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, 1999
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 preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 DAYS. YES [ X ] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. The Registrant had
39,614,623 shares of Common Stock outstanding as of November 8, 1999.
<PAGE>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
TABLE OF CONTENTS PAGE
- ----------------- ----
Part I Financial Information
Item 1 Financial Statements
Statements of Condition 1
(As of September 30, 1999 and December 31, 1998)
Statements of Income (For three and nine months ended
September 30, 1999 and three and nine months ended
September 30, 1998) 2
Statement of Changes in Stockholders' Equity
(For nine months ended September 30, 1999) 3
Statements of Cash Flows (For the nine months ended
September 30, 1999 and 1998) 4
Notes to Consolidated Financial Statements 5-11
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 12-16
Item 3 Quantitative and Qualitative Disclosures About Market Risk
Part II Other Information
ITEM 1 LEGAL PROCEEDINGS 19
-----------------
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS 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
--------------------------------
2
<PAGE>
<TABLE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CONDITION
--------------------------------------
SEPTEMBER 30, 1999 DECEMBER 31, 1998
----------------- -----------------
(000'S OMITTED)
ASSETS unaudited
<S> <C> <C>
ASSETS:
Cash and due from banks ................................... $ 57,856 $ 88,059
Federal funds sold ........................................ 21,000 45,050
Securities available for sale ............................. 2,049,555 2,029,041
Loans, net ................................................ 1,949,646 1,457,058
Loans held for sale, net .................................. 54,331 77,943
Accrued interest receivable ............................... 22,481 19,389
Bank premises and equipment, net .......................... 23,114 22,163
Intangible assets, net .................................... 15,999 17,701
Other assets .............................................. 148,886 20,543
----------- -----------
Total assets .............................................. $ 4,342,868 $ 3,776,947
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due Depositors-
Savings ................................................... $ 747,147 $ 730,614
Time ...................................................... 567,669 537,154
Money market .............................................. 90,874 82,360
NOW accounts .............................................. 74,839 73,541
Demand deposits ........................................... 329,895 305,392
----------- -----------
1,810,424 1,729,061
Borrowed funds ............................................ 1,880,777 1,344,517
Advances from borrowers for taxes and insurance ........... 10,743 7,091
Accrued interest and other liabilities .................... 36,661 27,236
----------- -----------
Total liabilities ......................................... 3,738,605 3,107,905
----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share, 100,000,000 shares
authorized, 45,130,312 issued and 40,234,723 outstanding at
September 30, 1999 and 45,130,312 issued and 43,704,812
outstanding at December 31, 1998 .......................... 451 451
Additional paid-in-capital ................................ 536,128 534,464
Retained earnings-substantially restricted ................ 242,061 215,414
Unallocated common stock held by ESOP ..................... (36,396) (38,456)
Unearned common stock held by RRP ......................... (25,439) (30,873)
Treasury stock 4,895,589 shares at September 30, 1999
and 1,425,500 at December 31, 1998 at cost ................ (91,101) (27,480)
----------- -----------
625,704 653,520
Accumulated other comprehensive income, net of taxes ...... (21,441) 15,522
----------- -----------
Total stockholders' equity ................................ 604,263 669,042
----------- -----------
Total liabilities and stockholders' equity ................ $ 4,342,868 $ 3,776,947
=========== ===========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(000'S OMITTED)
unaudited
<S> <C> <C> <C> <C>
INTEREST INCOME:
Loans ........................................................... $ 36,134 $ 25,960 $ 99,514 $ 72,945
Securities, available for sale .................................. 34,347 27,626 99,119 72,233
Federal funds sold .............................................. 375 482 1,807 1,406
----------- ----------- ----------- -----------
Total interest income ........................................ 70,856 54,068 200,440 146,584
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Savings and escrow .............................................. 4,761 5,245 14,014 15,169
Time ............................................................ 6,685 6,916 19,635 20,130
Money market and NOW ............................................ 1,060 954 3,087 2,733
Borrowed funds .................................................. 23,760 11,028 61,790 21,084
----------- ----------- ----------- -----------
Total interest expense ....................................... 36,266 24,143 98,526 59,116
----------- ----------- ----------- -----------
Net interest income .......................................... 34,590 29,925 101,914 87,468
PROVISION FOR LOAN LOSSES ....................................... 30 500 100 1,502
----------- ----------- ----------- -----------
Net interest income after provision for possible loan losses 34,560 29,425 101,814 85,966
OTHER INCOME:
Service and fee income .......................................... 8,756 1,844 23,293 5,970
Securities transactions ......................................... 436 72 921 747
----------- ----------- ----------- -----------
9,192 1,916 24,214 6,717
OTHER EXPENSES:
Personnel ....................................................... 12,930 7,360 36,604 19,790
Occupancy and equipment ......................................... 1,976 1,598 5,776 4,517
Amortization of intangible assets ............................... 565 519 1,675 1,557
FDIC Insurance .................................................. 50 52 150 160
Data processing ................................................. 1,109 926 3,250 3,119
Marketing ....................................................... 379 337 1,082 1,011
Professional fees ............................................... 580 464 1,574 1,724
Other ........................................................... 3,851 2,071 10,248 5,898
----------- ----------- ----------- -----------
Total other expenses ......................................... 21,440 13,327 60,359 37,776
----------- ----------- ----------- -----------
Income before provision for income taxes ..................... 22,312 18,014 65,669 54,907
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PROVISION FOR INCOME TAXES ...................................... 8,740 7,066 26,445 22,419
----------- ----------- ----------- -----------
Net Income ...................................................... $ 13,572 $ 10,948 $ 39,224 $ 32,488
=========== =========== =========== ===========
EARNINGS (LOSS) PER SHARE:
Basic ........................................................... $ 0.36 $ 0.26 $ 1.02 $ 0.78
Fully Diluted ................................................... $ 0.36 $ 0.26 $ 1.02 $ 0.78
WEIGHTED AVERAGE:
Common Shares ................................................... 45,130,312 45,130,312 45,130,312 45,130,312
Less: Unallocated ESOP/RRP Shares ............................... 3,314,155 3,318,487 3,373,244 3,377,531
Less: Treasury Shares ........................................... 4,402,415 -- 3,309,738 --
----------- ----------- ----------- -----------
37,413,742 41,811,825 38,447,330 41,752,781
========== ========== ========== ==========
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(000's omitted)
unaudited
UNALLOCATED
ADDITIONAL COMMON UNEARNED
COMMON PAID-IN STOCK RRP TREASURY
STOCK CAPITAL HELD BY ESOP SHARES STOCK
----- ------- ------------ ------ -----
<S> <C> <C> <C> <C> <C>
Balance January 1, 1999............. $ 451 $ 534,464 $ (38,456) $ (30,873) $ (27,480)
Change in unrealized
appreciation (depreciation)
on securities, net of tax...........
