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, 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
40,730,123 shares of Common Stock outstanding as of August 9, 1999.
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<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
Table of Contents PAGE
- ----------------- ----
<S> <C>
Part I Financial Information
Item 1 Financial Statements
Statements of Condition 1
(As of June 30, 1999 and December 31, 1998)
Statements of Income (For three and six months ended June 30, 1999 and
three and six months ended June 30, 1998) 2
Statement of Changes in Stockholders Equity
(For six months ended June 30, 1999) 3
Statements of Cash Flows (For the six months ended June 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 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
--------------------------------
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<TABLE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
---------------------------------
June 30, 1999 December 31, 1998
------------- -----------------
(000's omitted)
(unaudited)
<S> <C> <C>
ASSETS
ASSETS:
Cash and due from banks .............................................. $ 45,253 $ 88,059
Federal funds sold ................................................... 37,650 45,050
Securities available for sale ........................................ 2,125,175 2,029,041
Loans, net ........................................................... 1,764,566 1,457,058
Loans held for sale, net ............................................. 67,307 77,943
Accrued interest receivable .......................................... 22,490 19,389
Bank premises and equipment, net ..................................... 22,557 22,163
Intangible assets, net ............................................... 16,566 17,701
Other assets ......................................................... 32,631 20,543
----------- -----------
Total assets ......................................................... $ 4,134,195 $ 3,776,947
=========== ===========
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<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CONDITION
---------------------------------
June 30, 1999 December 31, 1998
------------- -----------------
(000's omitted)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Due Depositors-
Savings .............................................................. $ 752,569 $ 730,614
Time ................................................................. 554,457 537,154
Money market ......................................................... 86,837 82,360
NOW accounts ......................................................... 78,464 73,541
Demand deposits ...................................................... 347,080 305,392
----------- -----------
Total deposits ....................................................... 1,819,407 1,729,061
Borrowed funds ....................................................... 1,645,698 1,344,517
Advances from borrowers for taxes and insurance ...................... 9,278 7,091
Accrued interest and other liabilities ............................... 41,847 27,236
----------- -----------
Total liabilities .................................................... 3,516,230 3,107,905
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, par value $.01 per share, 100,000,000
shares authorized, 45,130,312 issued and 41,035,705
outstanding at June 30, 1999 and 45,130,312 issued and
43,704,812 outstanding at December 31, 1998 .......................... 451 451
Additional paid-in-capital ........................................... 535,179 534,464
Retained earnings-substantially restricted ........................... 232,980 215,414
Unallocated common stock held by ESOP ................................ (37,082) (38,456)
Unearned common stock held by RRP .................................... (30,873) (30,873)
Treasury stock 4,094,607 shares at June 30, 1999
and 1,425,500 at December 31, 1998 at cost ........................... (76,359) (27,480)
----------- -----------
624,296 653,520
Accumulated other comprehensive income, net of taxes ................. (6,331) 15,522
----------- -----------
Total stockholders' equity ........................................... 617,965 669,042
----------- -----------
Total liabilities and stockholders' equity ........................... $ 4,134,195 $ 3,776,947
=========== ===========
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(000's omitted)
unaudited
<S> <C> <C> <C> <C>
Interest Income:
Loans ...................................................... $ 32,715 $ 24,351 $ 63,380 $ 46,985
Securities, available for sale ............................. 33,420 23,257 64,772 44,607
Federal funds sold ......................................... 705 442 1,432 924
----------- ----------- ----------- -----------
Total interest income ...................................... 66,840 48,050 129,584 92,516
----------- ----------- ----------- -----------
Interest Expense:
Savings and escrow ......................................... 4,691 5,077 9,253 9,924
Time ....................................................... 6,481 6,666 12,950 13,214
Money market and NOW ....................................... 1,045 917 2,027 1,779
Borrowed funds ............................................. 20,316 6,223 38,030 10,056
----------- ----------- ----------- -----------
Total interest expense ..................................... 32,533 18,883 62,260 34,973
----------- ----------- ----------- -----------
Net interest income ........................................ 34,307 29,167 67,324 57,543
Provision for Loan Losses .................................. 11 501 70 1,002
Net interest income after provision for possible loan losses 34,296 28,666 67,254 56,541
Other Income (Loss):
Service and fee income ..................................... 9,043 1,977 14,537 4,126
Securities transactions .................................... 361 92 485 675
----------- ----------- ----------- -----------
9,404 2,069 15,022 4,801
<PAGE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended For the Six Months Ended
June 30, June 30,
------------------------- -------------------------
1999 1998 1999 1998
----------- ----------- ----------- -----------
(000's omitted)
unaudited
<S> <C> <C> <C> <C>
Other Expenses:
Personnel .................................................. 13,268 6,186 23,674 12,430
Occupancy and equipment .................................... 1,915 1,444 3,799 2,919
Amortization of intangible assets .......................... 557 519 1,110 1,038
FDIC Insurance ............................................. 49 57 99 108
