDATION FOUNDATION FOUNDATION FOUNDATION
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Estimated offering amount.... $ 331,500 $ 363,375 $ 390,000 $ 427,500 $ 448,500 $ 491,625 $ 515,775 $ 565,369
Pro forma market
capitalization............. 348,075 363,375 409,500 427,500 470,925 491,625 541,564 565,369
Total assets................. 2,437,078 2,457,000 2,489,314 2,512,752 2,541,550 2,568,504 2,601,621 2,632,618
Total liabilities............ 1,949,217 1,949,217 1,949,217 1,949,217 1,949,217 1,949,217 1,949,217 1,949,217
Pro forma stockholders'
equity..................... 487,861 507,783 540,097 563,535 592,333 619,287 652,404 683,401
Pro forma consolidated net
earnings................... 21,398 21,829 22,188 22,695 22,978 23,561 23,887 24,555
Pro forma stockholders'
equity per share........... 16.82 16.77 15.83 15.82 15.10 15.12 14.46 14.50
Pro forma consolidated net
earnings per share......... 0.79 0.78 0.70 0.69 0.63 0.62 0.57 0.56
Pro forma pricing ratios:
Offering price as a
percentage of pro forma
stockholders' equity per
share.................... 71.34% 71.56% 75.81% 75.85% 79.47% 79.37% 82.99% 82.76%
Offering price to pro forma
net earnings per
share(1)................. 11.39 x 11.54 x 12.86 x 13.04 x 14.29 x 14.52 x 15.79 x 16.07 x
Pro forma market
capitalization to
assets................... 14.28% 14.79% 16.45% 17.01% 18.53% 19.14% 20.82% 21.48%
Pro forma financial ratios:
Return on assets(2)........ 1.17% 1.18% 1.19% 1.20% 1.21% 1.22% 1.22% 1.24%
Return on stockholders'
equity(3)................ 5.85% 5.73% 5.48% 5.37% 5.17% 5.07% 4.88% 4.79%
Stockholders' equity to
assets................... 20.02% 20.67% 21.70% 22.43% 23.31% 24.11% 25.08% 25.96%
</TABLE>
- ---------------
(1) If the contribution to the Foundation had been expensed during the nine
months ended September 30, 1997, the offering price to pro forma net
earnings per share would have been 19.15x, 24.32x, 30.00x and 37.50x at the
minimum, midpoint, maximum and maximum, as adjusted, respectively.
(2) If the contribution to the Foundation had been expensed during the nine
months ended September 30, 1997, return on assets would have been 0.69%,
0.63%, 0.58% and 0.52% at the minimum, midpoint, maximum and maximum, as
adjusted, respectively.
(3) If the contribution to the Foundation had been expensed during the nine
months ended September 30, 1997, return on stockholders' equity would have
been 3.45%, 2.93%, 2.50% and 2.09% at the minimum, midpoint, maximum and
maximum, as adjusted, respectively.
15
<PAGE> 18
SELECTED RECENT FINANCIAL INFORMATION
INDEX TO SELECTED RECENT FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Financial Statements:
Statement of Condition as of September 30, 1997 and December 31, 1996 (unaudited)... 17
Statement of Income (For three months and nine months ended September 30, 1997 and
1996)(unaudited)................................................................. 18
Statement of Equity (For nine months ended September 30, 1997 and
1996)(unaudited)................................................................. 19
Statement of Cash Flows (For the nine months ended September 30, 1997 and 1996)
(unaudited)...................................................................... 20
Notes to Financial Statements (unaudited)............................................. 21
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... 23
</TABLE>
16
<PAGE> 19
STATEN ISLAND SAVINGS BANK
STATEMENTS OF CONDITION (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
ASSETS:
Cash and due from banks.......................................... $ 48,445 $ 43,522
Federal funds sold............................................... 36,300 9,100
Securities available for sale.................................... 960,375 703,134
Loans, net....................................................... 1,037,862 968,015
Accrued interest receivable...................................... 12,968 11,739
Bank premises and equipment, net................................. 19,945 18,675
Intangible assets, net........................................... 18,933 20,490
Other assets..................................................... 9,672 7,648
---------- ----------
Total assets............................................. $ 2,144,500 $1,782,323
========== ==========
LIABILITIES AND EQUITY
LIABILITIES:
Deposits
Savings....................................................... $ 815,817 $ 832,584
Time.......................................................... 547,230 500,570
Money market.................................................. 83,381 79,704
NOW accounts.................................................. 27,417 14,298
Demand deposits............................................... 192,647 150,592
---------- ----------
1,666,492 1,577,748
Borrowed funds................................................... 245,841 54
Advances from borrowers for taxes and insurance.................. 5,798 4,563
Accrued interest and other liabilities........................... 31,086 28,878
---------- ----------
Total liabilities........................................ 1,949,217 1,611,243
---------- ----------
EQUITY:
Retained Earnings................................................ 183,947 166,950
Unrealized appreciation on securities available for sale, net of
taxes......................................................... 11,336 4,130
---------- ----------
Total equity............................................. 195,283 171,080
---------- ----------
Total liabilities and equity............................. $ 2,144,500 $1,782,323
========== ==========
</TABLE>
17
<PAGE> 20
STATEN ISLAND SAVINGS BANK
STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE MONTHS
MONTHS ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------- -------------------
1997 1996 1997 1996
------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees............................. $21,071 $18,965 $61,591 $53,898
Securities available for sale and held to
maturity....................................... 13,619 11,889 36,984 36,130
Federal funds sold................................ 541 268 1,742 1,074
------- ------- ------- -------
Total interest income..................... 35,231 31,122 100,317 91,102
------- ------- ------- -------
Interest expense:
Savings accounts.................................. 5,479 5,308 16,240 15,804
Time deposits..................................... 6,967 6,470 20,033 19,260
Money market accounts............................. 611 609 1,821 1,825
NOW accounts...................................... 115 282 269 818
Escrow accounts................................... 22 19 66 59
Borrowed funds.................................... 1,888 1 2,441 5
------- ------- ------- -------
Total interest expense.................... 15,082 12,689 40,870 37,771