Allocation of 171,678 ESOP shares... 1,073 2,060
Vesting of 297,530 RRP shares....... 591 5,434
Treasury stock (3,470,089) at cost.. (63,621)
Net Income..........................
Dividends paid......................
----- --------- --------- --------- ---------
Balance September 30, 1999.......... $ 451 $ 536,128 $ (36,396) $ (25,439) $ (91,101)
===== ========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ACCUMULATED
OTHER
COMPREHENSIVE RETAINED COMPREHENSIVE
INCOME INCOME INCOME TOTAL
------ ------ ------ -----
<S> <C> <C> <C> <C>
Balance January 1, 1999............. $ 215,414 $ 15,522 $ 669,042
Change in unrealized
appreciation (depreciation)
on securities, net of tax........... (36,963) (36,963) (36,963)
Allocation of 171,678 ESOP shares... 3,133
Vesting of 297,530 RRP shares....... 6,025
Treasury stock (3,470,089) at cost.. (63,621)
Net Income.......................... 39,224 39,224 39,224
-------
2,261
Dividends paid...................... (12,577) (12,577)
------- --------- --------- ---------
Balance September 30, 1999.......... $ 242,061 $ (21,441) $ 604,263
======= ========= ========= =========
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1999 1998
----------- -----------
(000 omitted)
unaudited
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income .................................................. $ 39,224 $ 32,488
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization ............................... 1,750 1,411
Accretion and Amortization of bond and mortgage premiums .... 32 872
Amortization of intangible assets ........................... 1,675 1,557
Loss (Gain) on sale of available for sale securities ........ (921) (747)
Expense charge relating to allocation and earned
portions of employee benefit plan ........................... 6,597 3,766
Other noncash expense (income) .............................. (3,092) (173)
Provision for loan losses ................................... 100 1,502
Decrease in deferred loan fees .............................. (1,604) (809)
Decrease (increase) in accrued interest receivable .......... (3,092) (2,954)
Decrease (increase) in other assets ......................... (94,443) 3,522
(Decrease) increase in accrued interest and other liabilities 9,425 (62,117)
(Increase) decrease in deferred income taxes ................ 219 11,120
Recoveries of loans ......................................... 878 1,100
----------- -----------
Net cash provided by operating activities ................... (43,242) (9,462)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of available for sale securities ................. 351,339 385,637
Sales of available for sale securities ...................... 35,121 14,953
Purchases of available for sale securities .................. (478,058) (927,809)
Principal collected on loans ................................ 265,199 159,573
Loans made to customers ..................................... (1,229,405) (433,475)
Purchases of loans .......................................... (9,437) --
Sales of loans .............................................. 509,152 5,090
Capital expenditures ........................................ -- (1,954)
----------- -----------
Net cash (used in) investing activities ..................... (556,089) (797,985)
----------- -----------
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts ............................ 85,015 56,975
Borrowings .................................................. 536,260 407,505
Dividends paid .............................................. (12,576) (6,770)
Purchase of Treasury Stock .................................. (63,621) --
Purchase Of shares for RRP .................................. -- (29,161)
----------- -----------
Net cash provided by financing activities ................... 545,078 724,549
----------- -----------
Net (decrease) increase in cash and cash equivalents ........ (54,253) (82,898)
CASH AND EQUIVALENTS, beginning of year ..................... 133,109 148,935
----------- -----------
CASH AND EQUIVALENTS, end of period ......................... $ 78,856 $ 66,037
----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for-
Interest .................................................... $ 93,692 $ 55,072
Income taxes ................................................ $ 21,488 $ 22,584
</TABLE>
6
<PAGE>
STATEN ISLAND BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of Staten Island Bancorp, Inc.
(the "Company") and subsidiaries conform to generally accepted accounting
principles and to general practice within the banking industry.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary Staten Island
Savings Bank (the "Bank") and the Bank's subsidiaries. The Bank's wholly owned
subsidiaries are SIB Mortgage Corp. (the "Mortgage Company"), SIB Investment
Corporation ("SIBIC"), Staten Island Funding Corporation ("SIFC"), and American
Construction Lending Service, Inc. ("ACLS"). All significant intercompany
transactions and balances are eliminated in consolidation.
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 nine and three month period ended
September 30, 1999 are not necessarily indicative of the results to be expected
for the year ending December 31, 1999. 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
1998 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 also
has a lending center on Staten Island and a Trust department. A commercial
lending office is also located in the Bay Ridge, Brooklyn branch.
