<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from __________ to __________
Commission File Number 1-13503
Staten Island Bancorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3958850
- --------------------------------------------- ----------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
15 Beach Street
Staten Island, New York 10304
- --------------------------------------------- ----------------------------
(Address of principal executive office) (Zip Code)
(718-447-7900)
---------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the receding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. The Registrant had
44,542,312 shares of Common Stock outstanding as of November 5, 1998.
<PAGE> 2
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Table of Contents PAGE
- ----------------- ----
<S> <C> <C>
Part I Financial Information
Item 1 Financial Statements
Statement of Condition
As of September 30 1998 and December 31, 1997 1
Statement of Income (For nine months ended September 30, 1998 and
three months ended, September 30, 1998) 2
Statement of Equity (For nine months ended September 30, 1998) 3
Statement of Cash Flows (For the nine months ended September 30, 1998
and 1997) 4
Notes to Consolidated Financial Statements 5-10
Item 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations 11-16
Item 3 Quantitative and Qualitative Disclosures About Market Risk 14
Part II Other Information
Item 1 Legal Proceedings 17
-----------------
Item 2 Changes in Securities 17
---------------------
Item 3 Defaults Upon Senior Securities 17
-------------------------------
Item 4 Submission of Matters to a Vote of Security Holders 17
---------------------------------------------------
Item 5 Other Information 17
-----------------
Item 6 Exhibits and Reports on Form 8-K 17
--------------------------------
</TABLE>
<PAGE> 3
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
-------------------------------------------------------
SEPTEMBER 30, 1998 DECEMBER 31, 1997
-------------------- -------------------
(000's omitted)
ASSETS
unaudited
ASSETS:
<S> <C> <C>
Cash and due from banks........................................... $ 52,602 $ 58,435
Federal funds sold................................................ 13,435 90,500
Securities available for sale..................................... 1,865,941 1,350,467
Loans, net........................................................ 1,354,489 1,082,918
Accrued interest receivable....................................... 18,662 15,707
Bank premises and equipment, net.................................. 20,342 19,737
Intangible assets, net............................................ 17,182 18,414
Other assets...................................................... 8,817 14,992
-------------------- -------------------
Total assets.................................................. $ 3,351,470 $ 2,651,170
==================== ==================-
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits-
Savings........................................................... $ 717,652 $ 709,074
Time.............................................................. 539,037 520,693
Money market...................................................... 81,242 76,088
NOW accounts...................................................... 65,273 67,076
Demand deposits................................................... 275,205 250,721
-------------------- -------------------
1,678,409 1,623,652
Borrowed funds..................................................... 953,547 250,042
Advances from borrowers for taxes and insurance.................... 6,842 4,623
Accrued interest and other liabilities............................. 20,957 86,967
-------------------- -------------------
Total liabilities............................................. 2,659,755 1,965,284
-------------------- -------------------
STOCKHOLDERS' EQUITY:
Common stock par value $.01 per share: 100,000,000
shares authorized; 45,130,312 issued and outstanding 451 451
Additional paid in capital......................................... 534,036 532,521
Retained earnings substantially restricted......................... 207,217 181,499
Unallocated ESOP shares............................................ (39,143) (41,262)
Unallocated MRRP shares............................................ (29,161) -
-------------------- -------------------
673,400 673,209
Accumulated other comprehensive income, net of taxes 18,315 12,677
-------------------- -------------------
Total stockholders' equity..................................... 691,715 685,886
-------------------- -------------------
Total liabilities and stockholders' equity..................... $ 3,351,470 $ 2,651,170
==================== ===================
</TABLE>
<PAGE> 4
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------ ----------- ----------- -----------
1998 1997 1998 1997
------------ ----------- ----------- -----------
(000's omitted)
unaudited
INTEREST INCOME:
<S> <C> <C> <C> <C>
Loans.............................................................. $ 25,960 $ 21,070 $ 72,945 $ 61,591
Securities, available for sale..................................... 27,626 13,619 72,233 36,984
Federal funds sold................................................. 482 542 1,406 1,742
------------ ----------- ------------ -----------
Total interest income........................................... 54,068 35,231 146,584 100,317
------------ ----------- ------------ -----------
INTEREST EXPENSE:
Savings and escrow................................................. 5,390 5,501 15,752 16,306
Time............................................................... 6,916 6,967 20,130 20,033
Money market and NOW............................................... 809 727 2,150 2,090
Borrowed funds..................................................... 11,028 1,887 21,084 2,441
------------ ----------- ------------ -----------
Total interest expense.......................................... 24,143 15,082 59,116 40,870
------------ ----------- ------------ -----------
Net interest income............................................. 29,925 20,149 87,468 59,447
PROVISION FOR LOAN LOSSES.......................................... 500 501 1,502 5,502
------------ ----------- ------------ -----------
Net interest income after provision for possible loan losses.. 29,425 19,648 85,966 53,945
OTHER INCOME (LOSS):
Service and fee income............................................. 1,844 1,925 5,970 5,581
Securities transactions............................................ 72 193 747 (412)
------------ ----------- ------------ -----------
1,916 2,118 6,717 5,169
OTHER EXPENSES:
Personnel.......................................................... 7,360 5,859 19,790 15,954
Occupancy and equipment............................................ 1,598 1,449 4,517 4,233
Amortization of intangible assets.................................. 519 519 1,557 1,557
FDIC Insurance..................................................... 52 75 160 197
Data processing.................................................... 926 1,048 3,119 3,186
Marketing.......................................................... 337 324 1,011 972
Professional fees.................................................. 464 253 1,724 683
Other.............................................................. 2,071 1,941 5,898 6,122
------------ ----------- ------------ -----------
Total other expenses............................................ 13,327 11,468 37,776 32,904
------------ ----------- ------------ -----------
Income before provision for income taxes........................ 18,014 10,298 54,907 26,210
PROVISION FOR INCOME TAXES......................................... 7,066 4,261 22,419 9,212
------------ ----------- ------------ -----------
Net Income......................................................... $ 10,948 $ 6,037 $ 32,488 $ 16,998
============ =========== ============ ===========
EARNINGS (LOSS) PER SHARE:
Basic $ 0.26 N/A $ 0.78 N/A
Fully Diluted $ 0.26 N/A $ 0.78 N/A
WEIGHTED AVERAGE
Common Shares 45,130,312 N/A 45,130,312 N/A
Less: Unallocated ESOP Shares 3,318,487 N/A 3,376,897 N/A
------------ ------------
41,811,825 41,753,415
============ ============
</TABLE>
<PAGE> 5
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNALLOCATED
ADDITIONAL COMMON UNEARNED
COMMON PAID-IN STOCK MRRP
STOCK CAPITAL HELD BY ESOP SHARES
------------------------------------------------------
(000's omitted)
<S> <C> <C> <C> <C>
Balance January 1, 1998............... $ 451 $ 532,521 $ (41,262) $ -
Change in unrealized
appreciation (depreciation)
on securities, net of tax.............