------- ------- ------- -------
Net interest and dividend income.......... 20,149 18,433 59,447 53,331
------- ------- ------- -------
Provision for loan losses........................... 501 500 5,502 500
------- ------- ------- -------
Net interest income after provision for possible
loan losses.................................... 19,648 17,933 53,945 52,831
------- ------- ------- -------
Other income (loss):
Service and fee income............................ 1,925 1,615 5,581 4,829
Securities transactions........................... 193 (402) (412) (184)
------- ------- ------- -------
Total other income........................ 2,118 1,213 5,169 4,645
Other expenses
Personnel......................................... 5,858 5,311 15,954 15,055
Occupancy and equipment........................... 1,449 1,299 4,233 4,125
Amortization of intangible assets................. 519 519 1,557 1,624
FDIC insurance.................................... 75 1 197 2
Data processing................................... 1,048 593 3,186 2,103
Marketing......................................... 324 325 972 976
Professional fees................................. 253 365 683 760
Stationery and supplies........................... 254 225 942 643
Other............................................. 1,688 1,523 5,181 4,818
------- ------- ------- -------
Total other expenses...................... 11,468 10,161 32,905 30,106
------- ------- ------- -------
Income before provision for income
taxes................................... 10,298 8,985 26,209 27,370
------- ------- ------- -------
Provision for income taxes.......................... 4,261 2,739 9,212 10,782
------- ------- ------- -------
Net income.......................................... $ 6,037 $ 6,246 $16,997 $16,588
======= ======= ======= =======
</TABLE>
18
<PAGE> 21
STATEN ISLAND SAVINGS BANK
STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON SECURITIES
RETAINED AVAILABLE FOR SALE, TOTAL
EARNINGS NET OF TAXES EQUITY
-------- ------------------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
BALANCE, DECEMBER 31, 1995................... $145,175 $ 4,907 $150,082
Net Income................................... 16,558 16,558
Change in unrealized loss on securities
available for sale, net of taxes........... (4,036) (4,036)
-------- ------- --------
BALANCE, SEPTEMBER 30, 1996.................. $161,733 $ 871 $162,604
======== ======= ========
BALANCE, DECEMBER 31, 1996................... $166,950 $ 4,130 $171,080
Net Income................................... 16,997 16,997
Change in unrealized gain on securities
available for sale, net of taxes........... 7,206 7,206
-------- ------- --------
BALANCE, SEPTEMBER 30, 1997.................. $183,947 $11,336 $195,283
======== ======= ========
</TABLE>
19
<PAGE> 22
STATEN ISLAND SAVINGS BANK
STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
-----------------------
1997 1996
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income......................................................... $ 16,997 $ 16,588
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization................................... 1,267 1,165
Amortization of bond and mortgage premiums...................... 187 493
Amortization of intangible assets............................... 1,557 1,624
Loss on sale of available for sale securities................... 412 184
Other noncash (income).......................................... (2,919) (2,730)
Provision for loan losses....................................... 5,502 500
Increase in deferred loan fees.................................. 206 626
Decrease (increase) in accrued interest receivable.............. (1,230) 1,365
(Increase) in other assets...................................... (2,024) (4,376)
(Decrease) in accrued interest and other liabilities............ (143) (10,001)
(Increase) decrease in deferred income taxes.................... (4,855) 2,247
Recoveries...................................................... 717 840
--------- ---------
Net cash provided by operating activities.................. 15,674 8,525
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Redemption of trading securities................................... 20,564 --
Maturities of available for sale securities........................ 117,133 193,856
Sales of available for sale securities............................. 51,805 225,286
Purchases of available for sale securities......................... (431,865) (351,143)
Principal collected on loans....................................... 157,778 122,457
Loans made to customers............................................ (235,144) (253,364)
Sales of loans..................................................... 2,967 3,071
Capital expenditures............................................... (2,554) (2,605)
--------- ---------
Net cash used in investing activities...................... (319,316) (62,442)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts................................... 89,978 46,004
Borrowings......................................................... 245,787 (1)
--------- ---------
Net cash provided by financing activities.................. 335,765 46,003
--------- ---------
Net (decrease) increase in cash and cash equivalents....... 32,123 (7,914)
CASH AND CASH EQUIVALENTS, beginning of year......................... 52,622 76,464
--------- ---------
CASH AND CASH EQUIVALENTS, end of year............................... $ 84,745 $ 68,550
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for --
Interest........................................................ 39,652 37,777
Income taxes.................................................... $ 13,945 $ 12,390
========= =========
</TABLE>
20
<PAGE> 23
STATEN ISLAND SAVINGS BANK
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation
Staten Island Bancorp, Inc. (the Company) is a Delaware corporation
organized in July 1997 by Staten Island Savings Bank (the Bank) in connection
with the conversion of the Bank from a federally chartered mutual savings bank
to a federally chartered stock savings bank. For purposes of this Prospectus
Supplement the financial statements of the Company have been omitted because as
of September 30, 1997, the Company had not yet issued any stock, had no assets
(other than advance subscription proceeds) and no liabilities, and had not yet
conducted any business other than of an organizational nature. Alternatively,
the unaudited financial statements and the Management's Discussion and Analysis
of Financial Condition and Results of the Operations presented herein are for
the Bank as a predecessor entity to the Company. No proforma effect has been
given to the sale of the Company's common stock in the Conversion.
