<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 June 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
45,130,312 shares of Common Stock outstanding as of August 5, 1998.
<PAGE> 2
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
Table of Contents PAGE
- ----------------- ----
<S> <C> <C> <C>
Part I Financial Information
Item 1 Financial Statements
Statement of Condition
As of June 30 1998 and December 31, 1997 1
Statement of Income (For six months ended June 30, 1998 and
three months ended March 31, 1998) 2
Statement of Equity (For six months ended June 30, 1998) 3
Statement of Cash Flows (For the six months ended June 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 11-18
Item 3 Quantitative and Qualitative Disclosures About Market Risk 16
Part II Other Information
Item 1 Legal Proceedings 19
-----------------
Item 2 Changes in Securities 19
---------------------
Item 3 Defaults Upon Senior Securities 19
-------------------------------
Item 4 Submission of Matters to a Vote of Security Holders 19
---------------------------------------------------
Item 5 Other Information 19
-----------------
Item 6 Exhibits and Reports on Form 8-K 19
--------------------------------
</TABLE>
<PAGE> 3
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
<TABLE>
<CAPTION>
-----------------------------------------
JUNE 30, 1998 DECEMBER 31, 1997
----------------- -----------------
(000's omitted)
ASSETS
<S> <C> <C>
ASSETS:
Cash and due from banks............................. $ 67,355 $ 58,435
Federal funds sold.................................. 11,000 90,500
Securities available for sale....................... 1,634,821 1,350,467
Loans, net.......................................... 1,243,058 1,082,918
Accrued interest receivable......................... 17,561 15,707
Bank premises and equipment, net.................... 20,129 19,737
Intangible assets, net.............................. 17,716 18,414
Other assets........................................ 7,045 14,992
----------------- -----------------
Total assets..................................... $ 3,018,685 $ 2,651,170
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits-
Savings.......................................... $ 789,718 $ 827,757
Time............................................. 528,836 520,693
Money market..................................... 78,961 76,088
NOW accounts..................................... 33,340 15,249
Demand deposits.................................. 223,876 183,865
----------------- -----------------
1,654,731 1,623,652
Borrowed funds...................................... 610,042 250,042
Advances from borrowers for taxes and insurance..... 6,859 4,623
Accrued interest and other liabilities.............. 36,475 86,967
----------------- -----------------
Total liabilities............................... 2,308,107 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.......................... 533,651 532,521
Retained earnings substantially restricted.......... 199,879 181,499
Unallocated ESOP shares............................. (39,829) (41,262)
----------------- -----------------
694,152 673,209
Accumulated other comprehensive income, net of taxes 16,426 12,677
----------------- -----------------
Total stockholders' equity..................... 710,578 685,886
----------------- -----------------
Total liabilities and stockholders' equity..... $ 3,018,685 $ 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------ --------------------------
1998 1997 1998 1997
------------------------------ --------------------------
(000's omitted)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans................................................. $ 24,351 $ 20,499 $ 46,985 $ 40,521
Securities, available for sale........................ 23,257 11,914 44,607 23,365
Federal funds sold.................................... 442 797 924 1,200
------------ ------------ ------------ ------------
Total interest income.............................. 48,050 33,210 92,516 65,086
------------ ------------ ------------ ------------
INTEREST EXPENSE:
Savings and escrow.................................... 5,278 5,460 10,362 10,805
Time.................................................. 6,666 6,679 13,214 13,066
Money market and NOW.................................. 716 690 1,341 1,363
Borrowed funds........................................ 6,223 443 10,056 554
------------ ------------ ------------ ------------
Total interest expense.......................... 18,883 13,272 34,973 25,788
------------ ------------ ------------ ------------
Net interest income................................ 29,167 19,938 57,543 39,298
Provision for Loan Losses............................. 501 2,501 1,002 5,001
------------ ------------ ------------ ------------
Net interest income after provision
for possible loan losses........................ 28,666 17,437 56,541 34,297
OTHER INCOME (LOSS):
Service and fee income................................ 1,977 1,882 4,126 3,656
Securities transactions............................... 92 (41) 675 (605)
------------ ------------ ------------ ------------
2,069 1,841 4,801 3,051
OTHER EXPENSES:
Personnel............................................. 6,186 5,165 12,430 10,095
Occupancy and equipment............................... 1,444 1,413 2,919 2,784
Amortization of intangible assets..................... 519 519 1,038 1,038
FDIC Insurance........................................ 57 1 108 122
Data processing....................................... 997 1,107 2,193 2,138
Marketing............................................. 337 324 674 648
Professional fees..................................... 848 16 1,260 430
Other................................................. 1,869 2,044 3,827 4,181
------------ ------------ ------------ ------------
Total other expenses............................... 12,277 10,589 24,449 21,436
------------ ------------ ------------ ------------
Income before provision for income taxes........... 18,458 8,689 36,893 15,912
PROVISION FOR INCOME TAXES............................ 7,515 3,655 15,353 4,951
------------ ------------ ------------ ------------
Net Income............................................ $ 10,943 $ 5,034 $ 21,540 $ 10,961
============ ============ ============ ============
EARNINGS (LOSS) PER SHARE:
Basic $ 0.27 N/A $ 0.52 N/A
Fully Diluted $ 0.27 N/A $ 0.52 N/A
WEIGHTED AVERAGE
Common Shares 45,130,312 N/A 45,130,312 N/A
Less: Unallocated ESOP Shares 3,375,706 N/A 3,406,586 N/A