Allocation of 176,617 ESOP shares..... 1,515 2,119
Purchase of MRRP shares............... (29,161)
Net Income............................
Dividends paid........................
------------------------------------------------------
Balance September 30, 1998............ $ 451 $ 534,036 $ (39,143) $(29,161)
======================================================
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE RETAINED COMPREHENSIVE
INCOME INCOME INCOME TOTAL
-----------------------------------------------------------
(000's omitted)
<S> <C> <C> <C> <C>
Balance January 1, 1998............... $ 181,499 $ 12,677 $685,886
Change in unrealized
appreciation (depreciation)
on securities, net of tax........... 5,638 5,638 5,638
Allocation of 176,617 ESOP shares..... 3,634
Purchase of MRRP shares............... (29,161)
Net Income............................ 32,488 32,488 32,488
--------------
38,126
Dividends paid........................ (6,770) (6,770)
-----------------------------------------------------------
Balance September 30, 1998............ $ 207,217 $ 18,315 $ 691,715
===========================================================
</TABLE>
<PAGE> 6
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
(000 omitted)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 32,488 $ 16,588
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 1,411 1,165
Amortization of bond and mortgage premiums 872 493
Amortization of intangible assets 1,557 1,624
Loss (Gain) on sale of available for sale securities (747) 184
Other noncash expense (income) 3,593 (2,730)
Provision for possible loan losses 1,502 500
Decrease in deferred loan fees (809) 626
Decrease (increase) in accrued interest receivable (2,954) 1,365
Decrease (increase) in other assets 3,522 (4,376)
(Decrease) increase in accrued interest other liabilities (62,117) (10,001)
(Increase) decrease in deferred income taxes 4,350 2,247
Recoveries 1,100 840
-----------------------------------
Net cash provided by operating activities $ (16,232) $ 8,525
-----------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of available for sale securities 385,637 193,856
Sales of available for sale securities 14,953 225,286
Purchases of available for sale securities (927,809) (351,143)
Principal collected on loans 159,573 122,457
Loans made to cutomers (433,475) (253,364)
Sale of loans 5,090 3,071
Capital expenditures (1,954) (2,605)
-----------------------------------
Net cash used in investing activities (797,985) (62,442)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts 56,975 46,004
Borrowings 703,505 (1)
PURCHASE OF SHARES FOR RRP (29,161)
Net cash provided by financing activities 731,319 46,003
Net (decrease) increase in cash and cash equivalents (82,898) (7,914)
CASH AND EQUIVALENTS, BEGINNING OF YEAR 148,935 76,464
-----------------------------------
CASH AND EQUIVALENTS, END OF YEAR $ 66,037 $ 68,550
===================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for-
Interest 55,072 37,777
Income taxes $ 22,584 $ 12,390
</TABLE>
<PAGE> 7
STATEN ISLAND BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 1. Summary of Significant Accounting Policies
Basis of Financial Statement Presentation
The accompanying unaudited consolidated financial statements include the
accounts of Staten Island Bancorp, Inc. (the Company), its direct wholly-owned
subsidiary, Staten Island Savings Bank (the Bank), and the subsidiary of the
Bank, (Staten Island Funding Corp.)
The unaudited consolidated financial statements included herein reflect
all normal recurring adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for the interim periods
presented. The results of operations for the three and nine month periods ended
September 30,1998 are not necessarily indicative of the results to be expected
for the year ending December 31, 1998. Certain information and note disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to the
rules and regulations of the Securities and Exchange Commission. The unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and notes thereto included in the Company's
1997 Annual Report and Form 10-K.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported assets,
liabilities, revenues and expenses as of the dates of the financial statements.
Actual results could differ significantly from those estimates.
Business
The Company's principal business is conducted through the Bank which is
a traditional, full service, community oriented savings bank located in Staten
Island, New York. The Bank operates 16 full service and three limited service
branch offices on Staten Island and one in Bay Ridge, Brooklyn. The Bank's
deposits are insured by the Bank Insurance Fund (BIF) to the maximum extent
permitted by law. The Bank is subject to examination and regulation by the
Office of Thrift Supervision (OTS) which is the Bank's chartering authority and
primary federal regulator. The Bank is also regulated by the Federal Deposit
Insurance Corporation (FDIC), the administrator of the BIF. The Bank is also
subject to certain reserve requirements established by the Board of Governors of
the Federal Reserve System (FRB) and is a member of the Federal Home Loan Bank
(FHLB) of New York, which is one of the 12 regional banks comprising the FHLB
system.
Organization Form of Ownership
The Bank was originally founded as a New York State chartered savings
bank in 1864. In August 1997, the Bank converted to a federally chartered mutual
savings bank and is now regulated by the OTS. On April 16, 1997, the Board of
Directors of the Bank adopted a Plan of Conversion to convert from a federally
chartered mutual savings bank to a federally chartered stock savings bank with
the concurrent formation of a holding company (the Conversion). The Company
completed its initial public offering and Conversion on December 22, 1997 and
issued 45,130,312 shares of common stock at $.01 par value per share (Common
Stock). As part of the Conversion, the Bank established, in accordance with the
requirements of the OTS, a liquidation account for $183,947,000 which was equal
to its capital as of the date of the latest consolidated statement of financial
condition (September 30, 1997) appearing in the Company's prospectus supplement.
In February 1998, the Bank formed a subsidiary, Staten Island Funding
Corporation, as a passive real estate investment trust (REIT).