Data processing ............................................ 1,214 997 2,141 2,193
Marketing .................................................. 354 337 702 674
Professional fees .......................................... 437 848 995 1,260
Other ...................................................... 3,446 1,889 6,399 3,827
----------- ----------- ----------- -----------
Total other expenses ....................................... 21,240 12,277 38,919 24,449
----------- ----------- ----------- -----------
Income before provision for income taxes ................... 22,460 18,458 43,357 36,893
Provision for Income Taxes ................................. 9,129 7,515 17,706 15,353
----------- ----------- ----------- -----------
Net Income ................................................. $ 13,331 $ 10,943 $ 25,651 $ 21,540
=========== =========== =========== ===========
Earnings Per Share:
Basic ...................................................... $ 0.35 $ 0.27 $ 0.66 $ 0.52
Fully Diluted .............................................. $ 0.35 $ 0.27 $ 0.66 $ 0.52
Weighted Average:
Common Shares .............................................. 45,130,312 45,130,312 45,130,312 45,130,312
Less: Unallocated ESOP/RRP Shares .......................... 3,374,827 3,375,706 3,403,278 3,406,586
Less: Treasury Shares ...................................... 3,440,288 -- 2,754,345 --
----------- ----------- ----------- -----------
38,315,197 41,754,606 38,972,689 41,723,726
=========== =========== =========== ===========
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(000's omitted)
unaudited
Unallocated
Additional Common Unearned
Common Paid-In Stock RRP
Stock Capital Held by ESOP Shares
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance January 1, 1999................ $ 451 $ 534,464 $ (38,456) $ (30,873)
Change in unrealized
appreciation (depreciation)
on securities, net of tax..............
Allocation of 114,452 ESOP shares 715 1,374
Treasury stock (2,669,107) at cost.....
Net Income.............................
Dividends paid.........................
===================================================================================
Balance June 30, 1999.................. $ 451 $ 535,179 $ (37,082) $ (30,873)
===================================================================================
<PAGE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN
STOCKHOLDERS' EQUITY
(000's omitted)
unaudited
Accumulated
Other
Treasury Comprehensive Retained Comprehensive
Stock Income Income Income Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance January 1, 1999................$ (27,480) $ 215,414 $ 15,522 $ 669,042
Change in unrealized
appreciation (depreciation)
on securities, net of tax.............. (21,853) (21,853) (21,853)
Allocation of 114,452 ESOP shares 2,089
Treasury stock (2,669,107) at cost..... (48,879) (48,879)
Net Income............................. 25,651 25,651 25,651
-----------
3,798
Dividends paid......................... (8,085) (8,085)
=======================================================================================
Balance June 30, 1999..................$ (76,359) $ 232,980 $ (6,331) $ 617,965
=======================================================================================
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 6 MONTHS ENDED JUNE 30, 1999 AND 1998
1999 1998
--------- ---------
(000 omitted)
unaudited
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income .............................................. $ 25,651 $ 21,540
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization ........................... 1,174 917
Accretion and Amortization of bond and mortgage premiums 1,323 859
Amortization of intangible assets ....................... 1,110 1,038
Loss (Gain) on sale of available for sale securities .... (485) (583)
Expense charge relating to allocation and earned
portions of employee benefit plan ....................... 4,357 2,089
Other noncash expense (income) .......................... (5,359) 2,033
Provision for loan losses ............................... 70 1,000
Decrease in deferred loan fees .......................... (793) (65)
Decrease (increase) in accrued interest receivable ...... (3,101) (1,854)
Decrease (increase) in other assets ..................... 6,802 (333)
(Decrease) increase in accrued interest other liabilities 15,558 (46,032)
(Increase) decrease in deferred income taxes ............ 1,507 359
Recoveries of loans ..................................... 501 440
--------- ---------
Net cash provided by operating activities ............... 48,315 (18,592)
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of available for sale securities ............. 260,740 214,926
Sales of available for sale securities .................. 23,045 7,987
Purchases of available for sale securities .............. (422,821) (504,002)
Principal collected on loans ............................ 100,054 73,590
Loans made to cutomers .................................. (734,892) (236,239)
Purchases of Loans ...................................... (5,988) 0
Sale of Loans ........................................... 345,248 2,871
Capital expenditures .................................... (657) (1,278)
--------- ---------
Net cash used in investing activities ................... (435,271) (442,145)
<PAGE>
<CAPTION>
STATEN ISLAND BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 6 MONTHS ENDED JUNE 30, 1999 AND 1998
1999 1998
--------- ---------
(000 omitted)
unaudited
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposit accounts ........................ 92,533 33,316
Borrowings .............................................. 301,181 360,000
Dividends paid .......................................... (8,085) (3,159)
Purchase of Treasury Stock .............................. (48,879)
--------- ---------
Net cash provided by financing activities ............... 336,750 390,157
--------- ---------
Net (decrease) increase in cash and cash equivalents .... (50,206) (70,580)
CASH AND EQUIVALENTS, beginning of year ................. 133,109 148,935
--------- ---------
CASH AND EQUIVALENTS, end of period ..................... $ 82,903 $ 78,355
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for-
Interest ................................................ $ 59,300 $ 32,464
Income taxes ............................................ $ 9,110 $ 14,059
</TABLE>
4
<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"), and 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 six and three month period
ended June 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.