The Mortgage Company does business as Ivy Mortgage Corp. and is located
in Branchburg, New Jersey. The Mortgage Company originates loans in 22 states
and sells them to investors generating fee income for the Bank.
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 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.
7
<PAGE>
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.
The Bank has the following wholly owned subsidiaries:
The Mortgage Company was incorporated in the State of New Jersey in
1998. The Mortgage Company was formed to purchase the assets of Ivy Mortgage
Corp. The Mortgage Company currently originates loans in 22 states and had
assets totaling $63.2 million at September 30, 1999.
Staten Island Funding Corporation is a wholly-owned subsidiary of SIBIC
incorporated in the State of Maryland in 1998 for the purpose of establishing a
Real Estate Investment Trust ("REIT"). The Bank transferred real estate mortgage
loans totaling $648.0 million, net, which included certain other associated
assets and liabilities. In return the Bank received all the shares of common
stock and the majority of the preferred stock in SIFC. The assets of SIFC
totaled $666.4 million at September 30, 1999.
SIB Investment Corporation was incorporated in the State of New Jersey
in 1998 for the purpose of managing certain investments of the Bank. The Bank
transferred the common stock and a majority of the preferred stock of SIFC to
SIBIC. The consolidated assets of SIBIC at September 30, 1999 were $717.6
million.
American Construction Lending Services, Inc. is a wholly owned
subsidiary of the Bank incorporated in the state of Delaware in May 1999 and is
located in the state of Connecticut. ACLS's main business line is originating
residential construction loans throughout the country. The assets of ACLS
totaled $567,000 as of September 30, 1999.
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". In June 1999, the FASB issued
SFAS No. 137 "Accounting For Derivative Instruments and Hedging Activities
Deferral of the Effective Date of SFAS No. 133" which amended the effective date
of SFAS No. 133. SFAS 133 is now effective for all fiscal quarters of all fiscal
years beginning after June 15, 2000. The statement established accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize 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 will not have a material effect
on the Company's financial statements since the Company currently owns no
derivative instruments affected by this statement.
8
<PAGE>
Securities - Available for Sale. The following table sets forth certain
information regarding amortized cost and estimated fair value of debt, equity,
mortgage-backed and mortgage related securities of the Company at September 30,
1999 and December 31,1998.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------------- ------------------------
BONDS - AVAILABLE FOR SALE AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasuries ..................................... $ 17,263 $ 17,421 $ 29,678 $ 30,249
Govt. Sponsored Agencies ............................ 151,938 147,106 45,632 46,093
Industrial and Finance .............................. 183,979 169,784 150,931 146,982
Foreign ............................................. 555 690 289 248
---------- ---------- ---------- ----------
Total Debt Securities ............................... 353,735 335,001 226,530 223,572
---------- ---------- ---------- ----------
G.N.M.A. - M.B.S .................................... 17,560 17,236 20,555 21,035
F.H.L.M.C. - M.B.S .................................. 342,188 335,793 322,386 328,089
F.N.M.A. - M.B.S .................................... 489,652 485,187 558,595 563,898
Agency C.M.O.'s ..................................... 248,651 242,656 232,069 234,636
Privately Issued C.M.O.'s ........................... 443,426 429,879 473,424 476,329
---------- ---------- ---------- ----------
Total Mortgage-Backed and Mortgage Related Securities 1,541,477 1,510,751 1,607,029 1,623,987
---------- ---------- ---------- ----------
TOTAL BONDS - AVAILABLE FOR SALE ................... 1,895,212 1,845,752 1,833,559 1,847,559
---------- ---------- ---------- ----------
<CAPTION>
EQUITY SECURITIES AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Preferred Stock ..................................... 85,218 79,781 79,010 80,150
Common Stock ........................................ 82,633 85,321 58,995 61,284
IIMF Cap. Apprec .................................... 27,725 38,701 27,626 40,048
---------- ---------- ---------- ----------
TOTAL EQUITY SECURITIES 195,576 203,803 165,631 181,482
---------- ---------- ---------- ----------
TOTAL INVESTMENTS .................................. $2,090,788 $2,049,555 $1,999,190 $2,029,041
========== ========== ========== ==========
</TABLE>
9
<PAGE>
LOAN PORTFOLIO COMPOSITION The following table sets forth the composition
of the Bank's loans at September 30, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999 DECEMBER 31, 1998
---------------------------- ---------------------------
Total Percent of Total Percent of
Amount Category Amount Category
----------- ------- ----------- ------
(000's omitted)
<S> <C> <C> <C> <C>
Mortgage loans:
Single-family residential $ 1,568,404 80.45% $ 1,187,212 81.48%
Multi-family residential . 41,413 2.12% 33,328 2.29%
Commercial real estate ... 205,961 10.56% 137,720 9.45%
Construction and land .... 59,459 3.05% 42,420 2.91%
Home equity .............. 5,702 0.29% 6,121 0.42%
----------- ----- ----------- -----
Total mortgage loans ..... 1,880,939 96.47% 1,406,801 96.55%
Other loans:
Student loans ............ 446 0.02% 940 0.06%
Passbook loans ........... 5,564 0.29% 5,989 0.41%
Commercial business loans 35,364 1.81% 36,592 2.51%
Other consumer loans ..... 40,430 2.07% 24,070 1.65%
Total other loans ........ 81,804 4.19% 67,591 4.63%
----------- ----- ----------- -----
Total loans receivable ... 1,962,743 100.66% 1,474,392 101.18%
Less:
Premium on loans purchased 3,459 0.18% 1,194 0.08%
Allowance for loan losses (16,249) (0.83)% (16,617) (1.14)%
Deferred loan fees ....... (307) (0.01)% (1,911) (0.12)%
----------- ----- ----------- -----
Loans receivable, net .... $ 1,949,646 100.00% $ 1,457,058 100.00%