2
<PAGE> 8
Employee Stock Ownership Plan
In connection with the Conversion, the Bank established an Employee
Stock Ownership Plan (the ESOP). The ESOP borrowed $41,262,000 from the Company
and used the funds to purchase 3,438,500 shares of the Company's Common Stock
issued in the Conversion. The loan has an interest rate of 8.25% and will be
repaid over a 15 year period on a quarterly basis. Shares purchased are held in
a suspense account for allocation among the participants as the loan is paid. As
of September 30, 1998, 176,617 shares had been released and allocated. Shares
allocated will first be used for the employer matching contributions for the
401(k) Plan with the remaining shares allocated to the participants based on
compensation as described in the ESOP, in the year of allocation.
1998 Stock Option Plan
At a special meeting of the shareholders held on July 10, 1998, the
shareholders approved the 1998 Stock Option Plan (Option Plan). The Company has
reserved, for future issuance pursuant to the Option Plan, 4,298,125 shares of
Common Stock, which is equal to 10% of the Common Stock sold in the Conversion.
Under the Option Plan, unless stated otherwise, at the time of grant,
all options granted to participants shall become vested and exercisable at the
rate of 20% per year on each annual anniversary of the date the options were
granted, and the right to exercise shall be cumulative. Each stock option
expires ten years after the date of the grant. On July 10, 1998, the Board of
Directors of the Company granted 3,056,000 options to the Directors and Officers
of the Company and the Bank. Each option entitles the holder to purchase one
share of the Company's Common Stock at an exercise price equal to $22.875 per
share, which was the closing price of the Common Stock on the date of the grant.
1998 Recognition and Retention Plan
At a special meeting of the shareholders held on July 10, 1998, the
shareholders approved the 1998 Recognition and Retention Plan (RRP). The
objective of the RRP is to enable the Company to provide officers, key employees
and directors with a proprietary interest in the Company and as an incentive to
contribute to its success. The RRP will be funded with the purchase of 4% of the
Common Stock sold in the Conversion, or 1.7 million shares. As of September 30,
1998, 1.6 million shares had been purchased on the open market at a cost of
$29.2 million. The remaining 0.1 million shares were purchased in October at an
average price of $17.65 resulting in a cost of $2 million. The aggregate cost of
the shares of Common Stock purchased pursuant to the RRP is treated as a
reduction of the Company's stockholders' equity. On July 31, 1998, 1.5 million
shares were granted to the officers and directors of the Bank and will vest over
a five year period. The Bank recognizes expense ratably based on the market
value of the common stock at the date of the granting.
Demand Deposits
Each of the Bank's commercial and personal demand (checking) accounts
and NOW accounts has a related interest bearing money market sweep account. The
sole purpose of the sweep accounts is to reduce the non-interest bearing reserve
balances that the Bank is required to maintain with the Federal Reserve Bank,
and thereby increase funds available for investment. Although the sweep accounts
are classified as money market accounts for regulatory purposes, they are
included in demand deposits and NOW accounts in the accompanying consolidated
balance sheets.
Comprehensive Income
In July 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income". Statement
3
<PAGE> 9
130 established standards for the reporting and display of comprehensive income
and its components in the full set of general purpose financial statements. The
Company adopted SFAS No. 130 in the first quarter of 1998. All comparative
financial statements provided for earlier periods have been reclassified to
reflect application of the provisions of this statement.
Comprehensive income and accumulated other comprehensive income are
reported net of related income taxes. Accumulated other comprehensive income for
the Company consists solely of unrealized holding gains or loses on available
for sale securities.
New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting for
Derivative Instruments and Hedging Activities". This statement is effective for
all fiscal quarters of all fiscal years beginning after June 15, 1999. The
statement established accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognizes
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value.
In management's opinion SFAS NO. 133 when adopted will not have a
material effect on the Company's financial statements since the Company
currently owns no derivative instruments affected by this statement.
4
<PAGE> 10
SECURITIES - AVAILABLE FOR SALE. The following table sets forth certain
information regarding amortized cost and estimated fair values of debt, equity,
mortgage-backed and mortgage related securities of the Company at September 30,
1998 and December 31, 1997.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 DECEMBER 31, 1997
--------------------------------- ----------------------------------
BONDS - AVAILABLE FOR SALE AMORTIZED FAIR AMORTIZED FAIR
- --------------------------
COST VALUE COST VALUE
--------------- --------------- ---------------- ---------------
(000's omitted)
<S> <C> <C> <C> <C>
U.S. Treasuries.......................................... $ 35,719 $ 36,502 $ 55,206 $ 55,734
Govt. Sponsored Agencies................................. 46,030 46,904 50,284 50,884
Industrial and Finance .................................. 97,362 96,624 - -
Foreign.................................................. 283 182 269 268
--------------- --------------- ---------------- ---------------
Total Debt Securities.................................... 179,394 180,212 105,759 106,886
--------------- --------------- ---------------- ---------------
G.N.M.A. - M.B.S......................................... 21,898 22,648 24,147 24,420
F.H.L.M.C. - M.B.S....................................... 314,543 322,742 340,000 346,315
F.N.M.A. - M.B.S......................................... 553,514 560,595 451,337 455,994
Agency C.M.O.'s.......................................... 207,696 211,446 166,587 167,719
Privately Issued C.M.O.'s................................ 399,744 406,610 171,035 171,223
Payments in Transit...................................... 2,852 2,852 3,016 3,016
--------------- --------------- ---------------- ---------------
Total Mortgage-Backed and Mortgage Related Securities 1,500,247 1,526,893 1,156,122 1,168,687
--------------- --------------- ---------------- ---------------
--------------- --------------- ---------------- ---------------
TOTAL BONDS - AVAILABLE FOR SALE 1,679,641 1,707,105 1,261,881 1,275,573
--------------- --------------- ---------------- ---------------
<CAPTION>
EQUITY SECURITIES AMORTIZED FAIR AMORTIZED FAIR
- -----------------
COST VALUE COST VALUE
--------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Preferred Stock 57,504 50,888 15,965 16,549
Common Stock 68,886 74,934 23,643 27,226
IIMF Cap. Apprec. 24,690 33,014 24,599 31,119
--------------- --------------- ---------------- ---------------
TOTAL EQUITY SECURITIES 151,080 158,836 64,207 74,894
--------------- --------------- ---------------- ---------------
--------------- --------------- ---------------- ---------------
TOTAL INVESTMENTS........................................ $ 1,830,721 $ 1,865,941 $ 1,326,088 $ 1,350,467
=============== =============== ================ ===============
</TABLE>
<PAGE> 11
LOAN PORTFOLIO COMPOSITION. The following table sets forth the composition of
the Bank's loans at the dates indicated.