5
<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 $76.4 million at June 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 $666.0 million at June 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 June 30, 1999 were $709.3 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 $95,000 as of June 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 Deriviative 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.
6
<PAGE>
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, 1999 and December 31,1998.
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
----------------------- -----------------------
Bonds - Available For Sale Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- ----------
(000's omitted)
<S> <C> <C> <C> <C>
U.S. Government ..................................... $ 19,567 $ 19,784 $ 29,678 $ 30,249
Govt. Sponsored Agencies ............................ 141,815 137,924 45,632 46,093
Industrial and Finance .............................. 184,866 178,106 150,931 146,982
Foreign ............................................. 549 514 289 248
---------- ---------- ---------- ----------
Total Debt Securities ............................... 346,797 336,328 226,530 223,572
---------- ---------- ---------- ----------
G.N.M.A. - M.B.S .................................... 18,630 18,444 20,555 21,035
F.H.L.M.C. - M.B.S .................................. 352,530 348,151 319,905 325,608
F.N.M.A. - M.B.S .................................... 523,853 523,827 558,595 563,898
Agency C.M.O.s ...................................... 254,243 248,691 232,069 234,636
Privately Issued C.M.O.s ............................ 454,834 443,938 473,424 476,329
Payments in Transit ................................. 1,823 1,823 2,481 2,481
---------- ---------- ---------- ----------
Total Mortgage-Backed and Mortgage Related Securities 1,605,913 1,584,874 1,607,029 1,623,987
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total Bonds - Available For Sale ................... 1,952,710 1,921,202 1,833,559 1,847,559
---------- ---------- ---------- ----------
<CAPTION>
Equity Securities Amortized Fair Amortized Fair
Cost Value Cost Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Preferred Stock .................................... 78,870 76,219 79,010 80,150
Common Stock ....................................... 78,044 85,542 58,995 61,284
IIMF Cap. Apprec ................................... 27,725 42,212 27,626 40,048
---------- ---------- ---------- ----------
Total Equity Securities ............................ 184,639 203,973 165,631 181,482
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Total Investments ................................... $2,137,349 $2,125,175 $1,999,190 $2,029,041
========== ========== ========== ==========
</TABLE>
7
<PAGE>
Loan Portfolio Composition The following table sets forth the
composition of the Bank's loan portfolio at June 30, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------------------- --------------------------
Percent of Percent of
Amount Total Amount Total
----------- ------ ----------- ------
(Dollars in Thousands) (Dollars in Thousands)
<S> <C> <C> <C> <C>
Mortgage loans:
Single-family residential ........... $ 1,418,913 80.41% $ 1,187,212 81.48%
Multi-family residential ............ 35,871 2.03% 33,328 2.29%
Commercial real estate .............. 184,310 10.45% 137,720 9.45%
Construction and land ............... 52,290 2.96% 42,420 2.91%
Home equity ......................... 5,956 0.34% 6,121 0.42%
----------- ------ ----------- ------
Total mortgage loans ................ 1,697,340 96.19% 1,406,801 96.55%
Other loans:
Student loans ....................... 591 0.03% 940 0.06%
Passbook loans ...................... 5,785 0.33% 5,989 0.41%
Commercial business loans ........... 42,637 2.42% 36,592 2.51%
Other consumer loans ................ 33,389 1.89% 24,070 1.65%
----------- ------ ----------- ------
Total other loans ................... 82,402 4.67% 67,591 4.63%
Total loans receivable .............. 1,779,742 100.86% 1,474,392 101.18%
Less:
Premium (discount) on loans purchased 2,542 0.14% 1,194 0.08%
Allowance for loan losses ........... (16,600) (0.94)% (16,617) (1.14)%
Deferred loan fees .................. (1,118) (0.06)% (1,911) (0.12)%
----------- ------ ----------- ------
Loans receivable, net ............... $ 1,764,566 100.00% $ 1,457,058 100.00%
=========== ====== =========== ======
</TABLE>
8
<PAGE>
Delinquent Loans. The following table sets forth information concerning
delinquent loans at June 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>
June 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
------ -------- ------ -------- ------ --------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage loans:
Single-family residential ......... $24,934 1.76% $ 5,106 0.36% $ 4,572 0.32%
Multi-family residential .......... -- -- 47 0.13% -- 0.0
Commercial real estate ............ 6,476 3.51% 745 0.40% 1,076 0.58%
Construction and land ............. 138 0.26% -- 0.00% 2,128 4.07%
Home equity ....................... 311 5.22% 34 0.57% 173 2.90%
------- ---- ------- ---- ------- ----
Total mortgage loans .............. 31,859 1.88% 5,932 0.35% 7,949 0.47%
Other loans:
Commercial business loans ......... 1,304 3.06% 135 0.32% 568 1.33%
Other loans ....................... 1,000 2.51% 367 0.92% 602 1.51%
------- ---- ------- ---- ------- ----
Total other loans ................. 2,304 2.80% 502 0.61% 1,170 1.42%
------- ---- ------- ---- ------- ----
Total loans ....................... 34,163 1.92% 6,434 0.36% 9,119 0.51%
======= ==== ======= ==== ======= ====
</TABLE>
9
<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 at June 30, 1999 and December 31,
1998.