=========== ====== =========== ======
</TABLE>
10
<PAGE>
DELINQUENT LOANS. The following table sets forth information concerning
delinquent loans at September 30, 1999, in dollar amounts and as a percentage of
each category of the Bank's loan portfolio. The amounts presented represent the
total outstanding principal balance of related loans, rather than the actual
payment amounts which are past due.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------------------------------------------------------
30-59 Days 60-89 Days 90 Days or More
-------------------------- ----------------------- ------------------------
Percent of Loan Percent of Loan Percent of Loan
Amount Category Amount Category Amount Category
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Single-family residential ........... $37,986 2.42% $ 7,614 0.49% $ 5,008 0.32%
Multi-family residential ............ 173 0.42% -- 0.00% -- 0.00%
Commercial real estate .............. 7,292 3.54% 724 0.35% 1,872 0.91%
Construction and land ............... 104 0.17% 1,120 1.88% 578 0.97%
Home equity ......................... 315 5.52% -- 0.00% 29 0.51%
------- ---- ------- ---- ------- ----
Total mortgage loans ................ 45,870 2.44% 9,458 0.50% 7,487 0.40%
Other loans:
Commercial business loans ........... 2,730 7.72% 683 1.93% 190 0.54%
Other loans.......................... 1,433 3.09% 650 1.40% 615 1.32%
------- ---- ------- ---- ------- ----
Total other loans ................... 4,163 5.09% 1,333 1.63% 805 0.98%
------- ---- ------- ---- ------- ----
Total loans.......................... $50,033 2.55% $10,791 0.55% $ 8,292 0.42%
======= ==== ======= ==== ======= ====
</TABLE>
11
<PAGE>
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.
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
----------------------- ------------------------
(000'S OMITTED)
<S> <C> <C>
Non-accrual loans:
Mortgage loans:
Single-family residential .................................... $ 4,188 $ 7,067
Multi-family residential ..................................... -- 131
Commercial real estate ....................................... 4,466 6,534
Construction and land ........................................ 1,693 1,761
Home equity .................................................. 206 212
Other loans:
Commercial business loans .................................... 1,990 346
Other loans .................................................. 201 181
---------- ----------
Total non-accruing loans ..................................... 12,744 16,232
---------- ----------
Other real estate owned, net ................................. 988 849
---------- ----------
Total non-performing assets .................................. $ 13,732 17,081
========== ==========
Non-performing assets to total loans ......................... 0.70% 1.16%
Non-performing assets to total assets ........................ 0.32% 0.45%
Non-performing loans to total loans .......................... 0.65% 1.10%
Non-performing loans to total assets ......................... 0.29% 0.43%
</TABLE>
12
<PAGE>
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,
-------------------------- -----------
1999 1998 1998
---------- ---------- -----------
(000'S OMITTED)
<S> <C> <C> <C>
Allowance at beginning of period ......... $ 16,617 $ 15,709 $ 15,709
Provisions ............................... 100 1,502 1,594
Increase as a result of acquisition ...... -- -- 96
Charge-offs:
Mortgage loans:
Construction, land and land development -- -- --
Single-family residential ............. 107 224 358
Multi-family residential .............. -- 31 31
Commercial real estate ................ 367 309 344
Other loans .............................. 872 1,251 1,386
---------- ---------- ----------
Total charge-offs ..................... 1,346 1,815 2,119
Recoveries:
Mortgage loans:
Construction, land and land development -- 3 3
Single-family residential ............. 395 227 267
Multi-family residential .............. -- -- --
Commercial real estate ................ 3 116 210
Other loans .............................. 480 754 857
---------- ---------- ----------
Total recoveries ...................... 878 1,100 1,337
========== ========== ==========
Allowance at end of period ............... $ 16,249 $ 16,496 $ 16,617
========== ========== ==========
Allowance for possible loan losses
to total nonperforming loans at
end of period ............................ 127.50% 97.55% 102.37%
Allowance for possible loan losses
to total loans at end of period .......... 0.83% 1.20% 1.13%
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
CHANGES IN FINANCIAL CONDITION
Total assets at September 30, 1999 were $4.3 billion which represented
an increase of $565.9 million or 15.0% compared to total assets at December 31,
1998. The increase in total assets was the result of an increase of $492.6
million or 33.8% in loans, net and an increase in other assets of $128.3
million. These increases were partially offset by a decrease in cash and due
from banks of $30.2 million and a decrease in federal funds of $24.1 million.
The increase in loans, net was primarily due to the Bank's continued efforts to
increase lending volumes through its broker program for residential loans both
on and off Staten Island and a business development program for generating
commercial loans along with the retention of certain adjustable rate loans
originated by the Mortgage Company. The increase in other assets is primarily
due to the implementation of a bank owned life insurance (BOLI) program for the
purpose of funding it's various employee benefit programs. The initial premium
of $100.0 million was recorded in other assets and reflects the cash surrender
value of the policies.
Total deposits increased $81.4 million or 4.7% from $1.7 billion at
December 31, 1998 to $1.8 billion at September 30, 1999. The Bank's ongoing
business development efforts, especially for commercial accounts, is the primary
reason for this increase. Non-interest bearing demand deposit accounts increased
$24.5 million, savings accounts increased by $16.5 million, time accounts
increased by $30.5 million, money market accounts increased by $8.5 million, and
NOW accounts increased by $1.3 million during the nine-month period ending
September 30, 1999.