<TABLE>
<CAPTION>
------------------------------------------ ------------------------------------------
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------------------------------ ------------------------------------------
PERCENT OF PERCENT OF
AMOUNT TOTAL AMOUNT TOTAL
------------------- -------------------- -------------------- --------------------
(000's omitted)
<S> <C> <C> <C> <C>
Mortgage loans:
Single-family residential............ $ 1,109,895 81.94% $ 863,694 79.76%
Multi-family residential............. 33,626 2.48% 28,218 2.61%
Commercial real estate............... 130,527 9.64% 120,084 11.09%
Construction and land................ 44,348 3.27% 40,476 3.74%
Home equity.......................... 6,049 0.45% 6,538 0.60%
------------------- -------------------- -------------------- --------------------
Total mortgage loans............... 1,324,445 97.78% 1,059,010 97.79%
Other loans:
Student loans........................ 534 0.04% 4,033 0.37%
Passbook loans....................... 5,817 0.43% 6,929 0.64%
Commercial business loans............ 22,532 1.66% 19,559 1.81%
Other consumer loans................. 20,027 1.48% 13,212 1.22%
------------------- -------------------- -------------------- --------------------
Total other loans.................. 48,910 3.61% 43,733 4.04%
------------------- -------------------- -------------------- --------------------
Total loans receivable............. 1,373,355 101.39% 1,102,743 101.83%
Less:
Premium (Discount) on loans purchased 208 0.02% (729) (0.07)%
Allowance for loan losses............ (16,496) (1.22)% (15,709) (1.45)%
Deferred loan fees................... (2,578) (0.19)% (3,387) (0.31)%
------------------- -------------------- -------------------- --------------------
Loans receivable, net.............. $ 1,354,489 100.00% $ 1,082,918 100.00%
=================== ==================== ==================== ====================
</TABLE>
<PAGE> 12
NON-PERFORMING ASSETS. The following table sets forth information with respect
to non-performing assets identified by the Bank, including non-accrual loans and
other real estate owned, and non-performing investments in real estate at the
dates indicated.
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
-------------------------------- --------------------------------
(000's omitted)
Accruing loans 90 days or more past due:
<S> <C> <C>
Mortgage loans................................ $ - $ -
Other loans................................... - 85
-------------------------------- --------------------------------
Total accruing loans........................ - 85
-------------------------------- --------------------------------
Non-accrual loans:
Single-family residential..................... 8,026 9,395
Multi-family residential...................... 263 319
Commercial real estate........................ 6,089 8,436
Construction and land......................... 1,089 1,131
Home equity................................... 160 545
Other loans:
Commercial business loans..................... 337 836
Other loans................................... 946 570
-------------------------------- --------------------------------
Total non-accruing loans.................... 16,910 21,232
-------------------------------- --------------------------------
Total non-performing loans........................ 16,910 21,317
-------------------------------- --------------------------------
Other real estate owned, net...................... 770 618
-------------------------------- --------------------------------
Total non-performing assets....................... $ 17,680 $ 21,935
================================ ================================
Non-performing assets to total loans.............. 1.29% 1.99%
Non-performing assets to total assets............. 0.53% 0.83%
Non-performing loans to total loans............... 1.23% 1.93%
Non-performing loans to total assets.............. 0.50% 0.80%
</TABLE>
<PAGE> 13
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 Year Ended
September 30, December 31,
---------------------------------------------------------- ----------------------------
1998 1997 1997
---------------------------- --------------------------- ----------------------------
(000'S OMITTED)
<S> <C> <C> <C>
Allowance at beginning of period $ 15,709 $ 9,977 $ 9,977
Provisions 1,502 5,502 6,003
Charge-offs:
Mortgage loans:
Construction, land and land development - 2 -
Single-family residential 224 624 501
Multi-family residential 31 100 100
Commercial real estate 309 444 210
Other loans 1,251 485 507
---------------------------- --------------------------- ----------------------------
Total charge-offs 1,815 1,655 1,318
Recoveries:
Mortgage loans:
Construction, land and land development 3 10 10
Single-family residential 227 295 533
Multi-family residential - - -
Commercial real estate 116 238 251
Other loans 754 163 253
---------------------------- --------------------------- ----------------------------
Total recoveries 1,100 706 1,047
---------------------------- --------------------------- ----------------------------
Allowance at end of period $ 16,496 $ 14,530 $ 15,709
============================ =========================== ============================
Allowance for possible loan losses
to total nonperforming loans at
end of period 97.55% 61.72% 73.69%
Allowance for possible loan losses
to total loans at end of period 1.20% 1.38% 1.42%
</TABLE>
<PAGE> 14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Changes in Financial Condition
Total assets at September 30, 1998 were $3.4 billion, an increase of
$700.3 million or 26.4% from December 31, 1997. The increase in total assets was
the result of an increase in net loans of $271.6 million and an increase in
securities available for sale of $515.5 million. These increases were partially
offset by a $77.1 million decrease in federal funds sold. The increase in net
loans reflects the Bank's continued efforts to increase lending volumes and the
ability to capitalize on a very favorable interest rate market for mortgage
lending. The increase in the securities portfolio was a result of the Bank's
leveraging strategies to increase yields at acceptable risk through the use of
borrowed funds.
Total deposits increased $54.8 million from $1.62 billion at December
31, 1997 to $1.68 billion at September 30, 1998. The Bank's continued efforts in
business development were the primary reason for this increase. Demand deposits
increased $24.5 million, savings accounts increased $8.6 million and money
market accounts increased $5.2 million. In addition, time deposits increased
$18.3 million. These increases were offset to some extent by a $1.8 million
decrease in NOW deposits for the nine months ended September 30, 1998.
Borrowed funds increased to $953.5 million as of September 30, 1998 from
$250.0 million as of December 31, 1997. The growth of $703.5 million is
primarily the result of the Bank's strategy to fund asset growth through the use
of borrowed funds when acceptable spreads can be obtained. The borrowings
consist of reverse repurchase agreements of which $530.5 million are with Wall
Street brokerage firms and $423.0 million are with the Federal Home Loan Bank of
New York.