The accompanying financial statements are unaudited and were prepared
consistent with instructions to a Quarterly Report on Form 10-Q and therefore,
do not include information or footnotes necessary for a complete presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. All normal, recurring adjustments
which, in the opinion of management, are necessary for a fair presentation of
the financial statements have been included. The results of operations for the
three and nine months ended September 30, 1997 are not necessarily indicative of
the results to be expected for the year ending December 31, 1997. These interim
financial statements should be read in conjunction with the Bank's audited
financial statements and note disclosures contained in the Company's Prospectus
dated September 12, 1997.
2. LOAN PORTFOLIO COMPOSITION.
The following table sets forth the composition of the Bank's loans at the
dates indicated.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------------- -----------------------
PERCENT OF PERCENT OF
AMOUNT TOTAL AMOUNT TOTAL
---------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Mortgage loans:
Single-family residential....................... $ 827,272 79.71% $720,873 74.47%
Multi-family residential........................ 29,019 2.80 26,444 2.73
Commercial real estate.......................... 115,817 11.16 115,593 11.94
Construction and land........................... 41,090 3.96 28,779 2.97
Home equity..................................... 5,984 0.58 29,680 3.07
---------- ------ -------- ------
Total mortgage loans..................... 1,019,182 98.20 921,369 95.18
Other loans:
Student loans................................... 3,729 0.36 4,522 0.47
Automobile leases............................... -- 0.00 28,249 2.92
Passbook loans.................................. 6,830 0.66 5,933 0.61
Commercial business loans....................... 15,066 1.45 14,995 1.55
Other consumer loans............................ 12,560 1.21 9,712 1.00
---------- ------ -------- ------
Total other loans........................ 38,185 3.68 63,411 6.55
---------- ------ -------- ------
Total loans receivable................... 1,057,367 101.88 984,780 101.73
Less:
Discount on loans purchased..................... (728) (0.07) (3,475) (0.36)
Allowance for loan losses....................... (14,530) (1.40) (9,977) (1.03)
Deferred loan fees.............................. (4,247) (0.41) (3,313) (0.34)
---------- ------ -------- ------
Loans receivable, net............................. $1,037,862 100.00% $968,015 100.00%
========== ====== ======== ======
</TABLE>
21
<PAGE> 24
3. NON-PERFORMING ASSETS.
The following table sets forth information with respect to non-performing
assets identified by the Bank, including non-accrual loans, other real estate
owned, and non-performing investments in real estate at the dates indicated.
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accruing loans 90 days or more past due:
Mortgage loans:.................................. $ 66 $ --
Other loans:..................................... 342 1
------- -------
Total accruing loans..................... 408 1
------- -------
Non-accrual loans:
Mortgage loans:
Single-family residential..................... 10,338 10,417
Multi-family residential...................... 934 322
Commercial real estate........................ 9,668 11,102
Construction and land......................... 1,469 --
Home equity................................... 545 644
Other loans:
Automobile leases............................. -- 15
Commercial and discounted business loans...... 194 106
Other loans................................... 392 144
------- -------
Total non-accruing loans................. 23,540 22,750
------- -------
Total non-performing loans......................... 23,948 22,751
------- -------
Other real estate owned, net....................... 780 1,103
------- -------
Total non-performing assets........................ $24,728 $ 23,854
======= =======
Non-performing assets to total loans............... 2.35% 2.42%
Non-performing assets to total assets.............. 1.15% 1.34%
Non-performing loans to total loans................ 2.28% 2.31%
Non-performing loans to total assets............... 1.12% 1.28%
</TABLE>
22
<PAGE> 25
4. ALLOWANCE FOR LOAN LOSSES.
The following table sets forth the activity in the Bank's allowance for
loan losses during the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED
------------------- DECEMBER 31,
1997 1996 1996
------- ------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Allowance at beginning of period............................ $ 9,977 $10,704 $ 10,704
Provisions.................................................. 5,502 500 1,000
Charge-offs:
Mortgage loans:
Construction, land and land development.............. 2 -- --
Single-family residential............................ 624 1,137 1,590
Multi-family residential............................. 100 -- --
Commercial real estate............................... 444 239 376
Other loans............................................ 485 329 729
------- ------- -------
Total charge-offs................................. 1,655 1,705 2,695
Recoveries:
Mortgage loans:
Construction, land and land development.............. 10 -- --
Single-family residential............................ 295 345 408
Multi-family residential............................. -- -- --
Commercial real estate............................... 238 388 413
Other loans............................................ 163 107 147
------- ------- -------
Total recoveries.................................. 706 840 968
------- ------- -------
Allowance at end of period.................................. $14,530 $10,339 $ 9,977
======= ======= =======
Allowance for loan losses to total nonperforming loans at
end of period............................................. 61.72% 44.50% 43.85%
Allowance for loan losses to total loans at end of period... 1.38% 1.10% 1.02%
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
CHANGES IN FINANCIAL CONDITIONS
Total assets of the Bank increased $362.2 million or 20.3% from $1.78
billion December 31, 1996 to $2.14 billion September 30, 1997.
The increase in total assets for the first nine months of 1997 was
primarily due to a $257.2 million, or 36.6% increase in the Bank's investment
portfolio which is a result of the Bank's leveraging program and the use of
borrowed funds to purchase securities for the Bank's investment portfolio at an
acceptable spread.
Loans receivable net increased $69.8 million or 7.2% to $1.04 billion at
September 30, 1997 compared to $968.0 million at December 31, 1996. Such
increase was due to continued growth in the loan portfolio.
Deposits increased $88.7 million or 5.6% from $1.6 billion at December 31,
1996 to $1.7 billion at September 30, 1997. The largest increase was in time
deposits and demand deposits which increased $46.7 million and $42.1 million,
respectively. The growth in time deposits was primarily due to an increase in
deposits made in anticipation of payment for the Company's stock offering. The
growth in demand deposits was a result of the Bank's continued emphasis on
business development and in anticipation of the Company's stock offering.
23
<PAGE> 26
Borrowed funds totaled $245.8 million at September 30, 1997 compared to
$54,000 at December 31, 1996. Management has deemed borrowings to be a
cost-effective alternative to deposits which facilitate the Bank's ability to
leverage its balance sheet. Borrowed funds consist primarily of short-term
repurchase agreements maturing prior to September 30, 1998.
Equity increased by $24.2 million or 14.1% from $171.1 million at December
31, 1996 to $195.3 million at September 30, 1997. The increase was a result of
net income of $17.0 million and an unrealized gain on the Bank's securities
available for sale of $11.3 million at September 30, 1997 compared to $4.1
million at December 31, 1996. The recent volatility in the financial markets has
resulted in the appreciation in value of the Bank's investment portfolio.
RESULTS OF OPERATIONS
The Bank reported net income of $6.0 million for the three months ended
September 30, 1997 compared to $6.2 million for the three months ended September
30, 1996 a decrease of $209,000 or 3.3%. The decrease in net income was
primarily the result of an increase of $1.3 million in total other expenses and
an increase in the provision for income taxes of $1.5 million partially offset
by increases in net interest income of $1.7 million and other income of
$905,000.
Net income for the nine months ended September 30, 1997 amounted to $17.0
million compared to $16.6 million for the nine months ended September 30, 1996.
The increase of $409,000 or 2.5% was primarily due to an increase of $6.1
million in net interest income and a $1.6 million decrease in the provision for
income taxes, partially offset by a $5.0 million increase in the provision for
loan losses and a $2.8 million increase in total other expenses.
INTEREST INCOME
The Bank's total interest income was $35.2 million for the three months
ended September 30, 1997 compared to $31.1 million for the three months ended
September 30, 1996. The $4.1 million or 13.2% increase was primarily due to a
$2.1 million increase in interest income from loans and a $1.7 million increase
in interest income from securities. The primary reason for the increase in
interest income from loans was an increase of $118.6 million in the average
balance of loans partially offset by a decrease in the average yield of 14 basis
points from 8.27% to 8.13%. The average balance of the loan portfolio increased
due to increased loan demand, new loan products and continued emphasis on
commercial and other lending. The decrease in the average yield on the loan
portfolio was primarily due to the increased loan repayment activity in higher
yielding loans and the downward pricing of certain of the Bank's adjustable rate
loans. The increase in interest income on securities was due to a $81.5 million
increase in the average balance of the securities portfolio and a 20 basis point
increase in the average yield on the securities portfolio. The increase in the
average balance is a result of the Bank's leveraging strategy.
For the nine months ended September 30, 1997 interest income totaled $100.3
million compared with $91.1 million for the nine months ended September 30,
1996. The $9.2 million or 10.1% increase between the periods was primarily the
result of higher interest income for loans and securities. Interest on loans
increased $7.7 million or 14.3% as a result of a $146.3 million increase in the
average balance of the loan portfolio. This was offset to some extent by a
decrease in the average yield on loans from 8.28% for the nine months ended
September 30, 1996 to 8.10% for the nine months ended September 30, 1997. These
changes for the nine month period were due primarily to the same factors
described above with respect to the changes during the third quarter of 1997
compared to the third quarter of 1996. Interest income on securities increased
$854,000 or 2.4% primarily as a result of an increase in the average yield to
6.66% for the nine months ended September 30, 1997 compared to 6.37% for the
nine months ended September 30, 1996. This increase in yield was partially
offset by a $15.5 million decrease in the average balance of securities during
the same time period.