------------ -------------
41,754,606 41,723,726
============ =============
</TABLE>
<PAGE> 5
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
UNALLOCATED
ADDITIONAL COMMON
COMMON PAID-IN STOCK COMPREHENSIVE
STOCK CAPITAL HELD BY ESOP INCOME
---------------------------------------------------------------------
(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......... 3,749
Allocation of 119,391 ESOP shares 1,130 1,433
Net Income 21,539
--------
25,288
========
Dividends paid
--------------------------------------------------------------------------
Balance June 30, 1998 $ 451 $ 533,651 $ (39,829)
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
RETAINED COMPREHENSIVE
INCOME INCOME TOTAL
----------------------------------------------------------
(000's omitted)
<S> <C> <C> <C>
Balance January 1, 1998.......... $ 181,499 $ 12,677 $ 685,886
Change in unrealized
appreciation (depreciation)
on securities, net of tax......... 3,749 3,749
Allocation of 119,391 ESOP shares 2,563
Net Income 21,539 21,539
Dividends paid (3,159) (3,159)
-----------------------------------------------------------
Balance June 30, 1998 $ 199,879 $ 16,426 $ 710,578
===========================================================
</TABLE>
<PAGE> 6
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---- ----
(000 omitted)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 21,540 $ 10,961
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization 917 847
Amortization of bond and mortgage premiums 859 71
Amortization of intangible assets 1,038 1,038
Loss (Gain) on sale of available for sale securities (583) 564
Other noncash expense (income) 963 (5,789)
Provision for possible loan losses 1,000 5,000
Decrease in deferred loan fees (65) 80
Decrease (increase) in accrued interest receivable (1,854) (935)
Decrease (increase) in other assets (333) (148)
(Decrease) increase in accrued interest other liabilities (46,032) 1,756
(Increase) decrease in deferred income taxes 359 (4,535)
Recoveries 440 588
--------------------------------------
Net cash provided by operating activities $ (21,751) $ 9,498
--------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of available for sale securities 214,926 67,772
Sales of available for sale securities 7,987 83,674
Purchases of available for sale securities (504,002) (222,288)
Principal collected on loans 73,590 92,879
Purchases of Loans - -
Sale of Loans 2,871 2,333
Loans made to cutomers (236,239) (131,343)
Capital expenditures (1,278) (2,027)
--------------------------------------
Net cash used in investing activities (442,145) (109,000)
--------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts 33,316 64,236
Borrowings 360,000 60,043
--------------------------------------
Net cash provided by financing activities 393,316 124,279
--------------------------------------
Net (decrease) increase in cash and cash equivalents (70,580) 24,777
CASH AND EQUIVALENTS, BEGINNING OF YEAR 148,935 52,622
--------------------------------------
CASH AND EQUIVALENTS, END OF YEAR $ 78,355 $ 77,399
======================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 32,464 $ 25,711
Income taxes $ 14,059 $ 8,046
</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 six month periods
ended June 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. 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 IPO prospectus supplement. In February 1998, the Bank formed a
subsidiary, Staten Island Funding Corporation, as a passive real estate
investment trust (REIT).
<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 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 June
30, 1998, 119,391 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 plan, in the year of allocation.
Comprehensive Income
In July 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income". Statement 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 at this time the
Company owns no derivative instruments affected by this statement.
<PAGE> 9
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 June 30, 1998
and December 31, 1997.
<TABLE>
<CAPTION>
JUNE 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.......................................... $ 40,696 $ 41,151 $ 55,206 $ 55,734
Govt. Sponsored Agencies................................. 56,617 57,039 50,284 50,884
Industrial and Finance .................................. 5,158 5,152 - -
Foreign.................................................. 279 270 269 268
--------------- --------------- -------------- ---------------
Total Debt Securities.................................... 102,750 103,612 105,759 106,886
--------------- --------------- -------------- ---------------
G.N.M.A. - M.B.S......................................... 22,866 23,292 24,147 24,420
F.H.L.M.C. - M.B.S....................................... 293,159 299,071 340,000 346,315
F.N.M.A. - M.B.S......................................... 531,681 536,007 451,337 455,994
Agency C.M.O.'s.......................................... 219,665 221,154 166,587 167,719
Privately Issued C.M.O.'s................................ 328,055 329,443 171,035 171,223
Payments in Transit...................................... 4,638 4,638 3,016 3,016
--------------- --------------- -------------- ---------------
Total Mortgage-Backed and Mortgage Related Securities.... 1,400,064 1,413,605 1,156,122 1,168,687
--------------- --------------- -------------- ---------------
--------------- --------------- -------------- ---------------
TOTAL BONDS - AVAILABLE FOR SALE 1,502,814 1,517,217 1,261,881 1,275,573
--------------- --------------- -------------- ---------------
<CAPTION>
EQUITY SECURITIES AMORTIZED FAIR AMORTIZED FAIR
- ----------------- COST VALUE COST VALUE
--------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Preferred Stock 34,609 36,517 15,965 16,549
Common Stock 41,120 45,865 23,643 27,226
IIMF Cap. Apprec. 24,690 35,222 24,599 31,119
--------------- --------------- -------------- ---------------
TOTAL EQUITY SECURITIES 100,419 117,604 64,207 74,894
--------------- --------------- -------------- ---------------
--------------- --------------- -------------- ---------------
TOTAL INVESTMENTS........................................ $ 1,603,233 $ 1,634,821 $ 1,326,088 $ 1,350,467
=============== =============== ============== ===============
</TABLE>
<PAGE> 10
LOAN PORTFOLIO COMPOSITION. The following table sets forth the composition of
the Bank's loans at the dates indicated.