Stockholders' equity as of September 30, 1998 was $691.7 million or
20.6% of total assets compared with $685.9 million or 25.9% of total assets as
of December 31, 1997. The increase of $5.8 million was primarily due to net
income of $32.5 million, an increase of $5.6 million in unrealized appreciation
on securities available for sale net of taxes, and an allocation of ESOP shares,
resulting in an increase of $3.6 million. These increases were offset by
aggregate cash dividend payments of $6.8 million and the repurchase of 1.6
million shares for the Recognition and Retention Plan (RRP) during the third
quarter of 1998 at an average price of $18.31 totaling $29.2 million. This
resulted in tangible book value per share of $14.95 as of September 30, 1998.
Results of Operations
The Company reported net income of $10.9 million for the three months
ended September 30, 1998 compared to $6.0 million for the three months ended
September 30, 1997, an increase of $4.9 million or 81.4%. The increase in net
income for the quarter was primarily due to an increase in net interest income
of $9.8 million partially offset by an increase of $2.8 million in the provision
for income taxes, an increase in total other expenses of $1.9 million and a
decrease in other income of $0.2 million.
For the nine month period ended September 30, 1998, net income was $32.5
million compared to $17.0 million for the nine months ended September 30, 1997,
an increase of $15.5 million or 91.1%. The increase in net income for the first
nine months of 1998 was primarily due to an increase in net interest income of
$28.0 million, an increase in other income of $1.5 million and a decrease in the
provision for loan losses of $4.0 million offset by an increase of $4.9 million
in total other expenses and an increase of $13.2 million in the provision for
income taxes.
5
<PAGE> 15
Interest Income
Interest income increased $18.8 million or 53.5% to $54.1 million for
the three months ended September 30, 1998 compared to $35.2 million for the
third quarter of 1997. The increase was primarily due to a $4.9 million increase
in interest income from loans and $14.0 million increase in interest income from
securities. The increase in interest income from loans was primarily due to an
increase of $265.0 million in the average balance of loans. The average balance
of the loan portfolio increased due to increased loan demand and the Bank's
continued business development efforts to attract new loan relationships and
processing broker partnerships. The average yield on the portfolio decreased to
7.92% for the quarter ended September 30, 1998 from 8.07% for the third quarter
of 1997. The current rate environment continues to result in the payoff of
higher yielding loans and the origination of loans at market interest rates
which are currently lower than the average yield of the Bank's loan portfolio.
The increase in interest income on securities was due to a $906.3 million
increase in the average balance of securities offset by a decrease in the
average yield from 6.57% for the third quarter of 1997 to 6.34% for the third
quarter of 1998. The decrease in the average yield was the result of declining
interest rates in 1997 and 1998 and the accelerated payoff of higher yielding
investments. The increase in the average balance of the securities portfolio was
a result of the use of the proceeds from the Conversion and the Bank's program
to use borrowings to fund asset growth to leverage the balance sheet.
Interest income for the nine months ended September 30, 1998 was $146.6
million compared to $100.3 million for the same time period last year. The
increase of $46.3 million or 46.1% was the result of an $11.4 million increase
in interest income from loans and a $35.2 million increase in interest income
from securities. The primary reason for the increase in interest income from
loans was an increase of $207.8 million in the average balance of loans offset
by a decrease in the average yield from 8.12% to 7.98% during the nine month
period ended September 30, 1997 and 1998, respectively. The increase in interest
income on securities was the result of an increase of $771.7 million in the
average balance of securities partially offset by a decrease in the average
yield from 6.68% to 6.39% for the nine months ended September 30, 1997 and 1998,
respectively. The reasons for the growth and change in yields of the loan
portfolio and investment portfolio in the nine-month period ended September 30,
1998 are the same as those for the third quarter of 1998 disclosed above.
Interest Expense
Interest expense for the three months ended September 30, 1998 was $24.1
million compared with $15.1 million for the three months ended September 30,
1997. The increase of $9.1 million or 37.8% was due to an increase of $9.1
million in interest expense on borrowed funds. The increase in interest expense
on borrowed funds was due to a $646.8 million increase in the average balance of
borrowed funds offset by a decrease in the average cost from 5.98% to 5.67%.
Interest expense for the nine-month period ended September 30, 1998 was
$59.1 million compared with $40.7 million for the same time period last year.
The increase of $18.2 million or 44.6% was a result of an increase of $18.6
million in interest expense on borrowed funds offset by a decrease in interest
expense on deposits of $0.4 million. The increase in interest expense on
borrowed funds was due to a $436.0 million increase in the average balance of
borrowed funds offset by a decrease in the average cost from 5.89% for the nine
months ended September 30, 1997 to 5.74% for the nine months ended September 30,
1998. The decrease in the interest expense on deposits was a result of the $25.4
million decrease in the average balance of interest-bearing deposits. The
increase in the average balance of borrowed funds in the three and nine month
period is the result of the Bank's program to fund asset growth with borrowings
at acceptable spreads.
6
<PAGE> 16
Net Interest Income
Net interest income increased $9.8 million or 48.5% to $29.9 million in
the three months ended September 30, 1998 compared to $20.1 million in the same
time period one year ago. This increase was due to an $18.8 million increase in
interest income offset by a $9.1 million increase in interest expense. The
increase in interest income was due to a $1.17 billion increase in the average
balance of interest-earning assets. The average yield on interest-earning assets
for the three months ended September 30, 1998 was 7.00% down from 7.37% for the
three months ended September 30, 1997. The increase in interest expense was due
to a $618.3 million increase in average interest-bearing liabilities and an
increase in the average cost from 3.75% to 4.32% for the three months ended
September 30, 1997 and September 30, 1998, respectively. The Company's interest
rate spread and net interest margin amounted to 2.68% and 3.87%, respectively,
during the three months ended September 30, 1998 compared to 3.62% and 4.21%,
respectively, for the comparable period in 1997.