The increase in the average yield reflects the sale of lower rate
securities to purchase higher yielding securities in connection with the Bank's
restructuring of its investment securities portfolio in the past twelve
24
<PAGE> 27
months, while the decrease in the average balance is a result of the paydowns
and maturities earlier in the year exceeding the investment due to the funding
of lending activities.
INTEREST EXPENSE
The Bank's total interest expense was $15.1 million for the three months
ended September 30, 1997 compared with $12.7 million for the three months ended
September 30, 1996. The increase of $2.4 million or 18.9% was primarily due to
an increase of $497,000 in interest for time deposits and $1.9 million increase
in interest expense on borrowed funds. The increase in interest expense for time
deposits was primarily due to an increase of $41.6 million in the average
balance of time deposits primarily due to deposits in anticipation of payment
for the Company's stock offering. The increase in interest expense for borrowed
funds was due to an increase in the average balance of $125.2 million due to the
Bank's leveraging strategy which was not in place during the third quarter of
1996.
Interest expense was $40.9 million for the nine months ended September 30,
1997 compared to $37.8 million for nine months ended September 30, 1996, an
increase of $3.1 million or 8.20%. Interest on borrowed funds increased $2.4
million due to a $55.4 million increase in the average balance of borrowings
between the periods. Average borrowings for the nine months ended September 30,
1996 was $47,000. The significant increase in the average balance reflects the
leveraging strategy instituted by the Bank during the current fiscal year. The
average balance of interest bearing deposits increased by $82.6 million from
September 30, 1996 to September 30, 1997, while the average cost of these
deposits decreased from 3.66% for the nine months ended September 30, 1996 to
3.52% for the nine months ended September 30, 1997. This was a result of the
Bank's continued business development efforts for demand deposits along with
deposits made in anticipation of payment for the Company's stock offering.
NET INTEREST INCOME
Net interest income increased $1.7 million or 9.3% in the three months
ended September 30, 1997 to $20.1 million, compared to $18.4 million in the same
period in 1996. Such increase was due to a $4.1 million increase in interest
income which was partially offset by a $2.4 million increase in interest
expense. The increase in interest income was due to an increase of $218.9
million or 13% in the average balance of interest earning assets. The average
yield on interest earning assets was 7.43% for the three months ended September
30, 1997 compared with 7.42% for the three months ended September 30, 1996. The
increase in interest expense was due to an increase of $211.8 million or 15.3%
in the average balance of interest bearing liabilities. The average cost of
interest bearing liabilities for the third quarter of 1997 was 3.78% compared
with 3.66% for the same period last year. The Bank's interest rate spread (the
difference between the weighted average yield on interest earning assets and
weighted average cost of interest bearing liabilities) and net interest margin
(net interest income as a percentage of average interest earning assets)
amounted to 3.65% and 4.25%, respectively during the three months ended
September 30, 1997 compared to 3.75% and 4.39%, respectively, for the comparable
period in 1996.
Net interest income was $59.4 million for the nine months ended September
30, 1997 compared to $53.3 million for the nine months ended September 30, 1996.
This represents an increase of $6.1 million or 11.5%. The increase was a result
of a $9.2 million increase in interest income which was partially offset by a
$3.1 million increase in interest expense. The increase in interest income was a
result of an increase of $146.8 million in the average balance of interest
earning assets along with an increase of 8 basis points from 7.36% for the nine
months ended September 30, 1996 to 7.44% for the nine months ended September 30,
1997 in the average yield on interest earning assets. Interest expense increased
due to a $138.0 million increase in the average balance of interest bearing
liabilities which was partially offset by a decrease of 6 basis points in the
average rate paid from 3.66% for the nine months ended September 30, 1996 to
3.60% for the nine months ended September 30, 1997. The net interest spread and
margin increased to 3.84% and 4.41%, respectively, for the nine months ended
September 30, 1997 compared to 3.70% and 4.31%, respectively, for the nine
months ended September 30, 1996.
25
<PAGE> 28
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three months ended September 30, 1997
was $501,000 compared to $500,000 for the three months ended September 30, 1996.
The provision for loan losses in the third quarter of 1997 was based on
management's continuing review of the risk elements in the Bank's loan portfolio
and the growth of the portfolio.
For the nine months ended September 30, 1997, the provision for loan losses
was $5.5 million compared to $500,000 for the first nine months of 1996. In
addition to general provisions of approximately $1.5 million during the nine
months ended September 30, 1997, management determined that additional
provisions of approximately $4.0 million were necessary in light of estimated
losses with respect to the loans acquired from Gateway Bancorp, Inc. in
connection with the Bank's acquisition of Gateway Bancorp, Inc. in 1995; and
with respect to the Bank's portfolio of non-performing loans. Management views
approximately $4.0 million of the provisions during the nine months ended
September 30, 1997 as generally non-recurring in nature and anticipates that the
amount of provisions for loan losses in the future will be more consistent with
the $1.5 million of provisions which it otherwise would have made. While no
assurance can be given that future chargeoffs and/or additional provisions will
be necessary, management of the Bank believes that, as of September 30, 1997,
the allowance for loan losses was adequate.