<TABLE>
<CAPTION>
---------------------------------- -----------------------------
JUNE 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......... $ 1,015,070 81.66% $ 863,694 79.76%
Multi-family residential.......... 28,006 2.25% 28,218 2.61%
Commercial real estate............ 124,508 10.02% 120,084 11.09%
Construction and land............. 40,435 3.25% 40,476 3.74%
Home equity....................... 6,035 0.49% 6,538 0.60%
-------------- ------------- -------------- -----------
Total mortgage loans............ 1,214,054 97.67% 1,059,010 97.79%
Other loans:
Student loans..................... 2,814 0.23% 4,033 0.37%
Passbook loans.................... 6,384 0.51% 6,929 0.64%
Commercial business loans......... 22,509 1.81% 19,559 1.81%
Other consumer loans.............. 16,761 1.35% 13,212 1.22%
-------------- ------------- -------------- -----------
Total other loans............... 48,468 3.90% 43,733 4.04%
-------------- ------------- -------------- -----------
Total loans receivable.......... 1,262,522 101.57% 1,102,743 101.83%
Less:
Discount on loans purchased....... (147) (0.01)% (729) (0.07)%
Allowance for loan losses......... (15,994) (1.29)% (15,709) (1.45)%
Deferred loan fees................ (3,323) (0.27)% (3,387) (0.31)%
-------------- ------------- -------------- -----------
Loans receivable, net........... $ 1,243,058 100.00% $ 1,082,918 100.00%
============== ============= ============== ===========
</TABLE>
<PAGE> 11
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>
JUNE 30, 1998 DECEMBER 31, 1997
-------------- -----------------
(000's omitted)
<S> <C> <C>
Accruing loans 90 days or more past due:
Mortgage loans............................. $ - $ -
Other loans................................ - 85
------------ -------------
Total accruing loans.................... - 85
------------ -------------
Non-accrual loans:
Mortgage loans:
Single-family residential................. 8,710 9,395
Multi-family residential.................. 263 319
Commercial real estate.................... 6,878 8,436
Construction and land..................... 1,116 1,131
Home equity............................... - 545
Other loans:
Commercial business loans................. 284 836
Other loans............................... 574 570
------------ -------------
Total non-accruing loans................ 17,825 21,232
------------ -------------
Total non-performing loans.................... 17,825 21,317
------------ -------------
Other real estate owned, net.................. 523 618
------------ -------------
Total non-performing assets................... $ 18,348 $ 21,935
============ =============
Non-performing assets to total loans.......... 1.45% 1.99%
Non-performing assets to total assets......... 0.61% 0.83%
Non-performing loans to total loans........... 1.41% 1.93%
Non-performing loans to total assets.......... 0.59% 0.80%
</TABLE>
<PAGE> 12
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>
SIX MONTHS ENDED YEAR ENDED
JUNE 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 1,002 5,001 6,003
Charge-offs:
Mortgage loans:
Construction, land and land development - - -
Single-family residential 116 361 501
Multi-family residential 31 50 100
Commercial real estate 284 119 210
Other loans 725 380 507
------------- ----------- ------------
Total charge-offs 1,156 910 1,318
Recoveries:
Mortgage loans:
Construction, land and land development 3 - 10
Single-family residential 199 263 533
Multi-family residential - - -
Commercial real estate 116 222 251
Other loans 121 101 253
------------- ----------- ------------
Total recoveries 439 586 1,047
------------- ----------- ------------
Allowance at end of period $ 15,994 $ 14,654 $ 15,709
============= =========== ============
Allowance for possible loan losses
to total nonperforming loans at
end of period 89.73% 67.10% 73.69%
Allowance for possible loan losses
to total loans at end of period 1.27% 1.43% 1.42%
</TABLE>
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Changes in Financial Condition
Total assets at June 30, 1998 were $3.0 billion, an increase of $367.5
million or 13.9% from December 31, 1997. This increase in total assets was
primarily due to a $160.1 million increase in loans, net and a $284.4 million
increase in investment securities. These increases were offset by A $79.5
million decrease in federal funds sold. The increase in loans, net 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 $31.1 million from $1.62 billion at December
31 1997 to $1.65 billion at June 30, 1998. The overall increase in deposits was
primarily due to the Bank's continued efforts in business development. Demand
deposits increased $40.0 million, NOW accounts increased $18.1 million, and
Money Market accounts increased $2.9 million. In addition, time deposits
increased $8.1 million. All of these increases were offset to some extent by a
$38.0 million decrease in savings deposits for the six months ended June 30,
1998.