Borrowed funds increased $536.3 million or 39.9% to $1.9 billion at
September 30, 1999 from $1.3 billion as of December 31, 1998. The increase was
due to the Bank's continuing strategy to fund asset growth through borrowings
when acceptable spreads can be obtained. The borrowed funds consist of reverse
repurchase agreements with Wall Street brokerage firms and the Federal Home Loan
Bank of New York (FHLB) and advances from the FHLB secured by the Bank's
residential loan portfolio.
Stockholders' equity as of September 30, 1999 was $604.3 million or
13.9% of total assets compared to $669.0 million or 17.7% of total assets as of
December 31, 1998. The decrease of $64.8 million was primarily due to the stock
repurchase program which resulted in the purchase of 3.5 million shares at a
cost of $63.6 million during the first nine months of 1999, aggregate cash
dividend payments of $12.6 million and a decrease of $37.0 million in unrealized
appreciation on available for sale securities, net of taxes. These decreases
were partially offset by net income of $39.2 millio. The allocation of shares in
the Employee Stock Ownership Plan (ESOP) resulting in an increase of $3.1
million and the allocation of Recognition and Retention Plan (RRP) shares
resulting in an increase of $6.0 million. The tangible book value per share was
$14.62 as of September 30, 1999.
RESULTS OF OPERATIONS
The Company reported net income of $13.6 million or $0.36 per basic and
fully diluted share for the three months ended September 30, 1999 compared to
net income of $10.9 million or $0.26 per share for the same time period last
year. The increase of $2.6 million or 24% for the quarter was primarily due to
<PAGE>
an increase of $4.7 million or 15.6% in net interest income and a $7.3 million
or 379.7% increase in other income. These increases in income were partially
offset by a $8.1 million increase in total other expenses and a $1.7 million
increase in the provision for income taxes.
For the nine months ended September 30, 1999 earnings were $39.2
million compared to $32.5 million for the same time period last year. The
increase of $6.7 million or 20.7% in net income for the first nine months of
1999 was the result of an increase of $14.4 million in net interest income and
an increase in other income of $17.5 million. These increases were partially
offset by an increase of $22.6 million in total other expenses and an increase
of $4.0 million in the provision for income taxes. Earnings per share for the
first nine months of 1999 were $1.02 basic and fully diluted compared to $0.78
14
<PAGE>
for the first nine months of 1998. This represents an increase of $0.24 or
30.8%.
INTEREST INCOME
The Company's total interest income was $70.9 million for the three
months ended September 30, 1999 compared to $54.1 million for the comparable
time period last year. The $16.8 million or 31.0% increase was primarily due to
a $10.2 million increase in interest income from loans and a $6.7 million
increase in interest income from securities. The primary reason for the increase
in interest income from loans was a $592.4 million increase in the average
balance of loans partially offset by a decrease in the average yield from 7.92%
for the quarter ended September 30, 1998 to 7.57% for the current third quarter.
The increase in interest income from securities was primarily due to an increase
of $403.5 million in the average balance of securities and an increase in the
average yield from 6.34% to 6.39%. The increase in the average balance of the
loan portfolio was due to increased loan demand, the additional loans held for
sale by the Mortgage Company, the Bank's continued business development efforts
especially in commercial loans and the continued growth of the Bank's broker
program. The decrease in the average yield of the loan portfolio was due to the
payoff of higher yielding loans and the origination of loans at market interest
rates which over the past year have been lower than the average yield of the
Bank's loan portfolio. However, the current market rates exceed the average
yield on the Bank's loan portfolio. The increase in the average balance of
securities was due to the Bank's program to fund asset growth through borrowings
when acceptable spreads can be obtained.
Interest income for the nine months ended September 30, 1999 was $200.4
million compared to $146.6 million for the nine months ended September 30, 1998.
The increase of $53.9 million or 36.7% was primarily due to an increase of $26.6
million in interest income from loans and an increase of $26.9 million in
interest income from securities. The increase in interest income from loans was
due to an increase of $509.3 million in the average balance of loans partially
offset by a 29 basis point decrease in the average yield to 7.69%. The increase
in interest income from securities was due to a $577.6 million increase in the
average balance of securities partially offset by a 5 basis point decline in the
average yield on securities. The primary reasons for the increase in the average
balance of loans and securities are the same as those previously stated.
INTEREST EXPENSE
The Company's total interest expense was $36.3 million for the third
quarter of 1999, an increase of $12.1 million or 50.2% over the third quarter of
1998. The primary reason for the increase was a $12.7 million increase in
interest expense on borrowed funds due to an increase of $1.0 billion in the
average balance of borrowed funds partially offset by a decrease of 39 basis
points in the average cost. The increase in the average balance is a result of
the Bank's program to fund asset growth with borrowed funds at acceptable
spreads to leverage the balance sheet. The decline in the average cost is
primarily due to the declining interest rate environment over a majority of the
period. However, in the current rising interest rate environment it can be
expected that the average cost of borrowings will increase.
For the nine-month period ended September 30, 1999 interest expense was
$98.5 million compared to $59.1 million for the nine months ended September 30,
1998. The increase of $39.4 million or 66.7% was primarily due to a $40.7
million increase in interest expense on borrowed funds. The increase in interest
expense on borrowed funds was due to an increase of $1.1 billion in the average
<PAGE>
balance of borrowed funds partially offset by a decrease in the average yield
from 5.74% to 5.25%. The reason for the growth and decline in the average cost
in the nine month period are the same as those previously stated for the third
quarter of 1999.
NET INTEREST INCOME
Net interest income increased $4.7 million or 15.6% to $34.6 million
for the third quarter of 1999 compared to $29.9 million for the third quarter of
1998. The increase was due to a $16.8 million increase in interest income
partially offset by a $12.1 million increase in interest expense. The increase
in interest income was due to an increase of $995.3 million in the average
balance of interest earning assets partially offset by an eight basis point
decrease in the average yield to 6.92%. The increase in interest expense was due
15
<PAGE>
to an increase of $1.1 billion in the average balance of interest bearing
liabilities.