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
-------------- -----------------
(000's omitted)
<S> <C> <C>
Non-accrual loans:
Mortgage loans:
Single-family residential ........................ $ 5,054 $ 7,067
Multi-family residential ......................... -- 131
Commercial real estate ........................... 4,295 6,534
Construction and land ............................ 1,378 1,761
Home equity ...................................... 208 212
Other loans:
Commercial business loans ........................ 1,501 346
Other loans ...................................... 262 181
------- -------
Total non-accruing loans ......................... 12,698 16,232
------- -------
Total non-performing loans ....................... 12,698 16,232
------- -------
Other real estate owned, net ..................... 1,028 849
------- -------
Total non-performing assets ...................... $13,726 $17,081
======= =======
Non-performing assets to total loans ............. 0.77% 1.16%
Non-performing assets to total assets ............ 0.33% 0.45%
Non-performing loans to total loans .............. 0.71% 1.10%
Non-performing loans to total assets ............. 0.31% 0.43%
</TABLE>
10
<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>
Six Months
Ended Year Ended
June 30, December 31,
--------------------------
1999 1998
--------------------------
(000's omitted)
<S> <C> <C>
Allowance at beginning of period ................... $16,617 $15,709
Provisions ......................................... 70 1,594
Increase as a result of acquisition ................ 96
Charge-offs:
Mortgage loans:
Construction, land and land development ......... -- --
Single-family residential ....................... 70 358
Multi-family residential ........................ -- 31
Commercial real estate .......................... 217 344
Other loans ........................................ 301 1,386
------- -------
Total charge-offs ............................... 588 2,119
Recoveries:
Mortgage loans:
Construction, land and land development ......... -- 3
Single-family residential ....................... 301 267
Multi-family residential ........................ -- --
Commercial real estate .......................... 2 210
Other loans ........................................ 198 857
------- -------
Total recoveries ................................ 501 1,337
======= =======
Allowance at end of period ......................... $16,600 $16,617
======= =======
Allowance for possible loan losses
to total nonperforming loans at
end of period ...................................... 130.73% 102.37%
Allowance for possible loan losses
to total loans at end of period .................... 0.93% 1.13%
</TABLE>
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Changes in Financial Condition
Total assets at June 30, 1999 were $4.1 billion or $357.2 million
or 9.46% more than total assets at December 31, 1998. The increase in total
assets was the result of an increase of $307.5 million or 21.1% in loans net and
an increase in securities available for sale of $96.1 million or 4.74%. 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 and
its business development program for commercial loans along with the retention
of certain adjustable rate residential loans originated by the Mortgage Company.
The increase in the securities available for sale portfolio was the result of
the Bank continuing its capital management strategy to fund asset growth through
borrowings at spreads deemed acceptable to management.
Total deposits increased $90.3 million or 5.23% from $1.7 billion
December 31, 1998 to $1.8 billion June 30, 1999. The Bank's continued business
development efforts especially for commercial accounts, is the primary reason
for this increase. Non-interest bearing demand deposit accounts increased $41.7
million, savings accounts increased by $22.0 million, time accounts increased by
$17.3 million, NOW accounts increased by $4.9 million and money market accounts
increased by $4.5 million during the six months ended June 30, 1999.
Borrowed funds increased $301.2 million or 22.4% to $1.6 billion
at June 30, 1999 from $1.3 billion at 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 June 30, 1999 was $618.0 million or
14.95% of total assets compared to $669.0 million or 17.71% of total assets as
of December 31, 1998. The decrease of $51.1 million was primarily due to the
stock repurchase program which resulted in the purchase of 2.7 million shares at
a cost of $48.9 million during the first six months of 1999, aggregate cash
dividend payments of $8.1 million and a decrease of $21.9 million in unrealized
appreciation on available for sale securities, net of taxes. These decreases
were partially offset by net income of $25.7 million and the allocation of
Employee Stock Ownership Plan ("ESOP") shares resulting in an increase of $2.1
million. The tangible book value per share was $14.66 as of June 30, 1999.