Borrowed funds increased $360.0 million from $250.0 million at
December 31, 1997 to $610.0 million at June 30, 1998. The increase WAS a 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 $390.0 million are with Wall Street Brokerage
firms and $220.0 million ARE with the Federal Home Loan Bank OF NEW YORK.
Stockholders' equity totaled $710.6 million or 23.5% of total assets
at June 30, 1998 compared to $685.9 million or 25.9% of total assets at December
31, 1997. The $24.7 million increase was primarily due to net income of $21.5
million for the six months ended June 30, 1998, an increase in unrealized
appreciation on securities available for sale, net of taxes, of $3.7 million,
and allocations of ESOP shares, resulting in an increase of $2.6 million,
reduced by aggregate cash dividend payments of $3.2 million. This resultED in
tangible book value per share OF $15.35 as of June 30, 1998.
Results of Operations
The Company reported net income of $10.9 million for the three months
ended June 30, 1998 compared to $5.0 million for the three months ended June 30,
1997, an increase of $5.9 million or 117.4%. The increase in net income for the
quarter was primarily due to an increase in net interest income of $9.2 million,
an increase in other income of $0.2 million and a decrease in the provision for
loan losses of $2.0 million, offset by an increase of $1.7 million in total
other expenses and an increase in the provision for income taxes of $3.9
million.
For the six months ended June 30, 1998, NET INCOME WAS $21.5 million
compared to $11.0 million for the six months ended June 30, 1997, an increase of
$10.6 million or 96.5%. The increase in net income for the first six months OF
1998 was primarily due to an increase in net interest income of $18.2 million,
an increase in other income of $1.8 million, and a decrease in the provision for
loan losses of $4.0 million, offset by an increase of $3.0 million in total
other expenses and an increase in the provision for income taxes of $10.4
million.
Interest Income
The Company's total interest income was $48.1 MILLION for the three
months ended June 30, 1998 compared to $33.2 million for the three months ended
June 30, 1997. The $14.8 million or 44.7% increase was primarily due to a $3.9
million increase in interest income from loans, and a $11.3 million increase in
interest income from securities. The primary reason for the increase in interest
income from loans was an increase of $233.0 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. The average yield on the loan portfolio decreased to 7.87% for
the quarter ended June 30, 1998 from 8.15%
<PAGE> 14
for the second quarter of 1997. SUCH CURRENT RATE ENVIRONMENT HAS RESULTED 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
$771.2 million increase in the average balance of the securities portfolio
offset by a decrease in the average yield on the securities portfolio from 6.73%
for the second quarter of 1997 to 6.30% for the second quarter of 1998. The
decrease in the average yield WAS the result of declining interest rates during
1997 and the accelerated payoff of higher yielding investments. The increase in
the average balance of the securities portfolio WAS a result of both 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 six months ended June 30, 1998 was $92.5
million compared to $65.1 for million the same time period last year. The
increase of $27.4 million or 42.1% was the result of a $6.5 million increase in
interest income from loans and a $21.2 million increase in interest income from
securities. The primary reason for the increase in interest income from loans
was an increase of $178.8 million in the average balance of loans offset by a
decrease in the average yield on loans from 8.15% to 8.02% during the six month
period ended June 30, 1997 and 1998, respectively. The increase in interest
income on securities was the result of an increase of $703.2 million in the
average balance of securities partially offset by a decrease in the average
yield from 6.74% to 6.42% for the six months ended June 30, 1997 and June 30,
1998. The reasons for the growth and change in yields of the loan portfolio and
investment portfolio in the six month period are the same as those for the
second quarter of 1998.
Interest Expense
The Company's total interest expense was $18.9 million for the three
months ended June 30, 1998 compared with $13.3 million for the three months
ended June 30, 1997. The increase of $5.6 million was primarily due to an
increase of $5.8 million in interest expense on borrowed funds offset by a
decrease of $0.2 million in interest EXPENSE on deposits. The increase in
interest expense on borrowed funds was primarily due to a $403.5 increase in the
average balance of borrowed funds. The decrease in interest expense ON deposits
was due to a $26.0 million decrease in the average balance of deposits resulting
from deposit outflows in SAVINGS ACCOUNTS OFFSET BY DEPOSIT INFLOWS IN
CERTIFICATE OF DEPOSITS, MONEY MARKET AND NOW ACCOUNTS.
For the six month period ended June 30, 1998, interest expense
increased $9.2 million to $35.0 million compared to $25.8 million for the same
time period last year. The primary reason for the increase was an increase of
$9.5 million in interest expense ON borrowed funds offset by a $0.3 million
decrease in interest expense on deposits. The increase in interest expense on
borrowed funds was the result of a $328.8 million increase in the average
balance of borrowed funds. The decrease in interest expense on deposits was the
result of a $23.8 million decrease in the average balance of deposits. The
Bank's program of funding asset growth with borrowings at acceptable spreads has
resulted in the growth of the average balance of borrowed funds. Deposit
outflows in savings deposits WAS THE PRIMARY REASON FOR the decline in the
average balance of deposits.