For the nine-month period ended September 30, 1998, net interest income
was $87.5 million compared with $59.4 million for the same time period last
year. The increase of $28.0 million or 47.2% was the result of a $46.3 million
increase in interest income offset by a $18.2 million increase in interest
expense. The increase in interest income was primarily the result of a $971.5
million increase in the average balance of interest-earning assets partially
offset by a decrease in the average yield on interest-earning assets from 7.46%
for the nine months ended September 30, 1997 to 7.08% for the nine months ended
September 30, 1998. The increase in interest expense resulted from an increase
of $410.6 million in the average balance of interest-bearing liabilities along
with an increase in the average cost from 3.61% for the nine months ended
September 30, 1997 to 4.11% for the nine months ended September 30, 1998. The
average cost of deposits remained stable at 3.55% for the nine months ended
September 30, 1998 and 3.53% for the same time period last year. The Company's
interest rate spread and net interest margin for the nine months ended September
30, 1998 was 2.97% and 4.22%, respectively, compared with 3.85% and 4.42%,
respectively, for the nine months ended September 30, 1997.
The Bank's use of borrowed funds to leverage the balance sheet and the
current rate environment, primarily reflected in lower interest earning asset
yields, has resulted in the decrease in the interest rate spread and interest
rate margin for both the three and nine month periods ended September 30, 1998
compared to the same periods in 1997.
Provision For Loan Losses
The provision for loan losses for the third quarter of 1998 was $0.5
million, which was the same as the provision in the quarter ended September 30,
1997. The provision for loan losses year-to-date was $1.5 million compared with
$5.5 million for the same time period last year. The provision in the nine month
period in 1997 included a non-recurring amount of $4.0 million. The provision in
1998 is based on management's continuing reviews of the risk elements in the
Bank's loan portfolio.
Non-performing assets were $17.7 million at September 30, 1998 compared
to $21.9 million at December 31, 1997 and $24.7 million at September 30, 1997.
As a percent of total assets, non-performing assets were .53% on September 30,
1998 compared to .83% on December 31, 1997 and 1.15% on September 30, 1997.
Since December 31, 1997 non-performing assets have decreased $4.2 million or
19.1%.
The allowance for loan losses was $16.5 million as of September 30,
1998, an increase of $0.8 million since December 31, 1997. The decline in
non-performing loans and the increase in the loan loss reserve has resulted in
the allowance for loan losses growing to 97.6% of non-performing loans as of
September 30, 1998. As of December 31, 1997 this ratio was 73.7% compared to
60.7% as of September 30, 1997. While no assurance can be given that future
7
<PAGE> 17
charge-offs and/or additional provisions will not be necessary, management of
the Company believes that, as of September 30, 1998, the allowance for loan
losses was adequate
Other Income
Other income was $1.9 million for the quarter ended September 30, 1998
compared with $2.1 million for the quarter ended September 30, 1997. Other
income consists of service and fee income and net gains and losses from security
transactions. Security transactions for the third quarter of 1998 resulted in a
net gain of $0.1 million compared to a net gain of $0.2 million in the third
quarter of 1997.
Other income was $6.7 million for the nine months ended September 30,
1998 compared with $5.2 million for the first nine months of 1997. Service and
fee income was $6.0 million for the 1998 period compared with $5.6 million in
1997 while security transactions resulted in a net gain of $0.7 million in 1998
compared to a net loss of $0.4 million in 1997. The net loss in 1997 was due to
the restructuring of the Company's investment portfolio to improve quality and
yield. The increase in service and fee income was the result of an increase in
the Company's demand deposits and the related transaction volumes.
Total Other Expenses
Total other expenses increased $1.9 million or 16.2% to $13.3 million
for the three months ended September 30, 1998 from $11.5 million for the same
period in 1997. The increase was primarily due to a $1.5 million increase in
personnel expenses and a $0.2 million increase in professional fees. Personnel
costs increased due to the costs related to the RRP of $1.0 million, and the
ESOP of $0.7 million. Overtime expenses for the quarter increased $0.3 million,
primarily as a result of the conversion to a new data processing system. These
increases were offset by the elimination of the $0.5 million cost related to the
Bank's profit sharing plan. Professional fees increased due to the increased
audit and legal fees to operate as a public company.
Total other expenses for the first nine months of 1998 increased $4.9
million or 14.8% to $37.8 million compared to $32.9 million for the same period
in 1997. This was primarily due to an increase in personnel costs of $3.8
million and professional fees $1.0 million. These increases were partially
offset by a decrease of $0.2 million in other expenses. The increase in
personnel costs was a result of the costs related to the ESOP and the RRP, staff
additions to the Bank's lending operations to enhance credit administration, and
normal merit increases. Professional fees increased $1.0 million due to costs
related to forming Staten Island Funding Corporation, a passive Real Estate
Investment Trust (REIT), and increased audit and legal fees related to operation
as a public company. The decrease in other expenses was primarily due to reduced
costs related to non-performing assets.
Provision For Income Taxes
The provision for income taxes for the three months ended September 30,
1998 was $7.1 million compared with $4.3 million for the same time period last
year, resulting in an effective tax rate of 39.2% for the 1998 period and 41.4%
for the 1997 period. For the nine month period ended September 30, 1998 the
provision for income taxes was $22.4 million compared with $9.2 million for the
same period last year. The effective tax rate for the nine month period in 1998
was 40.8% compared with 35.1% in the first nine months of 1997. The provision in
1997 included a reduction of $2.6 million for the recapture of deferred city
taxes related to the New York City tax bad debt reserves. Adjusting for the
recapture of deferred city taxes in the nine months of 1997, the Bank's
effective tax rate would have been 45.1%. The reduction in the effective tax
rate in both the three and nine month periods in 1998 is primarily due to the
Bank's tax planning strategies.
8
<PAGE> 18
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, borrowings, 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 predicable sources of funds, deposit flows and loan prepayments
are greatly influenced by general interest rates, 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.
As of September 30, 1998, the Bank had entered into repurchase
agreements totaling $953.5 million as an alternative funding source for asset
growth. The Bank intends to continue the use of repurchase agreements 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 it 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, 1998
the total approved loan origination commitments outstanding amounted to $145.1
million. At the same date, the unadvanced portion of construction loans amounted
to $12.4 million. Certificates of deposit scheduled to mature in one year or
less at September 30, 1998 totaled $403.2 million. Investment securities
scheduled to mature in one year or less at September 30, 1998 totaled $23.3
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
meets it current commitments.