Results of Operations
The Company reported net income of $13.3 million or $0.35 per
share for the three months ended June 30, 1999 compared to net income of $10.9
million or $0.27 per share for the three months ended June 30, 1998. The
increase of $2.4 million or 21.82% for the quarter was primarily due to an
increase of $5.1 million or 17.62% in net interest income and a $7.3 million or
354.52% increase in other income. These increases in income were partially
offset by a $9.0 million increase in total other expenses and a $1.6 million
increase in the provision for income taxes.
For the six months ended June 30, 1999 earnings were $25.7
million compared to $21.5 million for the six months ended June 30, 1998, an
increase of $4.1 million or 19.09%. The increase in net income for the first six
months of 1999 was primarily due to an increase in net interest income of $9.8
million and an increase in other income of $10.2 million which were partially
offset by an increase of $14.5 million in total other expenses and an increase
in the provision for income taxes of $2.4 million. Earnings per share for the
first six months of 1999 were $0.66 compared to $0.52 for the first six months
of 1998.
12
<PAGE>
Interest Income
The Company's total interest income was $66.8 million for the
three months ended June 30, 1999 compared to $48.1 million for the three months
ended June 30, 1998. The $18.8 million or 39.11% increase was primarily due to a
$10.2 million increase in interest income from securities and an $8.4 million
increase in interest income from loans. The primary reasons for the increase in
interest income from securities was an increase of $645.6 million in the average
balance of securities. The increase in interest income from loans was primarily
due to an increase of $470.0 million in the average balance of loans partially
offset by a decrease in the average yield from 7.87% for the first quarter of
1998 to 7.67% for the second quarter of 1999. The increase in the average
balance of the securities portfolio was due to the Bank's continued program to
leverage its balance sheet through the use of borrowed funds to fund asset
growth at spreads deemed acceptable by management. 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 business development
efforts especially in commercial loans and the continued growth in the Bank's
broker program. The decrease in the average yield on the loan portfolio was due
to the payoff of certain higher yielding loans and the origination of loans at
market interest rates which are currently lower than the average yield on the
Bank's loan portfolio.
Interest income for the six months ended June 30, 1999 was $129.6
million compared to $92.5 million for the six months ended June 30, 1998. The
increase of $37.1 million or 40.1% was primarily due to an increase of $20.2
million or 45.20% in interest income from securities and an increase of $16.4
million or 34.9% in interest income from loans. The increase in interest income
from securities was due to an increase of $666.7 million in the average balance
of securities which was partially offset by a decrease of 10 basis points in the
average yield to 6.32%. The increase in interest income from loans was due to an
increase of $467.0 million in the average balance of loans which was partially
offset by a decrease in the average yield from 8.02% for the six months ended
June 30, 1998. The reasons for the growth in the securities and loan portfolios
and the decrease in the average yield of the loan portfolio are the same as
stated for the second quarter of 1999. The decrease in the average yield of the
securities portfolio was primarily due to the payoff of higher yielding
investments and the reinvestment of these funds at lower current market rates.
Interest Expense
The Company's total interest expense was $32.5 million for the
second quarter of 1999, an increase of $13.7 million or 72.29% over the second
quarter of 1998. The primary reason for the increase was a $14.1 million
increase in interest expense on borrowed funds due to an increase of $1.1
billion in the average balance of borrowed funds partially offset by a decrease
in the average cost from 5.73% for the second quarter of 1998 to 5.19% for the
second quarter of 1999. The increase in the average balance is a result of the
Bank's leverage program to fund asset growth. The decline in the average cost
was primarily due to the decline in interest rates.
For the six month period ended June 30, 1999, interest expense
was $62.3 million compared to $35.0 million for the six months ended June 30,
1998. The increase of $27.3 million or 78.02% was primarily due to an increase
of $28.0 million 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
balance of borrowed funds which was partially offset by a decrease in the
average cost from 5.87% for the first six months of 1998 to 5.23% for the first
six months of 1999. The reason for the growth in the average balance and the
decline in the average cost in the six month period are the same as those
discussed above for the second quarter of 1999.
Net Interest Income
Net interest income increased $5.1 million or 17.62% to $34.3
million for the three months ended June 30, 1999 compared to $29.2 million for
the second quarter of 1998. The increase was due to a $18.8 million or 39.1%
increase in interest income which was partially offset by a $13.7 million or
72.29% increase in interest expense. The Company's interest rate
13
<PAGE>
spread and interest rate margin amounted to 2.59% and 3.53%, respectively, for
the three months ended June 30, 1999 compared to 2.85% and 4.24%, respectively,
for the comparable period in 1998. Such decreases were primarily due to the
declining rate environment over the past year resulting in lower interest
earning asset yields and the Bank's continued use of borrowed funds.
For the six month period ended June 30, 1999, net interest income
was $67.3 million an increase of $9.8 million or 17.0% over the same period in
1998. The increase was the result of a $37.1 million or 40.1% increase in
interest income which was partially offset by a $27.3 million or 78.02% increase
in interest expense. The average cost of deposits for the first six months of
1998 was 3.66% compared to 3.35% for the first six months of 1999. The increase
in the average cost was due to the declining interest rate environment and the
use of borrowed funds which had an average cost of 5.23% for the current six
month period compared to 5.81% for the six month period ending June 30, 1998.