Net Interest Income
Net interest income increased $9.2 million or 46.3% to $29.2 million
from $19.9 million for the three months ended June 30, 1998 compared with the
three months ended June 30, 1997. Such increase was due to a $14.8 million
increase in interest income offset by a $5.6 million increase in interest
expense. The increase in interest income was due to an increase of $977.0
million or 54.9% in the average balance of interest earning assets. The average
yield on interest earning assets for the three months ended June 30, 1998 was
6.99% compared with 7.49% for the three months ended June 30, 1997. The increase
in interest expense was due to an increase of $377.5 million or 25.2% in the
average balance of interest bearing liabilities. The average cost of interest
bearing liabilities for the second quarter of 1998 was 4.04% compared with 3.56%
for the same period last year. The average cost of interest bearing deposits
remained flat at 3.53% for the
<PAGE> 15
second quarter of 1998 compared with 3.52% for the second quarter of 1997. The
Company'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 percentage of
average interest earning assets) amounted to 2.95% and 4.24%, respectively,
during the three months ended June 30, 1998 compared to 3.93% and 4.50%,
respectively, for the comparable period in 1997.
For the six month period ended June 30, 1998, net interest income was
$57.5 million compared with $39.3 million for the same time period last year.
The increase of $18.2 million or 46.4% WAS the result of a $27.4 million
increase in interest income offset by a $9.2 million increase in interest
expense. The increase in interest income WAS primarily the result of an increase
of $871.1 million in the average balance of interest earning assets partially
offset by a decrease in the average yield on interest earning assets from 7.51%
for the six month period ending June 30, 1997 to 7.13% for the same time period
this year. The increase in interest expense RESULTED from an increase of $305.0
million in the average balance of interest bearing liabilities along with an
increase in the average cost from 3.54% to 3.97%. The increase in the average
cost WAS due to the increased average cost of borrowed funds. The average cost
of deposits remained stable at 3.52% for the six months ending June 30, 1998
compared with 3.51% for the same time period last year. The Company's interest
rate spread and net interest margin for the six month period ended June 30, 1998
was 3.15% and 4.43%, respectively, compared with 3.97% and 4.54%, RESPECTIVELY,
for the six month period ended June 30, 1997. THE BANK'S USE OF BORROWED FUNDS
TO LEVERAGE THE BALANCE SHEET AND THE CURRRENT RATE ENVIRONMENT HAS RESULTED IN
THE DECREASE IN THE INTEREST RATE SPREAD AND INTEREST RATE MARGIN.
Provision For Loan Losses
The provision for loan losses for the three months ended June 30, 1998
was $0.5 million compared to $2.5 million for the three months ended June 30,
1997. The provision in 1997 included a non-recurring amount of $2.0 million. For
the six month period endED June 30, 1998, the provision was $1.0 million
compared with $5.0 million for the same period in 1997. The provision for the
first six months in 1997 included a non-recurring amount OF $4.0 million. The
provision in 1998 was based on management's continuing review of the risk
elements in the Bank's loan portfolio.
Non-performing assets were $18.3 million at June 30, 1998 or .61% of
total assets. At December 31, 1997 non-performing assets totaled $21.9 million
or .83% of total assets. The allowance for loan losses at June 30, 1998 was
$16.0 million or 89.7% of non-performing loans compared to $15.7 MILLION OR
73.7% at December 31, 1997. While no assurance can be given that future
charge-offs and/or additional provisions will not be necessary, management of
the Company believes that, as of June 30, 1998 the allowance for loan losses was
adequate.
Other Income
For the three months ended June 30, 1998 other income was $2.1 million
compared with $1.8 million for the three months ended June 30, 1997. Such
increase was PRIMARLY due to service and fee income of $2.0 million compared to
$1.9 million for the same period last year. 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.
Other income for the first six months of 1998 was $4.8 million
compared with $3.1 million FOR the first six months of 1997. SUCH increase was
primarily due to securities transactions which resulted in a loss of $0.6
million for the first six months of 1997 compared with a gain of $0.7 million in
the first six months of 1998. The loss in the first half of 1997 was due to the
restructuring of the Company's security portfolio in an effort to improve both
yield and quality. In the same time period, service and fee income increased
from $3.7 million to $4.1 million.
Total Other Expenses
Total other expenses increased $1.7 million or 15.9% to $12.3 million
for the three months ended June 30, 1998 from $10.6 million for the same period
in 1997. Such increase was due to a $1.0 million increase in personnel expenses
and a $0.8 million increase in professional
<PAGE> 16
fees. These increases were partially offset by a $0.2 million decrease in other
expenses. The increase in personnel expenses WAS due to the costs of $0.9
MILLION ASSOCIATED WITH the ESOP plan, staff additions to the Bank's lending
operations to enhance credit administration, and normal merit increases.
Professional fees increased $0.8 million due to costs related to 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.
Other expenses for the first six months of 1998 increased $3.0 million
to $24.4 million compared with $21.4 million for the first six months of 1997.