OTHER INCOME
Other income increased $905,000 or 74.6% to $2.1 million for the three
months ended September 30, 1997 from $1.2 million for the three months ended
September 30, 1996. Such increase was due to a $193,000 gain on securities
transactions during the 1997 period compared to a $402,000 loss during the third
quarter of 1996. The loss on securities transactions during the third quarter of
1996 was due to the restructuring of the Bank's securities portfolio in an
effort to improve both yield and asset quality. Service and fee income increased
from $1.6 million for the three months ended September 30, 1996 to $1.9 million
for the three months ended September 30, 1997. The increase in service and fee
income was due to an increase in the volume of transactions as well as an
increase in demand deposit accounts.
For the nine months ended September 30, 1997, other income increased
$524,000 or 11.3% primarily as a result of higher service and fee income.
TOTAL OTHER EXPENSES
Total other expenses increased $1.3 million or 12.9% to $11.5 million for
the three months ended September 30, 1997 from $10.2 million for the same period
in 1996. Such increase was primarily due to a $455,000 or 76.7% increase in data
processing fees and a $547,000 or 10.3% increase in personnel expenses. The
increase in data processing expenses was primarily due to increased fees charged
by the Bank's service bureau as a result of the service bureau's shrinking
customer base due to consolidation within the banking industry. The increase in
personnel expenses was due to normal increases in compensation and employee
benefit costs along with bonuses paid in the third quarter of 1997 for achieving
certain performance goals.
For the nine months ended September 30, 1997 total other expenses have
increased $2.8 million or 9.3% to $32.9 million from $30.1 million for the nine
months ended September 30, 1996. Such increase was primarily due to an increase
of $1.1 million or 51.5% in data processing fees, an increase of $899,000 or
6.0% in personnel expenses and a $363,000 or 7.5% increase in other expenses.
The increase in data processing expenses was primarily due to the write-off of
the Bank's investment in its service bureau. Given among other things,
consolidation in the banking industry, the number of bank customers of such
service bureau has decreased significantly in recent years. Based on its
assessment of the continuing viability of such service bureau, the Bank
wrote-off $969,000 with respect to this investment. The Bank is reevaluating its
data processing needs in general and, in particular, whether it will continue
its relationship with is current service bureau. Although it has made no
decision with respect to how best to meet its future data processing needs, any
determination by the Bank to enhance its data processing capabilities and/or
convert its systems to a new service bureau may result in increases in other
expenses. In this reevaluation process, the Bank is only considering vendors
that can guarantee their systems will be ready for the year 2000. The Bank's
current
26
<PAGE> 29
service bureau is in the process of implementing program changes needed for the
year 2000. The increase in personnel expenses was due to normal increases in
compensation and benefits as well as bonuses paid to officers and staff in the
current quarter. The increase in other expenses was due to a variety of
increases, including expenses related to loan collateral and real estate owned.
PROVISION FOR INCOME TAXES
The provision for income taxes increased $1.5 million to $4.3 million for
the three months ended September 30, 1997 from $2.8 million for the three months
ended September 30, 1996. The increase was primarily due to a $2.1 million
reversal of previously deferred income taxes related to bad debt reserves
accumulated for New York State purposes in the third quarter of 1996. The New
York State tax law was amended during the third quarter of 1996 to prevent
future recapture of the Bank's bad debt reserves and permit continued future use
of the bad debt reserve method for purposes of determining the Bank's New York
State tax liability. The provision for income taxes for the three months ended
September 30, 1997 reflects a refund of city taxes from 1996 and accruing at a
lower rate for city taxes due to a similar change in the New York City tax law
which took place in April 1997.
For the nine months ended September 30, 1997 the provision for income taxes
decreased $1.6 million to $9.2 million compared with $10.8 million for the nine
months ended September 30, 1997. In addition to the reasons stated above, in
April of 1997 there was a $2.6 million reversal of previously deferred income
taxes related to bad debt reserves accumulated for New York City purposes. The
change in the New York City tax law also permits continued future use of the bad
debt reserve method for purposes of determining the Bank's New York City tax
liability.
LIQUIDITY AND COMMITMENTS
The Bank's liquidity, represented by cash and cash equivalents, is a
product of its operating, investing and financing activities. The Bank's primary
sources of funds are deposits, amortization, prepayments and maturities of
outstanding loans and mortgage backed securities, maturities of investment
securities and other short term investments and funds provided from operations.
While scheduled payments from the amortization of loans and mortgage related
securities and maturing investment securities and short term investments are
relatively predictable sources of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions and
competition. In addition, the Bank invests excess funds in federal funds sold
and other short term interest earning assets which provide liquidity to meet
lending requirements. Historically, the Bank has been able to generate
sufficient cash through its deposits and has only utilized borrowings to a very
limited degree. As of September 30, 1997 the Bank had entered into repurchase
agreements totaling $245.7 million as an alternative funding source to leverage
its capital base. All of these repurchase agreements are short term and mature
before September 30, 1998.
The Bank intends to continue the use of repurchase agreements and in the
future FHLB advances, to leverage its capital base and provide funds for its
lending and investment activities.