Capital
At September 30, 1998, 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 $ 46,558 1.50% $ 393,882 12.69% $ 347,324 11.19%
Core capital $ 124,316 4.00% $ 397,285 12.78% $ 272,969 8.78%
Risk-based capital $ 108,276 8.00% $ 413,781 30.57% $ 305,505 22.57%
</TABLE>
Year 2000
During the quarter ended September 30, 1998, the Company converted most
of its mission critical bank systems, such as deposits and loans to a Year
2000-compliant platform provided by a new data processing servicer. The cost of
this Year 2000 compliance is borne by the vendor under terms of the Company's
contract with them. A comprehensive test of the Year 2000 functionality of this
system is scheduled for the first quarter of 1999. The Company's other
information technology-controlled systems have also been identified and are in
various states of readiness and testing. The estimated cost for Year 2000
compliance is $50,000 to $100,000, however, the actual amount will depend on
choices to be made by management in the coming months. This amount could
increase materially if problems are noted in the testing process that
9
<PAGE> 19
have not yet been identified. The majority of these costs are expected to be
incurred during calendar year 1998 and 1999; all such costs will be charged to
expense as incurred.
Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of management
as well as assumptions made by and information currently available to
management. In addition, in portions of this document and the Company's Annual
Report to Stockholders, the words "anticipate," "believe," "estimate," "expect,"
"intend," "should," and similar expressions, or the negative thereof, as they
relate to the Company or the Company's management, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future looking events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a discussion of the Company's asset and liability management
policies as well as the potential impact of interest rate changes upon the
market value of the Bank's portfolio equity, see "Management's Discussion and
Analysis of Financial Condition and Results of Operation" in the Company's 1997
Annual Report to stockholders. There has been no material change in the
Company's asset and liability position or the market value of the Bank's
portfolio equity since December 31, 1997
10
<PAGE> 20
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
----------- ------------ ----------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets: (000's omitted)
Loans receivable (1):
Real estate loans....................... $1,253,277 $ 24,428 7.73% $ 998,929 $ 20,082 7.98%
Other loans............................. 47,928 1,532 12.69% 37,277 989 10.53%
----------- ------------ ---------------- -----------
Total loans........................... 1,301,205 25,960 7.92% 1,036,206 21,071 8.07%
Securities................................ 1,728,872 27,626 6.34% 822,569 13,619 6.57%
Other interest-earning assets (2)......... 34,564 482 5.54% 38,790 541 5.54%
----------- ------------ ----------- ---------------- ----------- -----------
Total interest-earning assets............. 3,064,641 54,068 7.00% 1,897,565 35,231 7.37%
------------ ----------- ----------- -----------
Noninterest-earning assets.................. 127,596 109,104
----------- ----------------
Total assets.............................. $3,192,237 $2,006,669
=========== ================
Interest-bearing liabilities:
Deposits:
NOW and money market deposits........... $ 121,927 809 2.63% 105,622 726 2.73%
Savings and escrow accounts............. 789,125 5,389 2.71% 824,052 5,501 2.65%
Certificates of deposits................ 532,094 6,916 5.16% 542,039 6,967 5.10%
----------- ------------ ----------- ---------------- ----------- -----------
Total deposits........................ 1,443,146 13,114 3.61% 1,471,713 13,194 3.56%
Total Other Borrowings.................... 772,123 11,028 5.67% 125,292 1,888 5.98%
----------- ------------ ----------- ---------------- ----------- -----------
Total interest-bearing liabilities........ 2,215,269 24,142 4.32% 1,597,005 15,082 3.75%
------------ ----------- ----------- -----------
Noninterest-bearing liabilities (3)......... 274,720 221,157
----------- ----------------
Total liabilities......................... 2,489,989 1,818,162
Stockholder's equity........................ 702,248 188,507
----------- ----------------
Total liabilities and stockholders' equity $3,192,237 $2,006,669
=========== ================
Net interest-earning assets................. $ 849,372 $ 300,560
=========== ------------ ================ -----------
Net interest income/interest rate spread.... $ 29,926 2.68% $ 20,149 3.62%
============ =========== =========== ===========
Net interest margin......................... 3.87% 4.21%
=========== ===========
Ratio of average interest-earning assets
to average interest-bearing liabilities... 138.34% 118.82%
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------
1998 1997
----------------------------------------------------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
----------- ------------ ----------- ---------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets: (000's omitted)
Loans receivable (1):
Real estate loans....................... $1,175,254 $ 68,942 7.84% $ 964,870 $ 58,221 8.07%
Other loans............................. 46,483 4,003 11.51% 49,034 3,370 9.19%
----------- ------------ ---------------- -----------
Total loans........................... 1,221,737 72,945 7.98% 1,013,904 61,591 8.12%
Securities................................ 1,512,175 72,233 6.39% 740,502 36,984 6.68%
Other interest-earning assets (2)......... 34,604 1,406 5.43% 42,651 1,742 5.46%
----------- ------------ ----------- ---------------- ----------- -----------
Total interest-earning assets............. 2,768,516 146,584 7.08% 1,797,057 100,317 7.46%
------------ ----------- ----------- -----------
Noninterest-earning assets.................. 112,489 98,551
----------- ----------------
Total assets.............................. $2,881,005 $ 1,895,608
=========== ================
Interest-bearing liabilities:
Deposits:
NOW and money market deposits........... 107,070 2,150 2.68% 101,644 2,099 2.76%
Savings and escrow accounts............. 799,088 15,752 2.64% 827,077 16,296 2.63%
Certificates of deposits................ 525,379 20,130 5.12% 528,210 20,033 5.07%
----------- ------------ ----------- ---------------- ----------- -----------
Total deposits........................ 1,431,537 38,032 3.55% 1,456,931 38,428 3.53%
Total Other Borrowings.................... 491,429 21,084 5.74% 55,439 2,442 5.89%
----------- ------------ ----------- ---------------- ----------- -----------
Total interest-bearing liabilities........ 1,922,966 59,116 4.11% 1,512,370 40,870 3.61%
------------ ----------- ----------- -----------
Noninterest-bearing liabilities (3)......... 259,604 203,672
----------- ----------------
Total liabilities......................... 2,182,570 1,716,042
Stockholder's equity........................ 698,435 179,566
----------- ----------------
Total liabilities and stockholders' equity $2,881,005 $ 1,895,608
=========== ================
Net interest-earning assets................. $ 845,550 $ 284,687
=========== ------------ ================ -----------
Net interest income/interest rate spread.... $ 87,468 2.97% $ 59,447 3.85%
============ =========== =========== ===========
Net interest margin......................... 4.22% 4.42%
=========== ===========
Ratio of average interest-earning assets
to average interest-bearing liabilities... 143.97% 118.82%
=========== ===========
</TABLE>
(1) The average balance of loans receivable includes nonperforming loans,
interest on which is recognized on a cash basis.