For the nine-month period ended September 30, 1999, net interest income
was $101.9 million, an increase of $14.4 million or 16.5% over the same time
period one year ago. The increase was the result of a $53.9 million or 36.7%
increase in interest income partially offset by an increase of $39.4 million or
66.7% in interest expense. The increase in interest income was primarily due to
a $1.1 billion increase in the average balance of interest earning assets
partially offset by a decrease in the average yield from 7.08% for the nine
months ended September 30, 1998 to 6.92% for the nine months ended September 30,
1999. The increase in interest expense resulted from an increase of $1.2 billion
in the average balance of interest bearing liabilities and an increase in the
average cost from 4.21% for the nine months ended September 30, 1998 to 4.33%
for the comparable time period this year. The increase in the average balance
and average cost of interest bearing liabilities is due to the Bank's continued
use of borrowed funds to fund asset growth at acceptable spreads.
The Company's interest rate spread and interest rate margin for the
nine month period ended September 30, 1999 were 2.59% and 3.52%, respectively,
compared to 2.87% and 4.22%, respectively for the nine month period ended
September 30, 1998. The Bank's use of borrowed funds to leverage the balance
sheet resulting in a different composition of interest bearing liabilities along
with the previous declining 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 September 30,
1999 was $30,000 compared to $500,000 for the three months ended September 30,
1998. For the nine-month period ended September 30, 1999 the provision for loan
losses was $100,000 compared to $1.5 million for the first nine months of 1998.
The reduction in the provision is primarily due to the decline in non-performing
assets.
Non-performing assets were $13.7 million at September 30, 1999 compared
to $17.1 million at December 31, 1998. As a percent of assets, non-performing
assets were .32% at September 30, 1999 and .45% at December 31, 1998. During the
first nine months non-performing assets decreased $3.3 million or 19.6%.
The allowance for loan losses was $16.2 million as of September 30,
1999 compared to $16.6 million as of December 31, 1998. The decline in
non-performing assets has resulted in the allowance for loan losses growing to
127.5% of non-performing loans compared to 102.37% as of December 31, 1998.
Management of the Company believes that as of September 30, 1999 the allowance
for loan losses was adequate. However, no assurance can be given that future
charge-offs and/or provisions will not be needed.
OTHER INCOME
Other income was $9.2 million for the three months ended September 30,
1999 compared to $1.9 million for the three months ended September 30, 1998. The
increase of $7.3 million was primarily due to fees generated by the Mortgage
Company of $5.8 million, the increase in the cash surrender value of the Bank
Owned Life Insurance ("BOLI") of $1.0 million, an increase in the various
deposit account related fees of $0.5 million, and net security gains of $0.4
million.
<PAGE>
For the nine-month period ended September 30, 1999 other income totaled
$24.2 million compared to $6.7 million for the first nine months of 1998. The
increase of $17.5 million was primarily due to the fees generated by the
Mortgage Company of $16.3 million and the increase in the cash surrender value
of the BOLI of $1.0 million.
TOTAL OTHER EXPENSES
Total other expenses for the third quarter of 1999 were $21.4 million
or $8.1 million more than the same time period last year. This increase was the
result of an increase of $5.6 million in personnel expense and a $1.8 million
16
<PAGE>
increase in other expenses. The increase in personnel expense was due to a $2.4
million increase in commission expense, the personnel expenses of the Mortgage
Company of $1.8 million, and an increase in the non-cash expense generated by
the RRP plan of $576,000, and other routine merit pay increases. The increase in
commission expense was primarily due to the operation of the Mortgage Company.
For the nine month period ended September 30, 1999 total other expenses
were $60.4 million compared to $37.8 million for the first nine months of 1998.
The increase of $22.6 million or 59.8% was primarily due to an increase of $16.8
million in personnel costs, $1.3 million in occupancy expense and $4.4 million
in other expenses. The increase in personnel expense, including an increase of
$6.1 million was primarily due to the personnel costs of the Mortgage Company of
$5.0 million in commission an increase in the non-cash expense generated by the
RRP plan of $3.5 million, and other routine merit pay increases. The increase in
commission expense is primarily due to the operation of the Mortgage Company.
The increase in occupancy expense is primarily due to the $800,000 added
expenses from the Mortgage Company and an increase in depreciation expense
primarily due to the new computer equipment purchased as part of our data
processing conversion. The increase in other expense is primarily due to the
operation of the Mortgage Company.
Provision for Income Taxes
The provision for income taxes for the three months ended September 30,
1999 was $8.7 million compared to $7.1 million for the three months ended
September 30, 1998. The primary reason for the increase is the increase in
income before the provision for income taxes. The effective tax rate for the
third quarter of 1999 was 39.2% the same as the third quarter of 1998. The
reduction in the effective rate is primarily due to the tax-free earnings
generated from the BOLI.
For the nine-month period ended September 30, 1999 the provision for
income taxes was $26.4 million compared to $22.4 million for the comparable time
period last year. The primary reason for the increase was the $10.8 million
increase in income before the provision for income taxes which was partially
offset by a decrease in the effective tax rate. The effective tax rate for 1999
is 40.3% compared to 40.8% for 1998.
LIQUIDITY AND COMMITMENTS
The Company's liquidity, represented by cash and cash equivalents, is a
product of its operating, investing and financing activities. The Company'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.