The Company's interest rate spread and interest rate margin for
the six month period ending June 30, 1999 was 2.62% and 3.59% respectively,
compared to 3.03% and 4.43% respectively for the six month period ended June 30,
1998. The Bank's use of borrowed funds to leverage the balance sheet and 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 June 30,
1999 was $11,000 compared to $501,000 for the three months ended June 30, 1998.
For the six month period ended June 30, 1999 the provision for loan losses was
$70,000 compared to $1.0 million for the first six months of 1998.
Non-performing assets were $13.7 million at June 30, 1999
compared to $17.1 million at December 31, 1998. Non-performing assets were .31%
of total assets at June 30, 1999 and .43% at December 31, 1998. During the first
six months of 1999 non-performing assets decreased $3.4 million or 20.0%.
The allowance for loan losses was $16.6 million as of both June
30, 1999 and December 31, 1998. The decline in non-performing assets has
resulted in the allowance for loan losses growing to 130.74% of non-performing
loans as of June 30, 1999 compared to 102.37% as of December 31, 1998.
Management of the Company believes that as of June 30, 1998, 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 $9.4 million for the three months ended June 30,
1999 compared to $2.1 million for the comparable time period last year. The
increase of $7.3 million was primarily due to fees generated by the Mortgage
Company. The Company acquired the Mortgage Company in November 1998.
For the six month period ended June 30, 1999 other income was
$15.0 million compared to $4.8 million for the six months ended June 30, 1999.
The primary reason for the increase of $10.2 million was the activities of the
Mortgage Company.
14
<PAGE>
Total Other Expenses
Total other expenses for the second quarter of 1999 were $21.2
million compared to $12.3 million for the second quarter of 1998. The increase
of $9.0 million was primarily due to an increase of $7.1 million in personnel
costs, of which $2.7 million is commissions and $1.6 million in other expenses.
The increase in personnel costs was due to the additional personnel costs of the
Mortgage Company of $2.4 million, non-cash expense generated by the RRP plan of
$1.5 million, and other routine merit pay increases. The increase in commissions
is primarily due to the Mortgage Company. The increase in other expenses was
primarily due to the additional loan and administrative costs generated by the
Mortgage Company.
For the six month period ended June 30, 1999 total other expenses
were $38.9 million compared to $24.4 million for the same time period last year.
The increase of $14.5 million was primarily due to increases in personnel costs
of $11.2 million, of which $3.7 million is commissions and in other expenses of
$2.5 million. The increase in personnel costs was primarily due to costs
generated by the Mortgage Company of $4.1 million, the non-cash expense
generated by the Company's Recognition and Retention Plan ("RRP") of $3.0
million and routine merit pay increases. The increase in commissions was
primarily due to the Mortgage Company. The primary reason for the increase in
other expenses is the same as stated in the three month period.
Provision For Income Taxes
The provision for income taxes for the three months ended June
30, 1999 was $9.1 million compared to $7.5 million for the three months ended
June 30, 1998. The primary reason for the increase was the $4.0 million increase
in income before provision for income taxes. The effective tax rate for the
second quarter of 1999 was 40.6% compared to 40.7% for the second quarter of
1998.
For the six month period ended June 30, 1999 the provision for
income taxes was $17.7 million compared to $15.4 million for the comparable
period last year. The primary reason for the increase was the $6.5 million
increase in income before income taxes which was partially offset by a decrease
in the effective tax rate. This resulted in an effective tax rate of 40.8% for
the 1999 period and 41.6% for the 1998 period. The lower rate during 1999 was a
result of certain tax planning strategies put in place in the second quarter of
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.
As of June 30, 1999, the Company had borrowed funds totaling $1.6
billion as an alternative funding source for asset growth. The Company intends
to continue the use of borrowings 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 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
June 30, 1999, total approved loan origination commitments outstanding amounted
to $332.7 million. At the same date, the unadvanced portion of construction
loans amounted to $23.6 million. Certificates
15
<PAGE>
of deposit scheduled to mature in one year or less at June 30, 1999 totaled
$459.8 million. Investment securities scheduled to mature in one year or less at
June 30, 1999 totaled $12.4 million and amortization from investments is
projected at $296.5 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.
Capital
At June 30, 1999, the Bank had regulatory capital which was well
in excess of 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 $ 59,087 1.50% $379,236 9.63% $320,149 8.13%
Core capital $157,667 4.00% $381,764 9.69% $224,097 5.69%
Risk-based capital $149,590 8.00% $398,565 21.32% $248,975 13.32%
</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 a Year 2000 business resumption
contingency plan. The Company anticipates spending $150,000 to $200,000 on Year
2000 compliance in 1999. All such costs are charged to expense as incurred.