This was primarily due to an increase in personnel costs of $2.3 million and
professional fees of $0.8 million, offset by a decrease in other expenses of
$0.3 million. The reasons for the increases in personnel costs and professional
fees and the offsetting decrease in other expenses are the same as discussed
above for the second quarter.
Provision For Income Taxes
The provision for income taxes for the three months ended June 30,
1998 was $7.5 million compared with $3.7 million for the same time period last
YEAR, RESULTING in an effective tax rate of 40.7% for the 1998 period and 42.1%
for the 1997 period. For the six month period ending June 30, 1998 the provision
for income taxes was $15.4 million compared with $5.0 million for the same time
period last year. The effective tax rate for the six month period in 1998 was
41.6% compared with 31.1% in the first six 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 first six months of 1997, the Bank's effective tax
rate would have been 47.5%.
As part of its overall capital management and tax planning strategies,
the Bank funded Staten Island Funding Corporation with $650.0 million in
residential mortgage loans. The REIT will purchase additional loans from the
Bank using the cash generated from principal amortization and paydowns.
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 predictable 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 June 30, 1998, the Bank had entered into repurchase agreements
totaling $610.0 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 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 June 30,
1998 the total approved loan origination commitments outstanding amounted to
$163.5 million. At the same date, the unadvanced portion of construction loans
amounted to $7.6 million. Certificates of deposit scheduled to mature in one
year or less at June 30, 1998 totaled $421.8 million. Investment securities
scheduled to mature in one year or less at June 30, 1998 totaled $21.0 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.
<PAGE> 17
Capital
At June 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 $ 43,164 1.50% $ 412,893 14.35% $ 369,729 12.85%
Core capital $ 115,251 4.00% $ 416,587 14.46% $ 301,335 10.46%
Risk-based capital $ 98,664 8.00% $ 432,010 35.03% $ 333,346 27.03%
</TABLE>
<PAGE> 18
Year 2000
The Company has completed its assessment of the Company's vulnerability to
Year 2000 issues and has prepared initial estimates of the costs of resolution.
The Company has signed a contract to have its most critical systems such as
loans and deposits be processed by a new data servicer. The conversion to this
new system is scheduled for the third quarter of 1998. This servicer has made a
representation and warranty to be Year 2000 compliant by December 31, 1998. The
costs of compliance will be borne by the vendor under their contract. Company
personnel will participate in tests of this system as soon as practical to
insure full compliance. Failure to prepare this system for the Year 2000 would
materially affect the Company's ability to operate and serve its customers. 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 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 those and other 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.
<PAGE> 19
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------------------------------
1998
-----------------------------------------------------
AVERAGE
AVERAGE YIELD/
BALANCE INTEREST COST
------------------ ------------------ ----------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Real estate loans............................ $ 1,194,793,314 $ 23,105,968 7.76%
Other loans.................................. 46,690,289 1,244,706 10.69%
------------------ ------------------ ---------
Total loans............................... 1,241,483,603 24,350,674 7.87%
Securities..................................... 1,481,473,982 23,257,580 6.30%
Other interest-earning assets (2).............. 33,108,859 442,094 5.36%
------------------ ------------------ ---------
Total interest-earning assets.................. 2,756,066,444 48,050,348 6.99%
------------------ ---------
Noninterest-earning assets........................ 84,453,787
------------------
Total assets................................... $ 2,840,520,231
==================
Interest-bearing liabilities:
Deposits:
NOW and money market deposits............... $ 107,241,711 715,524 2.68%
Savings and escrow accounts................. 805,755,576 5,278,897 2.63%
Certificates of deposits.................... 524,493,545 6,666,405 5.10%
------------------ ------------------ --------
Total deposits............................ 1,437,490,832 12,660,826 3.53%
Total Other Borrowings........................ 435,891,143 6,222,588 5.73%
------------------ ------------------ --------
Total interest-bearing liabilities............ 1,873,381,975 18,883,414 4.04%
------------------ --------
Noninterest-bearing liabilities (3).............. 265,767,638
------------------
Total liabilities............................. 2,139,149,613
Stockholder's equity............................. 701,370,618
------------------
Total liabilities and stockholders' equity.... $ 2,840,520,231
==================
Net interest-earning assets...................... $ 882,684,469
==================
------------------
Net interest income/interest rate spread......... $ 29,166,934 2.95%
================== ========
Net interest margin.............................. 4.24%
========
Ratio of average interest-earning assets
to average interest-bearing liabilities....... 147.12%
========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
-----------------------------------------------------
1997
-----------------------------------------------------
AVERAGE
AVERAGE YIELD/
BALANCE INTEREST COST
------------------ ---------------- ----------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Real estate loans......................... $ 963,542,554 $ 19,478,848 8.11%