Liquidity management is both a daily and long term function of business
management. Excess liquidity is generally invested in short term investments
such as federal funds. The Bank uses its sources of funds primarily to meet its
ongoing commitments, to pay maturing certificates of deposit and savings
withdrawals, fund loan commitments and maintain a portfolio of mortgage backed
and mortgage related securities and investment securities. At September 30, 1997
the total approved loan origination commitments outstanding amounted to $48.0
million. At the same date, the unadvanced portion of construction loans
approximated $7.2 million. Certificates of deposit scheduled to mature in one
year or less at September 30, 1997 totalled $420.2 million. Investment
securities scheduled to mature in one year or less at September 30, 1997
totalled $48.1 million. Based on historical experience, management believes that
a significant portion of maturing deposits will remain with the Bank. The Bank
anticipates that it will continue to have sufficient funds, together with
borrowings, to meet its current commitments.
27
<PAGE> 30
CAPITAL
At September 30, 1997, the Bank had regulatory capital which was well in
excess of regulatory limits set by the Office of Thrift Supervision. The current
requirements and the Bank's actual levels are detailed below (dollars in
thousands):
<TABLE>
<CAPTION>
REQUIRED CAPITAL ACTUAL CAPITAL EXCESS CAPITAL
------------------- -------------------- --------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Tangible capital....... $31,694 1.50% $164,631 7.79% $132,937 6.29%
Core capital........... $63,524 3.00% $169,200 8.01% $105,676 5.01%
Risk-based capital..... $76,820 8.00% $181,234 18.87% $104,414 10.87%
</TABLE>
28
<PAGE> 31
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------- -------------------------------
1997 1996 1997
------------------------------ ------------------------------ -------------------------------
AVERAGE AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST BALANCE INTEREST COST
---------- ------- ------- ---------- ------- ------- ---------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets
Loans receivable(1):
Real estate loans.... $ 998,929 $20,082 8.04% $ 860,796 $17,685 8.22% $ 964,870 $ 58,221 8.05%
Other loans.......... 37,277 989 10.61% 56,790 1,280 9.02% 49,034 3,370 9.16%
---------- ------- ---------- --------
Total loans...... 1,036,206 21,071 8.13% 917,586 18,965 8.27% 1,013,904 61,591 8.10%
Securities............. 822,569 13,619 6.62% 741,064 11,889 6.42% 740,502 36,984 6.66%
Federal funds sold..... 38,791 541 5.58% 20,054 268 5.35% 42,651 1,741 5.44%
------- -------
- -
---------- ------- ---------- --------
Total interest-earning
assets............... 1,897,566 35,231 7.43% 1,678,704 31,122 7.42% 1,797,057 100,316 7.44%
------- -------
- -
------- --------
Noninterest-earning
assets................. 109,103 88,587 98,551
---------- ----------
Total assets......... $2,006,669 $1,767,291 $1,895,608
---------- ----------
Interest-bearing
liabilities:
Deposits:
NOW and money market
deposits........... 105,622 726 2.75% 138,095 891 2.58% 101,644 2,099 2.75%
Savings deposits..... 824,052 5,501 2.67% 746,623 5,327 2.85% 827,077 16,296 2.63%
Certificates of
deposits........... 542,039 6,967 5.14% 500,466 6,470 5.17% 528,210 20,033 5.06%
------- -------
- -
---------- ------- ---------- --------
Total deposits... 1,471,713 13,194 3.59% 1,385,184 12,688 3.66% 1,456,931 38,428 3.52%
Total Other
Borrowings........... 125,292 1,888 6.03% 51 1 11.09% 55,439 2,441 5.87%
------- -------
- -
---------- ------- ---------- --------
Total interest-bearing
liabilities.......... 1,597,005 15,082 3.78% 1,385,235 12,689 3.66% 1,512,370 40,869 3.60%
------- -------
- -
------- --------
Noninterest-bearing
liabilities............ 221,157 227,096 203,672
---------- ----------
Total
liabilities.... 1,818,162 1,612,331 1,716,042
Stockholder's equity..... 188,507 154,960 179,566
---------- ----------
Total liabilities
and equity..... $2,006,669 $1,767,291 $1,895,608
========== ==========
Net interest-earning
assets................. $ 300,561 $ 293,469 $ 284,687
---------- ----------
Net interest
income/interest rate
spread................. 20,149 3.65% 18,433 3.75% 59,447 3.84%
======= ======== ======== ========
Net interest margin...... 4.25% 4.39% 4.41%
======== ========
Ratio of average
interest-earning assets
to average
interest-bearing
liabilities............ 118.82% 121.19% 118.82%
======== ========
<CAPTION>
1996
------------------------------
AVERAGE
AVERAGE YIELD/
BALANCE INTEREST COST
---------- ------- -------
<S> <C> <C> <C>
Interest-earning assets
Loans receivable(1):
Real estate loans.... $ 811,143 $50,144 8.24%
Other loans.......... 56,448 3,754 8.87%
Total loans...... 867,591 53,898 8.28%
Securities............. 755,960 36,130 6.37%
Federal funds sold..... 26,661 1,074 5.37%
Total interest-earning
assets............... 1,650,212 91,102 7.36%
Noninterest-earning
assets................. 92,700
Total assets......... $1,742,912
Interest-bearing
liabilities:
Deposits:
NOW and money market
deposits........... 136,844 2,643 2.58%
Savings deposits..... 747,324 15,863 2.83%
Certificates of
deposits........... 490,149 19,260 5.24%
Total deposits... 1,374,317 37,766 3.66%
Total Other
Borrowings........... 47 5 14.06%
Total interest-bearing
liabilities.......... 1,374,364 37,771 3.66%
Noninterest-bearing
liabilities............ 216,419
Total
liabilities.... 1,590,783
Stockholder's equity..... 152,129
Total liabilities
and equity..... $1,742,912
Net interest-earning
assets................. $ 275,848
Net interest
income/interest rate
spread................. 53,331 3.70%
Net interest margin...... 4.31%
Ratio of average
interest-earning assets
to average
interest-bearing
liabilities............ 120.07%
</TABLE>
29
<PAGE> 32
RATE/VOLUME ANALYSIS
The following table sets forth effects of changing rates and volumes on net
interest income of the Bank. Information is provided with respect to (i) effects
on interest income attributable to changes in volume (changes in volume
multiplied by prior rate); (ii) effects on interest income attributable to
changes in rate (changes in rate multiplied by prior volume); and (iii) changes
in rate/volume (change in rate multiplied by change in volume).