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 Company 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,
1999, total approved loan origination commitments outstanding amounted to $308.2
<PAGE>
million. At the same date, the unadvanced portion of construction loans amounted
to $28.9 million. Certificates of deposit scheduled to mature in one year or
less at September 30, 1999 totaled $495.4 million. Investment securities
scheduled to mature in one year or less at September 30, 1999 totaled $12.1
million and amortization from investments is projected at $324.1 million over
the next 12 months. 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 its current commitments.
17
<PAGE>
CAPITAL
At September 30, 1999, the Bank had regulatory capital which
was well in excess of all regulatory requirements set by the OTS. 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 $ 62,716 1.50% $ 398,770 9.54% $ 336,054 8.04%
Core capital $ 167,333 4.00% $ 401,006 9.59% $ 233,673 5.59%
Risk-based capital $ 155,944 8.00% $ 417,255 21.41% $ 261,311 13.41%
</TABLE>
YEAR 2000
In the third quarter of 1998, the Company converted most of its mission
critical 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 born by the servicer under terms of Company's contract with them.
A comprehensive test of the Year 2000 functionality of the system was completed
during the first quarter of 1999. No significant problems were noted in the test
process. The Company's other information technology systems have been
substantially upgraded for Year 2000 compliance. In accordance with regulatory
guidelines, the Company has developed and successfully tested a Year 2000
business resumption contingency plan. As of October 1999 the Company has
incurred expenses of $100,000 related to year 2000 compliance and estimates
additional expenses of $50,000.
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
earnings of the Company, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's 1998 Annual Report to
Stockholders. There has been no material change in the Company's asset and
liability position since December 31, 1998.
18
<PAGE>
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1999 1998
------------------------------------ --------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------- -------- ---- ------- -------- ----
Interest-earning assets: (Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans receivable (1):
Real estate loans ........................ $1,813,208 $ 34,044 7.45% $1,253,277 $ 24,428 7.73%
Other loans .............................. 80,376 2,090 10.31% 47,928 1,532 12.69%
---------- ---------- ---------- ----------
Total loans ........................... 1,893,584 36,134 7.57% 1,301,205 25,960 7.92%
Securities ............................... 2,132,376 34,347 6.39% 1,728,872 27,626 6.34%
OTHER INTEREST-EARNING ASSETS (2) ........ 33,997 375 4.38% 34,564 482 5.54%
---------- ---------- ------ ---------- ---------- -----
Total interest-earning assets ............ 4,059,957 70,856 6.92% 3,064,641 54,068 7.00%
---------- ------ ---------- -----
Noninterest-earning assets ............... 204,482 127,596
---------- ----------
Total assets ............................. $4,264,439 $3,192,237
========== ==========
Interest-bearing liabilities:
Deposits:
NOW and money market deposits ............ 166,929 1,060 2.52% 151,106 954 2.50%
Savings and escrow accounts .............. 759,141 4,761 2.49% 722,863 5,245 2.88%
Certificates of deposits ................. 562,354 6,685 4.72% 532,094 6,916 5.16%
---------- ---------- ------ ---------- ---------- ------
Total deposits ........................ 1,488,424 12,506 3.33% 1,406,063 13,115 3.70%
Total Other Borrowings ................... 1,786,182 23,760 5.28% 772,123 11,028 5.67%
---------- ---------- ------ ---------- ---------- ------
Total interest-bearing liabilities ....... 3,274,606 36,266 4.39% 2,178,186 24,143 4.40%
---------- ------ ---------- ------
Noninterest-bearing liabilities (3) ...... 367,173 311,803
---------- ----------
Total liabilities ........................ 3,641,779 2,489,989
Stockholder's equity ..................... 622,660 702,248
---------- ----------
Total liabilities and stockholders' equity $4,264,439 $3,192,237
========== ==========
Net interest-earning assets .............. $ 785,351 $ 886,455
========== ==========
Net interest income/interest rate spread . $ 34,590 2.53% $ 29,925 2.60%
========== ====== ========== ======
Net interest margin ...................... 3.38% 3.87%
Ratio of average interest-earning assets ====== ======
to average interest-bearing liabilities 123.98% 140.70%
====== ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------
1999 1998
-------------------------------------- -------------------------------------
AVERAGE AVERAGE
AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST COST BALANCE INTEREST COST
------- -------- ---- ------- -------- ----
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Real estate loans ........................ $1,657,134 $ 94,388 7.62% $1,175,254 $ 68,942 7.84%
Other loans .............................. 73,870 5,126 9.28% 46,483 4,003 11.51%
---------- ---------- ---------- ----------
Total loans ........................... 1,731,004 99,514 7.69% 1,221,737 72,945 7.98%
Securities ............................... 2,089,810 99,119 6.34% 1,512,175 72,233 6.39%
OTHER INTEREST-EARNING ASSETS (2) ........ 52,913 1,807 4.57% 34,604 1,406 5.43%
---------- ---------- ---- ---------- ---------- ----
Total interest-earning assets ............ 3,873,727 200,440 6.92% 2,768,516 146,584 7.08%
---------- ---- ---------- ----
Noninterest-earning assets ............... 162,279 112,489
---------- ----------
Total assets ............................. $4,036,006 $2,881,005
========== ==========
Interest-bearing liabilities:
Deposits:
NOW and money market deposits ............ 164,249 3,087 2.51% 145,773 2,733 2.51%
Savings and escrow accounts .............. 752,260 14,014 2.49% 713,553 15,169 2.84%
Certificates of deposits ................. 551,257 19,635 4.76% 525,379 20,130 5.12%
---------- ---------- ------ ---------- ---------- -----
Total deposits ........................ 1,467,766 36,736 3.35% 1,384,705 38,032 3.67%
Total Other Borrowings ................... 1,573,740 61,790 5.25% 491,429 21,084 5.74%
---------- ---------- ------ ---------- ---------- -----
Total interest-bearing liabilities ....... 3,041,506 98,526 4.33% 1,876,134 59,116 4.21%
---------- ------ ---------- -----
Noninterest-bearing liabilities (3) ...... 354,411 306,436
---------- ----------
Total liabilities ........................ 3,395,917 2,182,570
Stockholders' equity ..................... 640,089 698,435
---------- ----------
Total liabilities and stockholders' equity $4,036,006 $2,881,005
========== ==========
Net interest-earning assets .............. $ 832,221 $ 892,382
========== ==========
Net interest income/interest rate spread . $ 101,914 2.59% $ 87,468 2.87%
========== ====== ========== ======
Net interest margin ...................... 3.52% 4.22%
Ratio of average interest-earning assets ====== ======
to average interest-bearing liabilities 127.36% 147.56%
====== ======
</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.