Other loans............................... 44,969,510 1,019,144 9.09%
---------------- ----------------
Total loans............................. 1,008,512,064 20,497,992 8.15%
Securities.................................. 710,241,906 11,914,536 6.73%
Other interest-earning assets (2)........... 60,319,461 797,250 5.30%
---------------- ---------------- ---------
Total interest-earning assets............... 1,779,073,431 33,209,778 7.49%
---------------- ---------
Noninterest-earning assets..................... 92,886,816
----------------
Total assets................................ $ 1,871,960,247
================
Interest-bearing liabilities:
Deposits:
NOW and money market deposits............. $ 99,260,418 690,067 2.79%
Savings and escrow accounts............... 834,599,695 5,460,248 2.62%
Certificates of deposits.................. 529,628,217 6,679,198 5.06%
---------------- ---------------- ---------
Total deposits.............................. 1,463,488,330 12,829,513 3.52%
Total Other Borrowings...................... 32,350,822 442,359 5.48%
---------------- ---------------- ---------
Total interest-bearing liabilities.......... 1,495,839,152 13,271,872 3.56%
---------------- ---------
Noninterest-bearing liabilities (3)............ 198,632,016
----------------
Total liabilities........................... 1,694,471,168
Stockholder's equity........................... 177,489,079
----------------
Total liabilities and stockholders' equity.. $ 1,871,960,247
================
Net interest-earning assets.................... $ 283,234,279
================
----------------
Net interest income/interest rate spread....... $ 19,937,906 3.93%
================ =========
Net interest margin............................ 4.50%
=========
Ratio of average interest-earning assets
to average interest-bearing liabilities..... 118.93%
=========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------
1998
-----------------------------------------------------
AVERAGE
AVERAGE YIELD/
BALANCE INTEREST COST
------------------ -------------- --------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Real estate loans......................... $ 1,135,595,431 $ 44,513,893 7.90%
Other loans............................... 45,748,976 2,470,667 10.89%
------------------- --------------
Total loans............................. 1,181,344,407 46,984,560 8.02%
Securities.................................. 1,402,030,953 44,607,508 6.42%
Other interest-earning assets (2)........... 34,624,625 923,805 5.38%
------------------- -------------- -------
Total interest-earning assets............... 2,617,999,985 92,515,873 7.13%
-------------- -------
Noninterest-earning assets..................... 104,810,230
-------------------
Total assets................................ $ 2,722,810,215
===================
Interest-bearing liabilities:
Deposits:
NOW and money market deposits............. $ 99,519,344 1,340,681 2.72%
Savings and escrow accounts............... 804,152,095 10,362,877 2.60%
Certificates of deposits.................. 521,965,345 13,213,987 5.11%
------------------- -------------- -------
Total deposits.............................. 1,425,636,784 24,917,545 3.52%
Total Other Borrowings...................... 348,756,112 10,055,759 5.81%
------------------- -------------- -------
Total interest-bearing liabilities.......... 1,774,392,896 34,973,304 3.97%
-------------- -------
Noninterest-bearing liabilities (3)............ 251,920,396
-------------------
Total liabilities........................... 2,026,313,292
Stockholder's equity........................... 696,496,923
-------------------
Total liabilities and stockholders' equity.. $ 2,722,810,215
===================
Net interest-earning assets.................... $ 843,607,089
===================
--------------
Net interest income/interest rate spread....... $ 57,542,569 3.15%
============== ========
Net interest margin............................ 4.43%
========
Ratio of average interest-earning assets
to average interest-bearing liabilities..... 147.54%
========
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------
1997
-----------------------------------------------------
AVERAGE
AVERAGE YIELD/
BALANCE INTEREST COST
------------------ -------------- --------
<S> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Real estate loans......................... $ 947,557,693 $ 38,139,368 8.12%
Other loans............................... 55,010,480 2,380,992 8.73%
------------------ -----------------
Total loans............................. 1,002,568,173 40,520,360 8.15%
Securities.................................. 698,788,732 23,364,995 6.74%
Other interest-earning assets (2)........... 45,536,856 1,200,221 5.32%
------------------ ----------------- ---------
Total interest-earning assets............... 1,746,893,761 65,085,576 7.51%
----------------- ---------
Noninterest-earning assets..................... 92,263,453
------------------
Total assets................................ $ 1,839,157,214
==================
Interest-bearing liabilities:
Deposits:
NOW and money market deposits............. $ 99,621,497 1,363,009 2.76%
Savings and escrow accounts............... 828,614,722 10,805,015 2.63%
Certificates of deposits.................. 521,181,962 13,066,264 5.06%
------------------ ----------------- ---------
Total deposits.............................. 1,449,418,181 25,234,288 3.51%
Total Other Borrowings...................... 19,932,908 553,337 5.60%
------------------ ----------------- ---------
Total interest-bearing liabilities.......... 1,469,351,089 25,787,625 3.54%
----------------- ----------
Noninterest-bearing liabilities (3)............ 194,785,235
------------------
Total liabilities........................... 1,664,136,324
Stockholder's equity........................... 175,020,890
------------------
Total liabilities and stockholders' equity.. $ 1,839,157,214
==================