Forward-Looking Statements
This Form 10-Q contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of management
as well as assumptions made by and information currently available to
management. In addition, in portions of this document and the Company's Annual
Report to Stockholders, the words "anticipate," "believe," "estimate," "expect,"
"intend," "should," and similar expressions, or the negative thereof, as they
relate to the Company or the Company's management, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future looking events and are subject to certain risks,
uncertainties and assumptions. Should one or more of these risks or
uncertainties materialize or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
For a discussion of the Company's asset and liability management
policies as well as the potential impact of interest rate changes upon the
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.
16
<PAGE>
<TABLE>
<CAPTION>
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
Three Months Ended June 30,
---------------------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
---------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Real estate loans............................ $ 1,637,579 $ 31,046 7.60% $ 1,194,794 $ 23,106 7.76%
Other loans.................................. 73,918 1,670 9.06% 46,690 1,245 10.69%
----------- -------- ----------- --------
Total loans............................... 1,711,497 32,716 7.67% 1,241,484 24,351 7.87%
Securities................................... 2,127,027 33,420 6.30% 1,481,474 23,257 6.30%
Other interest-earning assets (2)............ 61,473 705 4.60% 33,109 442 5.36%
----------- -------- ---- ----------- -------- ----
Total interest-earning assets................ 3,899,997 66,841 6.87% 2,756,067 48,050 6.99%
-------- ---- -------- ----
Noninterest-earning assets................... 136,300 84,453
----------- -----------
Total assets................................. $ 4,036,297 $ 2,840,520
=========== ===========
Interest-bearing liabilities:
Deposits:
NOW and money market deposits................ 167,414 1,045 2.50% 146,888 917 2.50%
Savings and escrow accounts.................. 756,951 4,691 2.49% 721,833 5,077 2.82%
Certificates of deposits..................... 549,817 6,481 4.73% 524,493 6,666 5.10%
----------- -------- ---- ----------- -------- ----
Total deposits............................ 1,474,182 12,217 3.32% 1,393,214 12,660 3.64%
Total Borrowings............................ 1,570,711 20,316 5.19% 435,891 6,223 5.73%
----------- -------- ---- ----------- -------- ----
Total interest-bearing liabilities........... 3,044,893 32,533 4.29% 1,829,105 18,883 4.14%
-------- ---- -------- ----
Noninterest-bearing liabilities (3).......... 352,508 310,044
----------- -----------
Total liabilities............................ 3,397,401 2,139,149
Stockholder's equity......................... 638,896 701,371
----------- -----------
Total liabilities and stockholders' equity... $ 4,036,297 $ 2,840,520
=========== ===========
Net interest-earning assets.................. $ 855,104 $ 926,962
========= -------- ========= --------
Net interest income/interest rate spread..... $ 34,308 2.59% $ 29,167 2.85%
======== ==== ======== ====
Net interest margin.......................... 3.53% 4.24%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities... 128.08% 150.68%
====== ======
<PAGE>
<CAPTION>
AVERAGE BALANCES, NET INTEREST INCOME, YIELDS EARNED AND RATES PAID
Six Months Ended June 30,
---------------------------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
---------------------------------------------------------------------------------------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1):
Real estate loans............................ $ 1,577,804 $ 60,344 7.71% $ 1,135,595 $ 44,514 7.90%
Other loans.................................. 70,563 3,036 8.68% 45,749 2,471 10.89%
----------- -------- ----------- --------
Total loans............................... 1,648,367 63,380 7.75% 1,181,344 46,985 8.02%
Securities................................... 2,068,175 64,772 6.32% 1,402,031 44,607 6.42%
Other interest-earning assets (2)............ 62,527 1,432 4.62% 34,625 924 5.38%
----------- -------- ---- ----------- -------- ----
Total interest-earning assets................ 3,779,069 129,584 6.91% 2,618,000 92,516 7.13%
-------- ---- ----------- -------- ----
Noninterest-earning assets................... 140,828 104,810
----------- -----------
Total assets................................. $ 3,919,897 $ 2,722,810
=========== ===========
Interest-bearing liabilities:
Deposits:
NOW and money market deposits................ 162,887 2,027 2.51% 143,063 1,779 2.51%
Savings and escrow accounts.................. 748,763 9,253 2.49% 708,821 9,924 2.82%
Certificates of deposits..................... 545,616 12,950 4.79% 521,966 13,214 5.11%
----------- -------- ---- ----------- -------- ----
Total deposits............................ 1,457,266 24,230 3.35% 1,373,850 24,917 3.66%
Total Borrowings............................ 1,465,759 38,030 5.23% 348,756 10,056 5.81%
----------- -------- ---- ----------- -------- ----
Total interest-bearing liabilities........... 2,923,025 62,260 4.30% 1,722,606 34,973 4.09%
-------- ---- -------- ----
Noninterest-bearing liabilities (3).......... 347,924 303,707
----------- -----------
Total liabilities............................ 3,270,949 2,026,313
Stockholder's equity......................... 648,948 696,497
----------- -----------
Total liabilities and stockholders' equity... $ 3,919,897 $ 2,722,810
=========== ===========
Net interest-earning assets.................. $ 856,044 $ 895,394
========= -------- ========= --------
Net interest income/interest rate spread..... $ 67,324 2.62% $ 57,543 3.03%
======== ==== ======== ====
Net interest margin.......................... 3.59% 4.43%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities... 129.29% 151.98%
====== ======
</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.