19
<PAGE>
RATE/VOLUME ANALYSIS
The following table sets forth the effects of changing rates and volumes on net
interest income of the Company. The 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 September 30,
---------------------------------------------------
1999 compared to 1998
---------------------------------------------------
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 .............................. $ (897) $ 10,914 $ (401) $ 9,616
Other loans .................................... (286) 1,038 (194) 558
-------- -------- -------- --------
Total loans receivable ......................... (1,183) 11,952 (595) 10,174
Securities ..................................... 222 6,447 52 6,721
Federal funds sold and interest-bearing deposits (101) (8) 2 (107)
-------- -------- -------- --------
Total net change in income on interest-
earning assets ................................. (1,062) 18,391 (541) 16,788
-------- -------- -------- --------
Interest-bearing liabilities:
Deposits:
NOW and money market deposits .................. 5 100 1 106
Savings and escrow accounts .................... (711) 263 (36) (484)
Certificates of deposit ........................ (590) 393 (34) (231)
-------- -------- -------- --------
Total deposits ................................. (1,296) 756 (69) (609)
Other Borrowings ............................... (757) 14,484 (995) 12,732
-------- -------- -------- --------
Total net change in expense on
interest-bearing liabilities ................... (2,053) 15,240 (1,064) 12,123
-------- -------- -------- --------
Net change in net interest income .............. $ 991 $ 3,151 $ 523 $ 4,665
======== ======== ======== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------------
Increase (decrease) due to
------------------------------------ Total
Rate/ Net Increase
Rate Volume Volume (Decrease)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Real estate loans .............................. $ (2,001) $ 28,268 $ (820) $ 25,447
Other loans .................................... (778) 2,358 (458) 1,122
-------- -------- -------- --------
Total loans receivable ......................... (2,779) 30,626 (1,278) 26,569
Securities ..................................... (511) 27,592 (195) 26,886
Federal funds sold and interest-bearing deposits (224) 744 (119) 401
-------- -------- -------- --------
Total net change in income on interest-
earning assets ................................. (3,514) 58,962 (1,592) 53,856
-------- -------- -------- --------
Interest-bearing liabilities:
Deposits:
NOW and money market deposits .................. 7 346 1 354
Savings and escrow accounts .................... (1,876) 823 (102) (1,155)
Certificates of deposit ........................ (1,416) 991 (70) (495)
-------- -------- -------- --------
Total deposits ................................. (3,285) 2,160 (171) (1,296)
Other Borrowings ............................... (1,789) 46,435 (3,940) 40,706
-------- -------- -------- --------
Total net change in expense on
interest-bearing liabilities ................... (5,074) 48,595 (4,111) 39,410
-------- -------- -------- --------
Net change in net interest income .............. $ 1,560 $ 10,367 $ 2,519 $ 14,446
======== ======== ======== ========
</TABLE>
20
<PAGE>
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
---------------------------------------------------
None
ITEM 5 OTHER INFORMATION
-----------------
a) On July 18, 1999, the Company announced the acquisition of First
State Bancorp, located in Central New Jersey with a scheduled closing in the
first quarter of 2000. First State Bancorp, a $360.0 million holding company
operates First State Bank which currently operates six branches in Monmouth and
Ocean Counties and is in the process of opening three new branches.
b) The Company's available for sale investment securities include
corporate bonds, with a carrying value of $3.1 million at September 30, 1999,
from a corporate creditor which reportedly has been experiencing financial
difficulties. These securities were acquired by the Company in July 1998 for
approximately $10.0 million. While the Company has received timely payments on
these bonds to date, the carrying value had been reduced by $6.9 million as of
September 30, 1999 to reflect the reduction in their market value. The creditor
recently announced that it has entered into an arrangement with the intention to
obtain an equity investor or sell the company. No assurance can be given that
the Company will not be required to take further write-downs and/or recognize
losses on these bonds in the future if the creditor's financial condition
deteriorates further. If the Company determines that these bonds are permanently
impaired, the Company would recognize a charge to current earnings equal to the
difference between the cost and the carrying value at such time. While there is
a limited market value for these bonds, management believes that their fair
value as of November 8, 1999 is approximately $3.0.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
a) Exhibits:
27.0 Financial Data Schedule
b) Reports on Form 8K
On August 19, 1999, Staten Island Bancorp filed a report on
form 8K to announce the acquisition of First State Bancorp,
the holding company for First State Bank.
On August 30, 1999 the above 8K was amended.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
STATEN ISLAND BANCORP, INC.
DATE: NOVEMBER 10, 1999 BY: /S/ HARRY P. DOHERTY
----------------- --------------------
Harry P. Doherty, Chairman of the Board
and Chief Executive Officer
DATE: NOVEMBER 10, 1999 BY: /S/ EDWARD KLINGELE
----------------- -------------------
Edward Klingele, Sr. Vice President
and Chief Financial Officer
22
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