Net interest-earning assets.................... $ 277,542,672
==================
----------------
Net interest income/interest rate spread....... $ 39,297,951 3.97%
================ =========
Net interest margin............................ 4.54%
=========
Ratio of average interest-earning assets
to average interest-bearing liabilities..... 118.89%
=========
</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> 20
RATE/VOLUME ANALYSIS
The following table sets forth the 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 June 30,
-------------------------------------------------------
1998 compared to 1997
-------------------------------------------------------
Increase (decrease) due to
--------------------------------------- Total
Rate/ Net Increase
Rate Volume Volume (Decrease)
----------- ---------- ----------- --------------
(000's omitted)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Real estate loans................................. $ (845) $ 4,675 $ (203) $ 3,627
Other loans....................................... 179 39 7 225
----------- ----------- ---------- ----------
Total loans receivable............................ (666) 4,714 (196) 3,852
Securities.......................................... (765) 12,938 (830) 11,343
Federal funds sold.................................. 8 (360) (3) (355)
Total net change in income on interest- ----------- ----------- ---------- ----------
earning assets...................................... (1,423) 17,292 (1,029) 14,840
----------- ----------- ---------- ----------
Interest-bearing liabilities:
Deposits:
NOW and money market deposits..................... (27) 55 (2) 26
Savings and escrow accounts....................... 7 (189) - (182)
Certificates of deposit........................... 52 (65) - (13)
----------- ----------- ---------- ----------
Total deposits.................................. 32 (199) (2) (169)
Other Borrowings....................................... 19 5,518 243 5,780
Total net change in expense on
----------- ----------- ---------- ----------
interest-bearing liabilities...................... 51 5,319 241 5,611
----------- ----------- ---------- ----------
Net change in net interest income...................... $ (1,474) $ 11,973 $ (1,270) $ 9,229
=========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------------------------------------
1998 compared to 1997
-------------------------------------------------------
Increase (decrease) due to
--------------------------------------- Total
Rate/ Net Increase
Rate Volume Volume (Decrease)
----------- ---------- ----------- --------------
(000's omitted)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable:
Real estate loans................................. $ (996) $ 7,568 $ (198) $ 6,374
Other loans....................................... 590 (401) (99) 90
----------- ---------- ---------- ------------
Total loans receivable............................ (406) 7,167 (297) 6,464
Securities.......................................... (1,132) 23,514 (1,140) 21,242
Federal funds sold.................................. 15 (288) (3) (276)
Total net change in income on interest-
earning assets...................................... (1,523) 30,393 (1,440) 27,430
----------- ---------- ---------- ------------
Interest-bearing liabilities:
Deposits:
NOW and money market deposits..................... (21) (1) - (22)
Savings and escrow accounts....................... (127) (319) 3 (443)
Certificates of deposit........................... 128 20 - 148
----------- ---------- ---------- ------------
Total deposits.................................. (20) (300) 3 (317)
Other Borrowings....................................... 21 9,128 353 9,502
Total net change in expense on
----------- ---------- ---------- ------------
interest-bearing liabilities...................... 1 8,828 356 9,185
----------- ---------- ---------- ------------
Net change in net interest income...................... $(1,524) $21,565 $(1,796) $18,245
=========== ========== ========== ============
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Part II Other Information
<S> <C>
Item 1 Legal Proceedings
Not applicable
Item 2 Changes in Securities
Not applicable
Item 3 Defaults Upon Senior Securities
Not applicable
Item 4 Submission of Matters to a Vote of Security Holders
Not applicable
Item 5 Other Information
Not applicable
Item 6 Exhibits and Reports on Form 8-K
a) Not applicable
b) No Form 8-K reports were filed during the quarter
</TABLE>
<PAGE> 22
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: August 5, 1998 By: /s/ Harry P. Doherty
-----------------------------------
Harry P. Doherty, Chairman of the Board
and Chief Executive Officer
Date: August 5, 1998 By: /s/ Edward Klingele
-----------------------------------
Edward Klingele, Sr. Vice President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 56,403
<INT-BEARING-DEPOSITS> 10,952
<FED-FUNDS-SOLD> 11,000
<TRADING-ASSETS> 0
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<INVESTMENTS-MARKET> 0
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<TOTAL-ASSETS> 3,018,685
<DEPOSITS> 1,654,731
<SHORT-TERM> 390,000
<LIABILITIES-OTHER> 43,334
<LONG-TERM> 220,042
0
0
<COMMON> 451
<OTHER-SE> 710,127
<TOTAL-LIABILITIES-AND-EQUITY> 3,018,685
<INTEREST-LOAN> 46,985
<INTEREST-INVEST> 44,607
<INTEREST-OTHER> 924
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<INTEREST-DEPOSIT> 24,917
<INTEREST-EXPENSE> 34,973
<INTEREST-INCOME-NET> 57,543
<LOAN-LOSSES> 1,002
<SECURITIES-GAINS> 675
<EXPENSE-OTHER> 24,449
<INCOME-PRETAX> 36,893
<INCOME-PRE-EXTRAORDINARY> 36,893
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<CHANGES> 0
<NET-INCOME> 21,540
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
<YIELD-ACTUAL> 7.13
<LOANS-NON> 17,825
<LOANS-PAST> 0
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<RECOVERIES> 439
<ALLOWANCE-CLOSE> 15,994
<ALLOWANCE-DOMESTIC> 15,994
<ALLOWANCE-FOREIGN> 0
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</TABLE>