17
<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 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,
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 .............................. $ (455) $ 8,563 $ (169) $ 7,939
Other loans .................................... (189) 726 (111) 426
-------- -------- -------- --------
Total loans receivable ......................... (644) 9,289 (280) 8,365
Securities ..................................... 20 10,134 8 10,162
Federal funds sold and interest-bearing deposits (62) 379 (54) 263
Total net change in income on interest-
-------- -------- -------- --------
earning assets ................................. (686) 19,802 (326) 18,790
-------- -------- -------- --------
Interest-bearing liabilities:
Deposits:
NOW and money market deposits .................. -- 128 -- 128
Savings and escrow accounts .................... (603) 247 (30) (386)
Certificates of deposit ........................ (484) 322 (23) (185)
-------- -------- -------- --------
Total deposits ................................. (1,087) 697 (53) (443)
Borrowings ..................................... (585) 16,200 (1,522) 14,093
-------- -------- -------- --------
Total net change in expense on
interest-bearing liabilities ................... (1,672) 16,897 (1,575) 13,650
-------- -------- -------- --------
Net change in net interest income .............. $ 986 $ 2,905 $ 1,249 $ 5,140
======== ======== ======== ========
<PAGE>
<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 .............................. $ (1,082) $ 17,334 $ (422) $ 15,830
Other loans .................................... (502) 1,340 (273) 565
-------- -------- -------- --------
Total loans receivable ......................... (1,584) 18,674 (695) 16,395
Securities ..................................... (698) 21,194 (331) 20,165
Federal funds sold and interest-bearing deposits (131) 744 (105) 508
Total net change in income on interest-
-------- -------- -------- --------
earning assets ................................. (2,413) 40,612 (1,131) 37,068
-------- -------- -------- --------
Interest-bearing liabilities:
Deposits:
NOW and money market deposits .................. 1 247 -- 248
Savings and escrow accounts .................... (1,165) 559 (66) (672)
Certificates of deposit ........................ (825) 599 (37) (263)
-------- -------- -------- --------
Total deposits ................................. (1,989) 1,405 (103) (687)
Borrowings ..................................... (1,007) 32,207 (3,226) 27,974
-------- -------- -------- --------
Total net change in expense on
interest-bearing liabilities ................... (2,996) 33,612 (3,329) 27,287
-------- -------- -------- --------
Net change in net interest income .............. $ 583 $ 7,000 $ 2,198 $ 9,781
======== ======== ======== ========
</TABLE>
18
<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
a. An annual meeting of shareholders of the Company was held
on April 29, 1999 ("Annual Meeting").
b. Not Applicable
c. There were 42,683,705 shares of Common Stock of the
Company eligible to be voted at the annual meeting and
36,163,840 shares were represented at the meeting by the
holders thereof, which constituted a quorum. The items
voted upon at the annual meeting and the vote for each
proposal were as follows:
1. Election of directors for a three year term
For Withheld
--- --------
Harold Banks 35,605,198 558,641
Dennis P. Kelleher 35,686,185 477,654
Julius Mehrberg 35,668,846 494,994
2. Proposal to amend the Company's 1998 Stock Option
Plan and the Company's 1998 Recognition and Retention
Plan and Trust so that upon change of control the
awards and options are fully vested.
For Against Abstain
--- ------- -------
32,601,085 3,171,764 390,991
3. Proposal to ratify the appointment of Arthur
Andersen, LLP as the Company's independent auditors
for the year ending December 31, 1999.
For Against Abstain
--- ------- -------
35,793,476 237,965 132,397
d. Not applicable
Item 5 Other Information
The Company's available for sale investment securities include
corporate bonds, with a carrying value of $7.5 million at June 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 $2.5 million as of
June 30, 1999 to reflect the reduction in their market value. The creditor
recently announced that it has entered into new financing arrangements which are
expected to provide it with additional stability during the coming months. 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 the fair value as of August 13, 1999 is approximately
$4.0 to $5.0 million.
Item 6 Exhibits and Reports on Form 8-K
a) 27.0 Financial Data Schedule
b) No Form 8-K reports were filed during the quarter
19
<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: August 16, 1999 By: /s/ Harry P. Doherty
-------------------------
Harry P. Doherty, Chairman of the Board
and Chief Executive Officer
Date: August 16, 1999 By: /s/ Edward Klingele
----------------------
Edward Klingele, Sr. Vice President
and Chief Financial Officer
20
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<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 40,489
<INT-BEARING-DEPOSITS> 4,764
<FED-FUNDS-SOLD> 37,650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,125,175
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