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
COMPARED TO THREE MONTHS ENDED COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996
--------------------------------------- -----------------------------------------
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
-------------------------- TOTAL NET ---------------------------- TOTAL NET
RATE/ INCREASE RATE/ INCREASE
RATE VOLUME VOLUME (DECREASE) RATE VOLUME VOLUME (DECREASE)
----- ------ ------- --------- ------- ------ ------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Real estate loans................ $(380) $2,838 $ (61) $ 2,397 $(1,199) $9,503 $ (227) $ 8,077
Other loans...................... 227 (440) (78) (291) 125 (493) (16) (384)
---- ----- ------ -----
Total loans receivable........... (153) 2,398 (139) 2,106 (1,074) 9,010 (243) 7,693
Securities......................... 380 1,308 42 1,730 1,626 (739) (33) 854
Federal funds sold................. 12 250 11 273 14 644 9 667
---- ----- ------ -----
Total net change in income on
interest-earning assets.... 239 3,956 (86) 4,109 566 8,915 (267) 9,214
---- ----- ------ -----
Interest-bearing liabilities:
Deposits:
NOW and money market deposits.... 58 (209) (14) (165) 183 (680) (47) (544)
Savings accounts................. (343) 552 (35) 174 (1,138) 1,693 (122) 433
Certificates of deposit.......... (37) 537 (3) 497 (671) 1,496 (52) 773
---- ----- ------ -----
Total deposits............... (322) 880 (52) 506 (1,626) 2,509 (221) 662
Other Borrowings................... (1) 3,471 (1,583) 1,887 (3) 5,841 (3,402) 2,436
---- ----- ------ -----
Total net change in expense
on interest-bearing
liabilities................ (323) 4,351 (1,635) 2,393 (1,629) 8,350 (3,623) 3,098
---- ----- ------ -----
Net change in net interest
income........................... 562 (395) 1,549 1,716 2,195 565 3,356 6,116
==== ===== ====== =====
</TABLE>
30
<PAGE> 33
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission ("SEC") a
Registration Statement under the Securities Act with respect to the Common Stock
offered hereby. As permitted by the rules and regulations of the SEC, this
Prospectus Supplement does not contain all the information set forth in the
Registration Statement. Such information, including the Conversion Valuation
Appraisal Report, as updated and revised, which is an exhibit to the
Registration Statement, can be examined without charge at the public reference
facilities of the SEC located at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of such material can be obtained from the SEC at prescribed rates. In
addition, the SEC maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the SEC, including the Company. The
statements contained in this Prospectus Supplement as to the contents of any
contract or other document filed as an exhibit to the Registration Statement
are, of necessity, brief descriptions thereof and are not necessarily complete;
each such statement is qualified by reference to such contract or document.
The Bank has filed an Application for Conversion with the OTS with respect
to the Conversion. This Prospectus Supplement omits certain information
contained in that application. The Application may be examined at the principal
office of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, and at the
Northeast Regional Office of the OTS located at 10 Exchange Place, 18th Floor,
Jersey City, New Jersey 07302.
The Company has filed with the Office of Thrift Supervision an Application
to Form a Holding Company. This Prospectus Supplement omits certain information
contained in such Application. Such Application may be inspected at the
principal office of the OTS, 1700 G Street, N.W., Washington, D.C. 20552, and at
the Northeast Regional Office of the OTS located at 10 Exchange Place, 18th
Floor, Jersey City, New Jersey 07302.
In connection with the Conversion, the Company will register its Common
Stock with the SEC under Section 12 of the Securities Exchange Act of 1934, as
amended ("Exchange Act"), and, upon such registration, the Company and the
holders of its stock will become subject to the proxy solicitation rules,
reporting requirements and restrictions on stock purchases and sales by
directors, officers and greater than 10% stockholders, the annual and periodic
reporting and certain other requirements of the Exchange Act. Under the Plan,
the Company has undertaken that it will not terminate such registration for a
period of at least three years following the Conversion.
A copy of the Plan of Conversion and the Certificate of Incorporation and
Bylaws of the Company and the Federal Stock Charter and Bylaws of the Bank are
available without charge from the Bank. Requests for such information should be
directed to: Frank J. Besignano, Senior Vice President, Staten Island Savings
Bank, 15 Beach Street, Staten Island, New York 10304.
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