(2) Includes money market accounts and Federal Funds sold.
(3) Consists primarily of demand deposit accounts.
<PAGE> 21
RATE/VOLUME ANALYSIS
The follwing table sets forth the effects of changing rates and volumes
on net interest income of the Bank. Information is provided with respect to (1)
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 September 30, Nine Months Ended September 30,
-----------------------------------------------------------------------------------
1998 compared to 1997 1998 compared to 1997
----------------------------------------- -----------------------------------------
Increase (decrease) due to Total Increase (decrease) due to Total
---------------------------- ----------------------------
Rate/ Net Increase Rate/ Net Increase
Rate Volume Volume (Decrease) Rate Volume Volume (Decrease)
------ -------- ------------ ------------ ------- ---------- --------- ------------
(000's omitted)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Real estate loans.................... $ (611) $ 5,113 $ (155) $ 4,347 $ (1,621) $ 12,695 $ (353) $ 10,721
Other loans.......................... 202 283 58 543 852 (175) (45) 632
------ -------- ------------ ------------ ------- ---------- --------- ------------
Total loans receivable... ........... (409) 5,396 (97) 4,890 (769) 12,520 (398) 11,353
Securities............................. (476) 15,006 (524) 14,006 (1,612) 38,541 (1,680) 35,249
Federal funds sold.. .................. - (59) - (59) (8) (329) 2 (335)
Total net change in income on interest-
------ -------- ------------ ------------ ------- ---------- --------- ------------
earning assets....................... (885) 20,343 (621) 18,837 (2,389) 50,732 (2,076) 46,267
------ -------- ------------ ------------ ------- ---------- --------- ------------
Interest-bearing liabilities:
Deposits:
NOW and money market deposits........ (25) 112 (4) 83 (58) 112 (3) 51
Savings and escrow accounts.......... 126 (233) (5) (112) 8 (552) - (544)
Certificates of deposit.............. 78 (128) (1) (51) 205 (108) (1) 96
------ -------- ------------ ------------ ------- ---------- --------- ------------
Total deposits..................... 179 (249) (10) (80) 155 (548) (4) (397)
Other Borrowings......................... (98) 9,747 (509) 9,140 (63) 19,200 (494) 18,643
Total net change in expense on
------ -------- ------------ ------------ ------- ---------- --------- ------------
interest-bearing liabilities........... 81 9,498 (519) 9,060 92 18,652 (498) 18,246
------ -------- ------------ ------------ ------- ---------- --------- ------------
Net change in net interest income........ $ (966) $10,845 $ (102) $ 9,777 $ (2,481) $ 32,080 $ (1,578) $ 28,021
====== ======== ============ ============ ======= ========== ========= ============
</TABLE>
<PAGE> 22
Part II Other Information
Item 1 Legal Proceedings
Not applicable
Item 2 Changes in Securities and Use of Proceeds
Not applicable
Item 3 Defaults Upon Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
On July 10, 1998, the Company held a special meeting of
stockholders to consider and approve the Option Plan and the RRP.
The votes cast for the Option Plan and the RRP were as follows:
For Against/Withheld Abstain Broker Non-Vote
Option Plan 24,078,586 2,866,347 403,220 235,499
RRP 23,189,550 4,004,665 389,437 0
Item 5 Other Information
On October 14, 1998, the Company announced its plans to
repurchase 2.3 million shares of Common Stock or approximately 5% of
the Company's outstanding Common Stock.
Repurchases will be made by the Company in open market
transactions from time to time over the next twelve months. The
repurchased shares will be held as treasury stock and will be
available for exercises of options under the Company's Option Plan
and for general corporate purposes.
On October 30, 1998 the Company announced that its newly
formed subsidiary, SIB Mortgage Corp, will acquire the residential
mortgage production operations and certain assets of Ivy Mortgage
Corp. of Branchburg, N.J. Ivy Mortgage maintains an extensive branch
and correspondent network in 21 states primarily in the Eastern
United States.
Item 6 Exhibits and Reports on Form 8-K
a) Not applicable
b) No Form 8-K reports were filed during the quarter
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STATEN ISLAND BANCORP, INC.
Date: November 13, 1998 By: /s/ Harry P. Doherty
-------------------------------------
Harry P. Doherty, Chairman of the Board
and Chief Executive Officer
Date: November 13, 1998 By: /s/ Edward Klingele, Sr.
-------------------------------------
Edward Klingele, Sr. Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0001042801
<NAME> STATEN ISLAND BANCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 36,319
<INT-BEARING-DEPOSITS> 16,283
<FED-FUNDS-SOLD> 13,435
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,865,941
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 1,370,985
<ALLOWANCE> 16,496
<TOTAL-ASSETS> 3,351,470
<DEPOSITS> 1,678,409
<SHORT-TERM> 575,500
<LIABILITIES-OTHER> 27,799
<LONG-TERM> 378,047
0
0
<COMMON> 451
<OTHER-SE> 691,264
<TOTAL-LIABILITIES-AND-EQUITY> 3,351,470
<INTEREST-LOAN> 72,945
<INTEREST-INVEST> 72,233
<INTEREST-OTHER> 1,406
<INTEREST-TOTAL> 146,584
<INTEREST-DEPOSIT> 38,032
<INTEREST-EXPENSE> 59,116
<INTEREST-INCOME-NET> 87,468
<LOAN-LOSSES> 1,502
<SECURITIES-GAINS> 747
<EXPENSE-OTHER> 37,776
<INCOME-PRETAX> 54,907
<INCOME-PRE-EXTRAORDINARY> 54,907
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,488
<EPS-PRIMARY> .78
<EPS-DILUTED> .78
<YIELD-ACTUAL> 7.08
<LOANS-NON> 16,910
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 10,895
<ALLOWANCE-OPEN> 15,709
<CHARGE-OFFS> 1,815
<RECOVERIES> 1,100
<ALLOWANCE-CLOSE> 16,496
<ALLOWANCE-DOMESTIC> 16,496
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
